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Decentralized Renewable
Energy based
I n rural India only 55% of households are electrified with 45 % relying on kerosene for household lighting and diesel power for basic economic activity. Dependency on subsidy driven fuel sources restricts economic growth as several income generation activities require access to reliable energy. The current focus of electricity and energy policy is geared towards centralized and conventional grid based system with fossil fuels being the main source for generation. However, renewable energy has been an important component of India’s energy planning process since quite some time. The renewable energy based power generation installed capacity has increased from 3475 MW (11% of the totaled installed capacity) in 2002 to 18,655 MW (11% of the installed capacity)1.Bihar Perspective The scenario in Bihar is no different, more than half of Bihar’s villages do not have electricity leaving only 4 per cent connected to the grid. Of the 89 % population residing in rural areas, 95% rely on kerosene for lighting. Primary contributing economic activities to the state’s economy are agriculture, services and industry sectors. Fertile soil, favorable climatic conditions and sufficient ground water has led to agriculture being the primary occupation in rural households. However, shortage of energy restricts development and socio economic progress. Bihar Energy Scenario Bihar has an installed capacity 540 MW and has a deficit of 8.10%, the per capita energy consumption in the state is 122.11 units compared to the national average of 778.71 units. The state is looking at increasing installed capacity to 11,146 MW mainly through major thermal and hydro-power projects. Although agriculture is the prime economic activity in rural Bihar, only 5.83% of the energy available is directed towards agriculture services. In its current scenario, rural Bihar is electrified by a mix of grid supply (4% of rural population) coal fired thermal power plants, a heavily subsidized diesel based power supply system and kerosene for household lighting. Fossil fuels are heavily subsidized in Bihar (INR 25 per litre in 2013). However, fossil fuels are non-renewable and are exposed to fluctuations in prices making it an inefficient driver of economic activity especially, in a situation where there is rampant poverty. Diesel is also used to run irrigation pumps, to irrigate a one acre farm, a 5 HP pump consumes approximately 8 – 10 litres of diesel. Kerosene is another fuel subsidized by the government a typical rural family would use about 6–7 liters of kerosene for household lighting per month. This model of government subsidizing fossil fuel seems to work best at keeping the economy afloat rather than driving further economic growth. Commercial activity, like telecom towers in rural areas, agricultural services, micro-enterprises and household lighting are the main subscriptions to this model of energy delivery. Bihar has recorded a growth of 11% in the past five years. For it to continue on the growth trajectory and future economic advancement will be its ability to fill this gap in energy. Given a highly dispersed population and limitations due to lack of desirable infrastructure centralized system would take time to reach the intended users and will also be an expensive developmental proposition. Due to the lack of a reliable and steady supply of coal or fossil fuels, a case is prevalent for renewable energy sources. Decentralized Renewable Energy (DRE) would cater to the local population driving localized economic development. Abundant natural resources in the form of rice husk, sugarcane, weed from wetlands like Daincha, widespread solar radiation and ample water present a reliable and more ecofriendly basis for generating electricity and propelling economic growth. This also places Bihar and India in a better position to meet international obligations with regards to cutting emissions and fighting climate change. Subsidies supporting DRE energy generation could be the answer, at a policy level, to Bihar’s and indeed India’s energy woes. Subsidy would promote entrepreneurship at local community level, firstly for setting up renewable energy plants and secondly for micro enterprises facilitated by a reliable supply of affordable clean energy. Ultimately, such a model would have a profound impact on Bihar’s economy paving the path for other states to employee a similar course of development. The Government of Bihar also has come up with the "Policy for promotion of New and Renewable Energy Sources – 2009 2 to address energy needs of the state.Challenges and Policy Imperatives for setting up DRE based power supply systems Decentralized renewable energy (DRE) systems address many obstacles facing growth however it has its own set of challenges. DRE require high initial investment for a local entrepreneur, moreover, uncertainty of the plants fate when and if the central grid finally reaches the area being serviced by the plant decides the longevity of the plant and a factor that deters the proliferation of DRE plants in rural areas. Business viability and longevity of DRE plants are also factors that financing institutions consider when financing such projects. It is thus difficult for an entrepreneur to access adequate funding to facilitate power generation and distribution via a DRE system. Also, the lack of funding options from government managed sources is a cause of concern. Government subsidies for generation and plant establishment are difficult to access and need streamlining. Subsidies are needed if adequate technical standards are to be met for micro-grids to restrict the proliferation of "jugadoo" poles and lines set up by diesel genset operators. This would also be very instrumental in promotion of local level "distribution entrepreneurs". Decentralized renewable energy has business viability which can be harnessed most effectively to increase energy access and boost economic growth. However, there are systemic issues which need to be addressed for facilitating its escalation. The following policy recommendations would help facilitate DRE based rural electrification in Bihar: • State incentivized emergence of new private enterprise models, particularly energy services companies (ESCOs), developed through innovative and alternative business opportunities in the electricity sector by use of decentralized generation • Institutional capacity building of relevant government agencies, like the State Investment Promotion Board (SIPB), the Bihar Rural Energy Development Authority (BREDA) Bihar State Electricity Board (BSEB) and Electricity Regulatory Commission (ERC) to drive the expansion of decentralized energy. • Inclusion of Department of Industries of Bihar for proliferation of renewable energy to facilitate access to expert support, strategy, marketing, access to infrastructure, training facilities and for accessing subsidies, loans and incentives. • The State Department of Industry and BREDA could develop direct links with schemes floated by the National Science and Technology Entrepreneurship Development Board (NSTRDB) for promoting technology-based entrepreneurship and schemes floated by the National Bank of Agriculture and Rural Development (NABARD) for financing self-help or joint ownership ventures as Energy Supply Companies (ESCOs) and Distribution Companies (DISCOMS). • The tax system can also be used to reward businesses that install DRE systems and successful DRE entrepreneurs. Tax incentives could include reduced local taxes (property/ service), expanded capital, lower interest rates or priority access to select government resources. • Policy should also support hybrid (mix of) technologies. This is a more efficient way of power generation in some cases. • DRE based distribution side subsidy introduction would create a conducive environment for distribution entrepreneurs. This would also be necessary to promote the development of technical standards to be met for micro grids and do away with "Jugadoo" mechanisms and associated threats. • A "Feed in" tariff policy once the grid reaches the area being serviced by the DRE based power plant. References http://www.business-standard.com/article/economy-policy/bihar-sanctions-rs-300-cr-subsidies-and-tax-rebates-to-woo-investors-113032100525_1.html on July 29, 2013 at 11.23 am Empowering Bihar: Policy pathway for energy access, Greenpeace, 2010 Dedicated feeder for Agriculture, Energy Department of Bihar, 2013
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