KEY ROADBLOCKS IN PROVIDING ACCESS TO MODERN ENERGY

When I was talking to one of my senior colleagues last week on issues related to access to modern energy, we could identify a series of factors, which negatively influence initiatives on providing access to modern energy. A few of such key roadblocks are- (i) Politically linked decisions (which we generally avoid in our discussion), (ii) lack of institutional capacity in facilitating the system for providing access to clean energy sources to poor, (iii) absence of private sector involvement in the supply chain owing to non-conducive investment environment for its resources and (iv) acute poverty of people and therefore weak ‘ability to pay (ATP)’ by the households.

With respect to the political roadblock, it was apparently clear from literatures review that political interference in development is unavoidable and most of the time, it becomes inhibitory in its actions. For instance, most political parties in India advocate for free, or highly subsidised, often unmetered electricity supply to poor. After electricity was put under public control and local states received the authority to set electricity prices in 1948 following the Electricity (Supply) Act, electricity pricing rapidly emerged as a powerful political tool and stake (Swain, 2006). Since then, political parties have campaigned for a subsidised or free electricity supply at least for agricultural consumption, in anticipation of capturing farmers’ political support. Subsidy has become such a political node that, in recent years, it has gained a prominent place in party manifestoes. Elections are sometimes won or lost on the basis of political parties’ commitment to this policy.

But, how useful this type of politically moved decisions is? Can we expect to develop a commercially viable market place for promoting access to modern energy sources to rural poor in this type scenario? Perhaps, this is a million dollar question and needless to say that this type of political myopia kills market potentials and continue to keep poor people at the level of poverty even in the coming years.

Lack of institutional capacity in facilitating the system for providing access to clean energy sources to poor is also a major roadblock. The deficiency in institutional capacity is observed at all level, starting from lead renewable energy agency in a country to the sub-national level and services centre, NGOs and communities. I believe that there is an urgent need to make an assessment of capacity building to manage the processes for effective deployment of modern energy sources. This assessment should outline where human resources could support the public sector.

There are limited funds available for developing and least developed countries to bear the initial finance and maintenance costs of project development. The lack of financial institutions and limited collateral to get a loan is a related hurdle. Besides, for many countries like in Nepal, conducive FDI policy is absent, which makes private sector involvement more difficult. As an immediate patchwork, government can consider providing attractive tax benefits or importing duty exemptions to the private importers, however, countries need a more organised solution to systemically remove this barrier.

At last, access to sustainable sources of clean, reliable and affordable energy has a profound impact on multiple aspects of human development; it relates not only to physical infrastructure (e.g. electricity grids), but also to energy affordability, reliability and commercial viability.  In practical terms, this means delivering energy services to households and businesses that are in line with consumers’ ability to pay. Unfortunately, the aspect of ATP is very often neglected.

I think, this is now key to work together to remove barriers to access to modern renewable energy solutions and improve access, quality, security and affordability of clean energy around the globe. SNV is committed to this endeavour.

Keshav C Das

Senior Advisor, Renewable Energy and Climate Change

 

Reference:

SWAIN, A. K. (2006), “Political Economy of Public Policy Making in the Indian Electricity Sector: A Study of Orissa and Andhra Prades”, M. Phil., Jawaharlal Nehru University

In Pursuit of Energy Efficiency in India’s Agriculture: Fighting ‘Free Power’ or Working with it?, Ashwini Swain, University of York, Olivier Charnoz, PhD, Agence Française de Development, 2012

Is high quality technological solution a myth?

How do you define high quality? Is it merely the quality of being superior? Or, is it a superior offering, which is easily accessible and acceptable to consumers?

In the context of dissemination of renewable energy technologies and enabling the poor consumers (at the bottom of pyramid) to have access to ‘high quality’ renewable energy technologies, the task of defining ‘high quality’ for consumers’ acceptability is further difficult.

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Figure: High Quality Framework

 It is particularly true as most of the hi-fi renewable energy technologies are expensive (beyond the purchasing power of rural poor), it demands high level of maintenance, knowledge to operate such devices and importantly it is not readily available in the local market, because of which, it needs to be imported from outside. Eventually, this import process creates negative market forces, which does not allow local enterprises for developing a regional and national market in the renewable energy with local innovation and market –led solution to the poverty alleviation.

A picture of this kind is noticed in case of the micro-scale renewable energy technologies, including the improved cookstove technology. Although, we have the Lima Consensus, followed by the ISO standardization initiative for the cookstove sector, however, it is found that the parameters used for this high quality standardization is purely based on indoor air-pollution, safety, GHG reduction, thermal efficiency etc. This initiative does not include parameters such as a pricing index based on broad principle of affordability of stoves as per the income level of people or country’s economic situation like poverty level, GDP, Purchasing power parity etc.

A technological solution is outmoded and not relevant for poor countries if it cannot be accessible to people at an affordable price without compromising with the superior technological dimensions. The question is-how to make it happen then, at a low price with best technical solutions?

It is assumed that private sector involvement in the micro-scale renewable energy sector could be the game changer, which could ensure high quality RET solution at affordable price. Global private sector players with an interest in micro-scale RETs should partner with the local and regional small and medium enterprise for take up this challenge. A mass production at the regional level is also the key to reduce the cost as well as maintain uniformity in the standard of RETs.

One major bottleneck for this initiative could be the limited capacities of local and regional level SMEs to carry out this profit making (profit for purpose) intervention with a market-led approach. International development organizations should come forward to bridge up this gap by providing capacity building services in the business management and institutional development to the SMEs. Indeed, to have a spark effect on private sector involvement and promoting high quality RETs, local government should also have conducive policies for private sector involvement.  In absence of such policies, high quality RETs would be transformed into a myth and an unfulfilled dream.

Keshav C Das