Clean energy can boost rural economy

In Vanawasipada, a tribal village only 100 km from Mumbai, villagers depend on a solar micro-grid that powers lights, fans, and TVs, as well as a flour mill that ensures a decent source of income for the mill owner. In Malapannatti, Karnataka, power cuts prevail for 6 to 8 hours a day. Women here stitch blouses and shirts using a solar-powered sewing machine, instead of using grid electricity, since it is more reliable and their monthly bill is halved in the process. Companies selling such sewing machines ensure access to not just the appliance, but also the enabling infrastructure: Low-interest loans, demonstration and training for the use, and after-sales service for repairs and maintenance. 

Today, only about 30 such clean energy innovations exist, and the scale at which most of them are deployed is in thousands at best, in stark contrast to the myriad income-generating activities performed in India’s 600,000 villages. Why should electricity access remain a barrier for rural businesses? How could the potential for clean energy innovations be tapped effectively? What is required to create, nurture, and scale them? 

More than 200 million people in India are currently deprived of adequate electricity access, and consequently, of earning livelihood through various income-generation opportunities. The rural economy is underserved by existing electricity sources and relies on human labour or fossil fuels such as diesel. Clean energy innovations, both for agriculture as well as for non-farm micro-enterprises, can complement the government’s electrification strategy, which is primarily household-oriented at present. This can be achieved by leveraging distributed renewables coupled with energy efficiency. By reducing input costs and drudgery, and increasing yields, product value, and incomes, innovations such as solar-powered milking machines, pesticide sprayers, and charkhas (spinning wheels) have already demonstrated their potential for rural businesses. But the success stories remain limited.

In Indian agriculture, about 40 per cent of the produce is wasted before reaching consumers, and the market value of the produce does not get reflected in the farmer’s revenues. Moreover, their real incomes remain low because of rising cost of agri-inputs, such as seeds, fertilisers, pesticides, irrigation equipment and services, among others. These issues are amplified in the case of small and marginal farmers, who constitute 86 per cent of cultivators in India. Owing to their fragile economic condition, they also remain more vulnerable to the effects of climate change on land, crops, and associated inputs. 

Innovative technologies and business models in clean energy-based cold chain, seed sowing, fertiliser application, pesticide spraying, or irrigation, which could reduce input costs and deliver higher farm outputs, present an attractive market opportunity. A recent report by the Council on Energy, Environment and Water (CEEW) indicates that just three activities — pesticide spraying, rice transplanting, and harvesting of grain crops — have a total market potential of about $40 billion. 

The non-farm sector, which comprises 34 million micro-enterprises in rural India, also suffers from lack of reliable electricity access. CEEW’s analysis on National Sample Survey data suggests 13 per cent of these micro-enterprises, engaged in activities such as custom tailoring, food processing, poultry and livestock rearing, and hairdressing, consider lack of reliable electricity access as a top bottleneck affecting their business. This does not even factor in the hours lost to unproductive and inefficient incumbent practices, the number of additional businesses that could potentially have existed had the electricity situation been better, and the limited number of income-generating non-farm activities undertaken in rural areas today. All of these are indicative of the latent demand in India’s rural non-farm economy. 

Clean energy-driven and energy-efficient machines could help meet existing demand as well as offer hope for addressing latent demand, so that the rural population finds more viable non-farm activities to supplement farm incomes. The Council’s analysis shows that, for 14 major non-farm activities, the market opportunity for clean energy-based innovative appliances is about $13 billion.  

Yet, billions of dollars worth of market opportunities remain untapped. CEEW researchers have found ecosystem-level gaps. The path from concept to commercialisation and scale for any innovation in this sector encounters two valleys of death: Technical failure and market failure. Innovators have overcome the former in many cases. For instance, SELCO India and SELCO Foundation are tech pioneers behind half of the clean energy innovations for the rural economy in India today. However, the deployment of these innovations at scale continues to be plagued by high upfront cost of distributed renewables, low and fragmented rural demand, paucity of long-term debt to end-consumers, and missing incentives to adopt energy efficient practices. 

Tackling these challenges could transform the market. The Council is seeking partners to build an ecosystem for clean energy innovations for the rural economy. The platform would: Provide affordable market intelligence to enterprises; facilitate strategic pilots; enable enterprise and consumer financing; connect with micro, small and medium enterprises (MSMEs) to help manufacture and distribute at scale; and engage with policymakers to improve technology transfer. 

The commercial deployment of clean energy innovations needs partnerships among public institutions, philanthropic foundations, private firms, and the international development community. Thus far, these opportunities were not even on the radar of government or financiers. We now have a better understanding of both the challenges as well as the systemic solutions. The rural economy, in India and elsewhere, could witness a clean energy awakening – if we acted now.

Waray is Programme Associate and Ghosh is CEO at the Council on Energy, Environment and Water ( Twitter: @GhoshArunabha; @CEEWIndia

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