The recent draft policy framework released by the Ministry of New and Renewable Energy (MNRE) to promote decentralised renewable energy (DRE) for livelihood applications, is a welcome step towards realising this need. DRE is an energy system, installed at, or, near the point of use, where renewable energy is generated, stored and used locally.
Keeping with its ambitious COP26 announcement of achieving 500 GW of non-fossil fuel capacity by 2030, this framework helps lay the ground for an enabling ecosystem to promote, adopt and scale DRE-based livelihood applications in India. DRE has the potential of being an important constituent of the 500 GW target by ably focusing the spotlight on rural development.
What constitutes DRE livelihoods?
The policy framework on DRE livelihood applications encompasses activities, appliances and services required for a means of living and are powered by decentralised RE sources such as solar, wind, biomass, micro-hydro and its combined configurations. Several successful uses of DRE exist in multiple sectors and the policy rightly includes end-uses in the health and education sectors, while also adding livelihoods and essential socio-economic services in the policy. This is a welcome step as the policy goes beyond agriculture with which rural livelihoods are generally associated.
The policy acknowledges the variety of energy supply options that can power livelihood sources. These include grid-connected hybrid systems – a combination of DRE and the grid – in regions where grid connections are stable and reliable; and mini-grids in regions that are hard-to-reach for the main grid.
Mainstreaming DRE into various sectors
In India, the share of rural employment in agriculture stood at 61.5 % in 2019-20, according to the Periodic Labour Force Survey (PLFS). The energy access needs across the agri-food chain have resulted in several applications of DRE in agriculture. Mainstreaming irrigation initiatives has provided the government with a template to scale other DRE livelihood applications. The establishment of benchmark costs, specifications and testing procedures for water pumping systems; financing opportunities through targeted subsidy schemes like Kisan Suraksha Abhiyan Utthan Mahabhiyan (KUSUM) for solarizing pumps; have together created an enabling ecosystem to scale solar pumps for irrigation.
We are witnessing a similar replication of this ecosystem in the cold storage sector too. It remains a vital cog to reduce food loss resulting from a weak agricultural supply chain, despite India being the second largest producer of fruits and vegetables globally. This push can be seen through the draft testing protocols for solar cold storage released by MNRE last September, along with subsidy schemes housed under the National Horticulture Policy.
The template used to scale solar irrigation could be replicated for other activities as well, while also ensuring DRE as a sector is promoted on par with individual applications that are powered by them.
The solutions we choose to scale depends on two things: assessing the need for the solution in the target geography and intended stakeholders, and the impact it creates on livelihoods. This implies both an evidence-based approach with proof of concept, as well as, a needs-based approach to ensure demand. This two-pronged approach to implement DRE solutions, would ensure the right livelihood applications are adopted and promoted in the appropriate demand centres.
What’s important to acknowledge is that one set of DRE livelihood applications may not be viable in another geographical context in the country. Livelihood recommendations will have to be region-specific, or value chain-specific which will require mapping demand, and understanding end-user requirements, market linkages, and raw material availability.
State governments must use the flexibility in the energy supply options mentioned in the policy to prioritize livelihoods that maximise job creation, income generation and socio-economic development. Such priorities must be backed by robust state-level policies and institutions, to complement those of the national government to create the enabling environment needed to adopt solutions rapidly.
Addressing climate vulnerability
The 2022 Intergovernmental Panel on Climate Change (IPCC) report warns of food insecurity, water scarcity and extreme climate events such as floods and droughts. India must address its climate vulnerabilities as climate change can exacerbate damage to infrastructure and affect supply chains. Extreme weather events have caused power outages for multiple days, if not weeks, testing the resilience of energy infrastructure globally. Rural communities are likely to face the brunt of climate change, as they are often more reliant on the weather for their livelihoods. This makes DRE solutions a reliable source of power, especially in climate vulnerable areas.
However, DRE livelihood applications are not entirely immune to climate-related events. As implementation agencies consider this policy to scale DRE livelihood applications, they must incorporate resilience planning while designing these systems, which could also account for climate-risk data, and local socioeconomic and ecosystem assessments. These solutions must set climate resilient infrastructure standards to ensure DRE livelihood applications support community resilience. These standards must be malleable to incorporate climate resilient design, which are geography-specific. Designing resilient DRE infrastructure will also require policy linkages across multiple sectors; and planning and coordination between national, state and local level agencies.
Building on the Policy
Just as higher-level targets on RE capacity addition have been established, DRE targets must devolve to the states, but also onto specific livelihood interventions. Currently, there are no DRE capacity targets linked to actual performance on the ground. However, DRE applications targets could be linked to enterprises developed, incomes generated, new job created, and so on. Meaningful targets can be established as states begin prioritising the livelihoods that require interventions.
In addition to this, targets must be complemented by integrated impact assessment frameworks to measure, monitor and assess if these interventions are achieving their stated outcomes. Such an approach will allow sub-national government organisations and local NGOs to take on priority sectors, while other stakeholders like clean energy enterprises and research organisations can support them in scaling solutions.
The DRE policy framework lays down an integrated approach towards planning and administration through the formation of the Inter-ministerial Coordination Committee. It also lays emphasis on working with non-government stakeholders like NGOs, and Community Service Organisations (CSOs). This is a welcome development as a recent research we conducted informed us of the lack of interdepartmental, sectoral and administrative coordination to achieve socio-economic development targets; and of the lack of appropriate financial allocations that can lead to poor integration of electricity requirements in development sectors.
The policy intends to engage the Association of Renewable Energy Agencies (AREAS) in knowledge sharing for DRE and has identified a greater role for SNAs to work with other state agencies. Development of state intervention cells would make the adoption of DRE and related applications easier, but if state livelihoods missions and SNAs fail to develop a strategy to create DRE enabled livelihoods, it will remain another policy on paper. Similarly, National Level Coordination Committees have been proposed. These must be complemented with similar approaches in the states.
Importance of finance
Frameworks like the one for DRE, require enabling financial provisions to succeed, and to scale. A 2021 study estimates an annual DRE investment requirement of USD 18 billion from 2024 onwards, a 10 times increase from the current levels of financing available, to meet the 2030 renewable energy targets. And while the government has relied on large scale grid-connected solar projects to achieve its targets, DRE will play a crucial role in achieving the updated 2030 targets.
Often policies fail to benefit the communities they set out to target. Like in the case of KUSUM, which has disproportionally benefited large, well-off farmers, while it intended to target small and marginal land holders. Inability to pay up-front capital costs despite the subsidy, lack of awareness, and social exclusion were factors that affected the poor uptake of KUSUM among targeted beneficiaries. This could affect DRE applications too.
Apart from supporting capital costs, innovative finance models have supported de-risking and lowering the capex burden through sustainable business models. Irrigation being the earliest DRE adopter has witnessed innovations on the lines of community based service models by multiple players including Claro Energy, Onergy, Oorja Development Solutions and others. In these service models, several small farmers share irrigation water pumps, and pay per use based on number of hours or litres of water consumed. This model has witnessed an uptake among priority groups i.e. marginal and small farmers (owning less than 2 hectares of land), who constitute 82 % of farmers according to the recent agriculture census. Community based interventions could ensure higher utilisation of livelihood applications which would make them financially viable for entrepreneurs and end-users.
A First Loss Guarantee Fund, set up by SwitchON Foundation and Punjab National Bank (PNB), for financing solar pumps for unbanked small and marginal farmers without the need for a collateral is an example of a unique financing mechanism between not-for-profit organisations and public sector banks. The collaboration follows the implementation of similar financing models between SwitchON and private banks where the solar pump project had zero Non-Performing Assets (NPA). Other organizations, including SELCO have extensively worked in the field of inclusive financing for energy access.
Similar financial coverages must be extended to other DRE livelihood applications in the form of staggered payments, insurances against climate risks, first loss funds, etc. to ensure DRE solutions benefit communities that need it the most.
Similarly, for implementing agencies and entrepreneurs, ability to raise finance is critical to implement new business models and to ensure their innovations scale from being pilots to standardised solutions. A 2021 study by Clean Energy Access Network (CLEAN) revealed how roughly INR 158 crores of capital was raised by 21 DRE enterprises in FY 2021.
Development sector initiatives have supported public and private sector finance in this space. Powering Livelihoods is a USD 3 million initiative by CEEW and Villgro supporting its cohort of enterprises in textiles, agriculture and allied activities, to enable large-scale deployment of their solutions.
As research and innovations continue, there must be ways to create fail-safe strategies for pilots that entrepreneurs could adopt without risking the community’s livelihoods. While DRE can power any application that uses the electric grid, its utilisation, seasonality, productivity, and subsequent income generation capacity can be different. Adopting evidence-based approaches that evaluate the impact of these solutions and learnings from past pilots, is the ideal way to help scale solutions.
Expanding the gamut of DRE powering livelihoods
The DRE framework by MNRE provides an indicative list of DRE applications encompassing sectors such as cold storages, agro-processing, irrigation, textiles and aquaculture. This list is a good start. But it is crucial that vendors and technology developers use this list as a guide to fabricate appliances that are most suitable for locations that need it the most, as well as develop new applications that can enhance livelihoods. These appliances must also be reliable, sustainable and affordable.
The MNRE draft Policy rightly highlights developing a digital catalogue that includes detailed financial and technical information on the machinery, along with installation, operations and best practices to increase income. Platforms such as CLEAN’s India Renewable Energy Appliances Portal (IREAP) is an example to build upon.
The framework is an acknowledgement and compilation of various learnings that implementing agencies of DRE solutions have created through their projects so far – on the need for demand assessment, R&D, standardisation of products, piloting, monitoring, training & capacity building and access to end user finance. It proves that there is no need to re-invent the wheel to achieve widescale adoption, but to create an integrated ecosystem where the government, private and non-government sectors can collaborate to scale DRE in the most effective manner. The policy attempts to build an inclusive ecosystem through promoting enhanced stakeholder coordination and access to finance, which can help ensure DRE-based solutions play a pivotal role in rural job creation, socio-economic development and poverty reduction. It will also support India’s 2030 climate goals.