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Claim Your Discount!In the previous module, we have seen what is meant by an energy policy, we have also seen a framework to analyse energy policies. And we looked at the air quality in Delhi and the INDC India's commitment in Paris and try to analyse how we can analyse these policies and how they are being implemented. We are continuing with this and we would like to like take a look at some examples of energy policies. (Refer Slide Time: 0:52) Let us look at access and as you know, for every country, especially for developing countries, the issue of access is one of the important energy goals. And that means we would like to provide affordable access to clean energy to the entire population. And in terms of this in the Indian context, we want to have clean cooking fuels. The predominantly the largest chunk of our population still uses solid fuels, biomass agricultural residues, typically in chulas with very low efficiencies and with adverse environmental impacts in terms of local indoor air pollution, which causes an impact in terms of respiratory diseases. So the idea is, can we switch from these solid fuels to more convenient fuels, like LPG, electricity, can we convert them to modern biofuels? Can we look at solar cooking and then the question of electrification and we have had very significant progress in terms of connecting almost the entire, the entire country is now connected to electricity, but several households do not have a connection because of the whole host of issues related to income affordability, so rural electrification is another issue. (Refer Slide Time: 02:26) So, when you look at this, we can see that you know, with increasing prosperity, the process of progress is where we started with initially just using human power, then going to animal power and then initially going to renewable and natural power with wind and water. And then we created basically everything started going into the fossil fuel where you can transfer and you had the centralized grid. And you had fuels, coal, oil, natural gas and going towards electricity. So, even when we think in terms of cooking also we start there is this energy ladder, where we go from solid fuels to gaseous fuels and electricity. And with income, one moves towards using more convenient and cleaner fuels. (Refer Slide Time: 03:24) What is the definition of energy access? Energy access is a household having reliable and affordable access to both clean cooking facilities and to electricity, which is enough to supply a basic bundle of energy services initially, and the idea is that this basic bundle or the level should keep increasing and then an increasing level of electricity overtime to reach the regional average. That means the idea is this is the definition by IEA part of the World Energy Outlook 2017 special report on access, the idea is that everyone should have access to clean cooking and electricity and to meet their basic needs and over time, they should keep increasing to go towards the regional average local or regional average. (Refer Slide Time: 4:15) And if you look at this, over the different income classes, when we look at, you know, the quintiles, quintiles means divide 100 into 5, 20 percentiles that mean lowest 20 %, the next and then and so on. So, we can do that in terms of rural and urban, you can see the difference in terms of this, where you will find that in the context of electricity, the lowest quintile has a smaller percentage where they are using electricity as the higher income, this goes to about 79 % in the urban it is almost like 100 % and so on. So, the fuel mix is very dependent on the income and the lower-income households are using biomass, traditional biomass and maybe kerosene for the lighting. (Refer Slide Time: 5:24) And so, there have been several different policies and schemes. So, in India at the, for households which are below the poverty line, and electricity connection is in many states provided free of cost. And this is being given for particular in many cases there is a Bhagya Jyoti and the Kutir Jyoti scheme. Wiring, meter, one connection, there is a limit in terms of the connected load to be provided, but this is almost given the sort of free of costs and even the connection costs. So Bhagya Jyoti scheme and now there is the Pradhan Mantri Har Ghar Sahaj Yojana, in many of these cases there is an incentive for the initial upfront connection cost and then there is subsidized electricity use. However, still the uptake of these some of these there are issues related to that. (Refer Slide Time: 6:22) We can look at now, if you look at the cooking, you can see this is from a paper by Rabindranath and Ram Krishna, where you see what happened, what is the implication of looking at different kinds of efficiency, low efficiency of the stock and the emissions, the health hazard, respiratory diseases, it also results in global warming. And there is an also can have more time taken for collection and there is stress on the biomass resource. There is drudgery and then also can result in poor soil quality, there are many different kinds of impacts. (Refer Slide Time: 07:06) There different kinds of chulha designs and it is possible. So, this is a conventional kind of chulha, if you see using solid fuel, there have been improved through the designs which can be smokeless, which can improve the efficiency and some of these designs are also available in the public domain where anyone can manufacture them, there the initial capital cost is slightly is higher. But then there is an advantage in terms of efficiency and the health impact. (Refer Slide Time: 07:39) And of course, as we go up this stream, we are looking at kerosene and LPG with a much higher rate at which we are providing the energy or the power, the efficiencies are high and there is much better controllability in terms of turning up and turn down. This is a sort of kerosene pressurized kerosene stove and this is an air fire electric air fire. So, and many of these, in terms of convenience, in terms of efficiency, in terms of emissions, they are much better. (Refer Slide Time: 08:16) Some of these chulhas which have been developed have been the estimate for this looks low smoke Chulha of the costs have been there. And you can see that we are talking in terms of a couple of thousand rupees and one can think in terms of how to cost this. (Refer Slide Time: 08:34) In general the access of electricity is linked very clearly with poverty. And this is from the global energy assessment. You can see many of the Latin American and African countries with high poverty levels also have less electricity access. (Refer Slide Time: 08:50) We have been relatively low pick up, but now we are going towards nearing at least 100 % in terms of the village connections and slowly going towards 70-80 % in terms of households. (Refer Slide Time: 09:06) The other issue which is there is that in many of these cases you will find that the quality of electricity in terms of number of hours of shortages and the reliability is another index that we can see. (Refer Slide Time: 09:26) There are apart from the centralized grid, there are options where we can have essentially different kinds of microgrids and we can create a license or a licensee or a franchisee, we can have a parallel license, we can have an off-grid collective and there are different kinds of building business models for this. (Refer Slide Time: 09:47) We have had in under these programs, the rural village electrification program, village energy security program, the recently DDG, which was earlier the RGGVY and we have essentially provided a capital subsidy for many of these remote villages. And some of these provide almost 90 % of the total project costs as a subsidy. The difficulty, of course, is that you have to have a mechanism so that subsequent maintenance if you have a PV battery system, the battery payment, and so on can be created. Again, there is even the national solar mission also there is an off-grid component where we can look at this. (Refer Slide Time: 10:40) You would be surprised to note that for low usage electricity, some of the remote rural areas for mobile charging, they pay a significant amount. It is a small amount of electricity that is required. But if you come converted into per kilowatt-hour, you will find that people end up paying quite a significant amount are willing to pay but it is for a small amount of electricity. As we go up, go down, increase the number of energy services, the first important one is cell phone charging, then comes lighting, then comes entertainment in terms of TV and cable TV, and then comes the other things in terms of comfort, fans and refrigerators and so on and so you can create this kind of a service and demand graph. (Refer Slide Time: 11:37) And there are different models and we have had a large number of distributed generating models, some of them are not for profit, some of them are for profits. And there are different kinds of prices and mechanisms and if you are interested, you can look at this in more detail. I am not going to cover this. (Refer Slide Time: 11:58) In this and many of these cases what happens is that there is local involvement in terms of operation and maintenance. For instance, in the Sunderbans, there was a collective of the village energy and the village community and they would train people. There was also load limiters so that in case the load went beyond a certain point, and if that happened several times, they would the household would be cut off, there was a fixed rate. In some cases, there are fixed rates they are metered. There also we are thinking in terms of prepaid metering and so, there are several different kinds of things. (Refer Slide Time: 12:41) And as you can see in terms of the measures, which are the ma ny of these have been encouraging demand-side management or energy-efficient operations equipment, because if we use energy-efficient equipment, then the requirement for the PV or the modules, the rating decreases and in this becomes overall much more cost-effective. (Refer Slide Time: 13:07) So, just to give you some idea, this is for affordable access, this is a small village in Maharashtra, there are a solar array charge controller battery and AC load. (Refer Slide Time: 13:21) And if you look at it, you can see that the most of the load is basically in the evening and with the result that the capacity factor would be low and this would result in high average prices. (Refer Slide Time: 13:35) So, it is quite common when you look at some of these, this is these are three biomass gasifier and PV, the energy costs are of the order of 30 to 40 Rs/kWh. Of course, we have worked out that if this is the design efficiently, they could be lower they are often oversized, and then that is because the demand estimation is accurate. (Refer Slide Time: 14:02) And then, I talked to you about the Sundarbans model where there is a cooperative for the renewable energy at different kinds of in the Sagar Island, there are 17 microgrids, there is a West Bengal Renewable Energy Development Agency, there is a power plant operator their customers and there is a committee of the beneficiaries and this is how it sort of work. (Refer Slide Time: 14:25) You can, of course, see it when we look at costs of energy, if the load factors are low, the costs are going to be high and so on. So whenever we talk about these microgrids or isolated grids if they are linked with only residential load, load factors are going to below. The way to do this is to add some industry or add some baseload or to add telecom towers so that capacity factors increase and the costs of generation. (Refer Slide Time: 14:57) We talked in during the financing I talked to you about the Selco example where they have providing innovations in financing so that they can look at solar home systems. (Refer Slide Time: 15:10) Another company which has been doing this is the DESI power which has been aggregating different kinds of biomass base powers solutions in Bihar and putting this in terms of the total amount of CO2 savings and so, getting the credit in terms of the certified emission reduction and then getting it registered under the clean development mechanism, they have also tied up with the telecom towers. The problem in many of these cases is that when the grid has come to these locations, at some points these they have not been able to compete. So, they have also looked at fixed costs in terms of irrigation pumps and households. (Refer Slide Time: 15:58) And husk power on a similar again biomass base power, but they initially started with their own prize money and they looked at overhead pole wiring, they directly reached the end-user. (Refer Slide Time: 16:12) And if you see in terms of the usage of for cooking, you look at rural and urban households over time and you can see that the mix of different kinds of fuels has changed over some time. (Refer Slide Time: 16:32) You can look at this from the NSSO data which is collected every few years National Sample Survey, and where you can see, for the income deciles this is plotted the energy consumption, the end-use energy and the total energy. And the interesting thing that you will find is that the end-user energy in the case of urban the total energy initially declines and then increases. And this decline is because then with the, in the lower-income classes, you are using more traditional fuels and because of that, though the end-use energy is keeping on increasing and because of the poor efficiencies, you can see this kind of mix, this is from the paper in 2012. (Refer Slide Time: 17:30) One can then make a comparison in terms of calculations. Now, it is possible to have modern biomass-based energy systems which will give you biomass gasifier based systems which give you LPG quality fuel and LPG and control. (Refer Slide Time: 17:46) So, for instance, if you look at this flame, this is rice, this is based on the gasifier, but it is firing rice husk and you can see that this flame is just like LPG flame, so this is another thing which can be done. (Refer Slide Time: 18:14) There are the stove designs and this is done by the research group at ISC Bangalore, this is the Oorja stove which needs pellets like this. Now, what happens here is that this becomes more efficient, it improves the, reduces the emissions, better from a health impact, but then the feedstock earlier biomass was just being collected and there was no price. Now this we have marketized and we are now creating this as a market where they will have to buy these pellets and we need to have this chain, so there is a cost implication of this. (Refer Slide Time: 18:48) This is an innovation from the US, it is a BioLite stove. And the interesting thing about this stove is there is a thermoelectric generator. We using the exhausts of the bio of the stove, and this is used to generate electricity, can run a small fan which caused the induced draft and it can also charge can be connected to get an LED light or you can charge your cell phone. So, this is an interesting kind of innovation, of course, this will cost more than the normal stuff. (Refer Slide Time: 19:25) There are different kinds of biomass-based stuff made by some of the technical NGOs in Pune. and Compact Biomass Gasifier you can see. (Refer Slide Time 19:37) And so in all of these, we can think in terms of different kinds of subsidy mechanisms. But when we talk in terms of cooking, it is needed for us to estimate when we think in terms of the environmental impact and the health impact. And one parameter which is used for this is the disability-adjusted life years. So one disability-adjusted life year is thought of as one lost year of a healthy life. And the sum of these disability-adjusted life years across the population, or the burden of disease can be thought of as a measurement of the gap between current health status and an ideal health situation where the entire population lives to an advanced stage free of disease and disability. This source is from the World Health Organization, you can see that this disability-adjusted life year is the year of lost life and the lost days of work. So what happens is because of disability, if people are not able to work at their full efficiency, and they have to take leave, so that is one and then if people die at a year which is before their expected life tenure. And so these are computed again in terms of based on the emissions, the health impact, respiratory diseases and the number of deaths and then in that population, statistically, the age distribution was impacted, then for each one, the number of years lost and then that is multiplied by the population. So, this is something you can get more details both in the World Health Organization as well as several papers which exist, but this is one way to quantify and in doing this, we can see how indoor air pollution compares with. For instance, outdoor, air pollution or with actual diseases and their impacts and you find that it is in most countries, this is very significant it comes in amongst the top few in terms of the health impact and this is something where we can see if we have a scheme where we can reduce the emissions, then we can adjust this and compare. (Refer Slide Time: 22:23) So, there is this whole chain as we said emissions, then the exposure and this depends on a variety of things that means, what is the time activity profile, what is the ventilation of the stove and the home and what kind of fuel is there, location of the kitchen, gender, age and cooking habits, demographic variable, and the cultural practices, ethnicity, income and education, fuel type and stove type, energy market structures, temperature variable, so, there are a whole host of different parameters, and many of these can be affected by policies. (Refer Slide Time: 22:46) So, now let us look at taking some of these that mean the earlier things that we have done and make a simple calculation to see what it means when we think in terms of looking at a switch of fields. So let us consider a poor rural household. It uses 3 kerosene lanterns with the following data. The cost of the lamp is Rs.100, life is 5 years, annual O & M cost is given as Rs.20/year. The usage is 4 hours per day or 20 millilitres of kerosene per hour, the price of kerosene market price has given us Rs. 35/litre. We are given that the kerosene is 82 % carbon by weight, specific gravity is 0.8, we want to replace it by solar PV lantern capital cost is Rs.550, life 10 years, Rs. 150, battery 2 years. (Refer Slide Time 23:46) The question that is asked is considering a household that uses kerosene, calculate the annual cost and the CO2 emissions for each kerosene lantern and the viability of replacement with solar, user residential discount rate of 60%. So let us look at a first household that uses kerosene, let us calculate the annual cost. (Refer Slide Time: 24:17) The annual cost will be and first, let us calculate annual kerosene used and annual kerosene use is going to be there, 3 this is sorry. Let us see for any each of the let us do this first for each one. Each of these kerosene lanterns is used for 4 hours. Okay and in each hour it is using 20 millilitres, so 4 into 20 by 1000 into 365 days you should calculate this, you will get this as 29.2 litres of kerosene. So that means, for the household if you are using 3 lanterns, 3 into 29.2 so 87.6 litres, and if we look at the cost this will be 87.6 into 35 comes out to be Rs 3066. We have also said that there is an operation maintenance cost of 20 rupees per lamp annually 16 so this comes to Rs.3126, fairly high amount. If we look at an annual CO2 emissions, let us calculate annual CO2 emissions. This will be now we are using 87.6 litres into density 0.8 that is about that is this turns out to be 70 kgs, and each kg has 0.82 kg of carbon per kg of kerosene into C plus O2 giving you CO2 so 44 by 12, and this turns out to be 210 kg of CO2, annual CO2 we have calculated. (Refer Slide Time: 27:15) The next question was so, is it viable annual cost and the CO2 emissions. So the annual cost is Rs. 3126 and the CO2 emissions is 210 kgs. So, the viability of replacement with solar so when we look at a replacement with solar, we are looking at a total cost is Rs. 700 right, and Rs. 700 is saving us annually we are saving around Rs. 3000 so the payback period is less than a month, less than a year and so from that point, it may be viable. However, if we now look at it in terms of it seems to be viable. (Refer Slide Time 28:09) Let us look at it in terms of the annualized life cycle cost. If you look at the annualized life cycle cost of for 1 lamp, this is going to be 100 into capital recovery factor 0.6 and 5 plus 20 plus 29.2 into 35. And if you look at this, you will find that can calculate this as this turns out to be 0.663 is Rs.1108, what is the annualized lifecycle cost for solar? This will be 550 into capital recovery factor 0.6, 10 years plus 150 which is the battery and we said battery life is just 2 years. So, 0.6 and 2 plus we can add in both the cases that the Rs.20 is going to be there. So, this is 550 into 0.6055 plus 150 into 0.985 and this turns out to be Rs.632. If you add Rs.20 to this which is the O & M, Rs. 652. So obviously, the ALCC seems to be lower, even if we forget about this cost, that means instead of 1160, there is 1001 it is like 1000 and 652. So, from this point of view at the full cost of kerosene, this does not look to be viable, this looks to be viable, solar looks to be viable. (Refer Slide Time: 30:23) If we compute can suppose there is a subsidy on kerosene and it is Rs.18/litre, then this will be 18 into 29.2. So, now this is Rs.525.6 this now, in when it is subsidized it is lower than the solar so it will not be liable to shift to solar once you have subsidized kerosene. And so, the question now is to calculate the cost of lighting for each solar lamp. And if the model was to have a lease model calculate the effective monthly payment. So, for each solar lamp, if we look at it in terms of the calculation that we had done, it was 652 divided by 12 which is 560 and 5248 something like 54 or 55 Rs/month. So, that could be a way in which we could do this. This is of course with the high discount rate. If we calculated this with a societal discount rate of 10 % then this is going to be much lower because we are going to do 550 CRF 0.1, 10 plus 150 CRF 0.1, 2 and with the result that this is just going to be, you can calculate this you will find that this is Rs. 341. And this is no point I think this is 0.167 and this is 0.1627, this is 0.576. So, if 341 divided by 12, something like Rs. 25, Rs. 26/month. And the advantage then is that this company which has the government or a public sector company, which has a lower discount rate, now needs to only recover at the rate of Rs.25 /month. And we can also look at if you see the subsidy that we had, the subsidy per lamp was now Rs. 17 into 29.2. So, you will see that we can also provide that subsidy if we want to keep that subsidy constant we can even reduce we can reduce the initial capital cost by that amount. And then we can have we can reduce the lease payments so that means instead of in a month, we are only paying lower quantity. The advantage there now is that because of the higher discount rate, the household is not able to upfront pay that initial amount and is now able to just pay these monthly payments. So, now the question then is the last part of the question is that would you recommend complete removal of the kerosene subsidy. And when we think about this the kerosene subsidy is also to provide for kerosene is often useful cooking. And in some of these cases, for instance, if there is no if there is a problem in terms of the battery and the solar, there will be an incentive for this. There will be what will be the issues in implementation, there is a transaction cost of actually providing this, we need to provide support for maintenance and what are the disadvantages of the solar lantern, we have to ensure that the PV modules are kept in the sun so that they get charged and then the usage pattern and the discharge. So, there are we would need to have a hybrid where we still can maintain a certain amount of kerosene and this, but this gives you an idea of how we can look at policies and we can look at economic impacts of putting the subsidies. The kerosene subsidy is in incidentally being phased out, but in most cases where we can calculate, you can see that the solar subsidy replacing the kerosene subsidy by a solar subsidy makes a lot of sense.
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