By Saurabh Kumar
Climate financing has been one of the most effective tools in incentivising and scaling clean energy projects. The creation of carbon markets has provided an additional source of revenue for clean and renewable energy projects. This has increased the commercial viability of such initiatives and consequently enabled them in scaling rapidly. One of the highly valuable avenues for generating capital for climate projects has been the Clean Development Mechanism (CDM). A part of the UNFCCC, CDM comes under the Article 12 of the Kyoto Protocol and seeks to reduce the concentration of GHG emissions in the atmosphere in a cost-effective way. It allows developed countries to use carbon credits generated from clean energy projects in developing countries to meet a part of their emission reduction targets under the Kyoto Protocol. India has been one of the most active participants in the carbon markets and has piloted one of the largest Program of Activities (PoA) under the Clean Development Mechanism to enable efficient lighting in households. This led to over 3 crore replacement of incandescent bulbs with CFLs and energy savings of nearly 1450m KWh.
These savings were achieved with minimum capital injection by the government but saw significant investment from the private sector. It was especially effective in rural markets. In the UJALA programme, wherein 36 crore LEDs have been distributed till date, the rural household penetration has been about 20%. One key observation from the implementation of UJALA has been that lower the cost of the bulbs, greater is the penetration. This showcases the effectiveness of carbon finance in rural markets. Creation of bespoke programmes that can lower the cost of equipment/energy can make them attractive for the traditionally price-conscious rural audience. The credits from such interventions can then be sold to other developed markets. There is significant potential for such projects in India’s hinterlands and other initiatives, apart from LEDs, such as decentralised solar can provide energy-efficient equipment and clean energy access to rural households. Currently, three ongoing and upcoming interventions have the most potential in enabling low carbon development in India’s rural areas:
UJALA 2.0: The learnings from the scale and success of the UJALA has been clear. Whenever the cost of LED was subsidised from the usual price of Rs 70/ bulb, the penetration and adoption saw an uptick. With the existing PoA, almost five crore rural households can be provided LEDs at Rs 15 each, the balance coming from carbon finance. Such a considerable decrease in prices would thus spur adoption of LEDs in the rural areas, thus creating a thriving market.
Decentralised solar plants: We are currently in the process of establishing decentralised solar plants of 0.5 to 10 MW in Maharashtra on unused government land near rural substations. Using carbon finance, additional solar capacity can be added to provide public lighting in rural areas, and batteries can be installed to provide clean peak power in the evening. This would not only enable the proliferation of clean energy but will also increase power access. Utilising carbon financing could add on additional returns, thereby making investments in decentralised solar commercially viable and attractive.
Gram Panchayat street lights: There is considerable potential for large scale installation of streetlights in rural areas. Using carbon financing and innovative business models, almost 3.5 crore streetlights can be installed across India’s hinterlands. This would lead to a significant infrastructure upgrade for the villages.
We can leverage carbon financing to rapidly strengthen rural infrastructure cleanly and sustainably, which can then create a resilient and sustainable rural community. A clear and coherent roadmap, along with synergies between the government, private sector and financial institutions will pave the way for a clean, green and energy secure future.
The author is Managing director Energy Efficiency Services Ltd. Views are personal
