Monthly Archives: March 2016

Prospects of indigenous resources for sustainable energy support in Rural Development of North East India

As part of the Global Social Impact Practicum (GSIP) course at the University of Chicago Booth School of Business, my team has made rapid strides over the last 8 weeks in coming up with the core elements of the social enterprise business model for bamboo-based power in rural India and a framework for assessing the geographical suitability of the model in various regions of the country.

As I reflect upon the progress of the project thus far, following are five key insights that have emerged along the way:

(1) The last decade has seen the Indian government undertake various policy initiatives to bring greater access to grid power for villages in India, in an effort to improve rural electrification levels. While several states have seen a proliferation of grid connection in villages, the government’s definition of what constitutes an electrified village is at best lousy: at least ten per cent of homes to be electrified including all common or public areas such as schools and clinics. This implies that some states in India that boast of 90% rural electrification levels may in fact be providing less than 4 hours of continuous power supply to the actual households in a village through centralized grid power supply. This power deficit, resulting in a large measure from unscheduled load shedding, creates a whole set of underlying challenges around provision of continuous, reliable electricity to power rural households.

(2) A Chinese proverb once said, “Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.” In order to provide continuous, reliable electricity to Indian villages in a sustainable way, villagers must be empowered to take control of the power generation value chain. If the source of power, a large coal-fired thermal plant, is located hundreds of miles away from the village site and connected through a grid, villagers have no visibility into or control over the “process” of power generation, and consequently can do very little to address any disruptions in that process. Therefore, a more sustainable model for rural electrification in India is based on the concept of “decentralized” power generation – placing the source of energy conversion as close to the village site as possible. This decentralized model constitutes the space in which most of the renewables – solar, micro hydro and wind, and biomass – currently operate in India.

(3) Biomass gasification as a form of decentralized power is not a new technology in India and has been in existence for almost three decades now. While the technology has witnessed gradual improvements through greater R&D investment, the reasons why it has not been implemented at scale are multifold:
(a) Economics: In the power generation industry, the most powerful metric boils down to the cost of a unit measure of electricity (KWh). Biomass has traditionally faced tough competition from mineral deposits such as coal (that India has an abundance of), and more recently from subsidized renewables such as wind and solar.
(b) Lack of national advocacy: There have been no coordinated efforts towards promoting decentralized power generation from biomass in rural India. For one, the agenda for rural electrification itself picked up momentum only in the last decade, and prior to that limited incentives were in place for state governments to invest in renewable technologies. Secondly, no single for-profit or not-for-profit organization that has the power or reach to cut across multiple state boundaries championed the cause of biomass power.
(c) Lack of a consistent fuel base: All renewables such as solar, wind, or hydro rely on a consistent, abundant, and sustainable energy source: solar irradiation, wind, and water, respectively. Biomass has traditionally struggled to identify a common source of energy across multiple use cases: molasses, organic content from wastelands (twigs/branches etc.), animal waste etc. This has prevented it from leveraging economies of scale in fuel production.

(4) Bamboo-based biomass for rural electrification, which is the focus of this project, has the potential to address the above challenges. Firstly, its business model for power generation is centered on the use of bamboo, a sustainable grass also called “green gold” colloquially, as the biofuel source. After China, India has the second largest bamboo reserves in the world. Secondly, Tata Trusts, India’s largest philanthropic organization and one that holds a 66% share in the holding company, Tata Sons, is the advocate behind use of bamboo-based power in rural India. Finally, Tata is keen on observing the total impact as a result of this initiative. This implies that a positive social return on investment (SROI) resulting from both direct (income based) and indirect (quality of life based) sources of impact in a village can actually offset unfavorable financial IRR for the proposed business model.

(5) The use of bamboo for power has the opportunity to create a multiplier effect in the rural economy of India by strengthening backward linkages to the benefit of marginalized communities and making bamboo a crop of choice. While bamboo based power will generate an increased demand for forested bamboo, it will also help promote an overall ecosystem that will incentivize the village artisanal workers to invest in skill-building for creating bamboo-based handicrafts and furniture, and for the farmers to consider cultivation/plantation of bamboo as the crop becomes commercially lucrative. However, for this ecosystem to survive and thrive, various challenges need to be navigated such as improving perception of bamboo as a quality material for high-end furniture in mainstream markets, and offering farmers competitive prices for bamboo plantations.

– Saurabh Garg