Can Distributed Renewable Energy generate livelihoods?

Photo of smiling man next to solar fridge in India

Clean energy, big impact. How DRE is powering economic opportunities in rural India.

Distributed Renewable Energy (DRE) refers to electricity generated from renewable sources, like the sun or wind, near the point of use. Electricity from conventional fossil-fuel-dependent power plants is expensive, but the cost of electricity from DRE systems is falling, making it more affordable.

With technological advancements, DRE is emerging as a viable solution for energy access. Nearly 65% of India’s population live in rural areas so creating economic opportunities away from urban centres is crucial. DRE can be a livelihood enabler. Recent DRE technologies like solar refrigerators, power looms, and dryers are empowering communities and reducing greenhouse gas emissions simultaneously. A CEEW study highlights a market opportunity of $50 billion (INR 4.08 lakh crore) for clean energy innovations to power livelihoods in India.

What constitutes DRE livelihoods?

In 2022, the Ministry of New and Renewable Energy, Government of India, published a framework to promote decentralized renewable energy livelihood applications. The framework aims to facilitate an enabling ecosystem for DRE adoption and recognises various livelihood applications such as solar dryers, solar mills, solar or biomass-powered cold storage, etc.

DRE livelihood solutions also include hybrid systems, a combination of grid and DRE wherever the grid is available, and mini-grids in regions where grid supply is unable to reach or is unreliable.

While evaluating various financing models for decentralised renewables, we visited the mini-grids site of OMC Power, a renewable energy service company, catering to micro-enterprises in remote rural regions. Several other players in India support the DRE livelihood model. For instance, Husk operates in India and has also scaled its model in Africa.

Micro, Small, and Medium Enterprises (MSMEs) often face major hurdles including inadequate access to reliable electricity and improper mechanisation. DRE-based technologies, with their ability to solve these problems by mitigating intermittent electricity and introducing mechanisation, can play a critical role in improving productivity and empowering women entrepreneurs.

DRE-based solutions offer greater viability than their grid-based or diesel counterparts making them economically lucrative for microenterprises.

Woman at a well alongside solar panels in rural India

DRE Technologies for Various Sectors

Recent years have seen a surge in numerous energy-efficient DRE livelihood technologies. With 59% of India's rural employment depending on the agriculture sector, DRE's applications in agriculture address crucial energy access needs across the agri-food chain. Mainstreaming irrigation initiatives has served as a model to scale other DRE livelihood technologies. Standardising specifications and testing procedures, while offering financing in the form of subsidies and loans, has led to widespread acceptance of solar pumps. A similar ecosystem is developing for cold storages, vital for strengthening the agriculture supply chain and reducing food loss. The government is actively pushing for setting up solar cold storages to strengthen the food supply chain and support livelihoods.

Technologies like solar silk reeling, spinning machines, and micro-solar pumps boast a significant share of women users, with participation rates of 92% and 65%, respectively. These technologies are creating sustainable incomes for these users while also improving productivity.

How to Scale DRE Livelihood Technologies?

Creating a conducive environment for DRE deployment requires better cooperation and resource pooling among different government departments, along with the active participation of public-sector banks.

Financial viability remains a key concern for DRE entrepreneurs for several reasons. Typically, they cater to rural low-income communities where affordability is a serious concern. Additionally, servicing remote locations increases logistics and transaction costs.

It is important to acknowledge that one DRE livelihood application may not be viable in another geography. Livelihood recommendations will have to be region-specific, requiring mapping demand and understanding end-user requirements, market link, and raw material availability.

While creating livelihoods through DRE implementation is achievable, challenges exist during deployment. So, what is the way forward?

The way forward

Need for Evidence at Scale: Investors, financiers, policymakers, and market enablers often seek meaningful evidence on the viability of clean energy-based livelihood solutions. However,  lack of thorough research and transparent data restricts stakeholders from making informed decisions.

Finance: Frameworks like the one for DRE require enabling financial provisions to succeed at scale. A Climate Policy Initiative study estimates an annual DRE investment requirement of USD18 billion from 2024 onwards – a 10-fold increase from the current financing levels– to meet the 2030 renewable energy targets. DRE will play a crucial role in achieving the updated 2030 targets.

Beyond covering initial costs, innovative financing models have helped de-risk and reduce the capital expenditure burden through sustainable business models. Irrigation, the first major DRE adopter, has seen groundbreaking community-based service models implemented by various players.

After-sales Services: Technology manufacturers and promoters must guarantee adequate after-sales support. Building trust with financiers requires sharing evidence of economic viability and offering partial default guarantees.

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