Solar power for the poor needs government support

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Governments in South Asia must support solar power to make it affordable to the rural poor, says development expert Vishaka Hidellage.

The accelerating demands for energy in fast-growing South Asia are mostly being met by increasing the centralised generation of non-renewable energy — based on coal, gas and petroleum — and its distribution through the electricity grid.

Yet interest in renewable energy, such as grid-connected solar systems, is rising with the region’s increasing focus on tackling climate change.

India and Sri Lanka have introduced ‘net metering’ options to facilitate such systems — where small-scale generators get paid for their net electricity production, over and above their domestic needs. And Sri Lanka has recently started using the latest technology to transfer power generated from rooftops to the electricity utility, via the grid. 

But such strategies only work in areas covered by the grid. And a large proportion of the 706 million people living without electricity in South Asia live in remote locations where grid extension is expensive, impractical or simply not viable.

In a region blessed with plenty of sunshine, policymakers should instead focus on harnessing decentralised solar power solutions to fill the energy gap.

Solar dawn

There is evidence that governments are slowly waking up to this potential for solar power. For example, most South Asian countries now promote solar home systems (SHS) for rural electrification, and provide small grants and subsidies to encourage their uptake.

The systems consist of a photovoltaic solar panel connected to a battery and charge controller, with one or more sockets to power electrical equipment.

SHS are convenient and can meet the basic electricity needs of rural households. They also have other benefits, such as reducing carbon emissions and eliminating the cost and ill-health associated with traditional fuels such as kerosene.

International financial institutions, such as the Asian Development Bank and the World Bank, have proactively supported government efforts to install SHS in remote settings, by providing loans and designing projects.

Solar subsidies

Microcredit providers that offer small loans to be paid back over 2–3 years, such as Grameen Shakti in Bangladesh, are also increasingly enabling the rural poor to buy SHS.

But while the numbers of SHS installed in South Asia are impressive — India is home to 700,000 systems (44 MW), Sri Lanka to 125,000 — the high initial cost and limited application is preventing its fast expansion.

There is still a large gap between what a solar system costs and what the poor can afford to pay. Each system costs US$0.25–0.43 (INR 12—20) per kWh in India and more than US$0.28 (LKR 32) per kWh in Sri Lanka — about three times the cost of conventional grid electricity.

Yet, in places where there is no grid, alternatives such as solar are the only option, however high the cost. Grid electricity has embedded hidden subsidies that are not paid by the urban consumer. But the argument for similarly subsidising rural electrification rarely wins; or even gets a fair hearing.

Government subsidies are critical to making the technology affordable.

Home grown

Governments must also help increase the uptake of solar systems by improving the infrastructure supporting them. This includes overcoming utility companies’ unwillingness to provide off-grid electricity services, developing successful business models for solar power and financing skills, supporting consumer financing and investing in research and development for solar technology itself. 

Applications such as water pumping, dehydration and heating could all improve incomes for the poor. Facilitating local research and development, manufacturing and capacity creation will help achieve this.

And governments must abandon policy constraints, such as subsidised non-renewable energy, tariff structures and import duties, and look instead at differential tariffs and tax exemptions for importing solar PV into the country.

Channelling government support into local capacity building and finding opportunities to add value to solar products should be a particular priority. The solar business in South Asia is dominated by a few key global players and component parts are imported and expensive. What little local manufacturing or local value addition there is, is generally less than 25 per cent and limited to making batteries and wiring.

Government incentives to promote SHS mostly go to centralised private companies, meaning that all the development work is done externally, with little opportunity for local capacity building in solar energy techniques and technologies.

Power to the people

Still, there are some attempts to improve this, including community empowerment programmes in India and Bangladesh that train people to build and maintain components such as charge controllers and light circuits.

India has also achieved some success in local solar manufacturing by collaborating with large energy companies. By doing so, the country has reduced the cost of solar options and expanded the range of solar applications to include solar water pumping, solar street lighting, solar lanterns, solar cookers, solar railway and traffic signals, and solar-powered telephone booths.

But there is significant room for improvement — solar still only contributes 0.02 per cent of energy generation in India and 0.06 per cent in Sri Lanka.

Off-grid solar systems have the potential to radically improve energy access in South Asia and help alleviate poverty. But the benefits of solar technology risk bypassing those that need it most — the rural poor — unless governments step up support. 

Vishaka Hidellage is regional director of the Sri Lanka, India, Pakistan Programme at Practical Action.