Barriers to Enhancing Energy Access for Households in

India and ChinaShonali Pachauri

May 26 2009

Presented at Cape Town

Outline of the Presentation• Background on poverty in India and China

• Overview of household energy use patterns and transitions in India and China

• Barriers to enhancing energy access for households – some general issues with examples from India and China

Poverty Still a Concern and Concentrated Mostly in Rural Areas

Data Source: Ravallion et al. (2007)

•60% of the world’s poor live in China and India

•Of the total 2.3 billion inhabitants, nearly 1.5 billion earn less than $2 per day

Mapping Energy PovertyTaxonomy based on final energy availability and share of non-commercial energy

Billions of people:Abject poverty: 1.3 Poor: 0.6 Less poor: 1.4Less poor: 1.4 Middle class: 1.4 Rich: 1.2

3.33.3

2.82.8Source: Gruebler et al, 2008

Pattern of Household Final Energy Use in 2005

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Rural Urban Rural Urban

India China

Solid Non-Solid

Data Source: Pachauri & Jiang 2008

Energy Transitions in Urban & Rural India and China

Urban China

0

20

40

60

80

100

1985 1990 1995 1999

Pe

rce

nta

ge

sh

are

in t

ota

l

Coal Electricity Gas , oil and others

Rural China

0

20

40

60

80

100

1985 1990 1995 1999Per

cen

tag

e sh

are

in t

ota

l

Coal Electricity Gas, oil and others Biomass

Urban India

0

20

40

60

80

100

1983 1989/90 1993/94 1999/00

Pe

rce

nta

ge

sh

are

in

to

tal

Coal Electricity Gas, oil and others Biom ass

Rural India

0

20

40

60

80

100

1983 1989/90 1993/94 1999/00

Pe

rce

nta

ge

sh

are

in

to

tal

Coal Electricity Gas, oil and others Biomass

Source: Pachauri & Jiang 2008

Energy Access Across Rural Household Quintiles

Data Source: Pachauri & Jiang 2008.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

q1 q2 q3 q4 q5

Quintiles

China Electricity

China LPG

China LPG

India Electricity

India LPG

Consumption of Modern Energy in Rural China & India

Rural

0

100

200

300

400

500

600

0 400 800 1200 1600 2000 2400 2800

Mean expenditure by deciles in 2000 PPP $ per capita

En

erg

y in

MJ

per

cap

ita

LPG in China Electricity in China LPG in India Electricity in India

Source: Pachauri & Jiang 2008

Energy Use Patterns - Urban Quintiles in India & China

Source: Pachauri & Jiang 2008

Fuel Choices by City in India and China

0%

20%

40%

60%

80%

100%

B iomass C oal/ C harcoalK erosene L P GO thers 0% 20% 40% 60% 80% 100%

S hanghai

B eijing

C hong qing

Tianjin

G uang zhou

S henyang

Wuhan

Xian

Haerbin

P ipedg asC oal

L P G

Source: Pachauri & Jiang 2009

Energy Distribution for Indian Households 1998-99

Source: Pachauri 2007

Changes in Energy Poverty in Indian Households

Source: Adapted from Pachauri et al 2004

BARRIERS TO ENHANCING ACCESS

Issues with Differences in Definitions of Access

• Physical access to energy • Economic access to energy –

– Affordability of the fuel or energy type– Affordability of a connection and equipment

• Unmetered access – – Illegal connections

• Connections through a central supply or grid or through distributed generation

• Access to high quality and reliable energy – quality of supply

Informational Barriers

• Definitions might differ and change– Village connections

or household connections

– Only central grid connections or decentralized distributed generation options

Source: Pachauri & Mueller 2009

Economic Barriers – Investments

Source: Ministry of Power

All figures in billion INR

5500

999

950

1260

Generation Transmission

Distribution Rural Electrification

Required investment in Indian Power Sector (Next 3 to 5 years)

Some Annual Cost Comparisons to 2015

1

80

215 225

50

500

0

100

200

300

400

500

Clean FuelsAccess

G8 ODACommitment

OECD ODA Energy PriceSubsidies

OECD FarmSupport

Global EnergyInvestment

$ Billion

Providing LPG Stoves and Canisters to 2.5 billion

Data Source: Various

Cost Comparisons Access to LPG

Economic Barriers – Pricing of Energy and Affordability

Category of Users Energy Expenditure (Rs. per year)

Energy expenditure as a percentage of total household expenditure (%)

Price per unit end-use energy (Rs. per Kwh)

Price per unit useful energy (Rs. per Kwh)

RURALBiomass 1227 10.1 0.09 0.46Biomass & Kerosene 1129 8.8 0.07 0.33Biomass & Electricity 1477 8.6 0.08 0.31Biomass, Kerosene & Electricity 1435 8.2 0.08 0.28Kerosene & Electricity 1388 7.5 0.38 0.70Kerosene & LPG 1670 6.1 0.19 0.37Kerosene, LPG & Electricity 2105 7.1 0.18 0.31Electricity & LPG 1896 6.4 0.20 0.33

URBANBiomass 1328 9.4 0.14 0.68Biomass & Kerosene 1185 8.8 0.08 0.37Biomass & Electricity 1261 8.4 0.09 0.34Biomass, Kerosene & Electricity 1595 8.7 0.09 0.33Kerosene & Electricity 1461 7.5 0.20 0.42Kerosene & LPG 2145 6.6 0.22 0.43Kerosene, LPG & Electricity 2427 7.5 0.18 0.32Electricity & LPG 2528 7.1 0.21 0.33

Pachauri & Spreng 2004

Economic Barriers – Access to Credit

• In addition to cost of fuels, upfront costs of connections and equipment are a significant share of the incomes of poor households

• Poor households are cash poor and do not receive a steady reliable income stream, so require access to ready and cheap credit

Institutional & Market Barriers

• Poor market development and lack of confidence for private sector investment– working in poor and low population density

areas makes it more difficult for private entrepreneurs to sustain a profitable operation.

– Often local public sector and entrepreneurs are not involved

• Many cases of successful pilot projects but poor replicability and scale-up

Political and Policy Barriers

• Political rhetoric resulting in setting unrealistic targets and in poor implementation of programs

• Low follow up and poor monitoring mechanisms

• Pricing of fuels often decided on considerations of winning the populist vote

• Subsidies often mistargeted and have other unintended consequences

Key Messages

• Integrating energy into overall Integrating energy into overall development and recognizing diversity of development and recognizing diversity of approaches in service deliveryapproaches in service delivery

• Demanding more institutional leadership Demanding more institutional leadership and critical roles for the public sector also and critical roles for the public sector also in public-private partnershipsin public-private partnerships

• Widening the policy “spectrum” and Widening the policy “spectrum” and putting more emphasis on learning-by-putting more emphasis on learning-by-doing capacity developmentdoing capacity development