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1. Sustainable Rural Energy Management E xploring challenges of market failures, externalities. Nakul Singh, mohd Amir Mansoori, Mohit Gautam

2. Introduction Energy is vital for socio-economic development. over 675 million people worldwide lacked electricity in 2021, mostly in rural areas of Sub-Saharan Africa and South Asia.

3. Rural Energy Management Decentralized energy solutions , reduce environmental degradation and Health benefits. Convenience factors and more productive lifestyle.

4. Objectives of the Report 1. Addressing Market Failures and High Startup Costs and Risks Understanding why rural energy markets often fail to provide sustainable solutions. Exploring the role of high capital costs, lack of financing, and risk factors in hindering renewable energy adoption. 2. External Costs and Benefits   Analysing the negative externalities of conventional rural energy practices such as biomass burning and diesel generation. Highlighting the positive externalities of renewable energy systems in rural communities (health, education, climate benefits).

5. Market failure and high startup cost Market failure occurs when the free market misallocates resources, preventing investments in renewable energy despite long-term benefits. Key causes: Public goods Nature of Energy Access Information Asymmetry Externalities

6. Barriers to Rural Energy Access Financial: High upfront costs Technical: Lack of expertise Institutional: Weak policy support Social: Cultural resistance

7. High Startup Costs of Renewable Projects Unlike fossil fuel–based systems, which rely on recurring fuel costs, renewable energy systems (solar, wind, micro-hydro, biogas) demand substantial upfront capital for infrastructure. Solar Mini-grids: Require land, panels, inverters, and battery storage; average cost ₹1.5–2 crore for a 100 kW system.

8. Risks in Rural Energy Enterprises - FInancial Risk: Low return on investment due to small customer base. - Technical Risk: Equipment failures, poor maintenance, lack of spare parts. - Policy Risk: Delayed subsidies, regulatory uncertainties, or changes in tariff structures. - Social Risk: Non-payment of electricity bills, seasonal migration of rural populations.

9. Case Study: Solar Mini-Grids (UP) Uttar Pradesh (UP), over 200 million people , of which nearly 65% reside in rural areas . Despite large-scale electrification programs, rural UP continues to suffer from low electricity reliability, frequent outages, and poor grid penetration. To address this gap, solar mini-grids emerged as a decentralized energy solution . A mini-grid typically consists of solar PV panels, battery storage, inverters, and a distribution network that supplies electricity to households and small enterprises within a village or cluster of villages.

10. Challenges: 1. High Startup Cost: Installation of a 25–50 kW solar mini-grid system costs between ₹30–60 lakh. 2. Low Revenue Generation: Households often spend less than ₹150–200/month on energy, limiting revenue. 3. Social Barriers : Villagers may mistrust private operators or prefer subsidized grid electricity. 4. Policy Uncertainty: Overlap between grid extension and mini-grid operations undermines investor confidence. Interventions and Support: - Government schemes like DDUGJY and Saubhagya indirectly supported demand for mini-grids. - UP Solar Power Policy 2017 provided subsidies and streamlined approvals. - International agencies such as the World Bank and IFC offered technical and financial support. - Private companies like Husk Power Systems pioneered solar-hybrid mini-grids.

11. Outcomes: - Economic: Enabled rural enterprises (flour mills, cold storage, phone charging) and boosted incomes. - Social: Improved study conditions for children, reduced kerosene use, enhanced quality of life. - Environmental: Reduction in diesel generator use cut carbon emissions significantly.

12. Policy Measures to Overcome Failures Capital Subsidies (PM-KUSUM) Concessional Loans & Microfinance Risk Mitigation Funds Capacity Building Public–Private Partnerships (PPP)

13. Understanding Externalities Energy use creates hidden costs/benefits not reflected in prices. Negative: Health impacts, pollution Positive: Health, literacy, empowerment

14. External Costs of Conventional Energy Diesel: ~2.68 kg CO₂/ litre Kerosene: High PM2.5 exposure Biomass: 55% households rely on firewood Coal: Used in rural brick and small industries

15. External Benefits of Renewable Energy Solar Home Systems reduce CO₂ and improve study time Biogas Plants save firewood, boost crop yields Mini-Grids power schools, healthcare ICS reduces fuel use and smoke exposure

16. Case Study: Improved Cookstoves (ICS) Problem: Traditional biomass stoves → Inefficient (8–12%), high smoke → Health risks (women & children). Solution: Improved Cookstoves (ICS): • 25–35% efficiency, 40–60% less smoke. • Saves 30–40% firewood. Key Programs: • NPIC (1985–2002): 35M+ stoves, adoption challenges. • NBCI (2009): Advanced ICS tech. • PMUY (2016): Promoted LPG, hybrid ICS + LPG.

17. Impacts: Saves 1–2 tons firewood & 1–1.5 tons CO₂/year per ICS. Women save 1–2 hrs/day collecting firewood. ₹2,500–3,500 annual household savings. Case Example (UP & Bihar): • 5,000 ICS → 10,000 tons firewood & 7,500 tons CO₂ saved annually. • SHGs built micro-enterprises selling & servicing ICS. Lessons: • Design fits traditional cooking habits. • Awareness + training are key. • Community ownership ensures sustainability. • ICS = Affordable, scalable transitional solution.

18. Recommendations Reducing Startup costs and risk through policy and finance models Encourage Private participation and community involvement Internalizing externalities through subsidies, CC and Incentives Strengthen PPP in rural energy

19. Methodology & Sources Secondary data from IEA, World Bank, IRENA, Indian government reports. Case studies: Solar micro-grids (UP), IMPROVED COOKSTOVES .

20. Conclusion Sustainable rural energy is key for social equity, environmental protection, and economic resilience. Requires multi-stakeholder collaboration and policy stability.

21. Thankyou