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Energy 34 (2009) 1014–1023

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Energy

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CO2 emissions mitigation potential of solar home systems under cleandevelopment mechanism in India

Pallav Purohit*

International Institute for Applied Systems Analysis (IIASA), Schlossplatz 1, A-2361 Laxenburg, Austria

a r t i c l e i n f o

Article history:Received 26 August 2008Received in revised form25 November 2008Accepted 25 November 2008Available online 26 April 2009

Keywords:Kyoto protocolClean development mechanismSolar home systemsIndia

* Tel.: þ43 2236807 336; fax: þ43 2236807 533.E-mail address: purohit@iiasa.ac.at

0360-5442/$ – see front matter � 2009 Elsevier Ltd.doi:10.1016/j.energy.2008.11.009

a b s t r a c t

The Government of India has taken several initiatives for promotion of solar energy systems in thecountry during the last two decades. A variety of policy measures have been adopted which includeprovision of financial and fiscal incentives to the potential users of solar energy systems however, only0.4 million solar home systems (SHSs) have been installed so far that is far below their respectivepotential. One of the major barriers is the high costs of investments in these systems. The clean devel-opment mechanism (CDM) of the Kyoto Protocol provides industrialized (Annex-I) countries with anincentive to invest in emission reduction projects in developing (non-Annex-I) countries to achievea reduction in carbon dioxide (CO2) emissions at lowest cost that also promotes sustainable developmentin the host country. SHSs could be of interest under the CDM because they directly displace greenhousegas (GHG) emissions while contributing to sustainable rural development, if developed correctly. In thisstudy an attempt has been made to estimate the CO2 mitigation potential of SHSs under CDM in India.

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1. Introduction

Electricity is recognized as a basic need for realizing the objec-tive of sustainable human development [1]. The Government ofIndia has given priority to the power sector since independencewhile fixing the five-year plan outlays. As a result, the installedgenerating capacity has risen from around 1300 MW at the time ofindependence to more than 144,913 MW in June 2008. However,the growth has not kept pace with the growth in demand or thegrowth of the economy generally. According to India’s CentralElectricity Authority, during 2006–2007 India’s total energyshortage was 68,341 million units, or 9.9% of its total requirements,and India’s peak shortage was 13,610 million units, or 13.5% of peakdemand requirements. Moreover, 78 million rural households donot have access to electricity. According to the 2001 census, only 60million (44%) households in India use electricity as a source oflighting out of about 138 million rural households [2]. Though theelectrification rate was improved from 42% in 1991 to 62% in 2005[3] but more than 400 million people in India were without accessto electricity in 2005 [4]. In the year 2005, the Government of Indialaunched a massive initiative for universal electrification throughRajiv Gandhi Grameen Vidyut Yojona (RGGVY) after realizing themagnitude of the challenge and recognizing the need for state

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support in the initial infrastructure development for energy supply.The programme aims to achieve village electrification by 2009 andprovide electricity access to all households by 2012. It was esti-mated that there are about 18,000 un-electrified villages in remoteand difficult areas [5] such as forests, hills, deserts and islands in thecountry therefore, it is decided that such remote villages whichcould not be electrified by conventional grid extension, should beelectrified by non-conventional energy means.

India has a vast supply of renewable energy resources, and it hasone of the largest programs in the world for deploying renewableenergy products and systems. Recently, the Indian government hasapproved creation of a national solar mission on the lines of theAtomic Commission as part of the National Action Plan on ClimateChange, to significantly increase the share of solar energy in thetotal energy mix. At the time when India is faced with the challengeof sustaining its rapid economic growth in a climate constrainedworld, the Action Plan pushes for not just promoting sustainableproduction processes, but also, sustainable lifestyles across theglobe. The Action Plan focuses attention on eight priorities’National Missions, the first among which is ‘‘Solar Energy’’, whosesuccess, according to the Prime Minister Dr. Manmohan Singh, hasthe potential to change the face of India. Apart from the above, Indiais the only country in the world to have an exclusive ministry forrenewable energy development, the Ministry of New and Renew-able Energy (MNRE). Since its formation, the Ministry has launchedone of the world’s largest and most ambitious programs onrenewable energy. Based on various promotional efforts put in

Exports66%

Telecommunications7%

Solar street lightingsystems2%

Solar PV power plant3%

SPV pumps3%

Others12%

P. Purohit / Energy 34 (2009) 1014–1023 1015

place by MNRE, significant progress is being made in powergeneration from renewable energy sources. MNRE is implementingthe Remote Village Electrification (RVE) programme with theobjective to electrify all the remote census villages and remotehamlets of electrified census villages through non-conventionalenergy sources such as solar, small hydro, biomass, wind, hybridsystems, etc. Solar electrification has emerged as a leading alter-native to grid-based rural electrification in many developingcountries [6–11]. In spite of the limitations of being a dilute sourceand intermittent in nature, solar energy has the potential formeeting and supplementing various energy end use activities[12,13]. MNRE is promoting the use of solar home systems (SHSs) tomeet the objective of complete rural electrification by 2012 forbasic lighting requirements in households in remote and lessinhabited villages where extension of grid network is currently notfeasible [5].

The development and large-scale dissemination of SHSs in Indiahave been aided by a variety of policy and support measures duringthe last two decades. A variety of policy measures have beenadopted which include provision of financial and fiscal incentivesto the potential users of SHSs however, nearly 0.4 million SHSs havebeen installed so far that are far below their respective potential[13]. One of the major barriers is the high costs of investments inthese systems. Moreover, the large-scale acceptance of SHSs willdepend upon a variety of socio-techno-economic factors. Since theinitial cost of the SHSs is relatively higher as compared to otherdomestic lighting options particularly for low income householdsin rural areas, the financial viability of an investment on SHS isexpected to play a crucial role in its diffusion.

The Kyoto Protocol to the United Nations Framework Conven-tion on Climate Change (UNFCCC) has opened the market fortrading in greenhouse gas (GHG) emission credits. The cleandevelopment mechanism (CDM) has been set up to assist non-Annex-I countries in achieving sustainable development objec-tives by promoting GHG reduction projects that generate emissioncredits (or Certified Emission Reductions (CERs)1) for Annex-Icountries [14]. There is tremendous interest among Indian projectpromoters, financing institutions, and other stakeholders in theopportunities emerging out of the CDM. By 1st August 2008, therewere 1133 CDM project activities registered by the CDM ExecutiveBoard2 and they are expected to produce more than 1.25 billionCERs before the end of the Kyoto Protocol’s first commitmentperiod in 2012 in which 355 CDM projects are located in India(http://cdm.unfccc.int/index.html). SHSs could become relevantfor the CDM because they directly displace GHG emissions andcontribute to sustainable rural development. In this study, anassessment of the theoretical carbon dioxide (CO2) mitigationpotential of SHSs under CDM has been made. The paper is set outas follows. Section 2 provides some salient features of the Indianprogramme on the promotion of SHSs. A brief detail of an SHS isgiven in Section 3. Section 4 presents a method for the estimationof the potential number of SHSs in India. CDM rules for small-scaleprojects on SHSs are discussed in Section 5 whereas Section 6presents the CO2 mitigation potential of SHSs in India. Section 7presents the forecast diffusion levels of SHSs under an optimisticCDM and business-as-usual scenario. Section 8 summarizes thefindings of the study.

1 A Kyoto Protocol unit equal to 1 MT of CO2 equivalent. CERs are issued foremission reductions from CDM project activities.

2 The CDM is supervised by the CDM Executive Board (CDM EB) and is under theguidance of the Conference of the Parties (COP/MOP) of the United NationsFramework Convention on Climate Change (UNFCCC).

2. Programme on SHSs in India

India has one of the world’s largest programs for deployment ofrenewable energy products and systems. Of the total 11,273 MW ofrenewable energy projects installed in India by December 2007 inwhich wind energy contributes 7845 MW, hydro power 2046 MW,biomass power and co-generation 1326 MW, waste to energy55 MW and solar photovoltaic (SPV) account for 2 MW (grid-interactive) [13]. The key drivers for renewable energy develop-ment in India are large untapped potential, demand–supply gap,concern for environment; need to strengthen India’s energysecurity, pressure on high-emission sectors from their stake-holders, solution for rural electrification, etc. [15]. MNRE isresponsible for the overall planning and programme formulationas well as overseeing the implementation of various programmeactivities in India. A country wide SPV programme is beingimplemented by the Ministry for more than two decades. Theprogramme is aimed at developing cost effective photovoltaictechnology and its applications for large-scale diffusion in differentsectors, especially in rural and remote areas. Major components ofthe SPV programme include research and development, demon-stration and technology utilization, testing and standardization,industrial and promotional activities, etc. More than 30 differentapplications have been developed. Among them are fixed andportable lighting units, water pumping, small power plants, powerfor telecommunications, railway signaling, off-shore oil platforms,TV transmission, remote weather stations, telecommunicationapplications, etc. Fig. 1 presents the details of sector-wise use ofSPV modules installed so far [13].

MNRE has made sustained efforts for the deployment ofphotovoltaic systems in rural areas. A large amount of experiencehas been gathered on technical, economic, social and managementissues. An analysis of the experience shows that SPV technology canbe a viable alternative to the extension of grid lines to electrifyvillages, especially in remote and difficult areas [16,17]. The overallreliability of SPV systems is better than the reliability of conven-tional power supply in rural areas. Applications like SHSs are usefulin even those areas which have intermittent electricity supply. Avast number of applications pursued so far have contributed ina significant way to the process of commercialization of photovol-taics in India. Fig. 2 presents the annual production and growth ofsolar cell and PV module (www.mnes.nic.in).

Solar home lightingsystems5%

Solar PV lantern2%

Fig. 1. Sector-wise use of solar PV modules (335 MWp capacity; 1.4 million SPVsystems). Source: http://www.mnes.nic.in accessed on 31st July 2008.

0

10

20

30

40

50

60

70

1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06Year

Pro

du

ctio

n (in

M

W) Solar cell

Solar PV module

Fig. 2. Annual production and growth of solar cell and PV module. Source: http://www.mnes.nic.in accessed on 31st July 2008.

Fig. 3. Typical solar home systems configuration shown with optional module andbattery. Source: http://www.enolar.com/products07a.htm accessed on 20th July 2007.

P. Purohit / Energy 34 (2009) 1014–10231016

The Village Electrification Programme (VEP) was introduced in2001–2002 for provision of SPV home-lighting systems in ruralhouseholds. In 2003–2004, VEP was modified to the RVE pro-gramme for electrification of those un-electrified remote censusvillages/hamlets, where grid connectivity was not likely to reach by2012, i.e. end of the 11th Plan period (MNRE, 2007). During 2005–2006, the National Electricity Policy – 2005 and the RGGVY, both ofwhich had a significant impact on rural electrification programmesincluding the RVE programme, were announced. RGGVY aims toprovide electricity access to all households, except some which arein remote villages/hamlets. The RVE programme was thus suitablymodified to align it with RGGVY and would now be extended onlyto those villages/hamlets not likely to receive grid connectivityunder RGGVY. During 2006–2007, the Rural Electrification Policy,which has laid down the broad framework for rural electrificationin the country, was notified. Accordingly, provision of SPV homesystems under RVE programme is required to be treated as aninterim solution. For the 10th Plan period, a target of covering 5000villages with SHS with an outlay of Rs. 7.35 billion was fixed. During2006–2007, projects were completed in 500 villages and hamlets innine States. Subsidy up to 90% of the normative cost of device/system, subject to not exceeding specific amount is provided. Inaddition, promotional support and service charges are beingprovided. In line with the provisions for below poverty linehouseholds under RGGVY, a single SPV light connection is beingprovided with level up to 100% subsidy, subject to not exceedinga specific amount.

3. SHSs

The home-lighting systems are powered by solar energy usingsolar cells that convert solar energy directly to electricity. Theelectricity is stored in batteries and used for the purpose of lightingwhenever required. These systems are useful in non-electrifiedrural areas and as reliable emergency lighting system for importantdomestic, commercial and industrial applications. Fig. 3 presentsa typical solar home-lighting systems configuration shown withoptional module and battery. The SHS is a fixed installationdesigned for domestic application. The system comprises of SolarPV Module (Solar Cells), charge controller, battery and lightingsystem (lamps and fans). The solar module is installed in the openon roof/terrace – exposed to sunlight and the charge controller andbattery are kept inside a protected place in the house. The solarmodule requires periodic dusting for effective performance.

The MNRE has laid down detailed specifications of all the SHSsand other systems that are being promoted under the programme.Only those systems, whose prototype has been tested and approved

by the authorized test centres as per the specifications are to beaccepted for supply under the programme. Five different configu-rations of SHSs are being promoted by the Ministry: 18 Wp PVmodule (one 9 W CFL), 37 Wp PV module (Two 9 W CFLs or one 9 WCFL and a fan) and 74 Wp PV module (Four 9 W CFLs or two 9 W CFLand a fan/TV). Subsidies amount to 50–60% of the investment costof the system. However, it is observed that the response to thegovernment programmes to promote SPV systems is poor despitebetter favorable conditions for support of SPV products. Dissemi-nation of SHSs is the most popular SPV systems promoted underthe government programme, but only 363,399 SHSs have beeninstalled so far [13]. Fig. 4 presents the time variation of cumulativenumber of SHSs installed in India. The key elements of a sustainablerural photovoltaic market include customer satisfaction, afford-ability, dealer profitability, and effective supply and service chains[18]. Financial affordability and lack of affordable credit at the end-user level are one of the fundamental barriers to uptake, makingthe technology unaffordable for lower-income rural households.Moreover, barriers such as stiff competition from subsidizedconventional energy and lack of technical support for installationand maintenance impede the penetration of these systems [19–22].

4. Assessment of the potential of SHSs in India

The potential of SHSs essentially depends on availability andaccessibility of solar radiation, and affordability of the user to investin an SHS. Using the above-mentioned factors, the total potentialnumber, of SHS (Nshs) can be estimated as

0

50

100

150

200

250

300

350

400

1992

-93

1993

-94

1994

-95

1995

-96

1996

-97

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-98

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-99

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-00

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-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

2007

-08

So

lar h

om

e system

s (in

000)

Annual installation of SHS (in 000) Cumulative installation of SHS (in 000)

Fig. 4. Time variation of solar home systems installed in India. Source: annual reports of the Ministry of New and Renewable Energy, Government of India, New Delhi.

P. Purohit / Energy 34 (2009) 1014–1023 1017

Nshs ¼ xXn

NiðziciÞ (1)

i¼1

where Ni represents the total number of households in the ith state,x the fraction of households living in the geographical areas withadequate solar radiation availability, zi the fraction of total house-holds living in the rural areas of the ith state, and ci the fraction ofhouseholds above the poverty line in rural area in the ith state.

India, being a tropical country, is blessed with plenty of sunshine.The average daily solar radiation varies between 4 and 7 kWh/m2 fordifferent parts of the country [12]. There are on an average 250–300clear sunny days in a year [13]. Fig. 5 presents the annual mean dailyglobal solar radiation in India (in kWh/m2/day). In this study onlythe area with daily solar radiation�4 kWh/m2 has been consideredfor potential estimation of SHSs as sufficient solar radiation isnecessary for all devices based on solar energy. Ideally, detailedsolar radiation data for each location should be used in evaluatingthe potential of these technologies. On a macro level, seven north-eastern sates and the northern states of Jammu and Kashmir,Himachal Pradesh and Uttaranchal in India can be given low priorityin the process of identification of niche areas for installation of SHSs[14]. It may be noted that the potential number of SHSs will decreasein near future with more households using reliable grid electricity.Table 1 presents the distribution of households in rural areas ofIndia. The state-wise population below poverty line in the rural areais also given in the same table. Using Eq. (1) the estimated potentialof SHSs in India has been estimated to be 97 million (Table 1). It isobserved that out of 138 million rural household in India 97 millionhouseholds can use SHSs. It may be noted that Uttar Pradesh hasa highest potential of SHSs (14 million) followed by Andhra Pradesh(11 million) and Maharashtra (9 million).

5. CDM rules for small-scale projects on SHSs

Small-scale renewable energy and energy efficiency projects arehelping to meet the needs of rural people in developing countries,alleviating poverty and fostering sustainable development. Keepingin view the low emission reductions per installation the Negotia-tors of the Marrakesh Accords [23] as well as the CDM EB adoptedsimplified CDM modalities and procedures for qualifying small-scale projects defined as: a) renewable energy project activitieswith a maximum output capacity equivalent of up to 15 MW, b)

energy efficiency improvement project activities which reduceenergy consumption by an amount equivalent to 60 GWh per year,and c) other project activities whose emission reductions are lessthan 60 kt CO2 per year. The thresholds for the latter two categorieswere increased by decision of the Conference of the Parties to theUNFCCC in November 2006.

Fig. 6 presents the distribution of 3700 CDM projects submittedto the CDM EB in each sector until July 2008. Out of the2305 projects (on renewables) currently at an advanced stage of theCDM project cycle solar energy projects make up a very small shareaccounting for less than 1%. In total, renewable energy projectsconstitute 62% of the project portfolio (Fig. 6). However, when theexpected CERs are broken down by project type as a product of howmuch carbon financing each project type receives (see Fig. 7),renewable energy projects account for only 13% of all CERs issuedby the Secretariat. The main reasons attributed to low CERs arerenewable energy projects typically reduce emissions of CO2, whichhas a global warming potential of ‘1’ and many renewable energyprojects are relatively small-scale. Table 2 presents the number ofCDM projects and associated CERs in the renewable energy sector.It may be noted that 23 solar energy projects (4 projects on SHSs)have been submitted to the EB until July 2008 that can generate2.8 million CERs up to the first commitment period of theKyoto Protocol.

Out of 3788 projects submitted to the CDM EB, 1657 projects(44%) belong to the small-scale CDM projects category by scale until1st August 2008. Fig. 8 presents the number of different project sizecategories of the 3788 CDM projects submitted until 1st August,2008 of which 1133 projects have been registered by the CDM EBand 72 projects were requesting registration (http://cdm.unfccc.int/index.html). Out of the 1133 projects registered by the EB, 355projects were located in India that can generate 215 million CER upto the first commitment period of the Kyoto Protocol. Only 4 projectsinvolve SHSs in which only one project ‘photovoltaic kits to light uprural households’ from Morocco has been registered by the CDM EBuntil 1st August 2008. Two projects from India and one project fromBangladesh were at the validation stage in the same period.

5.1. Baseline

The amount of emission reduction, obviously, depends on theemissions that would have occurred without the project. The

Table 1Estimated potential of solar home systems in India.

State No. of householdsin ruralIndia (million)

State-wise populationbelow poverty linein rural India (%)

Estimated potentialof solar homesystems (million)

Andhra Pradesh 12.4 11.1 11.0Assam 4.3 40.1 2.6Bihar 12.3 44.3 6.9Chhattisgarh 3.3 37.1 2.1Delhi 0.2 0.4 0.2Goa 0.1 1.3 0.1Gujarat 6.1 13.2 5.3Haryana 2.6 8.3 2.4Jharkhand 3.7 44.3 2.1Karnataka 6.9 17.4 5.7Kerala 5.0 9.4 4.5Madhya Pradesh 8.0 37.1 5.0Maharashtra 11.3 23.7 8.6Orissa 6.6 48.0 3.4Punjab 2.9 6.4 2.7Rajasthan 7.1 13.7 6.2Tamil Nadu 8.2 20.5 6.5Uttar Pradesh 20.4 31.2 14.0West Bengal 11.4 31.8 7.8Total 97.1

Source: http://www.censusindia.gov.in.

Fig. 5. Annual mean daily global solar radiation in India (in kWh/m2/day). Source: http://www.mnes.nic.in accessed on 15th August 2008.

P. Purohit / Energy 34 (2009) 1014–10231018

construction of such a hypothetical scenario is known as thebaseline of the project. The baseline may be estimated throughreference to emissions from similar activities and technologies inthe same country or other countries, or to actual emissions prior toproject implementation. The amounts of CERs that can be earnedby the project are then calculated as the difference of baselineemissions and project emissions. The selection of the baseline willhave a big impact on the amount of emission reductions that can becredited to the installation of SHSs. The CO2 emissions’ mitigationbenefit associated with an SHS depends upon the type/amountof fuel saved. An SHS usually replaces kerosene in the rural areasof the country [24–27]. To estimate the CO2 mitigation potential ofSHSs under CDM in India the small-scale methodology I.A./Version12, i.e. Electricity generation by the user has been used.

5.2. Additionality

To maintain the environmental integrity of the Kyoto Protocol,CDM credits are given only for activities that would otherwise notbe expected to occur. The ‘additionality’ criterion for the CDM isa key to ensure that CDM projects lead to real and additionalemission reductions. As indicated earlier, the high investment cost

Transport0.2%

Afforestation &Reforestation0.6%

Demand-side EE5%

Fuel switch3%

Supply-side EE10%

CH4 reduction &Cement & Coalmine/bed16%

Renewables62%

HFCs, PFCs & N2Oreduction3%

Fig. 6. Distribution of CDM projects in each category. Source: http://www.cd4cdm.orgaccessed on 15th August 2008.

HFCs, PFCs & N2Oreduction74%

Transport0%

Afforestation &Reforestation0.0%

Demand-side EE0%

Fuel switch1%

Supply-side EE4%

CH4 reduction &Cement & Coalmine/bed8%

Renewables13%

Fig. 7. CERs issued in each sector. Source: http://www.cd4cdm.org accessed on 15thAugust 2008.

Table 2Number of CDM projects and associated CERs in the renewable energy sector.

Type Number ofCDM projects

Annual CERs(000)

2012 CERs(000)

CERs issued bythe EB (000)

Hydro 963 93,107 424,610 6571Biomass energy 566 32,822 181,755 10,221Wind 491 39,936 200,422 4954Biogas 249 11,553 57765 317Solar 23 641 2817 0Geothermal 12 2407 13566 318

P. Purohit / Energy 34 (2009) 1014–1023 1019

is one of the major barriers of the large-scale dissemination of SHSsin India [18–22]. An analysis of the ‘Karnataka CDM photovoltaiclighting programme’3 project on SHSs approved by the Indian DNA(Designated National Authority) and submitted to the CDM EBindicates that SHS based CDM project face investment, technology,and barrier due to prevailing practices in India. Apart from theabove, even in the hypothetical case of an off-grid situation wherelifecycle costs of the SHSs would be cheaper than all other alter-natives, the high up-front investment cost to a rural household inacquiring a SHS would still be a barrier to widespread marketpenetration. In terms of costs per kWh in grid connected areas,costs of SHSs will be higher than grid electricity by a higher order ofmagnitude and such projects thus be additional at any rate.

5.3. Monitoring

Monitoring under small-scale rules consists of an annual checkof all systems or a sample thereof to ensure that they are stilloperating. Since the installations of SHSs are often widely dispersedin sparsely populated and difficult to reach areas, monitoring costscould make CDM participation prohibitive if each household witha system is visited. Simple and efficient sampling procedures aretherefore required. There are two variables that need to be moni-tored and verified in order to correctly establish emission reduc-tions from SHSs according to small-scale methodology I.A: numberof systems operational in the field, and estimated fuel savings peravailable system.

6. CO2 mitigation potential of SHSs in India

The annual CO2 mitigation potential of an SHS would depend onthe type and amount of fuel replaced by SHS. In India, about 56% ofIndian households use electricity for lighting, the rural–urbandisparity is quite prominent [28]. Only 43.5% of rural householdshave access to electricity while the rest rely on kerosene whereasabout 87.6% of the urban households use electricity for lighting.According to Census, 2001, 85 million households were withoutaccess to electricity in the country, 92% of whom resided in ruralareas [2]. Table 3 presents the state-wise percentage distribution of

3 See: http://cdm.unfccc.int/Projects/Validation/index.html.

households with kerosene as source of lighting in rural and urbanareas of India during 2001. In rural India, even in the electrifiedhouseholds, people continue to depend on other energy sources,chiefly kerosene, for lighting which is basically due to poor reli-ability and quality of the existing supply. Therefore, in this study, itis assumed that due to irregular supply of electricity in most partsof India rural households having electric connection will also useSHSs during load shedding.

The annual CO2 emissions’ mitigation potential by use of an SHS,CEMshs, can therefore be estimated as

CEshs ¼ HshsSFk

�CVkCEFkFCOk

�4412

��(2)

where Hshs represents the annual number of hours of illuminationprovided by an SHS, SFk the specific kerosene consumption (in l/h)in the hurricane lantern, CVk the calorific value of kerosene (in MJ/l),CEFk the carbon emission factor of kerosene (in kg/MJ), and FCOk

the fraction of carbon oxidized during kerosene combustion.What is now the financial attractiveness of an SHS based CDM

project? The monetary benefits associated with an SHS dependupon the monetary value of kerosene saved which is the product ofannual fuel savings and the price of the fuel saved and the differ-ence in investment costs between the common hurricane lanternand the SHS. The difference between the cumulative present valueof the benefits (due to the substitution of the kerosene and theavoided costs of hurricane lantern replacement at the end of itstechnical lifetime, if this ends before the end of technical lifetime of

Tidal 1 315 1104 0Total 2305 180,781 882,037 22,381

Source: http://www.cd4cdm.org accessed on 15th August 2008.

2 12 22 68

272

431

1926

564424

36 310 3 6 23 80 120

550

175 13616 24

0

400

800

1200

1600

2000

<11 t

o 5

5 to 1

0

10 to

20

20 to

50

50 to

100

100 t

o 500

500 t

o 100

0

1000

to 50

00

5000

to 10

000

>100

00

Size (kt/year)

Nu

mb

er o

f p

ro

jects Submitted

Registered

Fig. 8. Size categories of submitted and registered CDM projects until 1st August 2008.Source: http://www.cd4cdm.org accessed on 15th August 2008.

Table 4List of input parameters used in financial calculations.

Parameter Symbol Unit Value

Annual number of hours of illumination Hsl Hours 1200Annual repair and maintenance cost of solar home

system (as a fraction of the capital cost)– Fraction 0.05

Average life of the battery – Cycles 1200Calorific value of kerosene CVk TJ/kt 44.2Capacity of the solar home system – Wp 37Capital cost of the solar home system Cshs Rs. 18000Carbon emission factor of kerosene CEFk kg CO2/l 2.63Daily depth of discharge of the battery – Fraction 0.8Discount rate D Fraction 0.1Fraction of carbon oxidized during kerosene

combustionFCOk Fraction 0.995

Market price of hurricane lantern Chl,t Rs. 200Market price of kerosene pk Rs./l 20Specific kerosene consumption in the hurricane

lanternSFk l/h 0.04

Subsidized price of kerosene pk Rs./l 10Useful lifetime of the solar home system tshs Years 20

Source: [29–31].

P. Purohit / Energy 34 (2009) 1014–10231020

the SHS) and the costs (i.e. capital cost and annual repair andmaintenance cost) is the net present value (NPV) of the investmenton the SHS. Therefore, the NPV of an investment in the SHS can beexpressed as

Table 3State-wise percentage distribution of households with kerosene as source of lightingin rural and urban areas in India in 2001.

States/UTs Percentage distribution ofhouseholds using kerosene forlighting

Rural Urban

Jammu and Kashmir 19.2 1.6Himachal Pradesh 4.9 2.2Punjab 8.9 2.6Chandigarh 2.1 2.9Uttaranchal 46.7 8.4Haryana 20.6 6.1Delhi 13 5.7Rajasthan 54.7 9.6Uttar Pradesh 79.5 19.3Bihar 94.5 39.9Sikkim 24.3 2.8Arunachal Pradesh 37.9 9.4Nagaland 37.5 8.3Manipur 45.1 17.3Mizoram 52.8 5.2Tripura 67.6 13Meghalaya 68.2 10.9Assam 83.1 25West Bengal 79.2 19.5Jharkhand 89.6 23.8Orissa 79.8 24.3Chhattisgarh 52.9 16.5Madhya Pradesh 37.2 7.1Gujarat 26.2 5.5Daman and Diu 2 1.3Dadra and Nagar Haveli 16 3.8Maharashtra 33.6 5.1Andhra Pradesh 39.7 9.2Karnataka 27.2 8.8Goa 6.9 4.6Lakshadweep 0.1 0.3Kerala 33.8 15.1Tamil Nadu 28.2 11.1Pondicherry 18.6 8.2Andaman and Nicobar Islands 29.9 4.3Total 55.6 11.6

Source: http://www.censusindia.gov.in

NPVshs ¼"fðpkHshsSFkÞ � ðCMshs � CMhlÞg

(ð1þ dÞtshs�1

dð1þ dÞtshs

)

� Cshs þ(

CThl

ð1þ dÞT

)#ð3Þ

where CMshs represents the annualized replacement cost ofbattery4 alongwith repair and maintenance cost of SHS, CMhl theannual repair and maintenance cost of hurricane lantern, pk themarket price of kerosene, Cshs the capital investment cost of SHS,andCT

hl the cost of new hurricane lantern to be purchased in the Tthyear.

Table 4 presents the input parameters used to analyze thefinancial feasibility of SHSs in India [29–33]. In India, kerosene issold for domestic use under a quota system, which is heavilysubsidized [34]. Therefore two prices, subsidized price (Rs. 10/l) andmarket price (Rs. 20/l) of kerosene have been used for the estimatespresented in this study. Table 5 presents the results of an attempt toanalyze the financial attractiveness of an investment on SHS inIndia. Using the input parameters given in Table 4 the use of SHS isfinancially unviable to the end user, thus showing financial addi-tionality for the CDM. Fig. 9 presents the results of a sensitivityanalysis undertaken to study the effect of uncertainties associatedwith some of the important input variables on the NPV of the SHSwith subsidized and market price(s). As expected, the NPV of SHSsincreases with higher CER prices. The break-even price of CERs hasbeen estimated at 120V and 60V for the subsidized and marketprice of kerosene respectively. While the use of SHS would costmore than current CER prices on the world market that lie between5 and 20V depending on the quality of the project, the use of SHSswould only require a relatively limited amount of subsidy to makethem viable CDM projects. This however, does not include otherbarriers to project implementation such as the fear of users not to

4 The battery replacement cost of a solar home system is mainly a function of thenumber of battery replacements over the system lifetime, without taking thesalvage value of replaced batteries [29]. The battery life, in real operation isdominated by the daily depth of discharge and depends on its specific character-istics, i.e. average life at a specified daily depth of discharge (¼0.8) and the batterycoefficient which is given by Soras and Makios [30] as 0.02–0.03 for flat-platebatteries and 0.01–0.02 for tubular batteries. For simplicity, the annualized cost ofreplacement of battery is added in CMshs. Other input parameters are presented inTable 4.

Table 5Financial attractiveness of an investment on solar home system in India.

Indicators Unit Kerosene price and subsidies

Price of kerosene (Rs. 10/l) Price of kerosene (Rs. 20/l) Price of kerosene(Rs. 10/lþ 64% subsidy)

Price of kerosene(Rs. 20/lþ 32% subsidy)

Benefit to cost ratio – 0.36 0.68 1 1Net present value (000) Rs. �16.5 �8.3 0 0Cost per CER Va 120 60 – –

a 1V¼ 63.80 Indian Rupees as on 18th August 2008.

-20

-15

-10

-5

0

5

10

15

0 20 40 60 80 100 120 140

CER price (in euro)

NP

V o

f s

ola

r h

om

e s

ys

te

m (R

s)

NPVpk=10NPVpk=20

Fig. 9. Effect of the CER price on the net present value of solar home system.

P. Purohit / Energy 34 (2009) 1014–1023 1021

receive maintenance in case of breakdown and the unfamiliarity ofthe SPV technology [35].

Using Eqs. (1) and (2) the theoretical maximum CO2 mitigationpotential of SHSs can be estimated as

CEmshs ¼

"xXn

i¼1

Nifzicig#�

HshsSFk

�CVkCEFkFCOk

�4412

���(4)

Table 6 presents the theoretical mitigation potential of SHSs inIndia. The CO2 mitigation of SHSs has been estimated at 23 millionCERs annually. Table 6 also gives a breakdown according to states. Itmay be noted that Uttar Pradesh has the maximum mitigationpotential (3.4 million tonne CO2) followed by Andhra Pradesh (2.6million tonne CO2), Maharashtra (2 million tonne CO2), etc.

Table 6CO2 emissions’ mitigation potential of solar home systems in India.

State CO2 mitigation potential (million CERs)

Andhra Pradesh 2.65Assam 0.62Bihar 1.64Chhattisgarh 0.49Delhi 0.05Goa 0.04Gujarat 1.27Haryana 0.58Jharkhand 0.50Karnataka 1.36Kerala 1.08Madhya Pradesh 1.21Maharashtra 2.06Orissa 0.82Punjab 0.65Rajasthan 1.48Tamil Nadu 1.57Uttar Pradesh 3.37West Bengal 1.87Total 23.30

7. Diffusion of SHSs in India

Studies on the process of diffusion of new technologies providea useful framework to examine the acceptance of SPV products[22,36]. Studies on Communication and Diffusion of Innovationtheories suggest that the acceptance of innovations is influenced bythe characteristics of the innovation and also the process by whichthe communication takes place in the community. The acceptanceof an idea by an individual usually follows a process of awareness,knowledge and action. The information provided from differentsources creates awareness and knowledge which may lead toadoption. The communication flows through the community andtherefore social network is an important influence on adoption. Theproduct characteristics are also indicated to affect the rate at whichdiffusion takes place. The relative advantage of the innovation overits substitutes is an important influence on its acceptance [37]. SPVhas a distinct advantage in meeting the needs of remote commu-nities because of the high distribution costs of grid-power to thismarket [38,39] and the advantage increased with the oil shock [40].Empirical studies have shown that in a variety of situations thegrowth of a technology over time may conform to an S-shapedcurve, which is a combination of simple and modified exponentialcurves [41]. The S-shaped curves characterized by a slow initialgrowth, followed by rapid growth after a certain take-off point andthen again a slow growth towards a finite upper limit to thedissemination [42]. Therefore, a logistic model is used to estimatethe theoretical cumulative number of SHSs considered in the studyat different time periods.

As per the logistic model, the cumulative number, N(t), of theSHSs disseminated up to a particular period (tth year) can beexpressed as [42]

NðtÞ ¼ Nshs

�expðaþ btÞ

1þ expðaþ btÞ

�(5)

where the regression coefficients a and b are estimated by a linearregression of the log–log form of Eq. (5) as given below.

ln

24 NðtÞ

Nshs

1� NðtÞNshs

35 ¼ aþ bt (6)

The use of SHSs within the electrified households is still ques-tionable in near future. It may be possible that people will no longeruse the SHSs once they will get grid connection. Using the devel-opment path of China as an analogy it is assumed that in the year2019 India will achieve 100% rural electrification5. It may be noted

5 With the inherent assumption that India will follow the development path ofChina (at present China is 95% electrified with a GDP per capita of 1554 US$), theresults show that India can achieve the current GDP per capita of China in the year2018–2019 (in the high growth scenario). Therefore, it is assumed that India canachieve the 100% electrification in the year 2019 though the Indian Governmentaims to achieve 100% village electrification by 2007 and 100% household electrifi-cation by 2012 (www.powermin.nic.in; www.bharatnirman.gov.in).

Table 7Regression coefficients for the logistic curve used for the diffusion of solar homesystems in India.

Scenario(s) Regression coefficients R2

a b

Standard (SS) �10.2620 0.3091 0.9660Optimistic (OS) �9.1649 0.3096 0.9662

Table 8Projected values of the cumulative number of solar home systems and associatedcarbon credits.

Year Number of SHSs(million)

Installed capacity ofSHSs (MWp)

Annual CERgeneration(million)

SS OS SS OS SS OS

2012 2.0 5.9 75.1 219.7 0.5 1.42016 6.7 18.3 247.8 675.5 1.6 4.42020 15.6 37.4 575.8 1384.2 3.7 9.0

P. Purohit / Energy 34 (2009) 1014–10231022

that after getting the reliable electricity supply through the grid thehouseholds will no longer buy the SHSs. However, users whoalready have the SHS will use it up to the useful lifetime of thesystem. In India, the emphasis on subsidy by the support pro-gramme shifts the focus to the cost of the solar systems than theirbenefits. Velayudhan [22] examined the reasons for the limiteddissemination of solar lanterns in India. It uses ‘‘diffusion of inno-vation’’ framework to examine the dissemination process. It isobserved that subsidy for solar systems and the targets set forgovernment officials are the possible influence on the observedprofile for adopter categories. In principle, the early majority whocan afford the solar systems and take up the innovation on itsmerits are expected to disseminate the innovation. However, theprogramme on promotion of solar systems on the contrary not onlyfails to identify and promote to the early adopters, but focus on thedisadvantaged groups. In the absence of word-of-mouth commu-nication and restriction on the information sources by thegovernment agencies, the penetration level is far below from theirrespective potential. Therefore, in this study two cases such asstandard scenario (SS) and optimistic scenario (OS) are presented inwhich the SS is subsidy driven whereas in the OS it is assumed that,in the past, if the diffusion of SHSs would have been driven by themarket forces instead of subsidies then the cumulative number ofinstallation of SHSs would be three times more than the actual level[43–45]. The values of the regression coefficients using logisticmodel have been estimated by regression of the time series data forthe installation of SHSs (Fig. 4) extracted from the annual reports ofthe MNRE. Table 7 presents the regression coefficients for thelogistic curve used for the diffusion of SHSs in India. It may be notedthat the data on cumulative installed number of SHSs in India from1992–1993 to 2007–2008 is used to obtain the regression coeffi-cients presented in Table 7.

Fig. 10 represents the projected time variation of the cumulativenumber of SHSs using the logistic model considered in the study. Inthis analysis the total number of households using SHSs with timeis kept constant. Our results indicate that in India, even with highly

0

5

10

15

20

25

30

35

40

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035Year

Cu

mu

la

tive n

um

ber o

f so

lar h

om

e

lig

htin

g system

s (m

illio

n) SSshs

OSshs

100% electrification of households

Fig. 10. Time variation of cumulative number of installation of solar home systems inIndia using logistic growth model.

favorable assumptions, the dissemination of SHSs for domesticlighting is not likely to reach its maximum estimated potential inanother 20 years. But all these time periods are not relevant for theCDM whose current endpoint is 2012 and which may only be ableto live longer if post-2012 negotiations retain an emission targetbased policy regime. However, CDM could be used as a tool to fosterthe dissemination of SHSs in the country. It could accelerate thediffusion process. The projected values of the cumulative number ofSHSs and likely CER generation using the logistic model are pre-sented in Table 8. It may be noted that with the current trend ofdissemination of SHSs in the country around 2 million SHSs couldbe installed up to the end of first crediting period in the SS whereasin the OS around 6 million SHSs could be installed. Up to the year2020, more than 15 million SHSs are expected to be installed thatwould generate more than 3.5 million CERs in the SS whereas in theOS, more than 37 million SHSs are expected to be installed thatwould generate around 9 million CERs.

8. Conclusions

A macro-level assessment to estimate the CO2 emissions’ miti-gation potential of SHSs under CDM in India is presented in thisstudy. The preliminary estimates based on this study indicate that,there is a vast theoretical potential of CO2 reduction by the use ofSHSs for domestic lighting in India. The theoretical potentialnumber of SHSs has been estimated at 97 million. The annual CERpotential of SHSs in India could theoretically reach 23 milliontonnes. Under more realistic assumptions about diffusion of SPVtechnologies based on past experiences with the government-runprogrammes, annual CER volumes by 2012 could reach 0.5–1.4million and by 2020, 4–9 million. CDM could help to achieve themaximum utilization potential more rapidly as compared to thecurrent diffusion trend if supportive policies are introduced.However, it is questionable whether such a policy would be anoptimal use of scarce resources, given the fact that CDM projects inother sectors are much more attractive.

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