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Investment Opportunity: EmPP has a complementary financing package with the following investment options depending on the particular needs of the investor and the project: · Local Equity from village · Government Subsidy (MNES technology subsidy) · External (Indian and foreign) Equity · Carbon Certificate Sales (secured for a number of projects) · Commercial bank loans for power plants and micro enterprises · Grants An investment of Rs. 85 lacs per village includes local infrastructure, capacity building, training and the running cost of support services for 3 years. The total investment of 100 villages is envisaged to be 85 Crores. DESI Power packages and optimises the projects to ensure that all projects have the highest possible social, environmental and financial return on investment.
The Status of Access to Electricity in Rural IndiaThe Indian government has decided to “electrify” 18000 remotely located villages on the basis of decentralised power supply systems based on renewable energy resources and technologies. It is a great decision which, if properly implemented, can contribute substantially to reduce poverty in these villages and promote their sustainable development. It is generally recognised that about 300 million people in India (abt. 1.6 billion people around the World) have no access to commercial sources of energy. It is also recognised by many that that one of the main causes of poverty and the lack of progress in the rural areas is the inadequate and unreliable electricity supply and modern energy services. No non-traditional productive activities are possible without them. The record of the last fifty years of rural development, therefore, reinforces the special relevance of Gandhiji’s vision of self-reliant villages. Gandhiji’s basic concept is even more valid today than it was during his life time and it stands a much better chance of success now, thanks to Nehru’s vision on technological self-reliance and higher education, and Dr. Singh’s vision on liberalisation. The reasons are as follows: Ø It has become painfully evident during the last decade of liberalisation that it is well nigh impossible to mobilise the enormous amounts of capital required for large power stations to supply fossil fuel based electricity within a foreseeable period to every Indian, to every large and medium industries, to new rural micro-enterprises, to the agricultural sector and the urban and rural public services. Ø Even if the capital was available, the impending exhaustion of cheap sources of oil and gas, and the adverse environmental and ecological impacts of all fossil fuels, will bring to an end the era of fossil-fuel-driven industrialisation within fifty or hundred years. The impacts of green house gas emissions on the climate is already becoming evident. Ø Modern mature renewable energy systems are, on the other hand, available now and can supply reliable and affordable electricity, irrigation water and energy services at prices which are competitive with non-subsidised conventional fossil fuel based grid supplies and captive generation. Ø Many more technological solutions for local value addition through small scale industries in villages are available today than during Gandhiji’s days. A host of traditional and new agro-based industries and micro-enterprises can operate profitably in villages if reliable electricity supply is available Ø Local value addition of local resources, increased farm productivity and “export” of traditional and new products and services to nearby urban and peri-urban areas will promote faster economic growth and create local employment in villages. One such example is the supply of modern, village processed, cooking fuel based on agro-residues to replace the largely vanished fuel wood and fossil fuels. Ø Export of goods and services will increasingly become an alternative to the poverty driven migration of the village youth to city slums. Ø Investment in an EmPower Partnership Project in a single villages is relatively small. Local investments will be made in them by local groups and individuals if the projects are seen to generate profits and jobs within a framework of incentives from the government and support from the rural banking system. Ø The liberalised economic regime and the political framework of village Panchayats enable the government to promote a long-term public-private partnership model for the financing of the EmPower Partnership Projects. Financial Advantages of Decentralised Biomass Power Plants Of the more than half a million villages in India, where close to 65% Indians still live, about 310,000 villages have been declared to have been already electrified. According to government statistics, 80,000 more villages remain to be electrified. The State Governments have been directed to take up the electrification of 62,000 villages through the Electricity Boards under the traditional rural electrification programmes. The Government of India has also directed The Ministry for New Energy Sources, (MNES) to take up renewable energy based electrification of 18,000 villages in remote and inaccessible parts of the country. In actual practice, most of the electrified villages do not have reliable, adequate, or good quality power. No commercial investments in micro enterprises can therefore be made by either individuals or companies without installing diesel generators which have a very high generating cost, create adverse environmental and climate change impacts, cause high foreign exchange outflows and reduce the country’s energy security . As the experience of DESI Power’s EmPower partnership programme demonstrates below in Table 1, grid supply to remote areas is not competitive with electricity supply from modern decentralised renewable energy power plants. Table 1 below makes a general comparison (based on 2004 data) between centralised grid supply and decentralised local generation and supply of electricity. Figure 1 below compares the electricity prices at the end-use point from the two alternative supply systems. Table 1: COST OF SUPPLYING POWER TO A VILLAGE
The saving of CO2 emissions will be an additional gain to the global community. The EmPP Framework
Activities under the 100 Village EmPP Programme
Village Industrial and Household Services For the renewable energy based rural electrification to succeed without perpetual subsidy and losses it is essential to satisfy the critical condition of power supply and local load: 1. An adequate number of micro-enterprises should buy enough electricity to enable the electricity supply to be commercially viable. 2. Adequate amounts of affordable and reliable electricity should be locally available not only for domestic lighting and cooking but also for local micro industries and water pumping. Both these conditions can be met if the other government programmes on rural job creation and rural small scale industries were implemented simultaneously in an integrated manner with the government’s programme on renewable energy based rural electrification. EmPP is structured to ensure that these conditions can be met. PROJECT and FINANCIAL INFORMATION
A typical list of micro enterprises, water and energy services for an EmPower Partnership program is given in the table below:
The “Triple ROI” criteria for financing the EmPP programme One of the axioms of the current neo-liberal economic thought is that ALL investments must be justified on the basis of an adequate ROI otherwise the private sector will not invest. Issues related to fairness and equitable sharing of common resources, external costs and long term damages caused by economic activities carried out for private profit, and the short and long term monetary costs of social unrest, are not taken into account in such investment decisions. One of the hardest tasks of everyone involved in promoting sustainable development is to try and convince policy makers, private sector investors and financial consultants that ROI as the sole criteria is not adequate for programmes covering sustainable energy, economic and social rural development and poverty reduction. Economic, social and ecological consequences should be simultaneously considered in making investment decisions and selecting projects and a single “Triple ROI” criterion should be used for this purpose. The EmPP programme, on the other hand, promotes projects which combine social and ecological benefits with a fair financial return. The 100 village programme will create over 2500 direct, year round, jobs in addition to indirect jobs through increased farm production, new trading and commercial activities, and energy services. It will also reduce pollution, improve women’s health and reduce the migration to city slums. Overall, the growth of the GNP as well of the human development index of the village can be quantified and demonstrated for the large scale replication of the EmPP model. Typical Performance Criteria ("Triple Bottom Line") of EmPower Partnership Projects
DESI Power’s EmPP program seeks social investment in the rural development market place under a model of public-private partnership. EmPP is positioned to create local sustainable markets for decentralised power supply, energy services and micro-enterprises in Indian villages. Led by a network of social entrepreneurs and supported by a public-private network of partners, the project is well-positioned for successful revenue-based financial, social and environmental returns on investment. The project is an excellent multi-stakeholder response to poverty in rural India. The Government subsidy combined with private investment and the selling of the saving of CO2 emissions (under Clean development Mechanism of the Kyoto Protocol or under many existing voluntary schemes) will provide the start up capital for leveraging commercial bank loans and grants. ICICI has done its due diligence and is already providing loans for the first five projects. SBI and DESI Power are negotiating an agreement under which SBI will provide loans and organise government subsidies for village micro enterprises and local businesses. Grants are being sought for covering the costs of capacity building, training and the initial running costs of the Cluster Centre which provides continuing extension services to the villagers. DESI_MANTRA, a management training centre especially for women, has been established and the first batch of successful women are working in DESI Power on various assignments for the first five village projects. Roughly 600 people have to be trained during the next 3-4 years. The combined economic, social and ecological returns from the EmPP plants makes them one of the most cost-effective instruments for poverty reduction in villages and for promoting their sustainable development. Overall, the growth of the GNP as well of the human development index of the village can be quantified and demonstrated for the large scale replication of the EmPP model. With course corrections in planning and implementation based on “lessons learnt” in the pioneer EmPP projects, the profitability projections of new projects in the 100 village programme appear to be quite realistic. Corrective steps including capacity building of a bigger number of local people for the management team and operational staff (DESI_MANTRA); better selection, mix and larger numbers of micro-enterprises to match local resources and markets and give at least 70% PLF; higher investment in micro enterprises; more energy and house hold services such as drinking and irrigation water and cooking fuel; pure gas engines; and a profit oriented financing model; promise to ensure the technological, social, ecological and financial viability of the EmPower Partnership Program. |
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