Author: pmanifold@admin

Cooking landscape in India

Approximately 40% (2.8 billion people) of the global population still cooks with either wood, dung, coal, or charcoal. Nearly 84% of rural Indian households cook on stoves that use solid or biomass fuels. In India, women spend an hour every day collecting firewood. This time dedicated to collecting firewood and cooking limits their ability to attend school and generate income. Moreover, women are exposed to toxic pollutants released from the burning of solid fuels (wood, charcoal, etc.).

Also, the burning of solid fuel in inefficient traditional stoves is responsible for the emission of various indoor air pollutants, which have direct and indirect impacts on the health of women and children. According to the Global Burden of Disease estimation, solid fuel burning for cooking accounted for 6 lakh premature deaths in 2019 in India. Thus, it is need of the hour to transition to electric cooking solutions which include access to electricity, and cleaner, more efficient stoves.

Benefits of Electric Cooking

Electric cooking is cost-effective, safer, more energy-efficient, requires less maintenance than conventional cooking methods, and is free of emissions. Additionally, Electric cooking can also make use of solar power in both urban and rural areas. Presently, about 24% of the electricity consumed in India is generated from renewable resources, and planning to expand it to 40% by 2030. This will be more viable in rural areas where the electricity grid may not be very reliable but solar energy is easier to provide.

Some of the key benefits of electric cooking are:

Despite the benefits of electric cooking only ~5% households use electric cooking devices today.

Moreover, there is a high willingness to shift to electric cooking, however, there are certain barriers which needs to be addressed. Let’s understand what are these barriers!

Barriers to transition to Electric cooking

Getting consumers to adapt to new technology is a tricky proposition anywhere, but when it comes to electric cooking, its adoption remains riddled with more challenges. Affordability remains the topmost one, especially for a household that relies on biomass fuel which is available for free. An electric cook stove (induction to be precise)uses electromagnetism to heat cookware, which means that the utensils have to contain enough iron to generate a magnetic field around them. For a consumer, this not only means bearing upfront costs, as well as maintenance costs, but also the cost of switching to compatible cookware. This is something the majority of the households might not be willing to bear when their existing utensils and source of fuel are working to their convenience.90% of Ujjwala beneficiaries still use solid fuel for cooking.

The flame-based cooking offered by LPG and biomass is an important barrier that needs attention and resolution as chapatis, an integral food item of an Indian meal does not get cooked properly on an electric cookstove. According to a survey conducted by the Stockholm Environment Institute, majority of Indian women surveyed in rural area said they preferred cooking chapatis the traditional way in a clay oven, or over open fire, because it tastes better.

Another critical barrier is thelow-level perception for electric cooking mostly in rural areas. This issue is especially important, because it is this that is at the heart of the successful adoption of electric cooking technology. Consumers are sceptical about electric cooking appliances in terms of meeting their daily needs, durability and safety. Even though, firewood and LPG based cooking is quite unsafe.

In urban areas, there is lack of motivation to use electric cooking appliance. The incremental reduction in cooking cost is not of much interest as there is a high level of satisfaction and security in using LPG/ PNG.

The government of India has made efforts to enhance access to clean cooking energy through the ‘Go Electric’ campaign, launched by the Bureau of Energy Efficiency (BEE) talks about spreading awareness of the benefits of electric cooking in India. The draft National Energy Policy by NITI Aayog also aims to achieve access to clean cooking energy for all by 2022, emphasizing on electric-based cooking. However, this impetus from the government for widespread penetration and adoption of electric cooking is still limited. There is an elemental issue to the government’s plan of powering India’s cooking through electricity which is lack of electricity supply. While huge strides have been made in the area, power supply in most rural areas remains irregular at best. According to news reports, 10 states receive less than 20 hours of power, with nearly 30 million households that don’t receive power. Which brings us to the question — how can electric cooking be adopted if people can’t use it?

Way forward

To help adoption of electric cooking appliances it is important that traditional practices around cooking is understood and either accepted or countered when introducing electric cooking. The value proposition of electric cooking needs to be rightly communicated which requires focused and customized marketing strategies for electric cooking appliances. The varying acceptance patterns for electric cooking by men and women need to be understood and used for targeted communication. Hence, there is a need to build awareness about electric cooking which is not linked to only product features. There is a need for electric cooking industry to invest in social and behavioral research and use the information for product design, diversification and variety and also for marketing communication drive the transition.

Moreover, the potential end-users needs to be correctly identified. Pushing the economically stressed rural households with intermittent power supply may not be the right stakeholders for to start electric cooking uptake. If it has to then it needs to be supported by right financing mechanism. Rather it could be the urban population (including hotels, hospital, office canteens, schools and other institutions) with stable electricity supply that can be targeted for mass adoption. Possibly India may not transition completely to electric based cooking but both forms can co-exist with electric becoming the primary source of cooking. Moreover, if the Government of India develops a dedicated program to promote electric cooking with the participation of all State Governments, electric utilities, and all other related stakeholders and civil society associations to an aim to make electric cooking affordable and user-friendly for lower strata of the society, then electric cooking definitely will see a brighter future.

India stands strong in achieving universal access to electricity with almost 100% electrification by 2019. The national grid has played a very important role in improving this access, but its reliability continues to pose a challenge, and more so in semi-urban, rural and remote areas. Distributed Renewable Energy (DRE) in the form of solar roof tops (SRT) and solar home systems (SHS) tied with efficient appliances help improve reliability of service and are seeing increased adoption. By some estimates, there are approximately 4 million HHs (1.4% of the total 277 million HHs in India) with some form of SRTs or SHSs in India.

Many of the previously used SHSs were standalone systems powering AC and/or DC Appliances with energy storage. Today, there is a new class of DRE solutions commonly termed Hybrid Solar Systems, which integrates solar with AC grid power (uni or bi-directional) and can power AC and/or DC appliances. Such new Hybrid AC-DC (HAD) power solutions can help users to take advantage of solar power – improving supply hours and reducing their Power Distribution Company (Discom) energy bills. India saw estimated annual sales of some 0.8 million units of solar hybrid inverters or uninterruptible power supply (UPS) systems in 2019 (compared to some 8 million-unit sales of conventional inverters) and there is an expected increasing trend.

More and more power systems and appliances OEMs and System Integrators are joining this fast-growing HAD market in India. There is a new class of efficient appliances (including lights, bulbs, fans, TVs, refrigerators, washing machines, pumps, etc.) that use fundamental DC-run LED or BLDC motors, and can be run on AC supply and/or DC supply. Some further innovations in appliances include embedding energy storage inside the appliance to avoid the need for costly centralized power back-up solutions. These innovations on the appliances side will further push for increased need of enabling HAD infrastructure for the synergistic co-existence of AC and DC.

In this regard GOGLA initiated a whitepaper which evaluated the opportunities for HAD infrastructure in India. The paper evaluates potential customer segments expected to drive the demand for HAD solutions. The demand assessment identified HHs with no power back-up solution, potential HHs with grid-connected solar rooftops, existing conventional inverter customers, existing mini/micro grid customers and existing SHS users as the potential customer segments to transition hybrid solar systems.This paper also suggests three key strategies to enable these customer segments HHs to shift to HAD power solutions as below:

• Strategy-1: Upgrading existing power back-up solutions
• Strategy-2: Adding new HH that do not have any power back-up solution
• Strategy-3: Replacement at end of product life

To further strengthen the HAD infrastructure in India, below key recommendations were made to the OEMs, Government and Industry Associations. The findings of the study were shared through an online webinar along with industry experts.

During the launch event, Padmashri Prof. Ashok Jhunjhunwala stated small (<1kW) and large (>3kW) size of HAD power solutionwhich can also feed solar power back to grid can be designed at low-cost and scaled-up. It has immense potential to cover every home in India. He also emphasized that there is a need for remote monitoring, data analytics and controls to designsuch HAD system which will ensure there is no wastage of solar power, minimum usage of AC grid power and at the same time have sufficient power back-up.

Shiva Srivastava, Marketing Leader Asia from Greenlight Planet converged on the thoughtthat HAD is a very promising technology and futuristic as lot of homes are getting connected to grid and already using SHS. Venkat Rajaraman, Chairperson GOGLA India Working Group highlighted the strong need of hybrid AC-DC infrastructure as there is proliferation of EE DC appliances and grid extension. He also mentioned that he views HAD technology for residential sector would fit well and also be a big opportunity area for HAD power solutions.

Rajesh Kunnath, Radiostudio and Convener IEEE LVDC Standards said there are many gaps in standards and there has to be reports like this which act as a backbone to understand HAD architecture and credible market opportunity that is scalable. This will energize the standards body and pave way for manufacturers to participate in standardization to improve reliability. Adding to this Makena Ireri, Manager from CLASP highlighted that it will be important to facilitate R&D and pilot demonstrations as they help bringing more market players and bringing down the technology costs.

Acknowledging the study, Koen Peters, Executive Director, GOGLA mentioned that the research has come very timely as there are developments in industry with EE DC appliances and hybrid solar systems. He also stated that standardization may be a driver to innovation, and it would be wise for the industry to come up with the ideas as to what needs to be standardized and in what ways, before bringing it to BIS or IEEE to have a better direction to promote innovations.

It was concluded by Rahul Bagdia, Managing Director, pManifold that evidently the market is heading towards hybridization, i.e. integration of AC-DC power supply and appliances that support these systems. However, challenges like high upfront equipment cost, high sales effort, low customer awareness, and lack of standardization are an acknowledged reality. Yet, these factors should not deter off-grid players from diversifying and offering HAD solutions to customers. The key industry stakeholders like OEMs, Government and Industry Associations will play a vital role towards mitigating these challenges and enabling growth of HAD infrastructure in India.

Download Report

Distribution Franchisee (DF) model has only recently picked traction since 2009 after successful demonstration by Torrent Power Ltd. at Bhiwandi, Maharashtra, which got operational in 2007. The success there has sparked private businesses interest into the sector with more than 30 corporates jumping into the fray.

Many of the businesses comes from very diverse background of telecom, IT, infra, media, iron & steel etc. and it will be there new entry into the power sector, starting with distribution.

The emerging nature of the DF model, high return promise, low entry barriers, closer to end-consumers, focused high capex with predictable cash flows and easy financial leverage under energy efficiency are some of important investment attractors.

The risks of operationalization of DF are still getting unearthed with less than 3-5 implementors. Most businesses are intuitively betting on capitalising the high ATC losses in range of 30-50% in DF selected areas. The 15-20 years DF contracted period with estimated 4-5 years to bring losses to range of 15% makes viable ROI.

While the credibility of delivery from new players is still to be tested, there stands a strong chance of these new players bringing professionalism, technology, IT, measurements driven performance, analytics, strong SLAs (Service Level Agreements), and much forgotten customer focus back to the utility business.

Under light of this, is DF a good PPP model? Does it has potential to scale? We will continue sharing our views and also from best industrial experts on this in coming articles under label of ‘Smart Distribution’.

Post by: Rahul Bagdia @ pManifold.

With ongoing operationalization of Distribution Franchisee (DF), one common question that keeps hitting again and again is ‘Why need of DF? What it can do, which utility cannot or have not?’. While answer to this is pretty subjective, I would share my opinion in 3 breakups

Key issues that are affecting profitability of distribution utility

• What are key issues with Distribution Utilities?
• How that has constrained key stakeholders potentials?

Does Distribution Franchisee has solutions to above?

• Link from Measurements (MIS) to Effective Distribution Management missing
• Lack of Incentivization
• PSU Organizational Constraints
• No Investment in skill enhancement
• Low Enforcement
• Govt. hindrance & manipulation
• Low Accountancy

Key stakeholders revenue potential constrained with missing last-mile robustness

• End consumers not getting reliable, sufficient and rightly priced power
• Generators unable to get guaranteed evacuation of all generated power
• Distributors (Utilities) themselves in losses
• Power Traders do not have predictability
• Does DF has a solution to above

At the end of day, it will do same thing as utility, but with a difference – more concentrated ownership that will expedite decisions to actions. Another way to look upon it will be as an extended ‘Business Outsourcing’ model, wherein the Franchisee becomes the new front end to the end-consumers, but assets still remains on book of the original Utility. The real underlying phenomenon driven by franchisee model is

• Performance benchmarking through establishing baseline
• Incentives alignment of all stakeholders

It is this ‘Measurements and Analytics’ that will drive the change and bring above suggested values to all stakeholders.

Post by: Rahul Bagdia @ pManifold

An obvious question with so much projected on Distribution Franchisee (DF) model is:

What real gains both the utility and end-consumers could expect coming out of the Distribution Franchisee model?

While Bhiwandi implementation of Distribution Franchisee has shown increased consumer satisfaction for improved service levels, but it is yet to be proved conclusively that the model has brought any significant monetary gains to the utility. The slow emergence of a potential impactful model (distribution franchisee) amidst opposition – from utility employees and end-consumers, could be attributed to missing INFORMATION and transparency. Opposition from utility employees is obvious as DF with its flavor of privatization is based upon driving cost efficiency by increasing productivity and hence reducing on numbers of utility employees. But opposition and fear from end-consumers is little less understood, when it doesn’t matter that same power at same tariff (decided by State regulators & common to the state) comes from utility or DF. May be this fear from end-consumers has some roots in weaken regulation/enforcement or mis-information or perceived apprehensions.

In any case, going forward there are many questions, that needs clarification to smoothen resistance, but more importantly to engage all stakeholders well to co-create sustainable solutions. A few of importance are:

1. With reduced AT&C losses from 50+% to order of 15% and reduced administrative & operations costs, could it be expected to see decreasing power tariffs (or atleast no changes for 5-10 years inspite of rise in power procurement costs) as realised by end-consumers? If and how does DF monetary gains could be shared with its end-consumers?
   • Since there is only one state level tariff plan prepared, consolidating audit reports from each circles/zones, the good and bad performances of different circles (including that of Franchisee’s) get mixed to create one tariff plan. So in such case unless more decentralization penetrates in distribution, that DF circle end-consumers cannot expect their tariff plan alone to be improved. If however DF model scales all through out the state, then combined benefits could still bring common savings to all state end-consumers.
   • Above would also mean that even if one circle’s management did a poor job of cutting its AT&C losses, there is no way of penalizing them independently. The entire state end-consumers get penalized equally. This is one serious missing incentive structure that has plagued utility’s performance.
2. How does exactly DF implementation improves profitability of the utility?
   • What are financial calculations that local utility has to consider to make a strong case for bringing in Distribution Franchisee over business-as-usual case? What profits (if any) can utility expect by leasing out its assets for 15 years to Distribution Franchisee?
   • How does the effective cost of distribution to local utility is accounted in setting benchmark input rates and its locking for next 15 years? We only hear the price realization terms like ABR (Average Billing Rate) and tariff setting term ARR (Aggregate Revenue Requirements) in RFP, but no comparison of these with actual cost of distribution.
   • Has post DF termination and appropriate depreciation of assets already being accounted in investment decision making?
   • Is utility prepared to take charge again post DF tenure or will it re-lease another DF term or there will be full privatization?

Post by: Rahul Bagdia @ pManifold