Global energy-related greenhouse gas (GHG) emissions remain a significant threat to the climate due to their due to their magnitude and longevity. As per International Energy Agency (IEA) analysis[1], the total energy emissions increased to an all-time high of 41.3 Gt CO2-eq as shown in Figure 1.
Figure 1. Global Energy GHG Emissions
The emissions from energy combustion and industrial processes accounted for nearly 89% of emissions in 2022.Additionally, methane emissions from energy combustion, leaks and venting contributed another10%. These emissions present a stark picture of the climate change situation, as evidenced by recent extreme weather events observed worldwide (e.g., heat waves, floods, droughts, wildfires, etc.).According to the IEA’s World Energy Outlook 2022 analysis[1], global greenhouse gas (GHG) emissions are on track for a significant increase if investments in climate change mitigation are reduced and strict policies are not implemented. The projections indicate that energy related GHG emissions could surpass 55 GtCO2-eqby 2050.
This situation underscores the pressing need for immediate investment in energy transition technologies, encompassing both the supply side (renewable energy, nuclear power, energy storage, hydrogen, etc.) and the demand side (e-mobility, electrified heat, etc.). Historically, countries have predominantly directed significant investments towards fossil fuels to bolster energy security. However, energy transition investments matched fossil fuel investments for the first time in 2022, reaching USD 1.1 trillion, as depicted in theFigure 2. This represents a notable increase of USD 261 billion from the previous year.The shift in investment towards cleanenergy is a historic change that is unlikelyto be reversed, as low-carbon industriescontinue to grow.
Figure 2. Investment Comparison: Energy Transition (ETI) vs. Fossil Fuels (FF)
Figure 3. Energy CO2Emission Reductions by 2050 in 1.5°C Scenario
It is important to note that the current investment levels, although encouraging, are insufficient to propel towards the ambitious goals of1.5°C pathway.To set a course on a 1.5°C pathway, the energy transition urgently needs to accelerate; therefore, a holistic, multi-faceted approach is necessary.International Renewable Energy Agency (IRENA) analysis shows that a combination of renewables (both power and end use, electrification and fuels such as hydrogen) and energy efficiency, can provide 80% of the CO2 reductions needed to align the world on a 1.5°C pathway, as shown in Figure 3.To achieve this target, it is estimated that an annual average investment of USD 4.4 trillion will be required, which is equivalent to about 5% of global gross domestic product (GDP).
Potential sources of this funds
Climate finance investments have seen contributions from both public and private sources. Public sources, such as governments themselves; a combination of national Development Financial Institutions (DFIs), multilateral and bilateral DFIs; state-owned financial institutions; and others have played a significant role by providing grants and debt financing. Similarly, private sources, including commercial banks and corporations, have been at the forefront of financing climate-related initiatives. Some of the potential sources are explained below:
Many governments are establishing the banks as National Development Financial Institutions (DFIs) that focuses on raising and investing fundsacross different industry sectors of the country. This is becoming governments most important financial institution to support and mobilise capital to develop productive investments. Many countries like Germany (kfW), Singapore (DBS), Brazil (BNDES), India (SIDBI), South Africa (DBSA), etc. has their own DFIs established and are promoting and supports the development of innovation, a green economy and sustainable projects.
Green Bondsare a form of debt instrument and were developed in 2008 in response to growing concern about climate change and sustainability. When an entity issues a green bond, it is essentially borrowing money from investors who purchase the bond. The issuer agrees to pay back the principal amount of the bond along with periodic interest payments over a specified period of time.As of January 2023, green bonds have raised $2.5 trillion globally[1] to support green and sustainable projects.The World Bank, known for issuing the inaugural green bond in 2008, has continued its leadership in this field. To date, they have issued over 200 green bonds in 25 currencies, making significant contributions to the development of sustainable finance. Their efforts have also resulted in the establishment of the Green Bond Principles (GBP), which have emerged as international best practices for transparency and disclosure in the green bond market. [4]Low-cost Finance for the Energy Transition, IRENA 2023
International financial entities likeGlobal Environment Facility (GEF), Green Climate Fund (GCF), etc.have a primary goal of providing support for global environmental and climate-related projects. These entities place a strong emphasis on country ownership and alignment with national priorities and plans. They support projects and programs that include technical assistance and investments (typically for pilot implementation), which are in line with recipient countries’ national climate strategies and objectives. These funds are intended to mobilize additional resources and leverage investments from various stakeholders within the respective countries. So far, the GEF has disbursed over $22 billion in grants and blended finance, while also mobilizing an additional $120 billion in co-financing for over 5,000 national and regional projects[2]. Likewise, GCF has raised USD 10.3 billion equivalent as of July 2020[3].
Innovative financing tools such ‘debt-for-climate-swaps’ in which international creditors will agree to reduce debt, either by converting it into local currency, lowering the interest rate, writing off some of the debt, or through a combination of all three. The debtor will then redirect the saved money towards initiatives aimed at increasing climate resilience, lowering GHG emissions or others.
The expansion of blended finance refers to the increasing use and promotion of innovative financing mechanisms that combine public and private resources to address development challenges and mobilize additional investment. It can play an important role in derisking investments, attracting private capital, etc. to projects and initiatives that contribute to sustainable development.Public resources alone are often insufficient to address the vast financing needs required for sustainable development. By blending public and private resources, governments, development finance institutions, and other stakeholders can leverage the strengths of both sectors.
The above discussion highlights the importance of investments in energy transition technologies. Countries need to not only increase their own investments but also facilitate greater financing in developing and emerging economies. It is essential to recognize that relying on just a few financing solutions will not be sufficient. Instead, countries must explore multiple financing options to create economies of scale for emerging energy transition technologies.
The development of cold chain infrastructure is crucial for a country like India, which has a large agricultural sector and a significant need for efficient storage and transportation of perishable goods such as fruits, vegetables, dairy products, and pharmaceuticals. Government policies and initiatives play a key role in the large-scale development of cold chain infrastructure in India. The Indian government recognizes the importance of cold chain infrastructure and has implemented various policies and initiatives to promote its large-scale development.
One of the key approaches taken by the Indian government is the introduction of subsidies and grants-in-aid to incentivize the establishment of cold chain facilities. These financial incentives aim to offset the high capital costs involved in setting up cold storage units, refrigerated transportation, and other infrastructure components. The subsidies help reduce the financial burden on entrepreneurs and encourage private sector participation in cold chain development.
These flagship programmes promote the development of complete end-to-end cold chains, from the source to the end-customer. These initiatives aim to bridge the gaps in the existing supply chain and ensure the seamless movement of perishable goods. Some of these programs include:
Mission for Integrated Development of Horticulture (MIDH)
MIDH is a government scheme for holistic growth of the horticulture sector ((fruits, vegetables, root and tuber crops, mushrooms, spices, flowers, aromatic plants, coconuts, cashews, cocoa and bamboo shoots). It provides financial assistance, including for cold storage. Subsidies of 35% (or 50% in hilly areas) are available. MIDH helps establish energy-efficient multi-chamber cold storage units with thermal insulation, humidity control, advanced cooling systems, and automation. Long-term storage hubs up to 5,000 MT capacity are covered by NHM/HMNEH, while 5,000-10,000 MT hubs are covered by NHB scheme.
National Horticulture Mission (NHM) / Horticulture Mission for North East and Himalayan States (HMNEH)
Long-term cold storage and distribution hubs of up to 5,000 MT capacity are eligible for assistance under this open-ended sub-scheme of MIDH. Assistance comes in the form of credit linked subsidies, amounting to 35% of the capital cost of the project, or 50% in NE, hilly and Scheduled Areas.
National Horticulture Board (NHB)
The National Horticulture Board (NHB) is implementing the “Capital Investment Subsidy for Construction/Expansion/ Modernisation of Cold Storages and Storages for Horticulture Products.” Under this scheme (a sub-scheme of MIDH), assistance is available for the installation and modernization of cold storage units with capacity between 5,000 MT and 10,000 MT. This is an open-ended credit-linked programme offering subsidies amounting to 40% of the capital cost of a project (limited to INR 30 lakhs per project), or 50% in NE, hilly areas and Scheduled Areas (limited to INR 37.50 lakhs per project) sub-scheme of MIDH. Assistance comes in the form of credit-linked subsidies amounting to 35% of the capital cost of the project, or 50% in NE, hilly and Scheduled Areas.
Pradhan Mantri Kisan SAMPADA Yojana (PMKSY)
SAMPADA stands for Scheme for Agro-Marine Processing and Development of Agro-Processing Clusters. It consists of a comprehensive package to create modern infrastructure and efficient supply chain management from farmgate to retail outlet, with the goal of boosting the growth of the food processing sector and improving returns for farmers. This is in line with the GoI’s goal to double farmers’ income, creating significant employment opportunities in rural areas. It also reduces food waste, using efficient and modern technology to help the food processing industry and export houses convert surplus produce into an export commodity.
The following will be developed under PMKSY:
Mega Food Parks
Integrated cold chain and value addition infrastructure
Creation, expansion and modernization of food processing and preservation capacities
Infrastructure for agro-processing clusters
Backward and forward linkages
Food safety and quality assurance infrastructure
Human resources and institutions
So far, the Ministry has approved 41 Mega Food Parks, 353 cold chain projects, 63 agro-processing clusters, 292 food processing units, 63 backward and forward linkages projects and 6 Operation Green projects across the country.
Scheme for Integrated Cold Chain, Value Addition and Preservation Infrastructure
Part of PMKSY, this scheme is implemented by the Ministry of Food Processing Industries (MOFPI) with the aim of reducing post-harvest produce losses and providing better prices to farmers for their produce. Financial assistance (grants-in aid) is limited to a maximum of INR 10 crore per project for technical civil works, eligible plants and machinery, subject to the following conditions:
For storage infrastructure (including packhouses, pre-cooling units, ripening chambers and transport infrastructure), grants-in-aid are provided amounting to 35% of total project cost, or 50% for NE and Himalayan States, Integrated Tribal Development Project (ITDP) Areas and islands.
For value addition and processing infrastructure (including frozen storage and deep freezers integral to processing), grants-in-aid are provided amounting to 50%, or 75% for NE and Himalayan States, ITDP Areas and islands.
For irradiation facilities, grants-in-aid are provided amounting to 50%, or 75% for NE and Himalayan States, ITDP Areas and islands.
For reefer vehicles, credit-linked back-ended grants-in-aid are provided amounting to 50% of the cost of a new reefer vehicle/mobile pre-cooling van, up to a maximum of INR. 50.00 lakh. Integrated cold chain and preservation infrastructure can be set up by individuals, groups of entrepreneurs, cooperative societies, Self Help Groups (SHGs), Farmer Producer Organisations (FPOs), NGOs or central/state PSUs. Standalone cold storage units are not covered under the scheme.
Small Farmer Agri-Business Consortium (SFAC) Assistance
These subsidies are available for cold storage facilities set up as part of an integrated value chain project, provided the cold storage component accounts for no more than 75% of the Total Financial Outlay (TFO). Subsidies can amount to 25% of the capital cost of a project with a maximum ceiling of INR 2.25 crores, or 33.33% with a ceiling up to INR 4 crores in NE, hilly and Scheduled Areas.
In order to meet the government’s goal of doubling farmers’ income by 2022, several market reforms are being rolled out to encourage the development of CCI:
The establishment of 22,000 Gramin Agriculture Markets (GrAMs) to act as aggregation platforms
An Agri-Export Policy, which aims to double agri-exports by 2022
The promotion of 10,000 FPOs by 2024
The creation of the following Corpus Funds:
An agri-marketing fund to strengthen eNAM6 and GrAMs (INR. 2,000 crores)
An Agricultural Infrastructure Fund (AIF) to provide collateral-free loans with an interest subvention of 3% (INR. 100,000 crores)
Apart from this, the government is also providing profit-linked tax holidays, priority sector lending, and lower tax rates for raw and processed products. Cold chain services – including pre-conditioning, pre-cooling, ripening, waxing and retail packing – are also exempt from Goods and Service Tax (GST).
Some of the other key government initiatives in the cold chain sector are as follows:
Exemption from Customs and Excise Duty
Customs Duty: A concessional basic customs duty (BCD) of only 5% is applied for cold storage, cold room and industrial projects (including farm-level precooling) for the preservation, storage or processing of agricultural, horticultural, dairy, poultry, aquatic and marine produce and meat. Truck refrigeration units and other refrigerated vehicles are fully exempted from BCD.
Excise Duty: Central excise duty has been fully exempted for the installation of cold storage, cold rooms and refrigerated vehicles for the preservation, storage, transport and processing of agricultural, apiary, horticultural, dairy, poultry, aquatic and marine produce and meat. This also applies to air conditioning equipment and refrigeration panels for cold chain infrastructure, including conveyor belts used in cold storage units, mandis and warehouses.
Foreign Direct Investment (FDI):
100% FDI is allowed, leading to an increase in private sector investment. This policy requires a minimum investment of US$100, with at least 50% invested in back-end infrastructure.
Fiscal Incentives for Cold Chain”
Section 80-IB of the Income Tax Act provides deductions for cold chain-related industrial activity. Deductions apply to 100% of profits for the first five years, then 25-30% for the next five years.
Under Section 35-AD of the Income Tax Act 1961, deductions of 150% are permitted for expenditure incurred in setting up a cold chain facility.
These government initiatives aim to reduce post-harvest losses, improve farmers’ income, create employment opportunities, and enhance the overall efficiency of the agricultural supply chain.
GOI’s schemes and initiatives to support cold chain infrastructure signify its commitment to fostering efficient storage and transportation of perishable goods. By providing subsidies, grants, and incentives, the government encourages private sector participation, reduces post-harvest losses, and promotes the overall growth of the agricultural sector. These efforts align with broader goals of doubling farmers’ income, boosting food processing, and enhancing the efficiency of the supply chain. Overall, the government’s focus on cold chain development contributes to the economic growth and sustainability of India’s agricultural industry.
List of Government Schemes Providing Financial Assistance for CCI Development
Every year due to post-harvest losses, US$19.4 million worth of crops are wasted in India daily due to rejection at the farmgate and delays in the distribution process with significant impacts on the environment. Effective Cold Chain Infrastructure (CCI) is one intervention that could mitigate many of these challenges.
India is the world’s highest milk producer and the second-largest food producer. Agriculture, alongside its associated sectors, is India’s largest source of livelihood.
Almost 70% of rural households depend primarily on agriculture, and 86% of farmers are smallholders. Despite this production level, India is still home to over 190 million malnourished people, a quarter of the world’s total. The Global Hunger Index 2020 report ranks India 94th out of 107, lagging behind neighbouring countries like Bangladesh, Pakistan and Nepal. Farmers and food producers, especially smallholder farmers, still struggle with low-income levels, and 4.6-15.9% of fruits and vegetables (FFV) are lost annually throughout the supply chain. The country loses approximately INR 926 billion (US$14.33 billion) every year due to post-harvest losses, and US$19.4 million worth of crops are wasted in India daily due to rejection at the farmgate and delays in the distribution process with significant impacts on the environment in terms of toxic waste, water pollution, long-term damage to ecosystems, hazardous air emissions, greenhouse gas emissions and excessive energy use. Effective Cold Chain Infrastructure (CCI) is one intervention that could mitigate many of these challenges.
As the world’s second largest food producer, India should be able to feed its population; instead, 190 million Indians are malnourished. Proper food preservation techniques could help change this by ensuring that a higher proportion of domestically produced food reaches the Indian population. Reducing food losses would also boost the incomes of smallholder farmers and others who earn their livelihoods at the first mile segment of the value chain, creating jobs and improving food security for rural populations.
What is a cold chain?
A cold chain is an environmentally controlled chain of logistics activities that cools and preserves produce or products within stipulated parameters, including temperature, humidity, atmosphere, and packaging. A well-designed and developed cold chain can prevent food losses and reduce carbon emissions related to food waste. Cold chains also ensure food security by reducing food price inflation, buffering the food supply, and overcoming seasonal shortfalls. This buffering mechanism dampens the price fluctuations that typically put vulnerable communities at risk of poverty and hunger and better supports the growth of farmers’ incomes.
Barriers to Scaling-up CCI Business Models:
Different stakeholders in the cold chain sector face economic barriers that need to be addressed through a sustainable business model. These barriers include:
High investment cost:
Large-capacity CCI requires a sizable investment. For example, a 5,000 MT cold storage facility costs around INR 5-6 crore (US$670,000-800,000), including the cost of the land. A reefer truck with a 7.2T capacity costs around INR 18-19 lakh (US$24,000). Although the government provides subsidies of 35-75%, the remaining cost is still too high for most farmers.xxiii
High cost of land and its availability to the operator or service provider:
The cold chain business is capital intensive, and installing high capacity (~5,000 MT) cold chain infrastructure (like packhouses and cold storage facilities) becomes even more expensive due to the high cost of land. To access government subsidies the land where the cold storage unit will be installed must be owned by the individual or company, and a 5,000 MT-capacity cold storage unit requires 1-2 acres of land. Securing land near a farmgate can also be challenging for OEMs and operators.
High operating costs:
Most rural areas have access to grid electricity, but it is highly unreliable. This is a major issue for CCI near a farmgate, because it requires a constant power supply. Operators are forced to rely on diesel generators for about 30% of total expenses for the cold storage industry in India.
Access to financing:
Access to financing is a challenge for smallholder farmers. Low-income earners, many of whom are unbanked and have little financial literacy, find it extremely difficult to secure loans to purchase a cold storage facility since they are considered a credit risk. Loans and subsidies are generally only available to government institutions and FPOs, not to individual farmers.
Demand aggregation:
Due to a lack of awareness of the benefits of cooling, demand aggregation is often a challenge for CCI operators, resulting in low utilisation rates.
Low utilisation affecting revenue:
Low utilisation rates are a major challenge to the business viability of CCI. 90-95% of CCI assets are owned by the private sector, but due to smallholder farmers’ limited ability to pay for storage and transportation, many do not use the cold storage available. CCI funded by the government also lacks modern efficient technology and transport facilities, resulting in low capacity and utilisation. To ensure better adoption of CCI, it is important to develop sustainable and affordable business models for farmers. The focus should be on decentralising CCI solutions, which would reduce investment costs. Decentralisation would also make CCI more accessible to farmers and increase utilisation of the assets, resulting in better revenues for operators and allowing farmers to sell their produce at relatively high prices. The pay-as-you-store model should be scaled up, since it lifts the burden of ownership from the farmer and therefore removes the barrier of financing.
Also read : Challenges to the Uptake Of CCI
Potential Interventions to Increase the Uptake of CCI
Various strategies could be adopted to increase the uptake of CCI solutions in India, and to ensure that these solutions scale by 2030. The following are some recommendations for the sector.
For the Government and Donors:
Mainstream decentralised CCI at first mile (near farmgate):
Most CCI today are centralised and high-capacity, located near urban areas which are expensive for farmers (especially smallholder farmers), and are difficult to access. Decentralising CCI can potentially solve the problem of access, benefiting farmers from cold storage through improved incomes. Decentralised CCI solutions would also significantly reduce post-harvest losses, since unsold produce could be stored rather than being discarded or spoiling. Such units could provide multi-commodity storage at affordable rates near the farmgate. The government should consider scaling them up through a programmatic intervention similar to the KUSUM scheme, which focused on solar water pumps (SWPs).
Promote the use of renewable and alternative energy-based CCI solutions:
The government should promote the use of off-grid solar PV for CCI technology, as well as solar thermal systems, solar-biomass hybrid systems and PCM for thermal storage. There are several different ways this could be done: providing additional incentives for renewable energy-based CCI solutions under existing subsidy schemes; integrating support for CCI into existing renewable energy schemes (such as the SWP KUSUM Scheme, since the excess power generated by SWP systems could be used to power small cold rooms near the farmgate); or promoting the Decentralised Renewable Energy livelihood scheme. Deployment of these technologies would both reduce GHG emissions and mitigate the risks associated with weak grid connectivity. It could also bring down operating costs significantly, making CCI less expensive for operators and allowing farmers to store their produce at more affordable rates.
Develop a standards and labelling programme for cold chain components:
Decentralized renewable CCI solutions should have defined and measured energy efficiency, quality, and performance. The Bureau of Energy Efficiency (BEE) under the Ministry of Power (MoP) can establish energy performance parameters and minimum standards (MEPS) for equipment and appliances. BEE’s Standards and Labelling (S&L) program, which has improved energy efficiency for various consumer products, could be extended to cold chain technologies. Technical specifications and cost benchmarks for renewable-based CCI solutions are currently lacking, leading to improperly sized systems. Clear standards and guidelines would promote technology innovation and help consumers choose the best options.
Develop demand aggregation models for deployment and utilisation of CCI:
Today, CCI is concentrated in urban areas, primarily consisting of high-capacity and capital-intensive cold storage facilities. This uneven distribution leads to operational inefficiencies, undermining the benefits of the cold chain. The high investment costs hinder CCI growth, and low demand aggregation results in underutilised assets and increased costs for farmers. To address these issues, demand aggregation is necessary to deploy appropriately sized and technologically advanced CCI across the cold chain while reducing upfront expenses. This can be achieved through data-driven optimization of overall cold chain requirements and integrated deployment of storage and transport facilities. Establishing a feedback loop from wholesalers, retailers, and consumers to producers enhances farmers’ decision-making, amplifying the holistic benefits of CCI. A demand aggregation model similar to the successful programs for LED bulbs and electric vehicles, implemented by Energy Efficiency Services Limited (EESL), can lower upfront costs. Such a model could be integrated into existing government schemes like KUSUM, utilising surplus power from solar water pumps for productive-use applications.
Create behavioural change for farmers:
There is a need to provide incentives for medium and smallholder farmers to start using CCI. Stakeholders report a lack of awareness around CCI among farmers, who see it as a luxury rather than a necessity. Enhanced understanding of cold chain technology should change this perception, driving CCI uptake and improving income generation opportunities for farmers. Awareness drives led by government, financing institutions like NABARD, and NGOs would demonstrate the benefits of using CCI, convincing farmers to adopt it. Such campaigns could educate farming communities on pre- and post-harvest cooling practices to better manage their produce, and on how cold chains can improve incomes. This could be done through targeted consumer campaigns such as mobile van displays, live demonstrations and goodwill ambassadors, all of which will help scale demand for CCI.
Provide incentives for demand and supply side CCI ecosystems:
Currently, the government is providing various capital subsidies for CCI development. It is recommended that the government uses additional incentives to encourage the growth of both a demand side and a supply side CCI ecosystem. The supply can be boosted through grants, tax rebates and R&D funds, while providing fiscal incentives to CCI users would help grow demand. The supply side ecosystem could also be developed through capacity building, creating a pool of service providers and technicians. This would not only grow the CCI industry, but would establish India as a leader in CCI for both domestic use and export.
Build capacity and raise awareness of CCI:
Lack of awareness hampers the optimal operation of CCI, impacting commodity quality and consumer confidence. To address this, comprehensive capacity building and training are needed throughout the supply chain, including farmers, operators, and technicians. Training should cover economic impacts, business models, technical expertise (such as temperature requirements), system monitoring, installation, and maintenance. Special focus should be given to empowering rural women through skill development programs like “Pradhan Mantri Kaushal Vikas Yojana.” Collaboration among industry leaders, associations like ISHRAE, practitioners, construction professionals, academics, NGOs, and CSOs is vital for developing effective training programs at grassroots level.
Drive energy efficiency in new and existing CCI:
The government should promote retrofits and replacement of existing inefficient CCI technologies, and the efficiency of new installations should be driven by the S&L programme. This would significantly reduce operating costs of CCI, and these savings can be passed on to the end-user in the form of affordable storage rates. EESL ran a similar Demand Side Management (DSM) programme to replace inefficient motors and air conditioning units. India currently has the world’s largest capacity of cold storage warehouses, but these are designed almost exclusively for the long-term storage of potatoes; this existing single-commodity CCI storage needs to be converted or retrofitted to store multiple commodities through preferred lending programmes.
For OEMs /CCI Owners /Operators:
Strengthen product development:
OEMs should focus on product development to make their products more low cost sustainable and farmer-centric. Using clean technology (refrigerants with low GWP) would make CCI solutions more climate friendly, which would be a better fit for the market. 2. Develop financing and servicing models: TOEMs and system integrators should leverage available government subsidies to provide end-to-end financing solutions for their customers; this includes exploring pay-as-you-store and Cooling-as-a-Service models. These models can be beneficial for smallholder farmers, who do not then need to own CCI themselves. OEMs should also focus on value-added features like warehouse financing products, after-sales support from trained personnel, and integration with reefer transport to improve market linkages
For Financing Institutions (FIs):
Develop a long-term warehouse financing product:
There is a need for a long term (10-15 years) financing product that de-risks farmers’ production, de-risks the CCI business for operators, and benefits smallholder farmers without requiring them to own the asset. This could be developed based on the business model of the FPO, especially those using the CCI for their own consumption or to build a new business as aggregators. For FPOs in tribal communities where this business is still nascent, longer term financing is critical. In order to reach last mile FPOs, farmers and aggregators, FIs would need to create awareness of the credit linkages and subsidies available for this sort of infrastructure (through the AIF and MIDH, for example), and would have to assist with the process of applying for these schemes and financial products. This could be done through NABARD, SFAC and other FIs empanelled under schemes like AIF.
Also read : Government Support for the Growth Of CCI
Although use cases vary across value chains, overall, CCI India is underdeveloped in the agricultural sector, and significant quantities of food are lost each year due to a lack of cold chain technology. Many smallholder farmers are still unaware of proper post-harvest handling procedures, and cannot access or afford the CCI they need to prevent losses. Business models like pay-as-you-store would help drive CCI uptake at the first mile level, as would farmer education and the development of more off-grid cold chain solutions that could reduce the risk of power cuts in areas with poor grid connectivity. Solving this problem requires more than the proper technology; a system-wide approach combining education, financing and policy changes is needed for the potential of the cold chain market to be fully realised, and for Indians to finally revolutionise their agricultural sector.
Read full assessment report on cold chain markets in India here
Climate finance refers to the financing needed to address the causes and impacts of climate change, including mitigation (reducing greenhouse gas or GHG emissions) and adaptation (managing the risks and impacts of climate change). The need for climate finance has grown as the world recognizes the urgent need to address the impacts of climate change, which are already being felt in many parts of the world. It has been steadily increasing over the past decade and reached USD 653 billion in 2019/2020.Figure 1shows how this finance is sourced (public or private) and used across six sectors:
i) water & wastewater;
ii) infrastructure & industry;
iii) land use;
iv) transport;
v) energy systems; and
vi) other & cross-sectoral.
Figure 1represents an average annual amount in USD billion for 2019 and 2020, and they provide an in-depth look at how funding is allocated throughout the lifecycle of climate projects. Some of the key observations are as follows:
The public sector provided USD 334 billion (51%), primarily through Development Finance Institutions (DFIs). Private actors contributed USD 319 billion (49%), with commercial financial institutions and corporations contributing almost 80%.
Grants made up 4.5% (USD 30 billion) of climate finance, with governments as the main source
Most climate finance raised was in the form of debt, with market-rate debt accounting for 88%, while low-cost debt was only 12%
Equity investments contributed 31% (USD 207 billion) of total climate finance
Around 90% of climate finance was for mitigation and adaptation finance accounted for 7% of total finance, while dual-use projects accounted for 3%
The majority of mitigation funding was allocated to energy systems, which included renewable fuel production, power and heat generation, transmission and distribution networks, policy support, and capacity building
The transport sector ranked second among sectors receiving climate finance, covering various modes such as EVs, rail & public transport, waterways, aviation, and transport-oriented infrastructure
Figure 1. Global Climate Finance Landscape
Figure 2. Climate Finance Comparison with Paris Scenarios
Although climate financing has been growing in recent years, it remains insufficient to meet the investment requirements for realizing Paris-aligned scenarios and achieving net-zero emissions by 2050.According to Figure 2,the amount of climate finance in 2019/2020 accounted only for approximately 9% of the average scenario implementation cost. A significant portion of these investments were directed towards climate mitigation efforts in the energy sector, with only 6% of the investment going towards the transport sector. The several challenges/ barriers hindering the financing and development of green projects are
i) lack of suitable financial instruments and long disbursement procedures ii) high perceived risk and initial investments required iii) limited technical capacity of stakeholders to develop green projects iv) inadequate understanding and use of low-carbon technologies v) lack of supportive regulatory conditions to drive green investments and others.
This disparity underlines the pressing need for a substantial increase in climate financing to align with net-zero targets. Without sufficient financing, it will be difficult to meet the goals of the Paris Agreement and prevent catastrophic consequences.
In order to successfully transition to a sustainable, net zero emissions, and resilient world within this decade, a significant increase in climate investment is imperative. Unfortunately, as depicted in Figure 3, current finance flows are vastly insufficient and fall far short of the estimated annual investment needs, which are projected to be in the range of $2-2.8 trillion by 2030. Investing in the energy system is crucial for addressing climate change, and prioritizing investments in the power and transport sectors makes sense given their significant contribution to greenhouse gas emissions. In the power sector, investments can be directed towards developing renewable energy sources such as solar, wind, hydro, and others. This will reduce reliance on fossil fuels and decrease carbon emissions. Additionally, investments can be made in energy storage technologies to ensure the stability and reliability of the power grid. In the transport sector, investments can be focused on developing electric vehicles and the necessary charging infrastructure. This will reduce reliance on fossil-fuel powered vehicles and decrease carbon emissions from the transportation sector. Additionally, investments can be made in public transportation systems to encourage the use of mass transit and reduce the number of individual vehicles on the road.
Figure 3. Climate Finance Investment Needs by 2030
Climate finance must increase in speed and scale this decade for a credible transition to a sustainable, net zero, and resilient world. It should count in the trillions annually, whereas fossil fuel investments should dramatically decrease this decade to achieve this transition. Climate finance commitments also need to translate into action in the real economy, requiring all public and private actors to align their investments with Paris goals and net zero, sustainable pathways. This requires coordinated action from all actors:
Governments needs to build confidence in key markets with clear policy signals and incentives, with interim goals on net zero, whereas financial regulators should set standardized rules to enforce the targets
Development banks and international finance institutions can help build strategy, engage with counterparties, and support policy development, while deploying a wider range of instruments that take on more risk, helping to catalyze more private investment in developing economies
Private sector needs to better appreciate new approaches to collaborating and investing, but also needs to mainstream climate considerations by assessing risk and opportunities in a more holistic way
The International Energy Agency (IEA) recently published a report on the global energy outlook as part of its World Energy Outlook 2022.The report highlights the global energy crisis, which has been triggered by the conflict in Ukraine, and has resulted in significant price increases due to uncertainties about supply security and affordability. This comes at a time when energy markets are already tight following the COVID-19 rebound.
According to their “States Policies Scenario, 1900 – 2050,” the global demand for all fossil fuels is now exhibiting a peak or plateau for the first time.
In this scenario, coal use declines over the following few years, natural gas demand reaches a plateau by the end of the decade, and oil demand gradually declines through the middle of mid-2030s due to rising sales of electric vehicles (EVs). This indicates that from the mid-2020s to 2050, the global demand for fossil fuels will gradually decline. As a result, the proportion of fossil fuels in the global energy mix will fall from around 80% to just above 60% by 2050. Global CO2 emissions will gradually decline from a high of 37 billion tonnes per year in 2010 to 32 billion tonnes by 2050.This would be associated with a rise of around 2.5°C in global average temperatures by 2100, far from enough to avoid severe climate change impacts.
To minimize the impacts of the energy crisis, advanced and emerging economies/governments are now taking historic and decisive steps toward a cleaner, more affordable, and more secure energy system. Some of the most notable ones are “The US Inflation Reduction Act”, “the EU’s Fit for 55 package”, “REPowerEU”, “Japan’s Green Transformation (GX) programme”, “Korea’s goal to increase the share of nuclear and renewables in its energy mix”, and “ambitious clean energy targets in China and India”. These new
measures help propel global clean energy investment to more than USD 2 trillion a year by 2030, a rise of more than 50% from today in the States Policies Scenario. While clean energy investment rises above USD 2 trillion by 2030 in the States Policies Scenario, it would need to be above USD 4 trillion by the same date in the Net Zero Emissions by 2050 Scenario, highlighting the need to attract new investors to the energy sector. And major international efforts are still urgently required to narrow the worrying divide in clean energy investment levels between advanced economies and emerging and developing economies.
Amid the major changes taking place, a new energy security paradigm is needed to ensure reliability and affordability while reducing emissions. In this transition, declining fossil fuel and expanding clean energy systems will co-exist, since both systems are required to function well during energy transitions in order to deliver the energy services needed by consumers. And as the world moves on from today’s energy crisis, it needs to avoid new vulnerabilities arising from high and volatile critical mineral prices or highly concentrated clean energy supply chains.
More details can be referred from the following link:
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:
1
Speed – Cooks food 50% faster
2
Energy efficiency – savings in energy consumption and reduction energy usage cost
3
Easy & Precise Control – Achieve desired temperature
4
Safety – No flame, no gas leakage
5
Low maintenance –Change of burners, pipe, and regulators on periodic basis not required
6
Compact – Can be easily transferred from one place to another
7
Improves health – Prolonged exposure to smoke arising from conventional indoor cooking methods adversely impacting health
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.
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’.
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.
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:
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.
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?
