Providing reliable and financially sustainable electricity access in India using super-efficient appliances

In India, 46 million, mostly rural, households lack access to electricity – over 50% of those are in the states of Bihar and Uttar Pradesh. While India has set an aggressive goal of extending the grid to all households by 2019, grid extension does not necessarily imply reliable electricity access. Indian utilities face a financial disincentive to supplying reliable electricity in rural areas because of subsidized tariffs and low consumer willingness-to-pay. Tariff subsidies for full household electrification in these states would be about Rs 15,000 Cr per year, which is two-times the existing subsidies and equivalent to 20–30% of their annual utility revenues. We find that super-efficient lamps, TVs, and fans can reduce the energy consumption of a rural household by over 70% cost-effectively, resulting in a net reduction in the total subsidy burden. Reduced consumption offers an opportunity to raise consumer tariffs while ensuring consumers’ monthly electricity bills reduced. We also argue that super-efficient appliances make consumer-side storage cost-effective, leading to greater consumer willingness-to-pay. We recommend adoption of super-efficient appliances as part of the electricity access initiative in India, and electricity service based tariff setting as the next policy steps towards providing a reliable and sustainable electricity access.