Customers and Beneficiaries

Approximately seven in ten rural households are still without access to electricity in Indian even where a village is termed as electrified by the Government. These households continue to rely on less efficient and polluting energsourceses, typically kerosene, to the detriment of their social and economic development as well as the environment. In Karnataka, even when grid electricity is available, problems of capacity shortages and inconsistent quality plague the power supply. This has led households to look to alternative power supply systems such as solar PV, inverters and diesel generators. Despite high initial costs, Solar Home Systems (SHS) emerge as an attractive option in thecontext of costly or unreliable alternatives and escalating grid power tariffs, and therefore a growing number of households are turning to SHS as a matter of necessity and convenience.

Table 1 below summarizes the findings of a comparative assessment between the technology options available to Karnataka households.

Table 1: Monthly Costs in Rupees For a Household with 4 lights

However lacking access to credit, most potential users cannot afford to pay up-front for the twenty years of electricity supply that a PV system can provide. The customers for the planned loan facilities will be both households and small enterprises looking to use solar PV for either domestic activities or productive-uses. Typical customer households are 2-4 room stand-alone tenements, with at least one lighting point in each room, one on the porch and power points for fans and TV. The typical customer appears to be the middle class household (with monthly incomes of Rs 5,000-10,000 per month) in both urban and rural areas. In rural areas, double incomes - agricultural income plus salaries in non-agricultural jobs or income from small businesses - provide higher disposable incomes in many households. There is also the phenomenon of migrant remittances, viz. family members who work outside the village and remit part of their incomes to their dependants in the village.

There is increasing SHS sales activity in Karnataka, although the business is still very small as compared to the overall market. Through the provision of favourable terms of credit, this project should help grow the SHS sector significantly. With replication, the project will help tens of thousands of India's households and small enterprises to improve their access to modern and environmentally sustainable electricity services. The project will help grow the sustainable energy sector in South India through expansion of solar rural electrification service infrastructure in targeted regions. This impact will increase as rural finance institutions build confidence and begin to scale-up lending to the sector.

The programme will also contribute to poverty alleviation efforts of the Government of India with a strategy to reach the poor through both local Grameen banks and group lending via Self-Help Groups ("SHGs").