A Market-backed Model for an Agriculture Demand Side Management

1. A Market-backed Model for an Agriculture Demand Side Management Presented By – Apurva Chaturvedi USAID Rakesh K Goyal Tetra Tech Ashish Meshram Tetra Tech December 14, 2011

2. Why Agriculture Demand Side Management (AgDSM) in India? Agriculture consumes 23% of power & 38% of water (90% groundwater) 55 – 60% population dependent on groundwater Availability of water both for irrigation & drinking Financial health of power sector Food & Water security of 1.2 Billion population Subsidy of 8 billion US $ per annum Livelihood of Farmers

3. Pilots Conducted before the development of innovation

4. What Pilots Established –Saving Potential

5. Pilots Could not be Scaled Up Water & Electricity nearly free to farmers Absence of market based approach Ownership ESCO's in a nascent stage Reluctance to work in rural areas Tough geography and vast area Low literacy level of farmers Livelihood of farmers depends on irrigation. Reliability of DISCOMs getting subsidy has increased

6. Market based approach Win-win situation Innovation Process adopted A market-backed model developed for an Agriculture Demand Side Management • Project based on commercial principles • Long term horizon – no ‘snap back’ effect • Project risks shared among stakeholders and ESCO • Farmers - get new efficient pump, after-sales services, good quality power & required amount of water • DISCOM – energy savings with greater opportunity cost • ESCO – profit from saving energy, payback is less than 5 years • Rules of public procurement followed • Active engagement of all stakeholders • Extensive groundwork – studies, information – reduce perceived project risks

7. Innovation – Key stakeholders Roles and Responsibility • ESCO • Financing, Planning, procurement, replacement and maintenance, of pumps. • Water side interventions • Capacity Building of farmers • Obtaining farmers acceptance • DISCOM • Up gradation and maintenance of Electrical Network suitable for efficient pumps and Metering • Support to ESCO in building relationship with farmers • Timely payment to ESCO for energy saving • All Approvals from Regulator & State Govt. • Feedback from farmers Public Private Partnership Farmers A free new branded energy efficient pump sets and better O&M

8. Innovation-Tested at Site • Site Profile • Location : Doddaballapur (BESCOM) 70 KM from Bangalore, India • Geographical area : 11,000 Acres • No. of villages/population : 34/17,000 • % net sown area : 75% • % irrigated area : 16% • Major crops : Mulberry & Grapes • Depth of ground water : 400-750 ft. • No. of feeders/pump-sets : 4/604 • Typical pump sets capacity : 10-15 HP

9. Innovation- Test Implementation Overview Bid Process & Selection of ESCO Project Execution Electrical Network Data Baseline • Consumption before pump replacement • Ag & Non-Ag Load • Supply hours • Pump running hours • Single phasing • Acceptance by stakeholders • Data collection • Mining • Presentation • Preparing business model • Pump replacement • Monitoring & evaluation protocols • Governing structure • Keeping stakeholders informed • HVDS • Capacitor Banks Electronic meters • Separate agriculture feeders • Draft RFP and marketing • Pre NIT • Pre- bid meeting • Site visit • Bid evaluation • Negotiation and award Savings Capacity Building of Farmers Project Monitoring

10. Innovation-Salient Features of the Contract (ESCO and DISCOM)

11. Innovation-Metering and Verification Protocol • Findings • Contracted Load of Pumps as per BESCOM Record = 2.6 MW • Actual Connected Load of Pumps = 5.9 MW • Average Capacity of a Pump as per BESCOM record = 4.3 KW • Actual Average Capacity of a Pump = 9.7 KW • About 16% pumps in each month have zero consumption. • Supply hours are more than pump running hours • Farmers run pump as per their convenience and use capacitors to convert single phase supply into three phase supply. • New Tools Developed • Determination of IP set and non IP set Consumption separately • One meter can help in determination of up to 4 different capacity pumps consumption. • Estimation of consumption for the period when meter is not working.

12. Innovation-Pilot-Water-Side Interventions Promotion of Drip Irrigation Construction of Field Bunds Construction of Check Dam Farmer awareness - Cropping Pattern & Cultivation Practices

13. Scaling Innovation -Business Case Study Results with Maharashtra as Sample State (worst Case 100% debt with 15% Interest)

14. Innovation- Pilot Status Pumps replaced by energy efficient pumps Pumps maintenance Call Centre and office established Feedback from farmers is encouraging Host country approval for CDM obtained First energy saving invoice generated and paid by DISCOM to ESCO- 25% saving A dedicated website for farmers developed (www.agripowerindia.com) and kiosk installed for use of farmers Holistic water side intervention plan is ready implementation to start soon. Capacity building is continuous process. .

15. Sensitizing Stakeholders About Innovation Multi-stakeholder Meeting Involving Farmers Workshop with Pump Manufacturers Interactive session with DISCOM officials

16. Scaling Innovation at India Level will - • Save Electricity (19 Billion Units) • Save Network Capacity (83,557 ckt. Kms and 13,126 MVA) • Can help to bridge existing demand supply gap of electricity (by 60%) • Can improve the financial health of the power sector • Saves Subsidy annually (8000 Cr INR ) • Cross-Subsidy – Boost Industrialization, Reduce cost • Reduce Carbon Emissions (14.8 Tera Tonnes per annum) • Save Water • Rural development • Arrest shift from rural to urban Data from CEA Annual Report 2008 A conservative saving of only 20% has been assumed.

17. A MARKET -BACKED MODEL for AgDSM Scaling up of Innovation at India Level - Requires CAPACITYBUILDING POLICY SITE ACTIVITIES DOCUMENTATION

18. Coordinated Approach Ground Water Urban Development Surface Water Rural Development Food Security AGDSM Agriculture Finance Energy

19. Key Issues

20. Innovation won 2nd India Power Awards -2009 Project Partners