From supply-side to demand-based: how the ‘energy portfolio’ is the customer-centric approach to improving energy access
Energy portfolios better explain the complex reality of rural households’ energy choices and help identify previously overlooked opportunities to address their needs
By Chandrima Das and Akshay Kohli
Despite economic growth in recent times, energy poverty remains a critical problem for the rural poor in India. In 2016, 20% of Indians (244 million people) lacked access to electricity, and nearly 70% (819 million people) cooked using solid biomass fuels. The regular use of traditional and inefficient energy sources adversely affects the health of users and their families, their economic development, and the environment.
Take the case of 24-year-old Savita Nisad, who lives in a remote, off-grid village in Bihar. She wakes up at the crack of dawn to collect firewood and cow dung for the smoky clay stove used to cook the family’s meals. Her family got a government-subsidized LPG connection a few months ago but she rations its use, as they cannot afford regular refills of the cylinder. At noon, Savita uses the family’s 15-watt solar panel to charge her basic mobile phone, the family’s only reliable link to the outside world. The panel, paired with a small, locally-made battery, also lights the family’s one-room hut for two hours every evening, after which they either sit in darkness or use a kerosene lamp.
Savita’s narrative reflects the messy reality of many households in rural India who use traditional fuels for a multitude of purposes. This behaviour continues despite the advent of cleaner and safer decentralized energy solutions, coupled with innovative financing options and delivery infrastructure. The question begs to be answered: What will it take to nudge Savita and her family to use modern energy sources?
Helping consumers adopt modern energy sources involves more than just improving access. A key piece lies in understanding how consumers make energy choices in energy-poor settings; we need to use a frame that captures their actual behaviour and examines the tradeoffs inherent in their decisions. But research on energy has long been supply-centric and fuel-specific, guiding interventions and policy decisions based on a narrow focus. This perspective has inadvertently glossed over energy choices from the point of view of the user: the individual living in a rural household.
To address this gap, FSG collected data from 500 rural, energy-poor households in the Indian states of Uttar Pradesh (UP) and Bihar, and conducted in-depth qualitative interviews with more than 120 of these families to understand how they service their energy needs. This research helped us take a first step in uncovering the comprehensive and interconnected energy needs of the rural consumer and the decision-making processes they use for choosing energy sources. We call this collective set of multiple energy uses for a rural household and the multiple energy sources that service their needs an ‘energy portfolio.’
Looking at the consumer through an energy portfolio lens, we realized that rural households take a demand-based view in making energy choices. A household originates energy demand through their various activities that need energy. Supply-centric and fuel-centric frameworks do not examine energy choices from this vantage point. Traditional choice frameworks, such as the energy ladder, do not account for how multiple needs and characteristics of households, apart from affluence, interact to affect choices. Other frameworks, which account for the fact that households use multiple energy sources to meet an energy need, do not study the links between the household’s various energy uses. These blind spots can be removed if we place the rural household at the center of the frame and take a holistic demand-based view reflecting the reality of energy choices.
Energy portfolios also help explain how households use multiple energy sources to meet energy needs, a behaviour known as fuel stacking. Traditional frameworks, such as the energy ladder, assume that as a household grows more affluent, traditional fuels such as firewood are fully replaced by transition fuels such as coal, which are then replaced by advanced fuels such as LPG. Contrary to this, rural households may use biomass fuels in addition to LPG for cooking or kerosene in addition to solar energy for lighting.
Finally, energy portfolios are not just useful in better describing consumer behaviour; instead, they also help identify previously overlooked opportunities to take concrete action.
For example, the energy sector has traditionally focused on introducing new, cleaner energy sources into household portfolios, but there is a pressing need to focus on driving greater preference and greater usage of these modern sources once they have been introduced. For households accustomed to using free firewood, the introduction of government-subsidized LPG connections did not create the kind of impact it could have, as they struggled to cover a new expense of ₹600/month ($9) for refill cylinders. Similarly, poor households who were newly connected to the central grid struggled to pay ₹200/month ($3) for grid electricity. This resulted in them rationing their use of these modern sources, or in the case of LPG, avoiding repeat purchase altogether.
There is also an opportunity to expand the type and number of beneficial uses modern energy sources could be put to in situations where access to these sources already exists. For instance, we found that only 9% of solar energy users in our sample used solar-powered DC appliances (i.e., fans and televisions) in addition to basic lighting. By improving the quality of DC appliances available, especially in areas where grid electricity is unavailable or unreliable, these numbers could be increased. Though these households were aware of DC appliances and where to purchase them, prior experiences with affordable but low-quality, non-durable products had built negative associations in their minds. So they waited for the arrival of grid electricity before purchasing appliances.
A portfolio lens is a starting point for us to understand the needs of and challenges faced by the rural energy consumer. Activating opportunities that have so far been ignored will take much more work. But a customer-centric lens would certainly help uncover more effective pathways to close the large gap that exists.