EESL brings in carbon finance for LED bulb distribution in rural areas

Public sector company Energy Efficiency Services Ltd (EESL) has dipped into the carbon markets for funding its LED lamp distribution programme in rural areas.

EESL is an ‘ESCO’ or ‘energy services company’. It makes available to consumers energy efficiency appliances at its cost and lets them pay for it through the savings in their electricity bills. It began in 2014 with its ‘flagship’ product, LED bulbs, which remains its biggest success, even though it distributes several other products, such as electric motors and water pumps. Between 2014 and 2020, EESL distributed 365 million LED bulks, through the ESCO model, which has earned the company universal approbation, especially from the International Energy Agency.

However, most of the LED bulbs went to urban consumers — less than 2 per cent made it to the rural areas, because, even at a subsidised price of ₹50 a bulb, rural folk could not afford it.

Affordable bulbs

In November 2020, EESL roped in Mahua Acharya, a climate finance and carbon markets expert, who had dealt with carbon credits for over two decades, as the CEO & MD of EESL’s fledgling wholly owned subsidiary, CESL — a company that is meant to take over and run the assets of EESL. Acharya has now brought in a carbon finance dimension to LED distribution business, to make the bulbs affordable even to the rural population.

On Monday, EESL will launch at Arrah, Bihar (the constituency of the Union Power Minister RK Singh), a ‘GRAM Ujala’ programme. The programme recognises the need to further subsidise the bulbs of 7W or 12W, to about ₹10. The subsidy will be paid for by sales of instruments like carbon credits in the global carbon markets. There is potential to replace 300 million incandescent bulbs with LED, which could result in energy savings of 40,743 million kWhr annually and avoid peak demand of 22,325 MW a year, not to speak of carbon dioxide emission reduction of 37.48 million tonnes a year.

How Gram Ujala works

Gram Ujala will be implemented in villages only. Consumers may purchase a maximum of 5 LED bulbs against submission of an equal number of incandescent lamps that must be in working condition.

Consumers will be given 7W and 12W LED bulbs, at a price of ₹10 each. CESL will provide a warranty of 3 years against failure. Meters will be installed in each house to determine the total number of hours of usage. Carbon credit documentation will be sent to UN accredited validators.

The carbon credit instruments, such as certified emission reductions (CER), are broadly called ‘carbon offsets’ because they pay for carbon reduction activities in developing countries such as India, where it is cheaper to do so. The carbon market is broadly classified into two — compliance market and voluntary market. The former is that of the governments that have commitments to reduce carbon emissions. This market, at the moment, is dull. However, the ‘voluntary market’, where the demand for the offsets is provided by companies (Google, Apple etc) that have vowed to help fight climate change. Offsets get a good price in this market.

It is expected that the carbon offsets earned by EESL for its rural distribution of LED bulbs will be sold in the voluntary markets.

Acharya says about 15 million LEDs will be distributed in phase I, resulting in energy savings of 2037.15 million KWhr, avoided peak demand of 1116.25 MW and CO2 reductions of 1.874 million tonnes, all annually. Though the programme is to be launched in Arrah, LED distribution will also happen in Varanasi, and villages near Nagpur and Vijayawada and western Gujarat.

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