Informal markets for electricity: economics of lighting for hawkers in India

Abstract

PurposeThe purpose of this paper is to investigate the economics of supplying energy needs for illumination requirements by hawkers using alternatives like compact fluorescent lamps battery lamps, liquefied petroleum gas mantle lamps or supply from mini‐grids supported by local diesel generators. Further, the prevailing business models like the lamp rental and the mini‐grid models, which epitomise informal electricity markets, are also analysed.Design/methodology/approachThree localities in Kanpur city are identified and data on techno‐economic characteristics of illumination options used by hawkers are collected. To compare the available options with varying capital life‐span, equivalent annual cost approach is utilized. This is used to calculate the levelised cost of 1 kiloWalthour energy used for providing illumination.FindingsThe daily user cost of illumination ranges from Rs 6.1 to 17 (for four hours) across the four existing models studied in the paper. This translates to Rs 31.3 to 312.5 per kWh of electricity use. The technology choice by hawkers is influenced by lack of initial capital and inconvenience associated with cheaper options than overall economics of the alternative option is found.Practical implicationsThe paper highlights the absence of financial and institutional intervention that can help significantly reduce the cost of electricity access by such users and also help adoption of greener options like solar lanterns or solar battery bank charging stations. A practical solution may include a greater role of micro‐finance institutions. Greater awareness and capacity building needs of local entrepreneurs as well as of end‐users also need attention.Originality/valueThis is perhaps one of the few attempts to unravel the informal electricity markets in India and help identify issues that need attention so as to address needs of millions of consumers at the margin of the electricity grid in the country.