Switching to LEDs: UJALA promises to be a game changer

UJALA promises to be a game changer

In July this year, Meera Vashisht, a 13-year-old US resident of Indian origin, raised around $2,079 through crowdfunding to distribute LED bulbs among the underprivileged in India. While working on her science project, the seventh grader chanced upon news about the Unnat Jyoti by Affordable LEDs for All (UJALA) programme. With support from her parents and after almost a year of reaching out to 500-odd people in her neighbourhood, Vashisht collected the money to purchase LED bulbs from central government-owned Energy Efficiency Services Limited (EESL) for distribution among the slum dwellers of Keshavpuram in Delhi. Vashisht’s contribution has helped replace some 1,800 bulbs – and drawn attention to the immense scope of the UJALA scheme. Through UJALA, EESL plans to replace nearly 770 million bulbs in the country by 2019.

EESL, the super-energy service company promoted by the Ministry of Power, launched UJALA in January 2015. The aim was to provide people with affordable LED bulbs. EESL evolved a unique business model that entailed large-scale procurement of LED bulbs from private sector manufacturers through competitive bidding, and subsequent sales through distribution centres at rates well below the market price. Consumers could pay for them either through the on-bill financing model (partly upfront and the rest in instalments) or all in one go.

The results of this exercise were remarkable. In 2014-15, only 3 million LED bulbs were distributed. In 2015-16, this figure crossed 150 million. Almost 90 million of these LED bulbs were distributed under UJALA alone and the remaining were sold in the market. As per official statistics, almost 40 million LEDs are being distributed across the country every day.

The dramatic reduction in the prices of LED bulbs has been the other market transformation. In the last round of procurement, undertaken in September 2016, the cost of an LED bulb was Rs 38 as compared to Rs 300 around 20 months earlier and Rs 1,200 in 2010 for the first LED bulb made in India.

On the supply side, the programme has led to an exponential rise in the size of the LED market. The indigenous LED manufacturing capacity has increased almost fourfold. India is now the second largest market for LEDs after China, with a share of nearly 12 per cent.

A significant reduction in energy consumption, peak demand and carbon dioxide (CO2) emissions has been the other obvious benefit of the programme, which will help contribute to India’s Paris climate commitments. With over 178 million LEDs distributed so far, the country has been able to achieve annual energy savings of more than 23 million kWh, as well as a reduction in peak demand of 4,635 MW and in the carbon footprint of about 18.7 million tonnes per year.

The origin

The idea of an energy efficiency programme that shaves off peak demand goes back to 2009. Back then, the Bureau of Energy Efficiency (BEE) was running another energy-efficient lighting programme called the Bachat Lamp Yojana (BLY). The aim of the programme was to deliver CFLs at the cost of normal light bulbs to residential consumers. It sought to leverage the certified emission reduction (CER) benefits generated by the project. The project cost was to be recovered through the sale of greenhouse gas (GHG) emission reductions or CERs achieved in the respective project areas by the private investors funding the BLY projects.

Then came the switch to LEDs. Here’s why. According to experts, of the various technology options available for cutting emissions, LEDs are the lowest-hanging fruits and the easiest to implement. An LED consumes only one-tenth of the energy used by an ordinary bulb and half that of a CFL to provide the same or better light output. As per Power Minister Piyush Goyal, Mumbai would save up to $12 million per year if LED lights were installed in the entire city.

Against this backdrop, the Domestic Efficient Lighting Programme (DELP) was conceived and brought in to replace the BLY. The DELP was later remodelled and renamed UJALA. “The idea was to overcome the cost barrier in promoting LEDs by using the basic architecture and best practices of the BLY,” says Saurabh Kumar, managing director, EESL.

The first step towards the implementation of UJALA was a pilot done for the Puducherry Electricity Department in 2014. This was the first big drive for the large-scale installation of LEDs to replace all incandescent bulbs. At the time, it was estimated that 88 per cent of residential consumers in Puducherry were using incandescent bulbs, at an average of three bulbs per household. The replacement opportunity was projected to be between 700,000 and 750,000 bulbs. EESL replaced around 750,000 incandescent lights with 7 W LEDs priced at Rs 310 each. Households could buy these bulbs at an upfront subsidised rate of

Rs 10 per bulb. The programme was successfully completed by October 2014 and Puducherry achieved the unique distinction of lighting almost every home with LED bulbs.

The model was subsequently expanded to Andhra Pradesh and a few other states in the country. In January 2015, UJALA was officially launched as a pan-Indian programme.

Targets and status

UJALA is now much larger in scope and also includes street lighting. Its two components are DELP and the Street Lighting National Programme (SLNP). The former entails the conversion of conventional domestic lights to LEDs and the latter, the conversion of conventional street lights to LEDs. Under the DELP, EESL plans to replace 770 million inefficient bulbs with LEDs by March 2019. As per EESL, if all these bulbs are replaced, the total reduction in the country’s connected load would be an estimated 20,000 MW with energy savings of about 100 billion units every year. The total savings in consumer electricity bills would be Rs 400 billion every year, considering an average tariff of Rs 4 per kWh.

The distribution of LED bulbs in states is taking place through discom offices, discom bill collection centres, designated EESL kiosks, etc. Domestic consumers are able to procure LEDs in easy instalments with an initial payment of

Rs 10. The remaining cost is recovered over 10-12 months. The bulbs come with a three-year free replacement warranty in case of any technical defect (seven years under the SLNP).

EESL’s model thus ensures not only an annuity-based income stream for the company, but also a scalable one. According to a recent ICRA report, “The business model is highly scalable, given no upfront capital costs for clients and demonstrated success of the technology which assures annual payments are met through cost savings.” The fact that EESL has been able to multiply its revenue tenfold in one year speaks of the model’s success.

The scheme is currently being implemented in 21 states and five union territories. So far, EESL has distributed over 178 million energy- efficient LED bulbs across the country. This has led to an annual energy saving of 23.1 million MWh, a reduction of 18.7 million tonnes of CO2 emissions and savings of more than Rs 92.65 billion in consumer electricity bills. The scheme has also helped the country avoid a peak demand of over 4,635 MW. To ensure that quality bulbs are procured, EESL follows a stringent three-tier  process. According to the company, the failure rate of the bulbs distributed so far has been only 0.3 per cent.

For real-time monitoring of the scheme and its impact, the power ministry has developed a dashboard, which provides real-time updates on the number of bulbs distributed and the cities/towns/villages where the scheme is currently operational. Also, each distribution centre is geotagged for consumers to ascertain the exact location. The dashboard can be viewed at www.ujala.gov.in. A massive consumer outreach campaign has been launched through a microsite, www.iledtheway.in, in an attempt to reach out to citizens and spread awareness about the nationwide #iLEDtheway movement. Through the microsite, consumers can take a pledge to switch to LED bulbs. More than 59 million pledges have been signed so far.

Under the SLNP, EESL replaces conventional street lights with LEDs at its own cost, and the municipalities repay it through the reduction in energy and maintenance costs over a period of time. More than 300 municipalities have enrolled in the programme so far. Work has been completed in six urban local bodies – in Vizag, Jhalawar, Mount Abu, Pushkar, Neelimarna and Agartala.

As per EESL, the replacement of 35 million conventional street lights is expected to result in annual savings of 9,000 MUs, while the total cost savings for municipalities would be Rs 55 billion every year. It is estimated that street lights require 3,400 MW of power. With LED bulbs, this can be brought down to 1,400 MW. EESL has installed over 1.4 million LED bulbs across the country so far, the replacement leading to savings of over 46.6 MW of power.

Impact on the LED market

LED prices have been falling consistently since the launch of the scheme, owing to the economies of scale achieved through the procurement process. For the first round of procurement held in January 2014 for Puducherry, EESL achieved a cost of Rs 310 for a 7 W bulb, procuring about 750,000 bulbs. Prices in subsequent rounds of procurement have dropped to reach Rs 38 for a 9 W bulb in the tender floated in September 2016. Around 14 companies participated in the tender for the procurement of 50 million bulbs. Philips India won the entire order to supply bulbs in this tender. These prices are, however, exclusive of taxes and hence, the retail prices of LEDs vary across states.

According to the Electrical Lamp and Component Manufacturers Association (ELCOMA), the LED industry has grown 579 per cent from 2010 to 2014 and is currently worth Rs 33.95 billion. The market is expected to reach at least Rs 50 billion by this year. “By 2020, LED lighting will be at least two times the conventional lighting market, which, at present, is estimated at Rs 100 billion,” says Kumar.  Further, India’s share in the global LED market has increased from 0.1 per cent to 12 per cent. The penetration of LEDs increased from 0.4 per cent to 10 per cent in the domestic market.

Also, there has been a sixfold increase in investment in the LED industry in the past one year, to about $455 million. The exponential expansion by the industry has led to the creation of 60,000 additional jobs, besides $12 million in additional tax revenue to the government.

What’s next

While the programme has given a boost to the LED manufacturing industry, there have been some concerns raised by industry players. Reportedly, ELCOMA and its members have approached the power minister, requesting the government to go slow on procurement under the scheme as LED bulb distribution by EESL is impacting the ecosystem. According to them, the reduction in price disparity between the scheme and commercial sales could stress manufacturing capacities for the next 6-12 months till industry volumes grow adequately.

These concerns notwithstanding, EESL has significant growth plans. It is now looking to sell energy-efficient ceiling fans. Earlier this year, the company began exchanging old ceiling fans for more energy-efficient, five-star-rated ones. Further, it plans to replace agricultural pump sets with high efficiency products and make buildings more energy efficient.

A recent World Bank report states that, based on the success of UJALA, the market potential for energy-efficient products has risen more than four times to Rs 1,600 billion. It says residential end-use appliances, agricultural/ irrigation pumps and municipal infrastructure (street lights, etc.) are the top three demand-side management (DSM) markets contributing to this potential. With DSM measures in these segments, India could save 18-20 per cent of its current annual electricity consumption.

What EESL has done with UJALA is to take energy efficiency out of the realm of public policy to an idea that consumers are sitting up and taking notice of. If this can be replicated in other appliances and products, it would offer an attractive value proposition to consumers and act as a silver bullet in tackling climate change mitigation.