Beyond the Grid
How behavioral insights can drive decentralized renewable energy (DRE) adoption among rural women entrepreneurs
India, home to 1.4 billion people, faces a growing and urgent demand for energy as it continues to power its rapidly advancing economy. This increase is poised to escalate even more dramatically in the years ahead. India has heavily depended on coal as a developing nation to fulfil its energy needs. Remarkably, coal and oil still represent over 88% of the country’s primary energy supply1. The industrial sector is the largest energy consumer, accounting for 56% of total energy usage while contributing 27% to the nation’s GDP. However, India is now making major strides toward a cleaner future. As part of its Nationally Determined Contributions (NDCs), India has ambitious plans to boost its target for cumulative electric power installed capacity from non-fossil fuel-based resources to an impressive 50% by 2030. With a strategic focus on expanding wind and solar power installations, India proudly holds the position of the fourth-largest nation in renewable energy capacity, ranking fourth in wind power and fifth in solar power generation. The Ministry of New and Renewable Energy (MNRE) foresees India’s renewable capacity soaring to 500 GW by 2031-32, marking a transformative shift towards clean energy.
Barriers to Solar Adoption in Rural MSMEs
The Micro, Small and Medium Enterprise (MSME) sector plays a significant role in the Indian economy, contributing 30% to the nation’s GDP. It accounts for 33.4% of India’s total manufacturing output, with approximately 6.3 crores of MSMEs operating in the country. The government aims to increase this contribution to 50% in the forthcoming years. Regarding energy consumption, the industrial sector utilizes 56% of the total energy demand. In comparison, the MSME sector accounts for 25% of the energy demand within the industrial sector, generating 110 million tons of CO2e annually. Moreover, the energy demand for the MSME sector is projected to increase by nearly 50% by 2030.2 The Government of India has implemented various policies, strategies, and programs to enhance resource efficiency and sustainability in the sector.
Despite achieving 100% village and household electrification, grid reliability still poses challenges, especially in rural areas. This unreliability negatively impacts rural MSMEs, which comprise 51% of India’s total MSMEs and primarily involve food processing, garment manufacturing, and more (as per the Ministry of MSMEs). Inconsistent electricity supply is a significant barrier to their growth. Key challenges include unreliable electricity, high reliance on diesel generators, loss of competitive edge, limited access to low-cost finance, lack of awareness and technical expertise, and socio-cultural barriers to solar adoption.
Understanding Mindsets – The Missing Link in DRE Adoption
PCI India carried out a scoping study in 2024 on the DRE transition for women-led enterprises in Uttar Pradesh, with support from the Global Energy Alliance for People & Planet (GEAPP). The study identified ten categories of women-led enterprises with over 25% geographical coverage. These enterprises have been classified into four groups: agricultural businesses, food processing micro-enterprises, service-oriented enterprises, and commercial shops. The findings suggest that:
- 93% of entrepreneurs believe solar energy enhances income
- 94% are willing to transition to solar energy.
- However, with only 19% of the entrepreneurs having savings for capex, high capital cost is a significant challenge for them.
- Access to loans/credit and high capital investment are substantial challenges that spread uniformly across all types of enterprises operating in multiple demographics across the state (only 21% of the entrepreneurs know how to access government benefits through subsidies/affordable loans).
The study indicates significant women’s economic empowerment potential by promoting livelihood-enhancing decentralized renewable energy (DRE) technologies, such as solar pumps, solar reeling machines, and cold storage units. Research shows that 74% of users benefiting from these technologies are female, while 26% are male. Technologies like silk reeling and spinning, solar hydroponic fodder units, micro solar irrigation pumps, and home-based Kirana stores have higher shares of female users. The DRE has the potential to contribute to women’s economic empowerment through various means.
Despite numerous initiatives and the establishment of a favorable policy and regulatory framework, as well as a compelling economic rationale—characterized by declining solar tariffs in contrast to typically high grid power tariffs for industrial consumers—the adoption of rooftop solar technology has predominantly been limited to large-scale industries and the institutional sector. Consequently, the considerable potential within the MSME and residential segments remains largely untapped.
The study also provides specific behavioral insights about entrepreneurs’ risk-taking and decision-making abilities, especially those associated with enterprises like Flour & Spice Mills, Oil & Paddy mills, and Kirana shops with freezers prioritized for further project interventions. They prefer having a business set up at their premises instead of renting a place. Only 1.5% of flour & spice mills, 9.4% of oil & paddy mills, and 4% of Kirana shops are established in a rented place. Moreover, these entrepreneurs avoided bank loans as seed money to start the business. 76.2% of flour & spice mill owners, 75% of oil & paddy mill owners, and 84% of Kirana shop owners started their enterprises using personal savings and money.
Qualitative Study Indicate Behavioral Biases
Following the quantitative investigation, a qualitative assessment of a subset of respondents was conducted. This assessment identified the behavioral biases and heuristics utilized by entrepreneurs in industries such as flour milling, oil spill management, and small grocery retailing. The analysis provides specific insights into the decision heuristics employed by these entrepreneurs when evaluating solarization as an energy source for their operations. The prominent cognitive biases and heuristics identified are availability heuristics, confirmation bias, status quo bias, the affect heuristic, illusion of control, and regret & counterfactual bias. A critical finding indicates that no anchor is available for entrepreneurs, so they can use it as a reference point when making decisions on solarization, such as the amount they will save by solarizaton, increased hours of operations, profit amount increase, etc. Earlier Research34 on cognitive biases and decision heuristics in critical decision-making among MSME entrepreneurs has similar findings, which is of great importance in understanding the entrepreneurs’ behavioral insights and facilitating them through better product design, improved service access processes, and better choice architecture.
From Intention to Action
The insights have facilitated the creation of client personas to assess their immediate emotional and professional needs or preferences, creating nudges to influence their subconscious minds to make better decisions.
The PCI India team has integrated behavioral insights and pertinent Social Behavior Change (SBC) theories into the strategy of the project titled Decentralized Energy for Women’s Economic Empowerment (DEWEE), which is currently being implemented in Uttar Pradesh. This project aims to promote the solarization of enterprises operated by 10,000 women entrepreneurs. They have been very conscious about the behavioral insights while designing and developing the promotional materials and training the implementation team.
The time has come to investigate the application of behavioral insights in generating impact beyond traditional SBC themes such as health and nutrition. This exploration includes aspects such as household and institutional solarization, as well as behaviors associated with the use of solar cookstoves. It is essential to adopt both SBC and behavioral insights perspectives when designing and developing projects related to climate change.
Author: Brijesh Kumar Govind Rao, Program Design Expert, PCI India
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India Energy & Climate Dashboard – NITI Aayog, 2022-23
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https://energy.economictimes.indiatimes.com/news/power/why-india-must-focus-on-msmes-for-meaningful-energy-transition/103415768
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Cognitive Biases in Critical Decisions Facing SME Entrepreneurs: An External Accountants’ Perspective by Arno Nuijten and Others
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Bats Are Blind?” Cognitive Biases in Risk Perception of Entrepreneurs by Emre Şahin Dölarslan and Others
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