Solar power has the potential to significantly meet the electricity needs of the agriculture sector; however, its adoption among Indian farmers still remains low. In Punjab, a predominantly agricultural state, only very few farmers use solar-powered agricultural pumps, despite the region’s high demand potential. The reason can be particularly attributed to significant increase in the price of polysilicon, which led to the increase in solar module prices. In this context, a University of Cambridge working paper (June 18, 2024) on “Farmers preferences for incentives on solar pumps: Evidence from a choice experiment in Punjab” by Sukhgeet Kaur and Michael Pollitt seeks to determine the incentives that are most likely to encourage farmers to switch from conventional pumps to solar irrigation, whether individually or at the community level. The objective of the paper was to survey and analyse farmers’ preferences for various incentives under two support schemes: capital subsidies and feed-in-tariff rates for grid-connected solar pumps in India. In the experiment, farmers were presented with two options. The first option was to invest in an individual grid-connected solar agricultural pump and benefit from selling surplus solar energy. The second option was to receive free solar electricity from a solarised agricultural feeder established by a private developer, without the benefit of earning additional income from selling surplus solar energy. Renewable Watch presents key findings of the working paper…
Experiment’s outcome
After conducting in-person interviews with 859 respondents, the results indicate that farmers strongly prefer a 75 per cent subsidy over 60 per cent subsidy on the cost of solar pumps. While this seems obvious, an interesting outcome is that farmers favour earning income from energy sales to receiving an offset in their residential electricity bills. While a higher subsidy is important to all farmers, the utility of a solar pump significantly increases when a larger subsidy is combined with the alternative of earning income from energy sales. Furthermore, the paper underscores the preference among farmers for installing individual grid-connected solar pumps for agriculture. On an average, a higher buyback rate, a 75 per cent capital subsidy on the cost of solar pumps and an income from energy sales are likely to increase the likelihood of farmers choosing individual grid-connected solar pumps.
Farmers are willing to pay more for higher subsidies and would require compensation to install individual solar pumps with lower subsidies. Meanwhile, farmers prefer solar feeders when subsidies are lower. Moreover, the positive and significant effect of the buyback rate on adoption suggests that the buyback rate is a key driving factor for the uptake of solar pumps. The study establishes that the total subsidy amount is not the sole determinant, but rather, the design of financial incentive schemes plays a crucial role. The findings also underscore that solar pumps do require subsidies and ideally, an easy access to credit, especially in the form of credit-linked capital subsidies, given certain financial constraints faced by most farmers.
Moreover, the findings show that the socioeconomic characteristics of farmers significantly influence their adoption rates. Farmers who are more educated, as well as those with medium-to-large land holdings and multiple tube wells, are more inclined to adopt grid-connected solar pumps. Insufficient awareness about available schemes and limited institutional support are identified as reasons for farmers’ reluctance to adopt solar pumps. Thus, raising awareness about the installation and operation of solar pumps is likely to increase farmers’ acceptance of solar technology in agriculture.
On an average, farmers demonstrated a preference for buyback of solar energy, assigning a value to their own electricity consumption indirectly. In addition, the combination of subsidy and buyback incentivises farmers to prefer individual pumps over solar feeders more frequently. Individual pumps are seen as more convenient from the users’ perspective, with feeder-level solarisation being considered as the second-best option.
Going forward, these findings can guide the development of a well-balanced approach combining individual solar pumps and solar feeders to incentivise prosumers in selling solar energy and assist consumers in managing their energy needs. With the growing demand and technological advancements in solar energy, there are opportunities for expanding both individual and community solar installations. Overall, it is essential to expedite the adoption of solar pumps and ensure increased government subsidies for solar technology. For this, knowing exactly what farmers preferences are, in terms of incentives, is key for a faster and greater adoption of solar, which this working paper aimed to achieve.
