Which ‘freebie’ makes more sense:
- 200 units of electricity per month free, or
- Energy-saving electrical devices, free?
The LED ‘revolution’ speaks volumes for the latter option.
Ten years ago, an LED light bulb used to cost upwards of Rs400. Today, you can buy one online for Rs65. That is a reduction of 90% after allowing for inflation (at 5%pa-per annum).
How did this happen?
The Unnat Jyoti by Affordable LEDs for All (UJALA) scheme, launched in 2015, drove down the price of LED bulbs through bulk purchases, which led to a massive increase in the usage of these bulbs. By March 2022, about 2.4bn (billion) LED bulbs had been sold, and today 75% of India’s light bulbs are LEDs.
This led to a significant saving in electricity consumption. It is estimated that the use of LED bulbs has reduced the need for additional electricity generation capacity by about 60GW (gigawatts).
Now it is time for the next, albeit smaller, ‘revolution’.
Enter BLDC (brush-less direct current) fans.
Conventional ceiling fans consume about 75 watts of electricity per hour. BLDC fans use only about 35 watts per hour, mainly because they contain permanent magnets rather than the electromagnets which conventional fans use. BLDC fans are also mechanically simpler, though they contain electronic circuit boards which conventional fans don’t.
Why doesn’t everyone switch to BLDC fans, then?
The answer is simple – up-front cost. BLDC fans are more expensive.
Let’s look at the numbers.
A BLDC saves more than 35 watts per hour compared to a conventional fan. Assuming that an average fan runs eight hours a day for eight months a year, even at 35 watts per hour this totals up to 67kWh (kilowatt) a year. At an average cost of Rs7 per unit (kWh), this comes to Rs470pa (per annum).
India currently has about 410mn (million) ceiling fans, of which a negligible portion (3%) is BLDC fans, the rest being conventional induction-motor fans. Estimates say that there is an unfulfilled demand for another 66mn ceiling fans.
For simplicity’s sake, let us round off the total to 400mn conventional fans.
If all these fans were to be replaced by BLDC fans, our country would save approximately Rs19,000 crore in electricity bills per year.
Who will pay for these BLDC fans?
Ah, here is the opportunity.
A basic BLDC fan sells online at Rs2,500, of which 18% (about Rs350) is GST (goods and services tax), i.e., the net selling price of this fan is approximately Rs2,150. A basic induction-motor ceiling fan is available at Rs1,500.
Suppose the government buys 400mn BLDC fans from various manufacturers in India, and gives them away free to people, in exchange for a conventional fan.
Three things will happen:
- The cost of a BLDC fan will reduce substantially due to economies of scale. Besides, the scrap value of the old fans will further reduce the cost. The net cost of a basic BLDC fan should reduce to around Rs1,500.
- Today, only 40mn fans are currently sold annually. Hence, new factories will have to be built to produce so many BLDC fans, and employment will be generated.
You see, there is a strong case for the ‘new BLDC fan in exchange for your old fan’ scheme.
This scheme would cost the government Rs60,000 crore (@Rs1,500 per fan) and would save the nation Rs19,000pa in electricity costs annually for the next over 15 years.
To put the cost in perspective, the government spends Rs1,500 to give a household 200 units of electricity free. Moreover, this is the cost every month, not the one-time cost of a fan!
Besides, if 400mn BLDC fans were to replace conventional fans, peak demand for electricity will reduce by 14GW. If we assume that only 60% of the fans run at any one time, this number reduces to about 8GW.
Electricity demand in India is rising steadily, and if the consumption from fans reduces, the need to build more power plants will be correspondingly reduced.
New power plants cost Rs8 crore per MW. Hence, not having to build eight GW of power capacity will save the nation Rs64,000 crore, more than the cost of 400mn BLDC fans.
In terms of return on investment, the NPV (net present value) of annual savings of Rs19,000 crore for 15 years is Rs1,73,000 crore, about three times the upfront cost of Rs60,000 crore.
(Note: Did you know that the government will be investing Rs52,937 crore in BSNL this year, almost as much as the BLDC scheme will cost?)
Of course, replacing all 400mn fans will take many years. Hence, the investment will be spread out accordingly, and there will not be a huge impact on the exchequer.
No doubt, the scheme will need quite a bit of fleshing out, for example:
- Affluent people need not get free BLDC fans. They may be asked to pay a portion of the cost, say Rs750.
- Swapping of ‘new fan for old’ could start in the southern states where fans are used all year round, resulting in higher savings.
- Technicians will have to be trained to take down old fans, install new fans in their place, and deposit the old fans at designated places. Consumers may be asked to pay a small fee for their services.
- A logistic system will have to be set up for distributing new fans and collecting old fans for scrapping.
I hasten to add that I have tried to keep the numbers as realistic as possible. Nevertheless, even if one were to further trim the numbers, one would still find that the stream of savings (due to reduced electricity consumption) would make the scheme a viable financial proposition.
And I am not even accounting for the reduction in environmental damage due to lower electricity consumption!
So, is it time for free (or at least subsidised) BLDC fans?
(
Deserting engineering after a year in a factory, Amitabha Banerjee did an MBA in the US and returned to India. Choosing work-to-live over live-to-work, he joined banking and worked for various banks in India and the Middle East. Post-retirement, he returned to his hometown, Kolkata and is now spending his golden years travelling the world, playing bridge, befriending Netflix & Prime Video and writing in his wife’s travel blog.)
What's needed is our INDIAN Companies get READY FOR HUGE CAPACITY ???? with detailed planning or else "Chinese ????companies will walk away with our money & huge profits"