CHAPTER 2 REVIEW OF LITERATURE, OBJECTIVES

AND HYPOTHESES

26 

CHAPTER 2

REVIEW OF LITERATURE

2.1 Introduction:

The earlier literature makes us to understand the economic analysis of the

energy and economic growth, Renewable Energy Sources, energy management and

solar energy consumption. The present chapter deals with the review of literature and

methodology adopted for the study to understand the work done on the study area.

An attempt has been made to review some important works related to the present

study. It helps to identify the research gap, econometrics tools and techniques,

objectives, hypothesis, limitations and easily identify the study variables. The study of

the literature has been classified into two categories viz., Theoretical studies and

Empirical studies. The first part deals with theoretical studies and the second part

deals with empirical studies.

2.2 Theoretical Studies of Literature:

Theoretical studies have been sub classified into two sections. There are

2.2a. Related literature on Conventional Energy resources

2.2b.Related literature on Non-Conventional energy resources

2.2a Related Literature on Conventional Energy Resources:

Xavier Labandeira and BaltasarManzano(2012) study on “ Some

Economic Aspects of Energy Security” had explained that economic aspects

associated to energy security and cost associated to insecurity. They have illustrated

security of energy supply and the important of energy for contemporary economics

and how exhaustible and geographically concentrated resources are playing and are

likely to play in the future, a very important role within energy systems. Then they

27 

indicated on the negative economic effects from both energy price volatility and

supply disruption, which claim the implementation of public policies. They

concluded that, a reflection on the design of energy security polices, both taking into

account their overall costs and benefits, their efficient application through appropriate

policy instruments and the likely interaction that may occur with other energy and

environmental policies.

A study on “India’s Energy Options” by Sunder Gupta (2010) has

explained the energy sources like coal, natural gas, electricity, oil and nuclear energy

in India. He stated that, energy is the important source for economic growth and

sustainable development but India’s energy sources are limited and it has to depend

on imports for a long term to meet growing energy demands. Therefore, he has

suggested that private sector can be a good source of investment in energy generation

projects and oil exploration.

Sundar I and C.Venkatesan(2009) study on “Energy Economics” This

book explained the economics of energy, energy theories and economic development,

electricity demand forecasting and it is including econometric approach, time series

methods, integration, end-use approach(pattern of electricity consumption), energy

demand, forecasting new technologies, economics of depletable energy supply,

capacity investment and capacity constraints, market failures, renewable energy

sources and energy policy in India.

Parag Diwan and Chirag Shah(2009) study on “Energy Economics” this

book explained the energy depletable resources economics, supply energy resources,

economic distributional impacts environmental consequences, oil economics, Indian

downstream industry, natural gas economics, power sector, energy policy in India.

28 

James L. Sweeney(2004) study on “Economics of Energy” studied energy

resources and energy commodities that include motivating firms and consumers to

supply, convert, transport, use energy resources, and to dispose of residuals; market

structures and regulatory structures; distributional and environmental consequences.

Energy commodities are economic substitutes. Energy resources are depletable or

renewable and storable or non-storable. Human energy use is dominantly depletable

resources, particularly fossil fuels. Market forces may guide a transition back to

renewable resources. Inter-temporal optimal depletable resource extraction paths

include an opportunity cost or rent.

David I. Stern (2004) study on “Energy and Economic Growth” explained

the relation between energy and economic growth and more generally the role of

energy in economic production and graphically explained the Neoclassical Growth

Model, Elasticity of Substitution for capital and resources, Macro-Level Limits to

Substitution, GDP and Primary Unadjusted Energy Use in US.

Pradeep Chaturvedi (2003) study on “Energy, Environment and

Sustainable Development” This book explained energy supply, energy demand,

sustainable development, energy efficiency, rural energy, renewable energy,

environment protection, quality of life, energy policy, programme, implementation

and energy management systems in India.

Gupta V.P. and Sneh Gupta (2002) study on “Energy Patterns in India”

this book analyzed the pattern of energy consumption both of conventional and non-

conventional energy sources in India as well as in Rajasthan. It also describes the

prospective demand for and supply of energy in India as well as in Rajasthan. They

concluded that, there are around 2,800 villages in Rajasthan, which have been

identified far-flung and their electrification by conventional sources is economically

29 

non-viable for power supply from grid, may be electrified by new and renewable

sources of energy.

Raikhy P. S and et.al (1990) has examined the pattern of energy consumption

in agriculture, industry and households in Amritsar district of Punjab. This study

based on the basis of a sample study of 128 households. The study pointed out that the

households consume around 14% of non-commercial fuels and rest commercial fuels,

in agriculture sector energy is being used for soil preparation, irrigation, threshing,

fodder chopping and for transportation of agricultural produced. The industrial

sector, were making use of electricity, motor spirit, kerosene and diesel oil for power

purposes fire-wood, coal, rice-husk and furnace oil for heating purposes, petrol for

transport purpose and electricity for lighting purpose. They have concluded that the

industrial sample units consumed maximum amount of energy.

Veena D R (1988), studied the rural energy consumption in Gujarat. This

study based on both primary and secondary data. Primary data have been collected

from 10 villages of dhanerataluka of banarkantha in north Gujarat. Each taluka has

been divided into 5 sub-blocks and from each sub-block two villages have been

chosen with a view to cover different characteristics of house-holds such as their

occupations, castes, energy consumption pattern and infrastructural facilities. They

study has made an attempt to analyze the energy consumption in different sectors of

the economy like agriculture, industry and house-hold sector. They concluded that,

the share of electrical power in the total energy consumption in the agriculture sector

is the highest, in industrial units in rural areas make use of both commercial and non-

commercial fuels, in domestic sector in ten villages there is no consumption of coal.

Jose Goldemberg and et.al (1987) study on “Energy for A Sustainable

World” explained the demand and supply side management, energy problems on oil

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crisis in global level, energy and development, global climate change, alternative

energy futures, energy and employment, market-oriented countries, the role of

markets in end-use energy strategies, energy and basic human needs, energy

technology, economic activity in world.

2.2b Related Literature on Non-Conventional Energy Resources :

Owura Kofi amonabeng(2012), project study on “Assessing the Feasibility

of A Solar Water Heating System Based on Performance and Economic

Analysis” has investigated SWHs cost effective ways of heating water in residential

and public buildings such as hospitals and health centers in various places in Ghana.

They calculated annual energy and cost savings. The variables are type and size of

SWHs, usage habits, year of using. They concluded, SWHs with a better long-term

thermal performance when using the flat plate collector than the evacuated tube

collector. The economic analysis of the system was done with an initial total

investment of US $28,829 and life cycle saving of US $76,127, it gives a positive net

present value of US $31,869 with a payback period of 6 years. It means economically

positive effect of the society.

Ganesh Hegde(2012), explained the scope of solar energy in Kerala and

Karnataka. The study primarily depends on parameters like geographic location,

earth-sun movement’s solar isolation, potential and availability of solar energy in

these region, techno-economic analysis of the power technologies and utilization,

emission reduction. They observed, both states are power deficit states where the

annual energy consumption is more than the energy generated. They concluded, state

witnessed for major power crisis from last few years and hence power harvesting

from renewable energy source could be the solution for this problems.

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Valentina G (2012), explained the renewable energy potential, estimation and

achieve of renewable energy in India and challenges of renewable energy power

generation. She observed, India, estimated 150GW of renewable energy potential

and other challenges is transmission and distribution of the power to far flung areas of

the country and lower-cost scenario is based on developing low-diversity, low-cost

renewable energy sources, while the higher-cost estimate is based on a renewable

energy mix that is high diversity, including high-cost sources like solar. She

concluded, Indian Government has increased its renewable energy target for 2020

from increased 4% to 15%, this achievement will be growing for renewable energy

technology and contribution to India’s energy mix sources of renewable energy.

Strategic Plan for New and Renewable Energy Sector for the Period 2011-

17 By Ministry Of New And Renewable Energy Report (2011), MNRE has

initiated systematic programmes for renewable including for research and

development. Renewable energy is currently experiencing increasing all sectors of the

economy driven by sustained economic growth and growing global concerns

regarding climate change. There are various stakeholders that directly/indirectly

contribute towards the promotion of renewable energy, and each one has some

aspirations and expectations from this sector, just as they have a significant

responsibility. This is in a way laying foundation of a new economy that is inclusive,

sustainable energy in a definite time. However, there is a long way to go. In order to

create an enabling environment, the Ministry as a policy maker will have a significant

contribution to make.

Sian Adams (2011), study on “South African Consumer Attitudes towards

Domestic Solar Power Systems”, has investigated how solar energy consumers

groups adopters and early majority adopters in South Africa. The calculated

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descriptive analysis and cross-tabulation method to use statistical tools like, chi-

square test and t-test for consumer attitudes towards characteristic of solar systems,

consumers decision making process and solar energy technology. The sample size is

89 households. The variables of demographic profile are, gender, age, education,

monthly household income, rood insulation, energy saving lights, geyser blanket,

water saving taps, gas heating, gas stove, recycling , automotive light switch. In solar

energy variables are, years of using SWHs, help to reduce pollution, generate savings,

maintenance as an electric geyser or grid, value for money, technology, reliable

source of power, value to property, easy to install, safe form of power generation,

compatible with modern living. They concluded, majority demonstrate a positive

perception of the environmental characteristic of solar power and if consumers cannot

identify the relative advantage of solar power over their current source of power

supplied readily and cheaply through the national grid, it is unlikely that wide-scale

adoption will follow.

The study conducted by Soteris A. Kalogirou(2011) entitled

“Environmental Benefits of Domestic Solar Water Heating Systems” this paper

has analyzed the pollution caused by the burning of fossil fuels environmental

protection offered by domestic solar water heating systems. They calculated thermal

and economic analysis, environment benefits of solar energy and pollution control. In

economic analysis of this paper identified the parameters are total electric/diesel/both

system cost, annual fuel saving and pay-back time (year), solar energy system cost,

solar and conventional cost, conventional sources. The results shows that, by using

solar energy for domestic water heating considerable amounts of greenhouse polluting

gasses are avoided, energy savings, cost saving, long run benefit when compared to a

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conventional system. Concluded that, solar energy systems are offer significant

protection to the environment.

The study on “Solar Water Heating: Reducing The Barriers” by Jayson S

Naicker(2010), has investigated the current barriers to the mass rollout of solar water

heater in South Africa and provided possible solutions to reduce barriers. They

observed the barriers that are preventing the industry from developing are: the high

price of solar water heater, the lack of awareness of the technology, insufficient

training facilities leading to a shortage of skills and the low price of electricity. They

concluded, the development of cost effective financing mechanisms because the high

costs of production influences the price of solar water heaters. Financial incentives

models such as rebates could be more effective in assisting the low and middle

income groups with partial funding for the purchase of the solar water heater.

Sameer Maithel and et.al (2010) project submitted to MNRE, the study

conducted “Solar Water Heaters In India: Market Assessment Studies and

Surveys for Different Sectors and Demand Segments”, investigated solar water

heater users and non-users in household both urban and rural,

commercial/institutional and industrial segments in 29 districts of India. They carried

out a primary survey 1000 users and non-users of SWH and also held semi-structured

interviews of 200 stakeholders, SWH manufactures, dealers, banks, municipal

corporations, electricity distribution companies, architects and builders to select based

in consideration with MNRE. They concluded, in the residential sector there are 0.7

million SWH user households in both urban and rural, 65% of which are concentrated

in Karnataka and Maharashtra, in industries used limited and scattered and hospitals

and hostels supply of hot water management is an advantages but more than 15 rooms

34 

in not sufficient barriers. There is overall satisfaction with product-experience, some

concern being voiced over after sale support.

According to Thenmozhi S and N.Deepa(2009), study on “Conservation

and Saving of Energy - Need of the Hour” explained the energy sources, how to

conserve and save energy And environmental impact in India. They concluded that,

conservation and saving energy is most important, because growth and demand for

energy is increasing at a very fast rate, especially in the industrial sector, the transport

sector and household sector.

Srikanth Subbarao and Bob loyd (2009), study on “Development

Challenges under the Clean Development Mechanism (CDM) - can Renewable

Energy initiatives be put in place before peak oil?” discuses the global concerns of

developmental needs, energy and climate change, and their influence on the poor in

the developing world. They say that, this mechanism to promote clean carbon-free

energy for developing countries and modified CDM could deliver both reasonable

quantity of cost-effective emission reductions and increase the flow of technologies

and finance to some developing country.

Maximilian Auffhammer and et.al (2008), study on “Demand Side

Management and Energy Efficiency Revisited” explained the electricity savings

and underestimating costs associated with energy efficiency demand side

management programs in US. Using econometric model of residential electricity

demand, Variables are savings and cost. They construct nonparametric bootstrap

confidence intervals. They argued that, utility reported savings and costs true values

its mean reject the null hypotheses. They concluded, DSM programs have the

potential to play an important role in mitigating the environmental impact associated

35 

with meeting increasing demand for electricity end-uses and cost utility-reported have

indicated that DSM programs are highly cost-effective.

According to MNRE (2008), working paper on “Renewable Energy in

India: Progress, Vision and Strategy” explained the renewable energy programmes,

research and development, technology adoption, implementation, policy and

budgetary support in India. The paper outlines the basic strategy and approach being

followed for the growth of the renewable energy sector and emphasized the different

important roles that can be played in the off-grid particularly in meeting the

challenges of providing energy access to India's rural areas and reducing consumption

of fossil fuels which is essential for future energy security of the country.

House of Lords report (2007) explained The Economics of Renewable

Energy in UK. This report explained the main point is reducing carbon emission.

That purpose UK government’s has a contribution to a world-wide effort and

promoting renewable energy sources to generate the electricity. Although their

declared purpose is to improve the environment, it is clear that renewable energy

installations can also have adverse environmental impacts which the government

should bear in mind as it weighs the benefits and costs of expansion of renewable

generation then also achieve security of electricity supply. Concluded that, U.K is

installed the renewable energy sources to solve the problem of electricity,

environmentally benefits, reducing the carbon emission and less use of non

conventional sources.

The study on “Renewable Energy Futures: Targets, Scenarios and

Pathways” by Eric Martinot and et.al (2007) explored and forecasted, renewable

energy scenarios for the future 2050 in global, Europe and country specific targets and

scenarios. It is considered possible or desirable and to inform policy making. They

36 

considered common indicators are shares of primary energy, electricity, heat and

transport fuels from renewable. They concluded, by 2020, many targets and scenarios

show 20-35% share of electricity from renewable, Energy can increase to 50-80% by

2050 under the highest scenarios. These scenarios helps depending on degree of

future policy action, fuel prices, carbon prices, technology cost reductions, and

aggregate energy demand, with resource constraints mainly for biomass and biofuels.

Report compiled by ICLEI South Asia (2007) working paper on

“Renewable Energy and Energy Efficiency Status in India” analyzed the energy

problems of cities and to provide alternative energy solutions for industrial and

commercial establishments, it focuses on the development and application of

renewable energy technologies and energy efficient systems. He has concluded, local

governments are effective in promoting the generation of energy from renewable

resources. With their executive power they can implement sustainable energy at a

locally appropriate level, and also encourage the local community to switch to

renewable.

Rathore N.S and N.I.Panwar (2007) study on “Renewable Energy Sources

for Sustainable Development” this book explained the fundamental and design of

energy system, integrated rural energy planning system, energy integration

techniques, energy forecasting and rural energy modeling , renewable energy

resources, economic analysis of different energy options, energy programme,

development and implementation.

Peter Meisen and et.al(2006), study on “Overview of Renewable Energy

Potential of India” explained that, energy consumption and production, over the

period of 1980 to 2005, estimated on renewable energy potential, actual installed

capacity, availability and electricity consumption in India. They observed that, India

37 

has a negative energy balance for consumption and production, which has forced the

purchase of energy from outside the country. They concluded, the next few years

shortage of conventional energy sources, so capacity exists to shift towards more

renewable energy, since only a fraction of available renewable energy potential has

been tapped.

Venkataraman B and D Elango (2006) study on “Renewable Energy

Sources” explained the huge consumption of exhaustible energy resources and

looking for renewable energy resources. They concluded that, the renewable sources

are cost effective, user friendly so that they can easily beat the fossil fuels. Then

promoting renewable energy sources, can avoid the air pollution, soil pollution and

water pollution and country’s economy will increase and without affecting the

environment.

Ronald Steenblik (2005), working paper on “Liberalization of Trade in

Renewable Energy Products and Associated Good: Charcoal, Solar Photovoltaic

Systems and Wind Pumps and Turbines” examined the implications of liberalizing

trade in renewable energy, focusing on several reprehensive fuels and technologies.

He observed that, eliminating tariffs on renewable energy and associated goods which

are 15% or higher in many developing countries, it would reduce a burden on

consumers of energy, particularly people living in rural areas of developing countries,

as it is in such areas that many renewable energy technologies are making, and are

likely to make, their greatest contribution. He concluded, additional reforms may be

required in importing countries, domestic policies, especially those affecting the

electricity sector in general, rural electrification in particular, and the environment.

Daniel Weisser(2004) study on “On the Economics of Electricity Consumption

in Small Island Developing States: A Role for Renewable Energy Technologies?”

38 

has explained the economic implications like energy and economic development,

energy policy and planning, integrated renewable energy systems of power production

and electricity generation from renewable energy contribution and qualitative

potential in Small Island Developing States(SIDS). He says that, SIDS is gradually

changing from subsistence economies to monetary systems. This transition has been

accompanied by an increased use of energy, especially in the form of electricity,

which has many benefits for society, and has lead to a steady improvement in

standards of living.

Singh R.K.P and A.K.Mishra(1999) study on “Renewable Energy

Resources: Opportunities and Challenges In North-Eastern Region of India”

explained the energy resources like increasing demand and inefficient utilization,

depletion of fossil fuel forest resources, high price of petroleum products conservation

of conventional energy and renewable alternatives to conventional energy sources in

north eastern region of India. They said that, long term interest of our country’s

economic self reliance, free from environmental hazards and the accelerated economic

development of north eastern region; it measures for harnessing the renewable

resources of energy. The issue is not the technology but, awareness and motivation.

SomDutt Gupta and et.al (1999) study on “Renewable Energy Resources

Management in the North-East Region” explained the energy requirement in

villages, energy scenario in north east region, non-conventional energy technologies

and installed in north east, energy programme in north east region of India. They

said, renewable energy resource management is the electricity produced from non-

polluting sources such as wind, water and even rotting garbage is the only substitute

to overcome the present scenario of energy problem in the north eastern region of

Indian subcontinent

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John Byrne, Bo Shen and William Wallace (1998) study on “The

Economics of Sustainable Energy for Rural Development: A Study of Renewable

Energy in Rural China” analyzed to evaluated the economic viability of off-grid

renewable energy technologies for rural application in developing countries. Case

studies have been conducted for a representative sample of 41 households from the

Inner Mongolia Autonomous Region of China and analyzed costs of off-grid,

household scale renewable energy systems are cost-competitive with conventional

energy. They have concluded, renewable energy technologies, such as photovoltaic

and wind, can provide an economical and environmentally sustainable option for

meeting energy needs of remote rural households in these countries.

According to SushmaKaushik and Tejverma(1996) study on “Rural Energy

Management" this book explained the rural energy systems from the generation of

technology till utilization, despite the emphasis on management, the study

emphatically attempts to identify sets of other crucial factors, that could influence the

implementation of rural energy projects in India and empirically analyzed for primary

data and used econometrics i.e. multiple regression analysis and correlation, that

variables are age, socio-economic status, change proneness, risk orientation,

conservation, perception of energy situation, communication behavior, energy use

extent, perceived feasibility.

Gary J. Jones and Griffin Thompson (1996), Study on “Renewable Energy

for African Development” explained the problem of delivering energy services to

the rural population in the context of economic, social and political development and

then discussed on the rural electrification program which has tried to address the issue

in a manner that is socially acceptable, commercially viable, and technically feasible

40 

in Africa. They concluded, these issues empowered sustainable rural electrification

programs.

David Pimentel and et.al (1994), study on “Renewable Energy: Economic

and Environmental Issues” observed that, analyzed the potential of various

renewable energy sources i.e. solar energy technologies to supply in the US with its

future energy needs and assessed in terms of their land requirements, environmental

benefits and ricks, economic costs, and their advantages. They said that, the

implementation of solar technologies will reduce many of the current environmental

problems associated with fossil fuel production and use.

MNRE Project Peport (2010), the title is ‘Scheme and Frame work for

promotion of solar water heating systems by utilities and regulations” explained solar

water heater system potential to reduce electricity consumption and consequent emission

reduction, policy of SWHs, and analyse the segmentation of market for SWHs and

Rationale for utility driven promotional scheme in India. Then also explain the SWHs and

programmes of other countries like Australia, South Africa, California and Florida. This

report concluded that, usage of SWHs is reduced the electricity consumption.

2.3 Empirical Studies of Literature related on Energy, Renewable Energy

Resources, Energy Management and Solar Energy

Empirical studies have been sub classified into four sections. There are

2.3a. Related literature on Econometric tools like Co-integration and Causality

Test on Energy and Renewable energy resources

2.3b. Related literature on Techno-Economic Analysis of Solar Energy

2.3c. Related literature on Cost and Benefit Analysis and Life Cycle Cost

Analysis of SWHs

2.3d. Related literature on End-Use Method and Regression on Energy Demand

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2.3a. Related Literature on Econometric tools like Co-integration and Causality

Test on Energy and Renewable Energy Resources:

Nicholas Aperies (2009) study on “Energy consumption and Economic

Growth in Central America: Evidence from a Panel Co-integration and Error

Correction Model” has investigated the relationship between energy consumption

and economic growth for six Central American countries (Costa Rica, El Salvador,

Guatemala, Honduras, Nicaragua, and Panama) over the period 1980–2004 and using

Time series data test i.e. panel co-integration, test of panel unit root and tests of

dynamic heterogeneity. These tests consist of four variables i.e. real GDP, energy

consumption, labor force, and real gross fixed capital. He has observed energy

consumption and economic growth will be of help to energy conservation policies

which reduce energy consumption and its impact on a country's growth prospects.

A study on “Renewable Energy Consumption and Income in Emerging

Economies” by Perry Sadorsky (2009) has empirically analyzed the renewable

energy consumption and income for 18 emerging countries over the period 1994-2003

and has used tests for Panel unit root test, Panel co-integration and Panel causality test

for both variables. He said, Renewable energy can play an important role in reducing

an emerging country’s dependence on imported energy products (like oil and gas).

Renewable energy through reduced emissions of greenhouse gasses can also play an

important role in helping to address climate change issues.

Haurie A (2009) study on “Modeling Uncertainty and the Economics of

Climate Change: Recommendations for Robust Energy Policy” analyzed the

Environmental Modeling and Assessment is meant to gather front-edge research and

innovative analysis in the modeling of uncertainty related to the economics of climate

change. He has focused on advancements in probabilistic integrated assessment

42 

modeling and stochastic analysis of climate futures and used non-probabilistic

economic methods to treat uncertainty in global or regional dynamic climate change

models is explored and link between climate change and the nature of mankind’s

energy production and energy consumption.

Song Zan Chiou-Wei and et.al (2008), study on “Economic Growth And

Energy Consumption Revisited—Evidence From Linear And Nonlinear Granger

Causality” has empirically analyzed the linear and nonlinear Granger causality tests

are applied to test the causal relationship between energy consumption and economic

growth for a sample of Asian newly industrialized countries like Taiwan, Hong Kong,

Singapore, Indonesia, South Korea, Philippines, Malaysia and Thailand as well as the

U.S. from the period 1954 to 2006 and using econometric tests i.e. unit root tests,

Granger causality test, BDS test and nonlinear Granger causality tests. They

concluded that, higher level of economic development could induce more energy

consumption and facing the goal of emission reduction set by Kyoto protocol to

mitigate global warming.

David G. Ockwell (2008) study on “Energy and Economic Growth:

Grounding our understanding in physical reality” summarized economics

literature on the possibility of decoupling economic growth from energy use.

Empirical analyzed also demonstrated that improvements in GDP/energy use ratios in

the USA are better explained by shifts towards higher quality fuels than by

improvements in the energy efficiency of technologies. This implies a need to focus

on decarbonising energy supply, energy- efficiency improvements, and energy

savings. They included ecological, evolutionary and institutional economics. All of

which can make policy-relevant contributions to achieving a transition to a low-

carbon economy.

43 

Alberto Longo (2006) study on “The Internalization of Externalities in the

Production of Electricity: Willingness to pay for the attributes of a policy for

renewable energy” investigated the willingness to pay for a sample of residents in

England and explained the programs, then how to promote the production of

renewable energy. He has Used choice experiments, i.e., the preferences of

respondents for a policy for the promotion of renewable energy that: (i) contributes to

the internalization of the external costs caused by fossil fuel technologies; (ii) affects

the short-term security of energy supply; (iii) has an impact on the employment in the

energy sector; and (iv) leads to an increase in the electricity bill. He has suggested that

consumers are willing to pay a higher price for electricity in order to internalize the

external costs in terms of energy security, climate change and air pollution caused by

the production of electricity.

Jebaraj S and S.Iniyan(2004), study on “A Review of Energy Models”

explained reviews on various types of energy models i.e. energy planning model,

energy supply-demand models, forecasting models, renewable energy models,

emission reduction models and optimization models. These models based on neural

network it can be used in the energy forecasting and fuzzy theory can be used logic

for energy allocation of the country. They observed that, these energy models will

help in the proper allocation of widely available renewable energy sources such as

solar, wind, bioenergy and small hydropower in meeting the future energy demand in

India.

Wankeun Oh and Kihoon Lee(2004), study on “Causal relationship

between Energy Consumption and GDP revisited: the case of Korea 1970–1999”

studied the relationship between energy consumption and economic growth in Korea,

over the period 1970-1999 and using VAR model and multivariate model from the

44 

variables are capital, labor, energy, GDP and Divisia energy. They suggested that,

Korea existence of a long run bidirectional causal relationship between energy and

GDP, and short run unidirectional causality running from energy to GDP. The source

of causation in the long run points to the ECMs in both directions.

UgurSoytasa and RamazanSarib(2003), study on “Energy Consumption

and GDP: causality relationship in G-7 countries and emerging markets”

empirically analyzed the relationship between energy consumption and GDP in G-7

countries(Italy, Korea, Turkey, France, Germany, Japan and Argentina) and explained

the markets. They used VEC model and causality test for variables i.e. energy

consumption and real GDP. They says, bi-directional causality in Argentina,

causality running from GDP to energy consumption in Italy and Korea, and from

energy consumption to GDP in Turkey, France, Germany and Japan. They concluded,

energy conservation may harm economic growth in the last four countries.

Boudri J.C. and et.al (2002) study on, “The Potential Contribution Of

Renewable Energy In Air Pollution Abatement In China And India” analyzed,

the cost effectiveness of renewable energy sources in air pollution abatement in Asia.

They used acidification model i.e. RAINS-ASIA model (Regional Air Pollution

Information and Simulation Model), this model approach demonstrates that

optimization analysis and to help found that, cost effective strategies for air pollution,

for the coming 20 years. They concluded that, increased use of renewable energy

sources could reduce sulfur and carbon free, to conventional fuel supplies.

George Hondroyiannisa et.al (2002), study on “Energy Consumption and

Economic Growth: assessing the evidence from Greece” empirically explained the

relationship between energy consumption and economic growth in Greece from the

period of 1960-1996 employing the vector error-correction model and test for co-

45 

integration. It consist of three variables i.e. energy consumption, real GDP and price.

They concluded, there is a long-run relationship between the three variables,

supporting the endogeneity of energy consumption and real output. They found that,

this empirical evidenced to help the policy implications aiming at improving

economic efficiency can induce energy conservation without impeding economic

growth.

Ashishrana and P. R. Shukla (2001) study on “Macroeconomic Models for

Long-term Energy and Emissions in India” described the complex dynamics

between energy, emissions and Indian economy. They also described two top-down

models that is ERB (Edmonds and Reilly, 1983, Reilly et al., 1987; Edmonds and

Barns, 1992) model it indicated long-term model of global energy and greenhouse gas

emissions, another model is SGM (Second Generation Model) it indicated national

model. They concluded that India’s energy system will remain largely dependent on

coal and to change under a regime of carbon taxes towards less carbon-emitting fuels

like gas and renewable energy.

John Asafu-Adjaye(2000), study on “The relationship between Energy

Consumption, Energy Prices and Economic Growth: time series evidence from

Asian Developing Countries” examined, the causal relationship between energy

consumption, energy prices and economic growth for time series evidence from four

Asian countries like India, Indonesia, Philippines and Thailand and used co-

integration and error-correction models, it consist of three variables i.e. energy

consumption, energy price, economic growth. He concluded, India and Indonesia are

causally related but, Philippines and Thailand mutually causal and do not support that

energy and income are neutral with respect to each other.

46 

A study on “A note on the causal relationship between Energy and GDP in

Taiwan” by Hao-Yen Yang (2000) has examined the causality between energy

consumption and GDP in Taiwan, time series data for the period 1954-1997 and used

the tests for unit root (PP test), Co-integration test and Granger’s technique has taken

five variables i.e., GDP and energy consumption including coal, oil, natural gas, and

electricity. He says, causal relationship between GDP and the aggregate as well as

several disaggregate categories of energy consumption and Granger’s technique find

bi-directional causality between total energy consumption and GDP, find further that

different directions of cause exist between GDP and various kinds of energy

consumption.

A study on “A Multivariate Co-Integration Analysis of the Role of Energy

in the US Macro Economy” by David I Stern (2000) has analyzed the causal

relationship between GDP and energy use in the USA and using the econometric

models i.e. VAR model, integration, Single equation specification co-integration test

and Multivariate co-integration analysis. These tests consists of three variables, that

is GDP, energy input, capital input and labor input between the years of 1948 and

1994. He observed that, Single and Multivariate co-integration analysis shows that

energy is significant in GDP and also shows that, there is co-integration relationship

including GDP, energy, capital and labor. He has concluded, energy is a limiting

factor in economic growth but energy supply will tend to reduce output.

Suganthi L and A.Williams(2000), study on “Renewable Energy in India-a

modeling study for 2020-2021” explained, the energy requirement is being met by

both commercial and renewable energy sources in India. They have empirically

analyzed the source of renewable energy systems by used the optimization model.

This model constraints are demand, potential, social acceptance, reliability, emission

47 

and employment. They concluded that, commercial sources are non-availability of

sufficient resources and create emission of pollutants, it is now being felt that

renewable energy has to be utilized to a greater extent.

Elizabeth Cecelski(2000), study on “Enabling Equitable Access to Rural

Electrification: Current thinking and major activities in energy, poverty and

gender” has explained the ways of thinking in energy, poverty and gender, with a

focus on rural electrification and renewable energy, as an initial attempt to

conceptualize linkages like sustainable energy development and poverty, poverty and

some energy implications, rural development and poverty, energy-poverty and

gender.

Sun J.W. (1998) study on “Changes in Energy Consumption and Energy

Intensity: A Complete Decomposition Model” empirically analyzed the energy

consumption and energy intensity in developing country China and developed

countries Eastern Europe and USSR and used common problem in the general

decomposition models, i.e. the residual term. He has taken three variables i.e., energy

consumption, energy intensity and GDP for the period of 1973-1990. He has

concluded, China increased energy consumption and USSR decreased energy

consumption. The energy intensity in developed countries, Eastern Europe and USSR

and China still declined in this period, the intensity effect decreased the energy

consumption. The real energy consumption was still less than the activity effect in

developed countries.

Benjamin S. Cheng and Tin Wei Lai(1997) study on“An investigation of

Co-integration and Causality between Energy Consumption and Economic

Activity in Taiwan” analyzed the causality relationship between the energy and

GDP, Energy and Employment in Taiwan and used the tests for unit root test i.e., PP

48 

test, co-integration and Granger causality test for the period of 1955-1993. They

found that, causality running from GDP to energy consumption and also energy

consumption to employment unidirectional causal but not vice versa. They

concluded, in the newly industrializing countries in general, energy is an important

ingredient of economic development and economy which is well-developed but not

highly developed. Therefore, an increase in output influences energy consumption,

which in turn boosts employment. Additionally, increased energy consumption also

directly affects employment.

Abul M.M. Masih and Rumi Masih (1996), study on “Energy

Consumption, Real Income and temporal causality: results from a multi-country

study based on co-integration and error-correction modeling techniques”

empirically analyzed the energy consumption and economic growth for multi

countries like India, Pakistan, Malaysia, Singapore, Indonesia and Philippines. They

used co-integration tests and dynamic vector error-correction model. These tests

consist of two variables i.e., energy consumption and economic growth by each

countries, during the period of 1955-1990. They said that, India, Pakistan and

Indonesia countries were co-integrated but, temporal causality were mixed with

unidirectional causality from energy to income in India, reverse for Indonesia and

mutual causality for Pakistan.

2.3b. Related Literature on Techno-Economic Analysis of Solar Energy:

Solaiman O and et.al (2011), study on “Techno-Economic study of

potential using solar energy as a supporting power supply for diesel engine for

landing craft” explained the comparative analysis of fuel power consumption and

solar energy consumption in Malaysia’s company. They observed that the potential

of using solar PV system onboard a landing craft by analyzing the reduction usage of

49 

fuel and diesel, exhaust as well as carrying out economical analysis. They calculated

fuel and money saved by using solar panels, economically analysis were obtained by

determining data of cost, cash flow, annual average cost (AAC), and return

investment of both vessel with the support of solar PV system and without solar PV

system. They concluded, the use of solar panels will give benefits to the vessel and

also to the investment. Reduction of fuel consumption and diesel exhaust are proven

to show that there are potential in using solar energy to support the power requirement

for the landing craft as the installation of the solar hybrid system give benefits to the

company and also the environment.

Samara Sodrin and et.al (2009), study conducted on “Alternative Solar

Water Heater for Domestic Purpose”, investigated SWHs and EWHs in domestic

household. They said, every household has domestic electric water heaters which

consumes lot of electricity. Therefore to faced the problem of electricity. They

economically calculated, cost analysis, the variables are energy price, energy unit of

usage, electric system price, maintained cost in electric heater system to compare the

SWHs. They concluded, SWHs is efficient because of used to supply hot water 80%

of the time, and rest 20% will be supplied by the electric water heater, SWHs cheap,

abundant and free, very small amount of electricity and reduces of expenses for the

user.

Abdulkarim H T (2001), study on “Techno-economic analysis of solar

energy for electric power generation in Nigeria” has investigated global and

regional availability of solar energy and its feasible utilization for power generation.

He also discussed on technologies involving the concentration, collection and

conversion of solar energy to power. He analyzed, solar technologies were compared

economically with conventional technologies of power generation considering present

50 

social-economic environment to emphasize the need to supplement with and

eventually replace existing power generation systems with available, abundant and

inexhaustible solar energy system because of Nigeria power generated presently is

insufficient. He concluded, the utilization of solar energy for power generation would

reduce the over-dependence on hydropower, the adverse environmental effects of

fossil power and the dangers of nuclear power.

2.3c. Related Literature on Cost and Benefit Analysis and Life Cycle Cost

Analysis of Solar Energy

Yogesh Sharma and et.al (2013), studied on “Energy-Cost Analysis of

Alternative Sources” explained cost advantages and disadvantages of alternative

energy sources in Gwalior. The data collection was carried out for selected sites

coupled with their energy auditing to obtain the total energy consumed at house, and

analyzed energy specifications and installation-cost of the alternative energy sources,

cost analysis of cost of illness analysis, cost-minimization analysis, cost- effectiveness

analysis, cost utility analysis, cost consequence analysis, cost-benefit analysis, in

surveyed sites. They observed, the source of alternative energy powered in applying

homes reduce the emery cost.

Christopher J.Koroneos and EvanthiaA.Nanaki (2012), study on “Life

Cycle Environmental Impact Assessment of a Solar Water Heater” investigated

technical and environmental performance of a solar water heater in Greece. Using for

Life Cycle assessment method and techno-economic analysis. This LCA study

quantifies the environmental benefits of the installation a SWH with electricity an

auxiliary for domestic use in the city of Thessaloniki in Greece. They examined the

manufacturing stages of the SWH and records resource consumption and waste

streams to the environment. The test of LCA economic parameters are initial cost of

51 

SWHs and annual cost of other sources of DHWs, Size of water heater system,

energy cost, energy saving. The result gave LCA savings equal to 4280.0V and pay-

back time equal to 5years. They concluded renewable energy sources could provide a

solution to the problem, as they are inexhaustible and have less adverse impacts on

the environment than fossil fuels then especially solar energy systems offer significant

environmental protection.

Panapakidis D (2010), study on “Solar Water Heating Systems Study

Reliability, Quantitative Survey and Life Cycle Cost Method”, has investigated

overview of the solar water heater system , benefits, types of SWHs, and life cycle

cost analysis and comparative analysis of SWHs and other fuels in UK and Greek.

They calculated life cycle cost analysis; variables of performance are solar energy

available, family size, SWH size and type, time of use, type of building. The

economic variables are current fuel cost, inflation rate, discount rate, homeowner’s

income tax rate, investment time period, maintenance cost over time. They

concluded, both countries are the cost reduction and people believe that SWHs are

quite expensive compared to other sources of water heating.

Fouad Kamel(2010), study on “Life-Time Cost Benefit Analysis of Solar

Energy System in Queensland”, analyzed life time cost and benefit analysis for a

solar system comprising a grid connected photovoltaic unit and a solar water heater

operated at Toowoomba Queensland. The work represented technical and economic

assessment of the technology at local condition. They observed solar KWh price

indicated the ability of the system to provide competitive prices to cover demand

peaks in Queensland. Additionally, the solar system being located on site offers the

advantage of avoiding transmission and distribution losses throughout the electrical

network. The work is addressing advantages of associating solar heaters to

52 

photovoltaic systems covering energy demands for most of conventional domestic and

industrial users. Case studies for different technologies, different economic conditions

and system life times are presented. The results indicated SWHs economic benefits at

present equipment and energy prices, it provided the shortest payback time and the

lowest cost per kWh when compared to the other alternatives, the combined system

and the gird connected PV only then, technical and economic ability to reduce peak

electrical demands on the national grid.

The study on “Solar Water Heating Systems In Georgia: Cost-Benefit

Analysis” the document prepared by USAID, Rural Energy Program (2008). This

document basically interested in solar water heating systems or willing to use in

Georgia. Explain the technologies and products of hot water system. This document

calculated economic viability analysis of cost-benefit analysis of SWHs and EWHs.

The variables are solar system life time years, maintenance cost SWHs, expected

electricity charge, location, collectors type, temperature in small and large

family/hotels. The result of cost and benefit analysis indicated that, SWHs cover 75-

85% of annual hot water demand and cost of hot water decreases in similar ratio.

Concluded that, the bigger and more dimensioned the system is the more beneficial

and economically justified is installation of such system i.e. the more water is

consumed daily the more reasonable for the consumers is installation of such system.

Mousa and et.al (1996), evaluated the domestic solar water heating system in

Jordan using cost and benefit analysis of hierarchy process. They observed in this

paper the term of cost, the SWH system was the least expensive on a percentage basis

is the SWH cost about 13% compared to the most expensive heating system LPG of

about 28% and the term of benefit is the SWH was also the most beneficial, were

53 

about 31%. They concluded, both cost and benefit ratio of solar was also the least

expensive compare to other sources.

2.3d.Related Literature on End-Use Method and Regression analysis on Energy

Demand:

Nagaraja R (2008), study on “Unrestricted Electrical Energy Requirement

in Karnataka” has explained the power sector reforms in the state of Karnataka and

ushered in new policies, practices and guidelines for the administration, management

and development of the generation, transmission and distribution facilities. He said

that, grid code mandates each of the distribution and transmission company in the

state to submit the energy and peak demand projections for the next 10 years to state

regulatory commission energy year. He calculated, trend analysis, linear multi-

variable regression, partial end use method, scenario approach during the period of

1980-2007 based on secondary data. He concluded that, improving the private

electricity company can solve the shortage of electricity.

Aguilar C and et.al (2005), study on Domestic Water Heating and Water

Heater Energy Consumption in Canada”, estimated on SWH is second largest

energy end-use for Canadian households. They calculated, DWH efficiency, types of

fuels, relative cost efficiencies, factor influencing domestic hot water and energy

consumption, life cycle cost analysis, residential end-use model. In this paper study

parameters are household income, consumption of water, types of fuels use, total

number of persons in households, water heater tank size, energy use, life time of

system, and demand for water heater. They found that, used in residential end-use

model for the amount of energy required for household for base load requirement and

for personal use are broadly consistent with the value. These values differ to the fuel

54 

type that is used for water heating as well as other factor such as the type of

household.

2.4 Research Gap:

From the above literature reviews, majority of the studies found that,

• The past reviews focused on macro level studies and quantitative in nature

captured on energy consumption and production of conventional energy

sources. These reviews tries to understand the long run and short run

relationship between the economic structures are GDP, energy

consumption, labor force, energy price, employment, and capital in some

countries including India.

• These reviews are based to identify the causation and scarcity of

conventional energy sources that effect environmental problems.

• Some of the studies are at the macro level, to promote the non-renewable

to renewable energy sources and technology benefits.

• Most of reviews are based on technical aspects and empirical tests on solar

water heater consumption, cost-benefit, LCC, DSM, SSM, conservation of

conventional energy sources and environmental impact. So the studies are

based only on macro level and micro level.

But several studies have not considered the following issues. They are,

• Past reviews have not considered on economic viability to management of

renewable energy sources in Karnataka.

• Reviews have not focused on renewable energy potential, generation capacity

and distribution in Karnataka.

55 

• Reviews have not identified micro level study on solar energy availability and

it’s changed the energy demand, cost, and standard of living in Karnataka

• Reviews have not focused on primary data analysis of segment area selection

to analysis the solar water heater technology benefits, cost and benefits, LCC,

conservation of energy in Karnataka as well as other districts (Mysore) of

Karnataka.

Hence, the present study is focused on energy, energy generation, shortage of

electricity in India as well as Karnataka and also focused on issues relating to

renewable energy resource management in Karnataka. So, solar water heater

consumption is chosen as a micro level study in the city of Mysore.

2.5 Statement of the Problems:

Both in India and also in Karnataka electricity sector has faced many issues to

the problem of energy crisis and demand, supply for energy. They are,

• Due to the major shortage of coal, oil, and gas production of Electricity is

insufficient.

• Energy shortage is found during transmission, distribution and

management (Including Thermal power).

• Consumers are faced with load shedding problem of electricity. Because of

less power generation and management.

• Distribution of free electricity to farmers and to the BPL Cardholders has

caused financial losses.

• Environmental Hazards are eradicated due to the burning of coal,

firewood, oil and natural gas.

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Therefore, in number of problems are identified in India and Karnataka in

respect of Power generation, transmission and management in the energy sector. So,

the Government of Karnataka is promoting non-conventional energy for power

generation in the long run to fill the gap between demand and supply.

2.6 Objectives of the study:

The objectives framed for the study are,

1. To examine the long run and short run relationship between the energy

consumption and GDP in developing countries.

2. To study on renewable energy resources in Karnataka.

3. To examine Solar Water Heater Consumption to Reduce the Energy

Consumption in Mysore city

4. To examine the Solar Water Heater Consumption for economic viability of

cost effectiveness in Mysore city

5. To study the impact of family income and family size on energy consumption

in Mysore city

2.7 Hypotheses of the study:

The Hypotheses of study are,

1. There is long run and short run relationship between the energy consumption

and GDP in developing countries.

2. Installation of SWHs consumption has significantly reduced energy

consumption.

3. SWH is cost effective to compare the conventional energy.

4. Energy consumption, family income and family size are positively related in

households of Mysore city.