Are new institutional economics enough? Promoting photovoltaics in India's agricultural sector

Solar photovoltaic (PV) technology can bring emissions-free electricity to rural areas without access to the grid. Currently, policymakers are seeking ways to expand markets for off-grid PV from solar home systems to productive uses in order to enhance income generation and contribute to social development. This paper explores the role of the state in promoting such market growth. As a start, the state must improve institutions, thus echoing popular recommendations based in new institutional economic theory (NIE) that are currently touted by the World Bank and other large development agencies. Yet, NIE's framework may be insufficient because it fails to offer viable solutions to overcoming political barriers that contribute to technological path dependency. A case study in Punjab, India, where an agricultural PV water pumping program showed promising signs of successful market penetration in its first 3 years of operation, illustrates how the NIE's shortcomings manifest themselves in practice. The program was beginning to penetrate market entry for PV pumps via competition between PV providers. However, the government of India achieved this feat by providing subsidies to wealthy farmers, a move that is frowned upon by the NIE school. Based on findings from the case study, states should look beyond NIE's framework to expand and improve PV markets in productive uses by accounting for political constraints, assessing how PV technology can improve development goals, and cultivating locally appropriate service delivery models.

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