Thursday
August 23
2018

Ananth Aravamudan

Power Play: Can Energy Access Entrepreneurs Survive the Relentless March of Grid Electricity in India?

Editor’s note: This post is part of the NextBillion series, “Course Correction,” one of several topics we’re covering through special series this year. Click here for more details on our 2018 series.

 

When Prime Minister Narendra Modi declared on April 28 that the grid had finally reached the last unelectrified village in India, he set off a wave of different reactions across the country. There was jubilation, of course, for this represented a major landmark in energy access for people of the country. There was scepticism – everyone knew someone who didn’t have power in their home or village. And lastly, there was confusion. Social entrepreneurs in the field of decentralized renewable energy, who built impactful businesses by bringing energy access to unelectrified communities, were left wondering what kind of future lay ahead of them.

 

Full Energy Access Achieved?

No doubt there were loopholes in the government’s “100 percent electrification” claim. Thanks to an archaic definition, a majority of homes in a village could be off the grid and yet the village could be could be counted as electrified. S.N. Srinivas, CEO of CLEAN, an organization that represents energy access practitioners across India, points out that small hamlets that are omitted from the official census – and there are thousands of them – could be totally without electricity and yet not feature in the statistics. “We are still a long way from having 100 percent electrification at a household level,” he says.

But does this point to opportunities for renewable energy entrepreneurs in these off-grid pockets? The general consensus among practitioners seems to be: not really. The remaining unelectrified hamlets and homes are either extremely remote, or in some cases, lacking valid documentation to be viable from a business point of view. Moreover, under the government’s Saubhagya scheme, the focus has shifted to household-level electrification, with a target to have every house in India supplied with 24×7 electricity by March 31, 2019. There is talk of passing a Right to Electricity Act in Parliament, which would allow a household without grid access to sue the government.

Despite a quickly-shifting environment, energy access enterprises have found new ways to stay relevant. A closer look at Kolkata-based Onergy, an emerging player in India’s energy access landscape, throws light on how existing players have adapted to the changing scenario. Piyush and Vinay Jaju started Onergy in 2010, when official statistics showed that 34 percent of India’s villages were unelectrified. At the time, Onergy’s game plan was to sell solar home lighting systems at affordable prices (backed with financing options) to off-grid communities in eastern India. In 2014, 70 percent of Onergy’s sales came from home lighting systems. Cut to 2018, with zero unelectrified villages on official record – obviously this sales strategy has undergone a drastic shift.

“It’s not that the change came overnight,” says Piyush Jaju, “the trend has been quite clear for the past few years.”

Indeed, ever since Narendra Modi was voted into power in 2014, rural electrification shifted gears as it became a major developmental priority, as well as political plank, for the new government. With the number of off-grid villages shrinking by the year, companies like Onergy have had to overhaul their sales strategy on an annual basis.

“Today our product mix looks quite different. We remain committed to making a difference to the lives of the rural poor, but the impact happens in areas other than home lighting,” Jaju said.

Nearly 40 percent of Onergy’s sales in 2018 are expected to be in the form of solar water pumps, which allow even small farmers to access ground water and increase the productivity of their lands. To keep their business viable, Onergy has also made a major foray into rooftop solar systems in both urban and rural areas.

 

Obstacles to Opportunity

The good news is that any change brings opportunity. Grid entry into villages can be a powerful catalyst – it spurs aspirations, creates new demand and paves the way for innovative services. Entrenched players – as well as start-ups that are willing to pivot their business – could actually benefit from the spread of the grid.

When the electricity grid triggers the growth of micro-enterprises in rural areas, but falls short of meeting the entire demand, it opens up a gap that renewable energy can very easily fill. SELCO, one of India’s oldest and most respected decentralized renewable energy players, has started looking at this opportunity very carefully.

“We expect that over the next five years, at least 50 percent of our sales will come from the rural livelihood segment,” says Sudipta Ghosh, assistant general manger at SELCO India. This is a big shift for a company that for the first 20-odd years of its existence earned most of its revenues from off-grid solar home lighting systems. The company has already sold several hundred solar-powered sewing machines and is seeing strong demand for solar backup from internet kiosks in rural areas. It is also doing pilot sales of refrigeration systems, furnace blowers, milking machines, roti rolling machines and rice huskers – in all cases, working with customized end-appliances that are highly energy efficient.

At Villgro, India’s oldest and largest incubator for social enterprises, we run a program to support rural renewable energy access companies working in low-income states of India (funded by GIZ, the German development agency). All the members of our latest cohort were born in the era of widespread grid access, and they see the grid as a collaborator rather than a competitor. Take the case of CoolCrop, a startup that provides farm-level cold storages in rural areas. Niraj Marathe, one of the co-founders, feels renewable energy is an integral part of their offering.

“Even with 100 percent grid penetration, rural power supply is always going to be erratic,” he says. “And without power the entire stock that is kept in our cold storage can get spoiled.” Solar panels supplied with their units supplement grid power and provide backup during outages, adding a whole new dimension of reliability to their product line.

 

Diversifying products

Similarly, Garv Toilets, which makes smart, eco-friendly public toilets, uses solar energy to run the pumps, fans, lights and remote monitoring systems in their units. This allows them to maintain the quality of user experience, no matter what the grid power situation is at the site.

Other members of Villgro’s cohort have started selling “derivatives” – not energy itself, but products or services that are enabled by it. Oorja, a Delhi-headquartered social enterprise, started off piloting residential mini-grids in unelectrified villages. But managers found this market fading very fast, so they shifted their focus to agriculture and allied activities in nearby farms.

Says co-founder Amit Saraogi: “We found a lot of smallholding farmers did not have their own water sources and were paying a lot for their irrigation needs from diesel pumps. We decided to install and operate community solar water pumps that work on a pay-per-use basis.” With this scheme, Oorja still remains a renewable energy player, but the product that they sell to the end-user is water, by the cubic meter.

In another sector, Bombay Bijlee, a Mumbai-based startup, also taps into the aspirations of rural India. They sell solar powered “infotainment” packages – where monthly instalments pay not just for a TV and satellite receiver, but also the solar panels that power them.

Only time will tell if the paths chosen by these entrepreneurs will lead to success and scale. But they can surely take inspiration from how the internet evolved. In the early days, internet service providers ruled the roost, but as net access become faster and more widespread, a bewildering array of other, much more profitable businesses sprung up that rode astride the internet’s growth. Perhaps a similar story is waiting to unfold in India’s energy access sector.

 

Note: Aforementioned early-stage enterprises Bombay Bijlee, Oorja and Garv Toilets were sourced from Villgro’s national investment discovery programme iPitch last year. iPitch 2018 applications are open until Sept. 21. Apply now.

 

Ananth Aravamudan is Lead, Renewable Energy at Villgro.

 

Photo: Oorja community solar pump. Photo credit: Villgro

 


 

 

Categories
Energy, Entrepreneurship
Tags
business development, business models, clean energy, energy, energy access, entrepreneurship, impact investing, Off Grid Energy, renewable energy, social enterprise, solar energy, Villgro