Clean Energy and the BoP: More Power to the People

In this article Robert Moore shares his thoughts on a blog post by Think Change India, which reflects on the issue of clean energy at the BoP. Read the original article here.

IFMR Centre for Development Finance and the World Resources Institute are coming out with a report focusing on clean energy options for the base of pyramid in India, this report is titled “Power to the people” which was released in Mumbai on the 28th of September 2010 in front of a host of social sector investors and companies.

This article introduces the realities of rural electrification and the basis for their upcoming report.  It showcases a few significant concepts such as electricity access statistics, reliability, and the current market for alternative energy sources.

In India only 40% of rural households have access to electricity and 85% depend on kerosene for lighting and firewood for cooking.  However the problem is actually worse than that because as an apple farmer quoted in the article astutely said “Most houses have electrical connections, but what is the use? We have power for a few hours a day. Even when there is electricity, it is barely enough to operate one or two light bulbs. We cannot rely on it.”  This farmer makes an important point but this leads to an even deeper issue – imagine the trouble that commercial companies would have trying to rely on such energy distribution. How can India move manufacturing, processing, and industry jobs closer to the villages if the electricity isn’t even reliable enough for consumer use?

As the article goes on to illustrate, there are companies such as SBA Hydro which are selling clean energy products and services directly to the Base of the Pyramid population.  The SBA Hydro company sells hydroelectric power but there is also SELCO which sells solar power and Husk Power Systems which sells biomass power to name a few others.  Many of these company’s customers actually have access to electricity but as the quote above illustrates, the current available electricity just isn’t enough.

With SBA Hydro’s $1.26m investment from Acumen Fund allowing them to reach 6000 households, SELCO reaching over 120,000 households in the last 10 years, and Husk being able to reach over 10,000 households you can see that these companies are doing a great job providing solutions to the BoP. But even if 100% of their sales were to be from rural customers with no previous access to electricity this still only solves 16% of the 81 million rural households without electricity in India.

While each of these alternative energy companies are still pretty small and face their own challenges the “Power to the People: Investing in Clean Energy for the Base of the Pyramid in India” report should provide valuable information to both the investors and entrepreneurs trying to meet the needs of India’s rural electrification market.  Hopefully with more reports like these the energy companies can make smarter decisions and investors will feel more confident about the financial and social returns they will achieve from deploying capital in this industry.

Ed. Note: Read more about the report’s launch on the IFMR website, and access the report here.