Tuesday, October 10, 2006

Is Solar PV Affordable Yet?

Today, Harish Hande, the founder of SELCO visited our lab and gave a lunchtime presentation at the CSU business school. I met Harish last fall at the TechAwards and was impressed by his comments on the power of light as a tool for poverty alleviation. We visited again in July when I was in India, and I was further impressed by his activites. No doubt, Harish is a BOPreneur.

SELCO is a for profit company. It sells household photovoltaic solar electric systems to those that make $1-3 per day. Yup, read that last sentence again. When asked, Harish said that the company was formed to dispel myths, one of which is that solar electricity is unaffordable. These solar PV systems replace kerosene lamps; a dirty technology is replaced with a clean technology, and at a lower cost!

How does he do this? We keep being told how expensive solar PV is, compared to other energy sources. Since this is India, the trick must be that they exploit cheap labor and manufacture cheap, low quality, PV systems, right? Not at all; in fact, solar pv panels are more expensive in rural India than in Europe. And they purchase the same panels used by the market leaders, but at lower quantities and sizes. So no economies of scale advantage either. And he offers his customers full warranties and 24/7 on site service.

Instead, Harish looked at changing several business processes to make his systems affordable to the poor. He learned an important financial lesson from a street vendor who told him "300 rupees a month is way too much money, but 10 rupees a day is very affordable.". So he established microfinance plans with the rural development banks that made his systems affordable.

In addition, part of the service he provides is that of a business and energy consultant for his clients; but these are not MBAs or McKinsey alums. His average technician is from the community and dropped out of school after 5th grade. Yet they often come up with creative ways that the economic benefits of their electrical power will exceed the cost to the client.

What type of system does SELCO provide? Usually a small system that powers 2-4 lightbulbs (7-10 watts each). The technicians work with the clients to evaluate their needs, and they often figure out how to sell a lower powered system- meeting the client's needs, but at a lower cost. In addition, microentrepreneurs have started to use the systems to charge several batteries, which they then rent to shops for the evening hours of operation.

SELCO has installed 65,000 solar PV systems in India, for basketweavers, midwives, clinics and churches. Harish is now working to expand his business by making it a "one stop energy shop" for the rural poor in India.

A lesson for aspiring BOPreneurs: if someone tells you that a technology is too expensive for the poor, remember SELCO, and make sure you check to see if you can redesign the processes to make it affordable. You may also find a sizeable, profitable market opportunity!


sink sink socks said...
This comment has been removed by a blog administrator.
Anonymous said...

Good News

SELCO India, has won the 1st Prize among a contest of all Ashden Winners.

Congrats to SELCO India and the Managing Director - Dr. Harish Hande.

Anonymous said...

SELCO India makes profit at the cost of its employees and poor customers. They sell their solar products to poor people at more price than the competitor companies by connecting with rural banks and providing costly finance. Selco India rarely pays bonus to its employees. They have collected huge subsidies from Governement but havent passed the same to its customers.

Bopreneur said...

Anonymous comments cannot detract from what Harish and Selco have done. Which costly banks do you refer to? Early on Selco used Grameen Bank to help finance his systems... perhaps you have heard of them? They won the Nobel Peace Prize in 2006. Has he paid bonuses to execs, but not workers? How about the fact that he hires underemployed young men and trains them as technicians.
How about some facts to back up your statements? Or slide back into hole.

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