Tuesday, January 5, 2016

Electrifying India, With the Sun and Small Loans

FOR FULL STORY GO TO: http://tinyurl.com/h2ytvh4 The New York Times www.NYTimes.com

A few years ago, the hundred or so residents of Paradeshappanamatha, a secluded hamlet in the southern Indian state of Karnataka ...watched as government workers hoisted a solar-powered streetlamp....

When B. Prasad arrived two years later to encourage people here to abandon kerosene lighting for solar-powered home systems, people had some idea what he was talking about. What sounded preposterous to the village residents was the price. Mr. Prasad, an agent for Solar Electric Light Company, or Selco, was selling a panel and battery that would power three lights and an attached socket for phone charging for approximately 12,800 rupees, or $192.

... P. C. Kalayya ... and his neighbors rise early in the morning to walk miles along a nearly impassable dirt road to work on coffee, pepper and betel nut plantations. Mr. Kalayya earns $3 a day ... and half his wage is withheld by his employer as repayment for various loans.

... Selco agents succeeded in persuading Mr. Kalayya and 10 other village households to make the switch. Now, his wife can better see how much spice she is putting in as she cooks, and Pratima, their 18-year-old daughter, can study long after dark.
While India’s national solar plans gain steam, many communities are taking the lead by building village-scale projects. The village of Legga in Rahasthan was solar-electrified by women trained as Barefoot Solar Engineers.
The idea behind Selco, and other companies like it, is to create a business model that will help some of the 1.2 billion people in the world who don’t have electricity to leapfrog the coal-dependent grid straight to renewable energy sources.

About a quarter of the world’s off-the-grid people, or 300 million or so, live in India, mostly in remote, rural communities ... or in informal urban settlements. Hundreds of millions more get electricity for only a few hours a day. Prime Minister Narendra Modi has pledged to achieve universal electrification in India by the end of 2022. His main effort is adding hundreds of new coal plants, which have contributed to near-apocalyptic pollution levels across large swaths of the country.

... Mr. Modi has also promised investments that would significantly increase production from renewable sources. Partly to that end, Mr. Modi and President Fran├žois Hollande of France started an “International Solar Alliance” during the recent climate talks in Paris. With an initial pledge of $30 million from India, Mr. Modi said that the eventual goal was $1 trillion in global funding for solar technology development by 2030.

Solar power accounts for just 1 percent of India’s current electricity production, mostly through large plants that contribute power to the grid, but a generation of Indian energy entrepreneurs is out to prove that a faster, cleaner and ultimately more economical route to universal electrification is through solar home systems.
Selco India ... was one of the first of more than 40 companies now offering solar home systems in India.

Selco systems typically include a small panel connected to a battery that stores enough power to run one or more lights, phone chargers and, with higher wattage options, some small appliances. Since its inception in 1995, Selco India has sold 318,400 solar home systems, and has provided power systems to almost 10,000 schools, hospitals and other institutions....
For two decades, Selco has worked to persuade a network of banks to provide financing options to poor people who were typically seen as too risky. As Mohan Hegde, the company’s operations manager, noted, “The idea behind Selco is to take a poor man to the bank and see if what he can afford to pay per month is acceptable to the lenders.”
The sales presentation, once it includes assurance of financing from a bank, is much more palatable to potential customers: Pay the bank monthly installments of roughly the same price you’d spend on kerosene, and in a few short years, you’ll own the system and your basic energy needs will be fulfilled by the sun free.  “When we say free, their ears prick up,” Mr. Prasad said.

Without financing, decentralized renewable energy could never compete in India with kerosene, which is cheap because the government subsidizes its sale at a cost of more than $5 billion a year. Use of kerosene contributes to carbon emissions, but also to ... skin irritation, respiratory problems and a significant fire risk. Ultimately, it provides only dim, flickering lighting.
Shahanaz Ali, the manager of a branch of the Kaveri Grameena Bank,... created what’s called a ‘Joint Liability Group,’ ” said Ms. Ali. “In the J.L.G., we give a loan to a group, and each member acts as another’s guarantor, so therefore if one defaults, the whole group does, too.”

Through the cooperation of hundreds of banks like Ms. Ali’s, Selco effectively shifts financial risk away from the customer, and away from its own investors. By and large, the risk to the banks has been worth it — 7.4 percent of Selco’s hundreds of thousands of customers have defaulted.
Selco’s three investors are foundations, two European and one American, that function like venture capital firms, but emphasize social impact rather than profitability. Selco’s margins are only around 3 to 4 percent; net profit was just $62,500 in the 2013-14 financial year.

Other solar home system providers in India, as well as in Africa, have steered clear of the arduous bank-centric model and opted for pay-as-you-go plans, similar to prepaid cellphones. The user pays a shopkeeper for a certain amount of electricity and essentially rents the system.
Ms. Ali, the banker, had offered families in Paradeshappanamatha a minimum monthly payment of 350 rupees, or about $5.30, but after a group discussion, the families decided to make spending sacrifices so as to pay 500 rupees per month. 
A report released in early 2015 by the Climate Group, an international nonprofit working toward a low-carbon economy, together with Goldman Sachs, estimated that the 40 to 50 S.H.S. providers in India were on track to sell at least five million solar home systems in India between 2014 and 2018. The report added that “better models for consumer finance alongside large demand and rising incomes,” along with projected growth in per-capita income, could expand that number to around 7.2 million households, or more than 30 million people, by 2018.
In a cluster of around 70 hovels made of scrap metal and plastic about an hour’s drive through bumper-to-bumper traffic from Selco’s headquarters in Bangalore, the company is trying out a model specialized for urban, landless people.
Based on the number of people living in Mr. Haque’s vicinity, Selco provided him with two large solar panels to put on the roof, 32 power storage batteries and an equal number of single-bulb lamps to rent out. Mr. Haque now sells electricity from the batteries by the hour. He also fully charges phones for 5 rupees, or about 8 cents, saving his customers trips to distant charge shops whose owners they don’t trust, where they would have to stand guard for the duration of the charging.

He gets paid 1,000 rupees a month, or about $15, by Selco to serve as an operator, and also earns on the batteries and phone charging. But each month, he must pay 4,000 rupees as an installment toward the 80,000-rupee price, or $1,200, of the entire system, which is owned by Selco until the payments are complete. Very few banks would lend to itinerant workers like Mr. Haque, whose assets and livelihoods are so vulnerable, so this model shifts risk back onto Selco and its investors.

The risk is not just that Mr. Haque will come up short. This November, he returned from visiting his home in West Bengal to find that one of the solar panels had been stolen. He’d rather not inform the police; he says they already see the migrants as thieves, and look for excuses to evict them. Selco’s investors will cover the cost of the panel, and the replacement is going to be installed on a higher pole.
Mr. Haque worries about whether his home will be razed or if he’ll be able to generate electricity during the long weeks of monsoon rains, or dense winter fog, when lighting is more important than ever. And when your customers are living hand-to-mouth, just collecting payment is a daily frustration.

By Max Bearak
The New York Times www.NYTimes.com
January 2, 2016

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