This blog by Nidhi Bali, from Intellecap, is an outcome from a workshop held at the Sankalp Global Summit 2016 supported by Shakti Sustainable Energy Foundation
The biggest deterrent that prevents off-grid energy access enterprises from scaling up is the word off-grid! This and more was discussed during the recently held workshop on Enhancing Capacity to Accelerate off Grid Energy access along the side lines of the Sankalp Global Summit 2016. With the presence of financial institutions such as banks, Non-Banking Financial Companies (NBFCs), impact investors, energy enterprises and industry associations the event witnessed exciting discussions on ways to accelerate energy access for the un-electrified and under electrified millions in India.
“Off-grid”, a word for decentralized energy that is different than a grid-extended facility is the first barrier to be scaled to ensure rural poor perceive this as “real” energy and a solution that is sustainable and cost effective. Instead of addressing a decentralized solution as “off-grid”, an understanding of the solution as a little or a smaller grid that meets demands better and complements the ‘free but unreliable grid power’ is the need of the hour.
Although well begun is half done. The other half in case of energy access enterprises requires equally innovative outlook. As per the participants, this half comprises aspects related to four major areas –
People– It is very hard to recruit and retain highly skilled people at all stages of business. Be it senior management or field staff, talent is expensive and not readily available for this sector. The problem notwithstanding, the challenge of founder legacy persists where co-founders find it hard to delegate tasks and find that they are unable to focus on strategic business areas.
Policy– Ambiguity in policies regarding universal electrification and political grandstanding keeps investors interested in “off-grid” ma
Partnerships– Partnerships are an important element for enterprises that lack credible market information and last mile reach.
Pioneer support– A lack of ecosystem for pioneers to try new innovations in the sector does not help. With very few incubators or accelerators focusing on access to energy sector in India, enterprises fear experimentation and in absence of new technologies or innovations energy access
To complicate the problem with the perception of “off-grid”, these enterprises continue to be assessed by lenders using the traditional approaches like the credibility of historical track record and availability of collaterals. Both these areas pose significant challenges since energy access enterprises are relatively new with few collaterals and little or no credit history. Moving away from traditional collateral based models to cash-flow centric models can go a long way paving way for non-banking finance companies and innovative financial solution providers to take center stage. Suitable enablers like guarantee based mechanisms can also help channelize the initial capital required to nurture and grow these enterprises. Traditional banks and microfinance institutions may find consumer financing easier to start with to enable growth of this critical industry. Appropriate business models that deliver energy ‘off the grid’ as a solution and not as a product need to be encouraged as well. Captive mini grids with a commercial client like telecom tower or a fuel station as the base anchor load was discussed as an attractive proposition for investors and lenders.
The core need however remains transforming the perception of ‘off-grid’ into an understanding of a ‘smaller grid’ and this industry may turn out to be the potential disruption that is required, much like what mobile phones did to telephony a decade ago. Amen!