While there is much debate about the effects of global warming and the industry's preparedness to tackle it, there is very little work being done on the ground. The simplest issue of availability of capital is hindering the implementation of renewable energy projects both at large industry level as well as at the rural community level.

Another crucial issue today is the need of technology transfer of more efficient energy technologies. Thankfully the Asia-Pacific Partnership was doing its best with initiatives like the state level partnership between the states of Maharashtra and California.  200 power sector engineers have been exchanged till now to enable technology transfer. As more renewable energy power plants come on stream, the availability during peak power demand is also getting addressed. Infact wind energy has already crossed 7,000MW of power production in India as on 31 March 2007.

While large industries are gearing up to the challenge of the energy crisis, it is the household segment that needs drastic attention. Today, a wide range of solar photovoltaic systems right from solar hot water heaters, solar street lighting systems, energy efficient CFLs, tube-lights, fans, solar-wind hybrid solutions and other appliances are available. However, the high initial capital investment is still the biggest hurdle for promoting renewable energies like Solar Photo Voltaic (SPV) power cells. Thankfully, some innovative companies have found a simple solution for enabling their customers to buy solar power equipment with little investment. They have evolved an ingenious solution of arranging finance for poor households through micro-finance and bank loans.

Bangalore based Selco Solar Light Pvt Ltd and Orb Energy have built up a network of rural franchisees and micro-finance self help groups. Headed by Harish Hande, an IIT-Kharagpur graduate, Selco has partnered with regional banks such as Karnataka Vikas Grameen Bank, Pragati Grameen Bank, Syndicate Bank and Canara Bank in Karnataka and Sewa Bank in Gujarat. Selco works with NGO self help groups and other organisations that create daily financing mechanisms like micro-finance. Apart from lighting people's lives, Selco has helped also helped entrepreneurs start their own business. A woman entrepreneur bought solar lights in bulk and now rents them to midwives on a daily rental basis.

Similarly, a Singapore-based solar energy company Orb Energy, has chalked out its own path in creating a new segment in power solutions. Unlike Selco, Orb Energy has chosen the franchisee route and has established showrooms across all the districts of Karnataka to promote network marketing and brand recognition. It identified its target segment as the small and medium farmers as well as the salaried class in rural Karnataka and focused on them.

Damian Miller, CEO Orb Energy, says "We chose to go through the banks since solar power is going to be a large investment and only they can advice their customers to go for it.  Initially, it was tough to convince buyers since the capital cost is quite high. But we were able to convince them on point that is like buying nearly 20 years of power at a time. The electricity board (EB) bills can go up every year, but this cost remains the fixed and there is no recurring cost. The best cost comparison is the diesel gensets on which farmers have to spend a large amount."

The purchase of different solar energy equipment depends on the location. Urban households choose solar water heating while rural households choose Solar Photo Voltaic power cells. The cost depends on the size of the power needs: Rs.40,000 for a basic lighting and TV while it would be Rs.100,000 for a comprehensive package covering fans, heater, lighting etc. SPV can cover everything in a typical household except air-conditioning and with the use of an inverter, it can give AC output. Battery storage allows three days of power usage without any sunshine, which is very much crucial for villages where power outage is enormous.

Damian Miller feels that the financing option becomes crucial since the capital cost is so high. Orb Energy partners with Syndicate Bank, Karnataka Bank, Cauvery Grameena Bank and Canara Bank for its financing options. Buyers can make a down payment of 15-20% and the rest is financed by the banks who charge a wide range interest rates from 5% to 14% for three to five years period. For any buyer, the banks set the loan criteria such as credit history, current debt, income security, guarantor, hypothecation. This is where most of the marginal farmers get left out because of their feeble credit worthiness.

So it is obvious that small farmers go for smaller SPV units while large farmers and salaried households go for larger ones. Micro-finance companies and NGO self help groups have a big role to play in getting the initial investment for the needy.

These issues were discussed during the Asia-Pacific Partnership on Clean Development and Climate hosted by the Ministry of New and Renewable Energy (MNRE) and Confederation of Indian Industry (CII). 

Roving Reporter - Levine Lawrence

Issue BG82 Jan 08