Navigating the Developing-Nation Solar Boom
Solar technology is becoming more economical and accessible to the poor in rural communities outside Bangalore than it is to middle-class people here in the United States. Sound odd? Well, that's what social entrepreneur Paul Needham, co-founder of Simpa Networks, explains.
"What I find interesting is how here [in the United States] we think of solar as a luxury. It's for the upper-middle class. You can get it, if you're able to make that initial investment for the 'do good' factor. But in India, it's actually for the lower income groups and even the poor," he says.
It's been widely reported that Indians and Africans have jumped an era in technology by skipping land lines and heading straight for the mobile phone, carrying one in each pocket many times. But, the same is happening in terms of access to alternative energy. Unlike other products that become saturated in markets, Needham explains, energy is constantly in demand—and if it's coming from a clean source, such as solar, that's not a bad thing.
So what has all this demand meant? That Simpa's customers, who can be found in rural agricultural communities or in tight urban dwellings, have solar panels plastered to their delicate roofs.
"These are people who are living, maybe, eight families to a lot, with very few possessions, don't have toilets, and work in the cash economy, making things like cricket bats. But they're able to pay off the cost of it [a solar home system] in a year," Needham says.
Simpa's systems start at $150 and can go up to $450. That's far too much for these families to pay in one bill. So, Simpa adopted a pay-as-you-go approach that's nuanced, in that it accounts for irregular incomes.
"Only in North America do we know of an annual income," jokes Needham, "because we're on salaries. But if I ask them what's they're annual earning, they don't know because they don't have to file a tax return. They don't think in those terms. So, we wanted to account for the peaks and the troughs in their income into our pay-as-you-go model."
That means customers only pay for the energy they use. So, if a Simpa user has extra funds that month, she can use more energy. And over the course of a year or a few years, depending on how much a customer pays regularly, they can work toward ownership of the panel system—much like you would with a mortgage. And if times are good, and an upgrade is desired, families can opt for a more sophisticated solar-power system, something that they couldn't do with solar lanterns previously.
Plus, with the introduction of mobile-payment platforms in India in the coming year, Simpa's customers will be able to pay directly from their Java-based phones, making the process even more streamlined.
Needham, who is a former Microsoft employee, started Simpa in 2010. Interested in building a business with a social consciousness, he partnered with SELCO, India's most famous solar social enterprise, to test out the idea. Months later, he said he's learned a few key lessons, the most important one being that a Base-of-the-Pyramid market isn't straightforward to navigate in India.
"The BOP is not a single customer segment. It's millions of people," he says. "It's misguided when people talk of the BOP market as a whole. You've got to take a more nuanced approach. It's not just about serving people under some income threshold, like $2 a day, or $5 a day. There are so many other ways of defining a segment of the market and thinking about their needs, desires, preferences."
With 1.5 billion who still don't have access to electricity, Needham says he has a massive market to serve. To date, Simpa has launched commercially only in Karnataka, one of India's wealthier states. It hopes in 2012, through releasing the service in India's poorer states, such as Uttar Pradesh and Assam, to gauge Simpa's scalability.