Pradeep Singh lives in a village in the Hardoi district of Uttar Pradesh. But that does not mean he lacks resources. He owns a petrol pump and a private college. He has land in the area, and also, he says, “respect”. But there is one thing Singh has barely ever had—electricity.
“All we had known were diesel generators ... sometimes one hour, sometimes two,” says Singh. “When electricity came, it was like magic.” When he heard Prime Minister Narendra Modi speak about smart cities, he says he wanted to tell him, “Can you give us 24x7 electricity like Gujarat? If you can, we will become smart.”
Two years ago, Singh rented out about 1,000 sq. m. of land to OMC Power to set up solar panels for a mini-grid—a small solar plant that supplies electricity within a small radius around the plant. He became an OMC customer, using its electricity for his petrol pump. “24/7 power supply raised my earnings by around Rs 40,000 a month. Most of the pumps in the area operate only for a few hours a day because there is no electricity. But I can run up to 16 hours a day,” says Singh.
Around 300 million Indians have never had access to electricity. Which is why entrepreneurs like Rohit Chandra, co-founder of OMC Power, are building sustainable energy businesses based on the idea that demand will soar if electricity is made cheap and reliably available in such areas. Taking critical resources like electricity to neglected areas will also help bridge the ‘India vs. Bharat’ divide between urban prosperity and rural deprivation.
Nonprofit consultancy The Climate Group and investment company Goldman Sachs peg the market for decentralised renewable energy in India to be worth $150 million (Rs 947 crore) by 2018. An investment of $150 billion is needed to serve that market by 2022.
Started in 2010, OMC is one of India’s biggest players in solar energy generation and distribution. It has 30 units of about 100 kilowatt each and hopes to open 70 more by the end of the year. The only information that OMC shares about costs and revenues is that it sells power at a price around 20% less than the main-grid tariff. Recently, it entered into a joint venture with SunEdison to build 5,000 solar plants in the next five years that will allow 10 million people access to electricity. Chandra says his dream is to make OMC the world’s largest rural electrification company.
OMC provides electricity to 3,000 households (a population of around 15,000) across 30 villages in Uttar Pradesh. Along with SunEdison, the company plans to invest $1 billion in the next five years to generate 250 MW.
Chandra, Sushilkumar Jiwarajka, and Anil Raj founded OMC with their own funds. Chandra says he is proud that the company “has never accepted a single dollar of donation or grant money”. A telecom veteran (he worked for 25 years at Ericsson, Aircel, and Telenor), he says OMC is a profitable business—although it doesn’t declare numbers—and is “where the telecom industry used to be in the mid-1990s”.
He is fond of telling a story to illustrate his point. In 1995, many in Ericsson’s Mumbai office were hard-pressed to believe that there would be more than 1,000 mobile phone customers in the city. Today, there are nearly 15 million.
Chandra is not alone in believing that solar power could hold the key in an off-grid scheme of things. Speaking with Fortune India, power minister Piyush Goyal says that the government’s target of installing 100,000 MW of solar power capacity by 2022 depends on a chunk of it being built by entrepreneurs. ‘The faster industry and government join hands, the better we will be able to push the idea of sustainable energy,” says Goyal. “We don’t think in terms of either/or.”
To get a feel of how entrepreneurs are shining a light in remote corners untouched by electricity, I travelled to Hardoi. Ram Pal, who sells savouries at a roadside stall in a village had been using a kerosene-lit lantern until he shifted to OMC’s battery-operated lantern six months ago. Every morning at around 9 am, an OMC guy picks up the batteries from customers like Pal, recharges them using solar power, and returns them around 4 pm. For this, OMC charges Rs 5 a day. “There is no soot or smell, and my eyes don’t hurt either,” says Pal.
Sachin Tandon of dairy company Purica understands the need for power in remote areas only too well since he sells packaged milk, which needs refrigeration. Boond stepped in with a solution: 400 solar-powered refrigerated collection centres across the state. “Without solar power, there was no way we could have tapped into this,” says Tandon, who paid around Rs 35,000 for each of these units, which Boond set up and now maintains.
Boond, started by Rustam Sengupta, an electrical engineer and an MBA from Insead, also generates 800 KW of solar electricity and supplies power to more than 10,000 households across rural Uttar Pradesh and Rajasthan. The company, which IIM-Ahmedabad seedfunded in 2010, has since raised $1 million (Opes Impact Fund and Rianta Capital are the investors). It sees itself as a last-mile connector.
“The idea of the main grid supplying power everywhere is not viable because the number of customers in remote rural areas are too few to justify the cost of putting up distribution lines and maintaining them,” says Sengupta. “The solution has to be localised.” Many such companies are homing in on Uttar Pradesh because it has the highest number of people without access to electricity.
Chandra says he foresees off-grid power purchase take the same route as prepaid mobile connections. “Why are most Indians on a prepaid connection? Because they want to control what they spend. It’s the same with power. Customers of the future, especially in rural areas, will want prepaid packages for pre-determined number of hours of electricity,” he says. The prepaid base package OMC is developing will provide consumers with LED bulbs, a charging point, a connection to the house, and power supply from 6 p.m. to midnight. A consumer may choose to add connections for a fan and a two-in-one electric lantern with FM radio.
“Users should be able to customise access according that their needs, just the way you can now top up your mobile even for Re 1 or Rs 2,” says Chandra. This package is expected to be priced between Rs 139 and Rs 199 a month, depending on the number of connections.
The spread of energy sources is key to the success of such models, says Ravi Kailas of Mytrah Energy. Listed on the London Stock Exchange, the company has 10 wind farms of 543 MW (and another 450 MW being built) across eight states, which makes it one of India’s biggest wind power players. Mytrah also has the biggest collection of masts (180 of them) in the private sector to gather data that pinpoint where wind power systems can be built. It has raised $800 million to grow to 5,000 MW in the next decade.
The big question that needs to be addressed, says Kailas, is debt financing. “Neither do we have bond markets for large infrastructure nor do banks have the capability to keep financing large power projects. This demand will have to be met either by opening up the debt markets or by allowing insurance players to participate. Insurance companies have large pools of cash and they are buying only government bonds now.” Once a bank does the first risk assessment and the first round of funding and the project goes on stream, insurance companies can join as the second lender.
Back in Hardoi, Anup Kumar, a salesman at a licensed liquor shop, has taken connections for two solar lanterns from OMC because “once bottles [of country liquor and kerosene] almost got mixed”.