SELCO India

SELCO India
Access to Energy

Madava Hegde(p10madavah@iimidr.ac.in) Sravanti Krishna(p10sravantik@iimidr.ac.in)

SELCO India
Energy consumption is the most important factor for economic development. Its linkage to better quality of life, education, income and productivity is well established. Despite this 60% of the Indias population lacks access to reliable energy services. Connecting these people to conventional central grid energy resources is capital intensive and to some extent is impractical given the demand for energy from the consumers, who are already connected to central grid, is exceeding the supply resulting in power cuts. This provides an opportunity for off- grid renewable energy solutions. SELCO, with its highly customized and innovative product portfolio along with financial support, provides energy services to rural India. SELCO demonstrated that it is possible to improve the quality of living and income generating capabilities of the poor by accepting them as producers/entrepreneur rather than just consumers.

SELCO
SELCO started in costal Karnataka and Kerala in 1995 with the objective meeting enormous energy need through reliable, sustainable energy services to the poor. SELCO started with solar lighting i system and installed around 115,000 solar home systems (SHS) in the underserved rural households of rural India. The business model can be divided into three aspects Customization, financing, and maintenance support. Customization is the key to all of SELCOs offerings. "Wants can be standardized; needs have to be customized", says Harish Hande Co-founder and managing director of SELCO. Technicians from SELCO would work closely with prospective customers to understand their energy needs generating new ideas and offer suitable products at affordable prices. For instance, a technician worked with a rose picker to build head lamps bright enough to let famers work in the field late night to ensure their produce reached the market right in time for sale early in the morning. The sustainable renewable energy solutions need high initial costs. Organizing of loans to augment buying was a significant impediment to the business. SELCO tries to solve the problem by having relationship with nationalized, cooperative banks. Hande works with institutions like the Reserve Bank of India (RBI) and the National Bank for Agriculture and Rural Development to ensure sustained ii rural financing. RBI requires a down payment of 15% of loan to finance the buying . This is where other NGOs like Global Village Energy Partnership, United Nations Environment Program, and Renewable Energy and Energy Efficiency Partnership pitch in to provide the down payment or guarantee the loan. End user pays off these loans through increased income or through savings by using renewable energy solution of SELCO. Efficacy of renewable energy sources is always a bone of contention. Also due to the decentralized nature of energy source put the burden of maintenance on end users (In grid electricity producer will take care of maintenance). Hence sustainable supply chain and maintenance network is a must to create impact and to sustain. This is built through Energy Service Centres (ESC), NGOs, and Solar entrepreneurs. Market linkage is significantly important aspect in this whole process. SELCO also collaborates with NGOs to provide market for increased output of customer due to improved productivity. This is evident from how SELCO helped basket weavers by connecting them to middlemen to ensure sustained markets to their produce. SELCO follows two models of ownership of its products - End user ownership or solar entrepreneurship. In the end user ownership easy solar loans are offered with customized repayment schedule matching income cycle of the user. Guarantee or collateral required is provided by NGOs to banks such that solar loan can be easily approved. In solar entrepreneurs model customer will need to rent out the solar instruments on a daily basis. This model is primarily built to provide energy solution to consumers who faces real estate scarcity problem to use solar powered energy sources (Ex: street vendors). SELCO empowers solar entrepreneur to find enough number of customers such that business becomes viable. In this way SELCO tries to build the eco system in the field of operation.

Sustainability
Sustainable enterprise will have a mission of triple bottom line - delivering social, economic and environmental benefits simultaneously other than economic benefits. SELCO has shown that this can be achieved. SELCO through its renewable energy products like solar sirens, wildlife repulsions

SELCO India
instrument, motion sensors reduced the carbon foot prints and has become a eco-friendly business. These instruments use renewable energy sources unlike commercial models available in market giving them sustainable competitive advantage. Since predictive maintenance is a prerequisite for proper functioning of solar devices and it is an emerging technology, employees get secured future by being employed in this field. SELCO provides income generation opportunity through solar entrepreneurship (around Rs 10000 per solar lamp). Street vendors, tailors can get access to lower cost energy source (savings of Rs.1800 per anum). It improves the quality of life by providing smoke free energy source.
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SELCO enjoys the return not only in financial terms but also in the form of reputation, brand development which helped in gaining easy access to factor markets like raw materials and talent. TATA BP provides solar panel to SELCO with flexibility in terms of schedule and order size which iv helped in inventory cost reduction up to 25% . Social cause has also helped in attracting highly v qualified, experienced veterans to SELCO .It also enjoys sustainable competitive advantage in the network of NGO, SHGs used for reaching the customers which is key replicating the business in other states and at the same time sell more products. SELCO is economically sustainable business even though it seen had results in 2005-2007 due to wrong strategic decision to scale up quickly (to urban market because of distributor pressure) which resulted in bad inventories. It has emerged stronger after this fiasco through debt restructuring and decided not to deviate from its primary mission of serving rural poor and earned profit during the 2008. These factors along with change in government regulations like reduction in tariffs on solar panels should help in developing solar energy as a reliable alternative source of energy. SELCO can scale up its business to tap TIER-2 cities which experience frequent power cuts of short duration during summers. Given ESCs presence in most of the districts this should be an achievable target.

References: i http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4460 ii http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4460 iii http://www.selco-india.com/incubation_lab_projects.html iv Growing inclusive markets SELCO- Solar lighting the poor. v http://www.selco-india.com/management.html