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The Light Touch – India
There are billions of people worldwide who currently lack reliable access to electricity, clean water, and modern communication technologies. At the same time tremendous changes in these technology areas make access to services easier and more affordable. In India a solar energy company, founded in 1995, has developed a wide range of solar-powered equipment, installations and after-care support for lighting, water pumping and purification, TV and radio. In 2005 the success of this business was recognised internationally when it won the Ashden Award for Enterprise.
Sources of Power in Rural India
In many rural parts of India there is either no access to grid electricity or the supply is unreliable with frequent power cuts. Alternatives such as candles, kerosene and oil lamps provide lighting, whilst small dry cells and automotive batteries provide power for radios, televisions, and small appliances, but these are low quality, cumbersome, expensive and often dangerous.
Back in 1994 Harish Hande set out to demonstrate how solar energy could be used in the home. He along with two technicians established a demonstration house in rural Karnataka to showcase a solar lighting system and tried to convince local villagers of its benefits. "In those days, it was very difficult to make people understand the mechanisms of solar panels, since the concept of solar energy to generate electricity was a novel one in the rural community of the region," says Rai, one of the technicians.
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| House lit with a SELCO light |
SELCO India came into being in 1995, and in 1997 became a subsidiary of SELCO-US, under the leadership of Harish Hande, the current managing director, and Neville Williams, president of SELCO-US.
At that time there was growing interest in the promotion of renewable energy in developing countries, and Winrock International released a three-year conditional grant of $150,000 (£85,500) under the USAID Renewable Energy Commercialization project. A condition of the grant was that SELCO had to present a long-term feasibility report for their enterprise and return the money if it succeeded in meeting staged targets. SELCO India repaid the whole amount within five years.
The plan focused on establishing and maintaining a good relationship with customers and building their trust and confidence. As the business started to grow, more support came from a US not-for-profit company, E&C, which invested $107,500 (£61,250), becoming SELCO India's first investor. Solar Energy Light Fund, a US-based non-governmental organisation that promotes solar lighting in the third world, also contributed to the initial funding of SELCO.
Solar Success
SELCO has built up its business in the Southern Indian states of Karnataka, Kerala, and Andhra Pradesh. It has a wide customer base ranging from rural households and farms, banks, shops, restaurants, clinics, community and religious centres, and small-scale businesses and industries. A combination of factors has proved vital in its success – a good product, multiple simple financial packages and local support services that built up trust in this novel technology.
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| Solar lights being used in a hospital Intensive Care Unit |
SELCO brings together solar home ‘kits’ using components produced exclusively for them by Indian manufacturers. SELCO sets stringent specifications to meet guarantees of quality, which are passed on to the consumer as performance guarantees. The solar photovoltaic (PV) modules and batteries are bought in, but SELCO initially had problems with the quality of compact fluorescent lights, so set up a sister-business to manufacture both these and charge controllers.
A typical kit consists of a 35-watt panel, four 7W compact fluorescent lights and a lead-acid battery that can store sufficient energy for the system to work both day and night throughout the year. The batteries are designed to withstand significant discharge each day without rapid deterioration. (Cheaper car batteries cannot withstand this, and would become unusable within about six months.) An electronic charge controller protects the battery from charging or discharging too much, and enables the battery to be used for at least five years.
Emphasis is placed on designing SHS to meet consumers' needs and budgets whether it be for home or business. Depending on their requirements the system can be used for inexpensive lighting, water pumping, water heating, communications, computing, and entertainment.
The installation of the system is carried out by SELCO technicians. One innovative idea to make systems affordable is to place a light in the corner of one room and remove bricks into other rooms, so that a single light provides background illumination in three rooms. Another feature that allows flexibility at low cost is having lights that can be moved from one place to another.
These solar systems reduce dependence on other forms of energy and are more reliable, affordable, and safer to use.
Finance
The high initial cost of solar energy deters many people from adopting this technology. Each one costs Rs15,000-18,500 (£190-£235) – a price that would generally take it out of the reach of the poor. However, SELCO’s financial packages make it easier for people to purchase a solar home system. Customers are offered a 'lease-to-own' scheme whereby they pay 25 per cent of the system cost as an upfront payment. Then they repay a loan to cover the remaining cost at 12 per cent interest per annum, in keeping with the average monthly expenditure budget of a typical family in the region. For many the benefit of having lighting in the home or business means they have additional time for income creation activities.
| A more sustainable livelihood |
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Kumarasiri, a highly skilled carpenter, had a tiny unelectrified workshop in his house. Without electric light, he often could not complete the orders in time since he was limited by his daylight working hours.
A SELCO representative introduced him to a solar lighting system. Through the payment scheme, Kumarasiri invested in a new solar lighting system. He now carries out carpentry work from his home under electric light. With more time to produce higher quality items, his earnings have increased and he has a more sustainable livelihood. |
SELCO has built up relationships with local financial institutions to provide loans. For example, the rural development bank Malaprabha Grameen Bank (MGB) offers a solar lighting scheme that provides three- to five-year loans to customers to cover 90 per cent of the solar system cost.
In parts of Karnataka where no other type of financing is available, SELCO provides loans directly, using finance from IREDA (Indian Renewable Energy Development Agency). Rural farmers buy systems from SELCO on a lease-to-own basis. SELCO finances solar home systems for certain customers by providing them with loans at low interest rate with IREDA re-financing at 2.5 per cent per annum. Local institutions such as cooperatives, farmer associations and plantation companies are being encouraged to participate in these schemes. The local people run these schemes themselves. They function like local banks and provide loans to their members for installing SELCO solar PV systems.
| Trading success |
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Mallika Basnayake started to sell fruit from a small kiosk at the side of her house about six years ago. Lorries and vans stopped at this convenient roadside kiosk and it became very popular, but it had to close at dusk due to poor lighting. Mallika was introduced to solar lighting by a SELCO representative and after getting credit she purchased a SHS and the business is flourishing. |
Support Services
SELCO understands that it needs to provide not only reliable solar systems to customers, but also to back this up with information, installation, training and finance to develop a sustainable sales and service infrastructure.
It has set up branches in villages and trained local people as technicians. The SELCO team checks each system every four months to ensure it is working correctly. The PV modules supplied by SELCO come with a 10-year guarantee and batteries with a 3-year guarantee. There is a 90-day money back guarantee along with a year's free service.
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| A local SELCO service station |
The technicians not only carry out servicing and maintenance, but are encouraged to supplement their income on a commission basis by promoting SHS. Servicing the area on motorcycles, they not only provide a quick after-sale service but also act as collection agents for loan repayments. This close relationship with customers allows SELCO to better understand, efficiently service, and develop long-term relationships with them. They are able to provide at-home design consultation, installation, and after-sales service on all products sold.
Present and Future
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| Extending trading into the night time increases income generation |
SELCO has demonstrated that solar energy can be a profitable business in the rural areas. To date SELCO has sold and installed more than 55,000 solar PV systems providing light and electricity to more than 250,000 people. The company is keen to reach even the very poorest, such as street traders. For example very poor traders can carry out PV battery-charging businesses. They charge the batteries during the day, and hire them to other traders each night for a rental fee. In this way the trader has to pay only for the CFL, and the regular payment is brought to a more manageable daily basis.
To maintain this success they continue with promotion activities such as:
- Running awareness campaigns in rural areas to demonstrate solar home systems.
- Identifying potential beneficiaries.
- Training local technicians, installers and service personnel.
- Educating users.
Technologies like solar energy demand little in the way of a physical infrastructure; what is equally important is the human support infrastructure. Through the combination of product, finances and support services SELCO have built a thriving business by providing poor people with an affordable high quality product.
Acknowledgements
Hands On would like to thank Harish Hande, managing director of SELCO India, for his help in putting together this case study.
Further Information
Participating Organisations
SELCO India
#313, 12th Main, 15th Cross
5th Phase, J P Nagar
Bangalore - 560078
India
Tel: +91-80-26493144
Fax: +91-80-26493255
E-mail: selco@selco-india.com
Website: http://www.selco-india.com/
Resources
Ashden Awards
The Ashden Awards reward outstanding, inspirational and innovative local sustainable energy schemes that protect the environment, tackle climate change and make real improvements to people's quality of life. They are designed to encourage wider take-up of local energy solutions worldwide – proving to the public and policymakers alike that such schemes offer viable, practical ways of tackling poverty, resource shortages and climate change.
Website: http://www.ashdenawards.org/
Winrock International
1 Navjeevan Vihar
New Delhi
110017
India
Tel: + 91-11-26693868
Fax: + 91-11-26693881
E-mail: wii@winrockindia.org
Website: http://www.winrockindia.org/
Solar Energy Light Fund
1612 K Street, NW Suite 402
Washington, DC 20006
USA
Tel: 202-234-7265
Fax: 202-328-9512
E-mail: info@self.org
Website: http://www.self.org/
E&Co
Energy House
383 Franklin Street
Bloomfield, NJ, 07003 USA
Tel: 1-973-680-9100
Fax: 1-973-680-8066
Email: ecoweb@energyhouse.com
Web: http://www.energyhouse.com
Practical Action Technical Information Service
Schumacher Centre for Technology & Development
Bourton Hall
Bourton-on-Dunsmore
Warwickshire CV23 9QZ
UK
Tel: +44 (0)1926 634462
Fax: +44 (0)1926 634401
Website: http://www.practicalaction.org/
?id=technical_information_service
ITDG Publishing
Schumacher Centre for Technology & Development
Bourton Hall
Bourton-on-Dunsmore
Warwickshire CV23 9QZ
UK
Tel: +44 (0)1926 634501
Fax: +44 (0)1926 634502
E-mail: marketing@itpubs.org.uk
Website: www.itdgpublishing.org
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