Simpa Networks has evolved a ‘Progressive Purchase‘ model for solar electricity, lighting up rural homes through a flexible payment option.
The International Energy Agency estimates that about 1.5 billion people around the globe do NOT have access to electricity and 85% of these people live in rural areas. In India, close to 40% of the country’s population still lives with limited access to grid electricity. This is not to say that rural India is in complete darkness. The up-front cost of procuring clean, affordable energy is high and so several parts of rural India rely on kerosene, charcoal and other forms of fuel that are easier to access and in local purchase terms, cheaper. The existence of these alternatives indicates that people have the ability to pay for energy, but it needs to be in a format and amount that they can access. Regular energy sources have not been able to find ways to fit this need yet. Simpa Networks leverages this insight into the rural market to find a way to fit within the ‘ability to pay’.
“Customers pay up to $1000 over 8-10 years for kerosene lanterns why not capture what the customer is willing to pay and give them a cleaner alternative?”says co-founder Michael Macharg.
Based in Bangalore, Simpa Networks aims to develop affordable energy solutions for the poor. Their product makes solar electricity accessible and affordable to the rural and under served consumer through their innovative pricing system called ‘Progressive Purchase’.
Simpa Networks has developed a metered solar energy system that generates electricity and can be installed in any rural home. The system can be purchased for a small upfront cost and can be recharged (through local agents via SMS) according to usage. If the meter runs out, it switches off and comes back on once the user has paid for a recharge (recharge amounts vary from 50-500 rupees). But the real proposition is that as the user recharges the system, he or she is slowly paying to own the system. Once enough recharges have been made (across a period of approximately 3-5 years), the system unlocks and produces solar power for free.
What’s enabling adoption?
Flexibility. One of the reasons rural India relies on kerosene is that it appears cheaper since the user can pay only what he or she can afford, and buy based on money at hand. Simpa recognizes that rural incomes are irregular and applies this insight to their product pricing; the cost of electricity generated by the solar panels is the same as buying kerosene lamps. The ability to pay for clean electricity in small doses and the added bonus of eventually owning a solar panel that generates free power is what makes this product especially remarkable and innovative.
What are the challenges?
Need to create and build distribution and service channels into the targeted markets. Finding the right local partners to help distribute the solar panels into rural homes is a challenge. Right now, Simpa partners with SELCO India to take their product into villages and reach the rural population in Karnataka; and will need to find similar dedicated partners in other geographies to expand and scale up. The system also potentially requires routine maintenance. Servicing and employing an efficient workforce of partners to execute this maintenance is also a challenge that the Simpa team is looking to work through.
Impact – current and potential
Simpa Networks was incorporated in India in mid 2011 and have conducted their first round of pilot testing in Karnataka. They have a Sales agreement with SELCO India to sell 1000 solar home systems in 2012, growing to 5000 + systems through SELCO and other distributors in 2013. By 2014 they aim to have sold 25,000 solar home systems demonstrating a clear model and scale approach.
Paul Needham co-founder elaborates on the Simpa Business model. Watch him speak at Poptech 2011 (Video).
Products, services and business models that can help bring cheaper, more user friendly, clean energy into homes and work spaces across India is going to be a huge opportunity for innovators and entrepreneurs alike. Its early days yet, but enterprises such as Simpa Networks are doing some critical experiments in this direction and the insights from their learning and growth in this market will form the basis for a lot of development in this industry.
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