Can the Poor Afford Cleantech?

That’s a question I get often from friends and family in India and the US. “We need to feed our masses and eradicate poverty before we can worry about the environment,” the logic goes. That there must be a trade-off between the economy and the environment is the entrenched public and political opinion in India.

On the surface, there appears to be plenty of evidence to support this view: Solar costs aren’t at grid parity yet. LED and fluorescent lamps cost way more than incandescent bulbs. The poor will never pay for water, leave alone the latest purification technologies. And the fact that electricity and water are both government-controlled utilities makes matters worse with red tape and inefficiency.

My response to this usually involves two examples: SELCO India and WaterHealth International. SELCO has been bringing photovoltaics to the poorest customers for more than 10 years now, while thousands of villagers are paying for water purified by WaterHealth’s technology.

How? Well, the secret sauce in their success, other than of course the extraordinary commitment of their leadership, is what Stu Hart terms “radical transactiveness.” To put simply, radical transactiveness is to dive deep into your customers’ experience, often with stakeholders other than just the company, to co-create/evolve a business model that works for the customers at the “base of the economic pyramid”(aka BOP).

SELCO recognized that its customers had no access to grid and were instead heavily reliant on kerosene! He recognized that with the appropriate microfinancing mechanism, daily payments toward a solar home system cost his customers less than what they shelled out for kerosene. The improved quality of light and air also enabled additional income generation and healthcare cost avoidance. (Click here for an awesome first hand account of how SELCO works by Raj Melville)

“Grid parity” simply does not matter to the approximately 100,000 villages of India that aren’t yet connected to the grid! Even in urban India, the cost of backup power generation from diesel or petrol must be accounted for to draw a fair comparison in many cases. (See article regarding India’s dependence on liquid fossil fuels for backup power generation.)

WaterHealth did not create a home purification system for the poor. Instead they discovered by engaging local communities and NGOs, that even the poorest were willing to “pay per use” via a community-level water purification system. The source of water itself does not change from before the project.

At 1 Rupee for 15 litres, 60% to 80% of total village population uses WaterHealth’s facilities. Turns out the poor will indeed pay for basic necessities such as clean water. Villagers reported improved health and ability to work for a living.

Any venture capitalist or entrepreneur will tell you that a superior technology does not ensure market success. That’s true for cleantech as well. I am not down playing the difficulty of introducing new technologies in the BOP market. But it’s not the technology’s fault if the business model imposed is inappropriate.

The poor certainly can afford cleantech. And as the examples above prove, often they stand to benefit the most from clean technologies.

Green Ventures’ $300 million fund will boost India CDM projects

When the Kyoto Protocol’s Clean Development Mechanism (CDM) went into effect China, Brazil and India stood out as countries with greatest potential for carbon offset or reduction projects. You only need to look at CDM projects interactive map to realize that prediction was accurate: these three countries have the greatest concentration of dots representing project locations.

Take a closer look and you will see a difference. While China and Brazil are dominated by red and orange dots representing large scale projects, India is predominantly yellow representing small scale projects. It is in fact true that India has the largest number of projects, but they are smaller when compared with China’s. Now, a new entry into India’s CDM landscape may change that.

New York based Green Ventures International has launched a $300 million India Carbon Fund — the largest such allocation in the carbon credit space in India by a single private entity. The entire sum will be aimed at a wide variety of CDM projects including energy generation, distribution and efficiency. Registered under the name of “Green Ventures Advisors Pvt Ltd” with UNFCCC, Green Ventures will act both as a buyer and seller of Certified Emissions Reduction (CER) credits.

As founder and CEO Krish R. Krishnan points out, global financial & carbon players find the Indian carbon space very fragmented and difficult to navigate. In a recent interview with Mint, he said it took him two years to research and develop local understanding and networks in India. With offices in New York, London and Mumbai, his team is now well placed to connect India’s need for energy and cleantech with capital and technology from developed markets.

Not knowing the GVI team, its difficult to predict what kind of projects they may end up financing. They are open to the entire gamut and all mechanisms that CDM allows. But I think the market factors are ripe for large scale solar and energy efficiency in particular. Despite the huge potential, solar hasn’t take off in India because of cost. But solar cell prices are set to decline sharply as more silicon capacity comes online and around 50 VC-funded solar companies (many not c-Si) start itching for revenues. In energy efficiency, India’s large cement and agricultural sectors will prove to be low hanging fruit. Central and State (most recently Haryana) policies are increasingly lending support to such energy efficiency projects make them more attractive.

Anyway, here’s wishing Green Ventures a great success and hoping that its entry will spur cleantech activity to the benefit of India’s power-hungry masses and industry.