Can social ventures help address the issue of energy poverty in India and beyond?

In the latest On Purpose blog, Alex Stephens (October 2013 Associate) considers the issue of ‘energy poverty’ in India and beyond.

With the economically developed world racing ahead and producing new technologies daily, are we doing enough to ensure that developing countries are able to follow suit?

Researchers have highlighted repeatedly that a key to combatting poverty in developing countries is ensuring that individuals have access to energy in order to be able to meet their basic human needs. According to the International Energy Association, 1.4 billion people worldwide are without access to electricity, and 85% of these people live in rural areas. This results in a staggering statistic: 97% of individuals in Sub-Saharan Africa and developing Asia are energy poor!

The definition of the term ‘energy poverty’ is widely debated, ranging from those who do not have access to electricity to allow them to carry out basic tasks (such as cooking and lighting their homes) to more complex theories around the demand for electricity. Regardless of the definition, this lack of energy is a widespread problem, and it makes me wonder whether we will be able to reach a key UN goal: to achieve universal access to modern energy services by 2030.

Energy poverty is particularly prevalent in India — the World Bank report “Energy Poverty in Rural and Urban India” suggests that 57% of individuals in rural India and 28% of individuals in urban India are energy poor. While the country’s energy system is improving, it is widely unreliable and there is a clear discrepancy between energy access for urban versus rural households. Although the Indian government is attempting to address these problems (for example, with the liberalisation of India’s energy sector), the government still declares many rural areas too remote to be connected to the grid. In addition, unrealistic pricing models set by the government prevent India’s energy sector from operating in line with global market fluctuations, and there is limited access to the latest energy technologies. These challenges deter international investment and stunt growth.

Despite these challenges, there are a number of innovative social ventures attempting to address rural India’s energy poverty problem. For example, Husk Power Systems (“HPS”) is a social venture set up by three social entrepreneurs in Bihar, India. After years of research, HPS constructed its first plant in 2007, financed by personal savings. HPS uses rice husks (a waste product) to produce electricity that is then supplied to local villages. The entrepreneurs initially found it difficult to scale this business due to its high-risk model and the lack of a reputable supply chain that scared off investors (a common hurdle in the social enterprise sector). Fortunately, after winning prize money, HPS was able to expand the project, demonstrate their viability, and gain further funding from Acumen. To date, HPS has helped over 200,000 lives and has saved 9.24 million litres of kerosene.

The Acumen Fund has invested in a variety of enterprises working to provide electricity to ‘energy poor’ households, reduce the use of kerosene and contribute to economic growth in developing countries. Kerosene is an expensive gas used in lamps and for cooking (on average, an Indian household spends 15% of its income on kerosene). Kerosene also produces a significant amount of carbon dioxide and it has caused many injuries and deaths.

Other ventures trying to address the issue of energy poverty include:

• D.Light Design, a high-quality solar-powered lighting system. It costs $8, with no reoccurring costs and will save a household $150 over five years. So far this technology has prevented 2,000 kerosene-related deaths, has offset 2.4 million tonnes of CO2, and has “empowered” over 31 million lives globally.
• Arani Bio Energy, a system introduced in Northern India that burns pine leaves to create energy. Arani has created its own supply chain and, therefore, jobs for local communities (e.g. collecting pine needles).
• ORB Energy, a home solar photovoltaic system used to ensure reliable power for those priced out of traditional methods. It offers a five-year financing programme for those that can’t afford the upfront cost.

The development of these innovative social ventures should give us hope yet. With the help of existing social ventures, government support, and continued investment in social enterprises, I hope to see the percentage of energy poor people dramatically reduce, not only in India, but worldwide.