Novel business models are transforming the energy sector with companies increasingly offering services in place of products. From the software we use to the energy we generate consumers are increasingly able to replace costly initial down payments with more manageable subscriptions.
A pioneering example in our sector is modern electricity prepayment or what in today’s parlance would be ‘electricity as a service’. Although initially gaining a stigma as it was provided to bad payers, the massive acceptance and growth of pay-as-you-go cellular telephony has brought the concept into the mainstream.
Nowhere are such models more necessary than in developing countries where the costs of many products and services are high but incomes are generally low. With more than a billion people lacking access to modern sources of electricity and with companies lining up with potential offerings, innovative ways need to be found to get these into the field.
Power for rural India
An example where this is being done is the Gurgaon, India based Omnigrid Micropower Company (OMC). Founded in 2011 the company sets up small solar power plants, which generate less than 50kW of power, in the vicinity of cellular towers. The power is used to run the cellular towers as well as to supply nearby homes and businesses.
For anchor and business customers, power is provided on a kWh consumed basis. For community customers OMC charges the equivalent of the existing household budget for diesel and kerosene, and manages the provision of power through a variety of connection packages, including indoor wiring with power sockets and light bulbs. Once the electricity is in place other services are provided such as internet, TV and electric vehicle rentals.
“This Anchor, Business, Consumer (ABC) sequence has enabled a commercially viable rollout and ramp up of OMC’s model,” state Pär Almqvist, chief marketing officer, and Sarraju Narasinga Rao, chief technology officer, in a contribution in the Energy Access Practitioner Network’s Mini-grid newsletter. “Efficient distribution of minigrids and the ability to generate power that can supply not just the telecom tower but also the village makes the implementation of the ABC model possible. By itself, neither the telecom community nor the community would be viable customers.”
OMC operates in the North Indian state of Uttar Pradesh, which is the country’s largest in area and population. Over 150 million of Uttar Pradesh’s 200 million people live in its 100,000 villages and approximately half of them lack access to electricity.
70 micro-power plants and counting
Currently, OMC owns and operates 70 solar micro-power plants providing energy access through minigrids to 200 villages with a total population of 1 million people. By the end of 2015, OMC had generated over 1,500MWh of clean energy. In addition, approximately 5,500 metric tons of CO2 emissions had been saved by fossil fuel replacement.
So what has OMC learned from its experiences?
1. Energy access is not merely building generation capacity. The cost of local energy storage and distributed operations must be taken into account as these are areas where most energy access providers face challenges.
2. Availability of energy access fuels further demand. Any long-term energy access venture must be made to scale to allow for increased supply to meet growth in demand.
3. A diversified customer base is critical for commercial viability. While OMC started out focusing on telecom power, with community power as an added benefit, the company realized that community power is a growth area, made possible by long-term PPAs with telecom infrastructure companies. This hybrid model integrating both community and business customers has been critical to its success.
4. Recruitment and training of local staff is key to sustainable operations. At OMC, experienced employees train new recruits in an operational power plant, allowing them to learn through practical experience, with training provided on a regular basis to ensure ongoing competence development.
Minigrids for electrification
In its 2012 report, Towards Achieving Universal Energy Access by 2030, the Energy Access Practitioner Network estimated that over 40% of the installed capacity to achieve universal access to electricity by 2030 could be most economically delivered by mini- and microgrids.
OMC’s model, with appropriate policy in place, could serve for other rural areas of the developing world, for example in Africa. OMC’s goals include establishing 500 micro-power plants by the end of 2016 and providing power to 3,500 telecom towers and 2 million homes – 10 million people – in over 1,600 towns and villages by 2018.