Off-Grid Solar for Rural India - Understanding the Market - India Renewable Energy Consulting – Solar, Biomass, Wind, Cleantech
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The rapid development and versatility of solar PV has provided the rural community with wide variety of choices, regardless of the capacity/size or location. Despite government’s initiatives and the various schemes, there remains a lot of rural communities which do not have access to off grid solar products and solutions. It is evident that the major issue behind the insufficient progress in off grid solar energy in the rural pockets of the country, is the general lack of interest and enthusiasm among companies / vendors to cater to this market. This could mainly be attributed to lack of knowledge or rather understanding of the dynamics of the rural market and perhaps due to a strong belief that rural market in inherently risky with very less prospects for commercial gain. Entrepreneurs must realize that opportunities are emerging for the private sector to deliver clean and affordable energy to the rural communities and in order to crack this market, it is vital to develop a critical understanding of the market.

The suitability of a technology / product for a particular rural segment would depend upon a lot of factors, the details of which has to be understood in detail in order to gain access to this complex market segment. The blog attempts to provide the vital understanding that is needed for successful deployment of solar based off grid solutions and products in the rural markets of India.


Estimate the actual demand for the product/ service

For many rural communities, there would be an obvious requirement for electricity, but often with low levels and irregularities in income, the extent of affordability requires serious understanding. Though as an entrepreneur one could see exciting market for off grid solar products and solutions in rural India, one must understand that the need for power does not necessarily translate into ability to pay. This, combined with the need for plants to maintain a certain plant load factor, necessitates the requirement for careful demand estimation while selecting target segment. It is worthwhile to mention here that the LaBL model of TERI has been a big success as they usually conduct a scoping survey to estimate the likely demand for lighting and ability to pay following which they size the plant/operation accordingly.


Give some serious thought on financing  

The most important factor that would influence the adoption of solar off grid solutions and products would be affordability and the ease of access to low interest or rather no interest finance. Finance for the end user on favorable terms is a necessity for off-grid solar power systems and products as they typically involve high upfront investments. While it might seem that a solar lantern is not a capital intensive purchase for the urban population, it would be a huge upfront investment for the rural community which is in fact the actual target segment for solar lanterns. A similar case applies for home power systems and lighting systems where the upfront cost makes it financially unviable for the semi urban community to invest.

Financial support is an important component of solar off grid solutions and products, at least in the initial years. It is the company’s responsibility to facilitate timely disbursement of grants and subsidies to the rural population, failing which it would be invariably impossible for this market segment to show any kind of interest in adopting solar products. Financing is not only vital for domestic products but it is even more essential for large scale community off grid solutions such as the solar pumps.


Work out affordable electricity tariffs:

As affordability is one of the key factors from an end user’s perspective, the electricity tariffs for a community solar power plant should be based on the ability to pay. Willingness to pay and affordability are influenced by variety of factors such as flexibility and frequency of payment schedules, proximity to payment points and quality of customer service. It is understandable from Development Alternatives Groups model that building trusts and community buy-in is therefore important to induce the communities to pay for electricity.


Post sales maintenance earns a lot of trust and repute

Off grid solar projects don‘t deliver without a robust post installation maintenance facilities. Regardless of the type of business model, unless a company is able to have a robust service channel, the possibilities of growth is limited. Experience from SELCO shows that business models which provide proper after sales assistance, find more customers and thus, a model’s success eventually depends on the ability to earn the trust of the end user which is very much dependent on the post sales assistance.

Since the livelihoods of many customers are critically dependent on the solar systems and products, the company will have to respond to every breakdown as quick as possible. Though it was a challenging task for SELCO, given that most of the installations are in remote areas,  they are able to respond to 65% of these calls within 24 hours and they are constantly working on measures to improve this rate. This is a standing evidence of why SELCO has grown so rapidly to sell solar lighting to more than 100,000 rural home and institutions in a single state. Employing more than 170 people, SELCO services these households from 25 service centers scattered all across rural Karnataka.

The quality of customer service also influences the willingness to pay. As rural consumers are not educated, they desire a service provider who provides regular repair and maintenance services rather than a mere seller who doesn’t have a good grievance redressal mechanism.


Structured management is essential while dealing with a fragmented off grid market

Any business can be successful only if it has a well defined administrative structure and effective management at the local level. There should be well-trained technical, administrative and support staff to run the business on a day-to-day basis. Well laid out procedures and set processes should be developed and followed. The model of PRADAN reinforces the importance of structured administration and management at every level. For implementing the solar powered weave yarn project, Scatec Solar imparted technical training to PRADAN personnel. Each village selected an operator and PRADAN, with the help of Scatec Solar trained them on operation, maintenance and book keeping. The training was also provided to the individual women-user who were using the weave yarn. The training was phased and repeated to make the operators and users well equipped with the regular functioning and maintenance.


The business in off grid pockets is highly influenced by the socio-economic benefits

The business model should have visible socio-economic benefits, be it improvement in rural incomes, educational benefits, health care implications etc. To ensure this, the model should cater to productive applications in addition to domestic end use. SELCO and D.Light have been able to scale up their business precisely because they were able to solve the key pain points in rural community and more importantly were able to make the rural uneducated end user understand the socio economic benefits that are possible by investing on solar lighting systems over kerosene.


Promoting community participation is the only way to scale up the business

Businesses with fewer layers and greater community interaction seem to work well and have the potential to scale up. Only those institutions which can successfully mobilize the communities by engaging with them can be sustainable in the long run. Voluntary labor and capital contribution by the communities in implementation of a project also brings in a sense of ownership. It has also been seen that models such as the one followed in AURORE’s solar powered water pumps which leverage local contribution seem to perform very well on a large scale.  Since AURORE was able to convince the communities by making them understand the tangible and intangible benefits, there was a very high degree of community participation which has resulted in the scaling up of this business from two villages to almost 3000 villages in the state of Gujarat.


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About Narasimhan Santhanam (Narsi)

Narsi, a Director at EAI, Co-founded one of India's first climate tech consulting firm in 2008.

Since then, he has assisted over 250 Indian and International firms, across many climate tech domain Solar, Bio-energy, Green hydrogen, E-Mobility, Green Chemicals.

Narsi works closely with senior and top management corporates and helps then devise strategy and go-to-market plans to benefit from the fast growing Indian Climate tech market.

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