Dispatch from Padrauna, India (Part 3)

[here are the links to Part 1 and Part 2]

My last night in Hyderabad, 100 people gathered at the Acumen Fund offices for an informal community event at which I and my colleague, Karthik Chadrasekar, spoke.  It’s always exciting to see such a large turnout and interest in our work, and I was struck particularly with the number of people I met who are working on entrepreneurial ideas to deliver power and light.

It’s not surprising, given the staggering numbers: 500 million people in India alone without reliable power (and 3 billion globally); 1.5 million deaths annually from indoor air pollution; and the poor typically spending 15% of their income on dirty, low-quality fuels – more than is spent on healthcare or education.

But of course all big solutions start at the beginning, not the end…with one system or pilot or idea that works so well that it is built to grow. And to make it all happen, you need the right person, or people, with a vision of how to make the impossible possible.

The idea behind Husk Power Systems came from Gyanesh Pandey who, together with his partner Ratnesh Yadav, began tinkering with renewable fuel solutions for the poor in 2002.  By 2007, Gayanesh and Ratnesh had settled on biomass as their preferred fuel source and had set up shop in the Indian state of Bihar, where Gyanesh is from.  Bihar is part of India’s “rice belt” so rice husk is abundant, as is poverty.

But no one had ever built an end-to-end system here that generates power and delivers it to villagers’ homes at an affordable price.

A Husk system (the brown stuff is rice husks)

Husk Power Systems began as an NGO, the Samta Samriddhi Foundation, that built one mini-system and wired the surrounding village.  The system uses rice husks to power turbines to create electricity, and the business model is powerful in its simplicity: create small-scale infrastructure (wires to thatch homes strung on bamboo poles); a predictable and reliable power supply from 6pm to midnight; and sell customers two CFL (compact fluorescent) bulbs at a price that they can afford.

Or, as it is sold to the villagers: the cost of electric light to your home (which has never been delivered in the thousands of years this village has been here) is 300 rupees for the connection (about US$6) and less than 100 rupees (US $2.50) per month.

Uptake has been swift.

In every village we visited, house after house after house was bathed in the cool blue glow of CFL lights.  Homes in villages that had been dark or powered by kerosene for thousands of years were lit up.  And not just some of them.  Nearly ALL of them.  80% or more of them in every village we entered.

Demand – for this product, with this reliability, at this price – is not an issue, which sets Husk apart from nearly all of the businesses that serve the poor in the developing world.

This helps explain the pace of Husk’s growth: they had two systems installed by the NGO by early 2008, and a little more than 2 years later they have nearly 50 systems serving more than 100,000 people and growing at an accelerated pace.  The plans to scale are aggressive, with the goal of reaching hundreds and then thousands of systems in the next few years.  And that will bring its own challenges – of acquiring more turbines and building and maintaining more systems and building the salesforce and collecting payments from customers and training thousands of mechanics.

But what I find so exciting is to see a business serving the poor with a core model that works so well, one in which promise of meeting a need is matching up with the reality on the ground – high demand , hugh penetration, and high satisfaction from low-income customers, with underlying economics that work.  Having seen hundreds of businesses around the globe that aim to do just this, I know how rare it is.

And if business solutions to poverty are going to work on any sort of scale – not just delivering products to some but addressing social issues at their root – we need to start asking ourselves this question of market penetration.  All too often we look at the company level and ask if it is selling enough at a low enough cost to make the business work.  This itself is hard enough.  But for so many social problems, large-scale change will only come when market penetration (even if the market is just one village) – for safe drinking water, primary education, sanitation, vaccines, maternal care, etc  – reaches 70%, 80%, 90%, even 100%.

It is this depth of adoption that will fundamentally alter the infrastructure of people’s lives.

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Dispatch from Padrauna, India (Part 2)

[if you missed Part 1, you can read it here]

As the sun rose over the deep green rice fields around us, hundreds of people were walking along the highway and amongst the rice paddies, starting their day – squatting, walking, sitting, and waking.  That’s one aspect of India that feels different from nearly everywhere:  no matter where you go, it feels like there are always a lot of people going about their business.

1 in 6 people in the world lives in India, so any social issue in India is, by definition, a big one.  The Indian state of Bihar, India’s poorest, has a population of 85 million, 80% of whom have no reliable access to electricity, 58% of whom are under the age of 25, and 85% of whom live in rural areas.  And this is just one state – with a population larger than the UK, France, Italy, Spain, or Germany – in a country of 1.1 billion people.

When people talk about what will ultimately break the back of poverty – philanthropy or market-based solutions, or some combination of the two – I’m inexorably drawn back to these sorts of numbers.  They makes me ask how anything could possibly grow to touch hundreds of millions of lives without some sort of economic engine that works.  It feels impossible.  The imperative, then, is to find a way to make markets work in service of social change in places like Bihar.

Lighting and cooking solutions are a great place to start, because villagers already spend  10-15% of their income on fuel (for dirty, unsafe kerosene lamps and for open stoves that spew noxious smoke in people’s homes), and because 1.5 million people a year die globally from respiratory conditions resulting from indoor air pollution – 50% more than from malaria.

The opportunity and the need here is huge.

Acumen Fund has two investees that are working to crack this problem: D.Light, which sells solar lights to replace kerosene lamps, and Husk power, which is bringing power directly into people’s homes.  So when six-foot-two Gyanesh Pandey, CEO of Husk Power Systems, casually rolled into the (VERY bare-bones) Skylark Hotel in Padrauna wearing shorts, a white t-shirt, and a big smile on his goateed face, I wanted to know how and why he is solving a problem that no one else has managed to tackle.

Karthik Chandrasekar (Acumen Fund) and Gyanesh Pandey (Husk Power Sysetms)

What comes across quickly in conversations with Gyanesh is that markets are working in a limited way even in Bihar:  villagers are buying kerosene, fertilizer, seed, alcohol and clothing, so even people making just a few dollars a day have some small amount of cash that they’re spending.  This means that the goal isn’t to wave a magic wand and introduce markets where they don’t exist; the goal is to understand the village-level economy – and the mindset of people living there – well enough to offer solutions that will work to improve lives.

It turns out Gyanesh, who has a BS in Electrical Engineering from IIT Varanasi and an MS in Electronics Engineering at Rensselaer Polytechnic Institute, grew up in a village in Bihar, and he’s quick say, with a twinkle in his eye, “Hey, if I don’t work on these problems, who will?”

Gyanesh started tinkering with renewable fuel solutions for the poor in 2002, and in 2007 he and his partner Ratnesh Yadav set up and funded an NGO, the Samta Samriddhi Foundation, to build one mini-system that would provide power to 2-3 surrounding villages at a price villagers could afford.  Gyanesh and Rathnesh figured that if the price were low enough and the reliability high enough, they could sell power and 1-2 lightbulbs to villagers who would be all too happy to give up their kerosene lamps.

Husk Power's systems use rice husks (that brown stuff) to generate power

In 2008, based on promising early results, Gyanesh and Ratnesh set up Husk Power as a for-profit company, and less than three years later Husk has installed and is operating more than 40 ultra-small systems that are providing power to more than 100,000 people, and Husk plans to grow to 5-10x their current size in the next few years.

(TO BE CONTINUED)