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Simpa Networks offers clean energy through a prepaid payment platform

Feb 15 2013, 20:22   |   By Entrepreneur

By Shonali Advani

There is no doubt that clean technology still interests investors in India. But it is equally true that we are a while away from witnessing that interest translate into being a major game changer on ground. The government concedes that a large majority of India still remains without electricity while its push into renewable energy, especially solar power, is significant. The high upfront cost prohibits the bottom of the pyramid from affording these sources. Thus, they end up spending small fortunes on not-so-efficient alternatives like kerosene lamps, and battery charging services.

Clarity dawns
This realization dawned on five individuals-Paul Needham (45), Jacob Winiecki (35), Shashi Kumaraswamy (37), Michael MacHarg (38) and Karthik Meda (32)-who worked in the fields of micropayments, clean technology and social ventures in various capacities at different organizations in the US. The five were united by a desire to crack this problem in access to energy.

They launched Simpa Networks in late 2010 in the US and looked at markets where demand for their expertise existed. India was on top of the list, thanks to a population of over 1.2 billion out of which 400 million live without electricity.

"To reach that many people in Africa we would have to go across 54 different countries," notes Needham, President, Simpa Networks. By early 2011, they moved base to Bengaluru to build a foundation for what they hope can be a global business. "Seventy-five million households in India are spending $50-150 on poor alternatives," cites Needham, as per their research. This segment has low, irregular income, and little or no access to formal income which makes it difficult for them to make large purchases. "This population likes to buy in small packages," he says in context to sachet marketing adopted by many large corporations that entered these markets. These corporations include mobile operators who figured the issue and now offer top-ups in very small denominations.

Pay as you go

Taking a cue, the founders built Simpa Networks' technology platform on the prepaid mobile phone user experience. It is a combination of software as a service and an integrated meter. The server-based software is accessible via an SMS gateway and a web interface, while the low-cost prepaid meter regulates the use of electricity in response to encrypted instructions.

For the hardware aspect, it has a solar panel of 15-40 watts with a battery which stores electricity, wires to connect it to homes, and a charge controller that controls the flow of electricity. "It's not connected to a grid, but has its own panel, installed on a roof," explains Needham. After working with 20 different configurations, they came up with five different pricing models ranging from Rs. 9,000 to Rs. 20,500, each with a different capacity for energy consumption. Households can run fans, lights, small radios and mobile charging devices with this product.

Progressive payment
In their model, a customer makes a down payment, usually 20 percent of actual cost, to install the solar system and tops up the system by purchasing prepaid credits, the usage of which is monitored by the meter.

The lowest denomination or top-up that a customer can purchase is Rs. 50 through the SMS gateway while the minimum credit for energy they can buy at a given time is Rs. 10 per day.

Once credits are consumed, it shuts off usage. Each payment for energy adds up to a final purchase price and once fully paid, the system unlocks permanently to produce energy free of cost from there on. "We're giving them access to a new form of capital," Needham says. Simpa sells credits through an agent model, similar to mobile operators. "We are piggy backing on an infrastructure that [already] exists," says MacHarg, Vice President-Markets, Simpa. Miguel Granier, Founder and Managing Director of Invested Development, who invested at seed-fund stage into Simpa, feels that the previous model of centralized energy production and distribution has failed leaving nearly one-third people globally without reliable energy. "Simpa is working to solve that market failure and their solution, pay-as-you-go energy, could be as disruptive as prepaid mobile was to telecommunications," he says.

Integrating the system
Simpa currently works with Bengaluru-based sustainable energy enterprise SELCO, their system integrators. "Effectively, SELCO sells system, one that works on our technology," says Meda, Vice-President Finance, Simpa. Simpa sells their system to SELCO, which then sells it to its customers through its network of business associates. Payments are processed over mobile and Simpa's revenue management software handles payment processing, pricing plans, and collections. Once installed, SELCO takes care of the installation and three years of after sales service. "Customers pay us back over time," says MacHarg.

Harish Hande, Founder at SELCO, which has been selling in Karnataka for 18 years says about the Simpa model: "It partly solves payment mechanisms and takes far more risk than regular traditional banks. Again, the impact will surely depend on the reach of their chosen partners."

SELCO has been one of the early partners and served as an initial test bed for Simpa's technology when the social venture started with pilot sales in Karnataka and Uttar Pradesh.

With them, it has sold close to 200 units so far.

Business on the grid
Simpa's innovation has other applications. For one, it can sell its prepaid metering solution to micro grid companies, and solar home system vendors. In 2012, it signed a Memorandum of Understanding with a large national developer of solar micro grids for 1,70,000 households in Uttar Pradesh. Here, consumers prepay for electricity service on a pay-as-you-go basis topping up via agents or through their mobile phones. Simpa collects payments, deducts platform service fee and passes the balance onto their partner.

"Many micro grid companies face problems with collections and consumers are having trouble understanding what they paid for," explains Needham, who was happy to discover that Simpa had already developed a solution for the problem presented to them and with a few modifications, they could address a much larger market.

Rupesh Shah, Director of Product Management, Intuit and an advisor to Simpa Networks, sees sense in the firm's go-to-market strategy. He explains, "Selling across three verticals is an interesting way to approach and quickly test the market. Now they have to be smart about how much they will invest and where."

For Hande, the ability of rural India to adapt payment methods via an electronic medium would be a challenge. "Also, how to secure guarantees of assets in the client's house is another," he mentions. Simpa is ready to build more partnerships, deploy its technology in micro grids and establish a presence in other countries over the next two years.

© Entrepreneur India January 2013
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