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.
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.
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
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
"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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