Q&A: ‘Sustainable energy makes people bankable’
- Economic development depends on cheap energy – but it must be sustainable
- Poor people need to access finance to get off-grid power
- Combined with good finance, sustainable energy can lift people out of poverty
India’s investments in renewable energy are growing fast. The country plays an important role in global efforts to meet emission targets: its burgeoning middle-class has growing energy demands, while a large number of people still live in rural poverty without access to power.
Harish Hande, co-founder of the Bangalore-based company SELCO, believes that renewable energy needs to go beyond being a box-ticking exercise — it needs to create better livelihoods. For his work he has won the 2018 Skoll Award for Social Entrepreneurship.
In this interview, which is part of SciDev.Net’s Bellagio Residency 2018 series, Hande explains how SELCO coaxed banks to fund solar power for the poor, and how technological innovation is crucial to reducing energy consumption.
What motivated you to start SELCO?I had a feeling we are thinking wrongly about inclusivity. For example, if you and me did a PhD on sugar cane, we would be called experts on sugarcane — but a farmer who has worked with sugar cane for 45 years will not be called an expert, and he will have to listen to us because we have the PhD. Our ability to confuse, conveniently, intellectual poverty with financial poverty — it hurts me a lot.
My motivation was: how do you destroy three myths? The myths that the poor can’t afford sustainable technologies, that the poor cannot maintain sustainable technologies and that you can't run a commercial venture while trying to meet social objectives.
How does SELCO help provide renewable energy?We started with the concept that, if sustainable energy was to succeed, there are two things that are critical in rural areas. The first is a very good after-sale service. Often, poor people in the villages have been taken for a ride by the urban class who go and sell them system and run away. You need to gain trust that whatever is going to be installed will actually work.
The second thing is the cost. If people are to buy solar panels for their houses, which are an asset, they can be the second most expensive purchase after the house itself. You needed long-term finance, not microfinance. How do we convince the local banks to actually finance the poor?
What solution have you found?Imagine a Siddi community in northern India. The average Siddi family earns between 1,500 to 1,800 rupees a month, that’s around US$25 to US$30. On kerosene and candles, they spend US$2.5-3 per month. And on mobile charging, when they go to places where there's electricity, they spend US$1 a month. That’s US$50 in a year, and $250 in five years. A solar system financed through a bank over five years costs US$200. So the question is not technology or affordability. The question is, will the bank finance the poor families?
The first time we took 30 families to get finance, the bank required a 100-per-cent guarantee. So we kept 100 per cent of the money in the bank, in case any of the families defaulted. After six months, the bank said the payments were going fantastically well. So I asked: if you knew this six months ago, what guarantee would you have taken from us? They said: 20 per cent. So I removed 80 per cent of the money and, using our 20 per cent that was left, we unlocked local capital four times over.
What was the result?The best answer was from one Siddi who said: ‘once I finished my solar loan, I will take a loan for a sewing machine’. What this means is, I have become bankable.
Sustainable energy finance pushes people multiple ladders up in the social structure. That's the beauty of it. We should not look at sustainable energy from an environmental perspective, we should look at it from a development perspective.
You’ve highlighted the banking system as one barrier. What other major barriers have you found?Today, when I design solar power for a sewing machine, people say solar power is expensive. But nobody says that the sewing machine is inefficiently designed. We are not designing [technology] for low-resource areas; instead we are putting in more features because of the assumption that somebody is going to pay for the electricity bill.
Another example: dental chairs. A dental chair has 120 features. It guzzles electricity, so you put it in a large hospital for free dental services. But this service is actually not free for the poor, because two days of trekking to that hospital means loss of labour. If you had provided a dental chair with only four features, I could have delivered dental services right at the doorstep of the poor, at one-tenth of the cost. The biggest barrier is that we are not asking how to create innovation in terms of livelihood applications for the poor.
How do you see India's move towards energy transition, driven mostly by global climate change commitments?I think India and Africa are developing in an unsustainable manner, because everybody is looking at electrification only. But sustainable energy is an enabler for better health, better education, and better livelihoods. We are not looking at that potential. For example, today I am going to provide sustainable electricity to aid family X. We tick the box and say we have reached the goal of providing the X’s with sustainable energy.
But are they out of poverty? Because if not, that family’s two kids will not have electricity when they move out, and they will be the poverty of 2025 and 2030.
But what about emissions reduction?What I’m saying is, don’t push for electrification in an absolute form. We need standards of efficiency. When you’re doing electrification at a lower cost, so instead of three air conditioners you use eight air conditioners — that is not going to help.
Can India truly show that sustainable energy is highly linked to poverty reduction? My best success would be if the ministry of sustainable energy in India would disappear and be recreated within the ministries for women, health and education, so that anytime they come up with a new programme, they will think about sustainability from day one. That’s what we are pushing for.