Energy access is a priority for India, and the vast potential for advanced clean energy would necessitate funds and incentives to ensure effective and timely adoption of solutions, said an official of Shell Foundation.
A multi-dimensional approach is needed to understand the issues plaguing the energy sector and its various trade-offs, the official added.
The Foundation is an initiative of oil major Royal Dutch Shell. The independent charity seeks to establish public private partnerships with the Indian Government in the clean energy sector, either directly or through companies that it has invested in.
The Foundation has several strategic partners in India like Envirofit, which designs, produces and distributes clean cookstoves. The Foundation is also working with a rural marketing company, Project Dharma, a social enterprise, to serve the needs of rural households at the bottom of the pyramid, by creating a rural distribution network that provides customised products at socially affordable prices.
Exisiting barriers Pradeep Pursnani, Deputy Director of Shell Foundation, said expecting early adopters of modern energy solutions to be the poorest of the poor is an outdated concept. However, there exist many barriers.
“Once you find solutions, there is an opportunity for financial innovation. We have created solutions for working capital, and solutions for small enterprises that need access to debt but don’t have a track record, collateral, or access to money,” he said.
Adding that developing new supply chain solutions to these challenges could often take several years, he said it could also require considerable investment, “and only then will an energy enterprise gain significant traction in the bottom of the pyramid (BOP) markets”.
For example, it took Envirofit three years to transition from a business to consumer (B2C) to a predominantly business to business (B2B) business, in order to achieve economies of scale and build the brand credibility that was needed to create, market, and sell its products.
Dharma Life, a social enterprise, ensured the building of a network of rural entrepreneurs, retailers and distributors to bring a range of social impact products, such as cookstoves, solar lights, water purifiers and sewing machines, to market in rural India.
Similarly, IntelleGrow, a non banking financial intermediary that provides debt finance and skills support to small and growing businesses, with a major focus on access to energy, came to the Foundation’s fold in a unique way.
“It was the result of us understanding the market. They were trying to grow in India, and were struggling to get access to debt. So, we looked deeper to understand how there could be a solution,” said Pursnani. He added: “Accessing capital without collateral was unheard of. Today, IntelleGrow has created a model that is hands-on. We created a new financing model to help small businesses in high impact sectors to access tailored loans.”
Last year, venture debt lender IntelleGrow Finance raised ₹28 crore ($4.5 million) from Omidyar Network, with participation of existing investor Michael & Susan Dell Foundation.
The investment aims to help IntelleGrow achieve its target of lending to more than 250 companies across India by 2016.
“Many of our social enterprise partners are now delivering promising results, but are all in the early phases of growth. Until they can prove financial viability, they will struggle to attract growth finance,” said Pursnani.
He added that to aid the success of such pioneers, it is “essential to lower the risks for further entrepreneurs and investors to join these markets.”