The New Idea

Harish chartered the Solar Electric Light Company (SELCO) in 1995 to challenge these assumptions. SELCO has proven that the poor can afford and benefit from modern and clean energy services. Today, SELCO has installed more than 95,000 solar panel systems, with over 400,000 people directly benefitting and tens of thousands more indirectly benefitting. SELCO has provided sustainable energy services to the underserved and keeps costs to a minimum by focusing on the specific lighting needs of its clients as opposed to the common practice of catering to the general electricity demands of a population. Additionally, through door-step service, SELCO demonstrates that maintenance is not an issue. The families and individuals purchasing solar services receive routine check-ups and care for the equipment. The company works with the natural forces of the market, and although 75 percent of its clients earn less than US$4 a day, SELCO generates enough revenue to break even.

As SELCO offers unique products and services to deliver electricity to the poor, its financing methods are equally important. Since the cost of providing an energy service to an underserved household can represent several months of income, the provision of affordable and accessible credit is essential. By partnering with credit cooperatives and commercial and regional rural banks, SELCO helps customers obtain the necessary credit to purchase solar lighting and heating systems. Intrinsic to SELCO’s mission is Harish’s belief that global climate disruption must be addressed. The “greening” of rich nations will not solve the problem, and according to Harish, “The planet will be destroyed by the billions of people in the developing world who will be forced to use non-optimal forms of energy to meet their absolute basic needs.”

The Problem

Approximately 57 percent of India’s population does not have access to electricity, and for many who do, the supply is unreliable. An absence of electricity has many debilitating consequences, such as forcing people to return to dark homes after a demanding work day; subjecting people to toxins and heat from burning kerosene oil; inhibiting the education of children who are unable to read; and limiting the ability to generate income. The more rural the location, the less likely it is to have access to electricity. Since the poor lack the capital to meet their basic energy needs, they are trapped in a cycle that prevents them from realizing their intellectual potential and stifles their entrepreneurialism.

Harish connects this social condition with disastrous environmental effects. Currently, India emits a billion tons of CO2 each year. Without access to electricity, people are forced to use inefficient, substandard forms of energy—most commonly fossil fuels such as kerosene oil. Burning these fuels releases toxins into the air that are damaging to human health and the environment.

While some citizen organizations (COs) have attempted to replicate the success of SELCO, they often make serious errors in their approach that may lead to dissolution and market deterioration. For example, SELCO’s commercial viability has been threatened by COs that subsidize their supply chain and undercut market forces. In the short term, they may install a handful of units, but after the funding is depleted and issues of maintenance surface, the recipients are left with expensive, inoperable equipment—and the organization that delivered the product has moved on to another cause. Even worse is the long-term impression it has left on the market, because organizations that want to deliver sustainable services cannot compete with unreasonably low prices or free services affixed to charity. In contrast, SELCO’s model makes lighting and energy solutions available to the most underserved demographic of India’s population, provides unique financing opportunities, and delivers clean and sustainable solutions.

The Strategy

Harish’s initial focus was not where he could make a profit, but the viability of the technology and its traction among SELCO’s target customers. Harish had wrongly assumed that the technology was readily available, but he quickly realized that SELCO would have to produce unique parts and systems for the varying needs of its clients. He strategically positioned SELCO to function within the “needs sector” to provide clean energy services. The organization keeps costs to a minimum by creating the smallest solar photovoltaic (PV) systems for a given space and user. Similarly, experience with or understanding of “needs sector expertise” was a critical criterion when hiring people for SELCO.

Harish’s first challenge was to find technicians working in the rural areas to do the installations. Through a door-to-door process, Harish formed SELCO’s team. In 1996 Malaprabha Grameen Bank was the first to finance SELCO and began by funding 100 PV systems. This paved the way for larger and more substantive financial endorsements from other institutions. SELCO consistently dispels the notion that a commercial venture cannot function while meeting social objectives.

In 2004 SELCO’s business model was influenced by an unexpected outside force. Germany’s Green Party subsidized solar paneling, which sucked up the world’s production. Manufacturers in India had a shortage of modules needed to build the products SELCO used. Because of the demand for larger systems, manufacturers stopped building the smaller modules, and the cost of solar panels increased by 47 percent over 18 months. Often when volume goes up, cost goes down, but in Harish’s situation it was the exact opposite: The subsidized supply chain had an adverse effect on the local enterprises trying to sustain business. To protect SELCO’s future viability, Harish made a key decision to grow the organization vertically. Product offerings were diversified from compact florescent lights and solar energy systems to include light emitting diode lighting.

SELCO has twenty-five solar service center offices in the states of Karnataka, Andhra, Pradesh, and Kerala and has significantly expanded to service communities and institutional infrastructures as far away as Sri Lanka. With a staff of more than 150, the company has installed more than 95,000 solar lighting systems, thereby preventing the emission of 375,000 tons of CO2. SELCO has also partnered with more than twelve local financial institutions and ensures that clients receive personal service and door-step financing—two key components for the successful dissemination of modern energy services in underserved areas. In addition, SELCO is preventing further environmental degradation by rural communities as they strive toward electrification. Each solar system SELCO installs offsets global warming by reducing more than 5 tons of CO2 per household.

SELCO’s success is based on innovations in maintenance and customization processes, as well as sound cost structures that make solar rural electrification a long-term viable option for families, small business owners, and communities that depend on light for commerce, education, and cultural activities. Harish created SELCO with no financing and points out that in the 15-year history of the company, it has spent only US$500,000 to build capacity.

The Person

Harish grew up in the steel town of Orissa on the east coast of India, where he completed all of his schooling through grade 12 before entering the Indian Institute of Technology (IIT) for undergraduate work in energy engineering. Harish then traveled to the U.S. to complete his master’s degree and a PhD. At the time, not many universities had programs in sustainable energy, but Harish came across the Center for Sustainable Energy at the University of Massachusetts, and both his degrees focus on rural electrification.

Even as a student, Harish showed entrepreneurial talent. With a friend, Harish addressed IIT’s drug problems by implementing a drug-free campaign that led to a virtually drug-free campus. Harish’s doctoral fieldwork was in Sri Lanka and India; however, it was a trip to the Dominican Republic for his master’s degree research that sold him on the promise of solar power as a viable energy solution for the poor. Returning to the U.S., Harish reconnected with his co-founder and began to draft the design of SELCO. They headquartered in Bangalore because the state of Karnataka has a larger network of financial institutions in rural areas.

Under Harish’s founding leadership and vision, SELCO has managed to work for hundreds of thousands of underserved and forgotten Indians, make US$3M in annual turnover, deliver modern energy solutions, and withstand massive supply-side inflation without passing on the costs to its customers. Harish likes to stress that the best systems are built on big-picture forecasting, and probably the best illustration of this point is from the company’s experience of “cracking the cultural code” and getting Indians to adopt certain behaviors or practices. Harish believes “one must think in the long term and have patience. There is no shortcut to creating good processes… Concentrate more on the processes and the numbers will come.”

SELCO’s story is an improbable one. Looking back, Harish laughs at it being the first job he had out of college, and he is a man of uncommon humility and openness. Harish believes people usually don’t capture the true reasons for their successes—so, unlike failure, success is often not as easy to learn.