"Flatland: Will the Bangalore Boom Help or Hinder Low-Carbon Innovation in India?"
by George Black, reposted from OnEarth Magazine
It was New York Times columnist Tom Friedman who made Bangalore famous. This city of seven million is the Silicon Valley of India, its technology parks and outsourcing services the driving force behind the country’s remarkable recent boom. For Friedman, Bangalore was the key to understanding the new global economy, and he came up with a snappy catchphrase to describe it, which in turn became the title of a best-selling book: The World is Flat. In this flat new world, India’s “knowledge economy” would rescue millions from rural poverty and usher them into a world of eight percent growth rates and abundant clean energy.
I came to Bangalore last month in search of this new energy economy, whose success or failure will be critical in determining the fate of the planet. But what I found was very different from what Friedman had in mind. In many ways it was more exciting; but it was also much more challenging. There’s no doubting India’s sincerity about shifting, over time, to a low-carbon future, but the vision of that future that I found in Bangalore will demand a radical change in the mindset of the government and of those who have done most to create Friedman’s Flat World.
Arriving here, as I did, from the teeming chaos of Uttar Pradesh, one of India’s most impoverished states, is an extreme form of culture shock. From the gleaming airport, my cab whisked me into the city along a divided highway (soon to be an expressway), flanked by tall concrete pillars (soon to be the metro to the airport). There was hardly a rickshaw or a sari in sight. Instead there were giant billboards advertising financial services, skiing vacations in Switzerland, and luxury prestige residences with golf course views. Were we really in India?
My illusions about the Flat World lasted about 12 hours — until the next morning, to be precise, when I sat down to talk to Ananth Aravamudan.
On the face of it, Aravamudan’s involvement in renewable energy is the embodiment of Friedman’s ideal. A native of the neighboring state of Tamil Nadu, he has lived in Bangalore for 20 years. His first job in the software business was with WIPRO, which provides information technology services for 150 Fortune 500 companies. In 1999 he left WIPRO to become one of the founders of MindTree, which has since become an important IT and outsourcing company in its own right. But in 2009, he told me, he decided he wanted to do “something more meaningful,” and joined SELCO, the Solar Electric Light Company, becoming the senior technical manager for its newly established research lab. Since its foundation in 1995, SELCO has illuminated some 140,000 households — about 700,000 people — almost all of them in the state of Karnataka, of which Bangalore is the capital. Those numbers make SELCO one of the world’s leading providers of solar photovoltaic panels.
I found that Aravamudan was deeply skeptical about both the Bangalore boom and its relevance to India’s most pressing energy needs. The boom is actually a bubble, he said, based on offering the world’s cheapest software development services to the world market — “but this won’t remain true for very long, as other newcomer nations will price their services more aggressively. Also, the growth of Bangalore and the IT sector has only benefited a small percentage of people, while alienating a whole lot of others.” It was true that most of SELCO’s technical experts were graduates of the Bangalore high-tech sector, but they were isolated outriders. “Almost no one here is looking at the problems right under their noses,” he said — the most urgent of these being to find ways of providing affordable, clean energy to the 400 million Indians who, without it, will never be able to enter the economic mainstream. The problem with a Flat World, you might say, is that a lot of people fall off the edge.
SELCO’s success has made its founder and managing director, Harish Hande, something of an international celebrity. Last year he was one of a dozen entrepreneurs chosen to meet with President Obama during his visit to India, as well as an invitee to the annual meeting of movers and shakers at the World Economic Forum in Davos. But Hande has used these elite platforms shrewdly to advance the vision of social equity that brought him into the renewable energy business in the first place. You might expect someone who has devoted his life to solar energy to praise the Indian government’s ambitious National Solar Mission, which aims to generate 22,000 megawatts of clean power in the next decade, the equivalent of more than 60 average-size coal-fired power plants. But the most Hande would say, in a World Economic Forum blog, was to damn the initiative with faint praise as “extremely well-intentioned.”
The main problem, he wrote, was that more than nine out of every ten solar megawatts would be used to feed the central power grid, which could never expand fast enough to meet the country’s rising hunger for energy. The government continued to believe that size is everything, whether that took the form of coal-fired power plants, nuclear reactors, massive hydropower schemes, or the huge thermal solar arrays that it now dreams of building in the scorching deserts of India’s northwestern states. There’s nothing wrong with these solar arrays per se, of course, especially if they lessen India’s reliance on fossil fuels. The problem, Hande said, was that the government was ignoring the wisdom that had been acquired over the past two decades about the potential for solar power in places the grid can never reach. “For those of us who have day in and day out worked hard to create sustainable businesses in the rural areas,” he wrote, “the solar mission feels like a hangman’s noose.”
The fact that SELCO is a business is important to keep in mind. “We use the word company very consciously,” Aravamudan told me. “We’re not an NGO.” The SELCO model is based on the belief that providing clean energy to those who most need it requires a sound and sustainable business model, even if the company’s major shareholders are foundations and private equity funds that are more interested in social impact than the magnitude of profits.
The entry-level package offered by SELCO consists of a single 25-watt solar panel and four lights — two LEDs and two CFL bulbs — for which it charges 7,500 rupees, about $150. That may not sound much, but in rural India it’s a small fortune. So SELCO set out to debunk a couple of tenacious myths: that the rural poor couldn’t afford renewable energy, and that a social enterprise couldn’t be commercially viable. The genius of its approach was not to lower prices (which would have meant a corresponding drop in quality), but to work out a financing model that would make high-quality technology affordable.
The biggest obstacle for potential buyers, who could usually offer no collateral, was scraping together the cash for the down payment on a bank loan (Indian banking regulations require “margin money” of 15 percent or more). The idea of a “solar loan” was unknown when SELCO started, but over time the company found creative ways of helping buyers with their initial payments, enlisting a persuasive network of supporters that included international organizations such as the Renewable Energy and Energy Efficiency Partnership, based in Vienna, as well as local farmers’ cooperatives, microfinance institutions, even local branches of the Rotary Club. The result: 90 percent of SELCO’s customers repay their loans on time, and the reluctance of local banks has largely evaporated.
Which is not to say that SELCO’s path has always been easy. The company didn’t turn a profit until 2001, and six years later the surging global demand for photovoltaics — spurred in large part by Germany’s introduction of lavish subsidies for solar power — almost put it out of business. Supply couldn’t keep up with demand, and prices rose by almost 50 percent, imperiling SELCO’s core commitment to affordability. The World Bank’s International Finance Corporation helped SELCO over the hump, but the company also decided that its future depended on more than selling off-the-shelf solar panels and lighting systems. It needed to diversify, to develop a range of new, affordable renewable technologies. So SELCO set up an R&D lab, financing it through a new not-for-profit rather than drawing the working capital from the company, which was operating on razor-thin profit margins. “That gave us the the freedom to explore projects that aren’t necessarily commercially viable yet,” Aravamudan said.
The lab is based 200 miles west of Bangalore, in the small town of Ujire, which is nestled in the Western Ghats, a range of misty, forested mountains dense with coconut and areca palms, coffee and rubber plantations, and scented groves of cardamom, cloves, and peppercorns. At intervals we passed through small towns with soaring, technicolor-painted temples, and crossed bridges over rushing streams. There was some potential for small-scale hydropower in this part of India, Aravamudan said, and for energy from the winds that blow off the Arabian Sea. But rivers are seasonal, and winds are fickle, and together they could barely make a dent in Karnataka’s perpetual energy crisis. Most of the power in the state comes from the giant Raichur coal-fired power plant, he told me, but India cannot dig or import coal quickly enough to keep the turbines spinning. Even booming Bangalore has to endure rolling blackouts.
The SELCO lab is run by Anand Narayan, a chemical engineer whose career path has been, to put it mildly, unorthodox: back and forth to the University of Colorado, Boulder, where he got his PhD, bracketing a spell at the elite Indian Institute of Science in Bangalore and another as a disciple of the Japanese writer Masanobu Fukuoka, whose book One Straw Revolution promotes a Zen vision of “natural farming.” However, Narayan told me drily, “I found that my intellectual interest in farming wasn’t matched by my enthusiasm for the actual work.” So back he went back to Colorado, where he worked for seven years at a cell phone startup in Denver, before finally returning to Karnataka to take charge of the new lab.
The set-up in Ujire is as idiosyncratic as Narayan’s career path, and as smartly conceived as SELCO’s business model. The lab occupies a large, airy space in the SDM Institute of Technology — SDM standing for Shri Dharmasthala Manjunatheshwara, a renowned Hindu temple and pilgrimage site in the nearby town of Dharmasthala. Through donations from pilgrims, the Dharmasthala Trust has become a financial and political powerhouse in Karnataka, opening more than a dozen of these technology institutes around the state.
The lab had something of the mad inventor’s workshop, large concepts executed not only with PV panels and circuit boards but with hammer, nails, and screwdriver. Narayan’s desk was littered with half a dozen different models of solar lamps and lanterns. On the floor nearby was a selection of improved cookstoves, designed to burn firewood and cow dung more efficiently and with lower carbon emissions. SELCO had experimented with solar-powered electric fences, Narayan said, to keep animals from trampling crops and vegetable gardens, but they were too expensive for most people, costing 10,000 rupees — $200 — to fence in an acre of land. Scattered around the lab were solar dehydrators for preserving fruits and vegetables and machines to dehusk and grind grains. At one end of the room, an intern from the University of Strathclyde in Scotland was scratching his head over a miniature wind turbine, painted bright yellow, which sat on the floor like some oversize spider from the imagination of Dr. Seuss.
“Maybe we’re doing too much,” Narayan said with a grin. “But we’ll try all sorts of things to see what works.” Nine out of ten experiments would probably come to nothing, but the devices that made it through the testing process would use renewable energy in a way that was customized to local needs, and nothing would go to market until SELCO was satisfied that it was supported by a cast-iron business plan.
A few miles away in Dharmasthala, SELCO’s newly opened “energy center” was gearing up to greet the floods of pilgrims — 100,000 were expected — who would be arriving the next day for the Laksha Deepotswava, the Festival of Lights. Energy center sounds grandiose, but it was actually a modest affair: a converted 20-foot shipping container with a dozen PV panels on the roof and shelves of solar lanterns for rent beneath a smiling portrait of the temple administrator. Eighteen people had stopped by already today to charge their cell phones, and the solar-powered water purifier had dispensed more than 1,500 gallons of clean drinking water to thirsty pilgrims. The festival would bring a steady stream of customers and give SELCO a huge captive audience for its products and services. The plan now is to replicate the center at other pilgrimage sites around the country.
Again, it was hard not to be impressed by the company’s ingenuity. There are scores of clean energy initiatives in India, and while SELCO may be the best known, most share the same core philosophy: think from the ground up rather than from the grid down. Solar power may indeed be a key to India’s future, but not perhaps as the government imagines. The solutions may come from humbler places, like here among the pilgrims in Dharmasthala, where glittering solar arrays in the deserts of Rajasthan and the Flat World of Bangalore feel like visions from an alternate and more distant reality.
George Black is executive director of OnEarth, a print and online magazine published by the Natural Resources Defense Council. This is part one in a two-part series published at OnEarth.