In an interview to India CoCreates, Brian Shaad, Co-Founder, MGP, talks about his company's business model, positioning and future plans. Prior to founding MGP in 2010 Brian worked with many NGOs, donors, governments and the private sector developing multi-sector partnerships for solving simple, yet often protracted, development challenges. When he’s not overseeing MGP’s expansion in Uttar Pradesh, Brian can be found on his organic farm in Sacramento, California where he’s helping to revive the region’s small farm economy. Interview excerpts:
It's important to note that we provide villages their most basic needs - light and mobile phone charging. We are not an electricity supplier but a lighting utility. And our competition is kerosene.
With our services, households get electrical light that is ten times brighter than the light of a kerosene lantern. They get twice the number of light points, a mobile phone charger. They get light for a longer duration, almost three times more. All this, while paying less than what they currently pay for kerosene and mobile phone charging.
The most immediate impact of our service is household savings. In addition to savings, we've also seen people getting into secondary income activities (sari embroidery, bag weaving, etc) and extended hours for shopkeepers and tailors means more business. In our villages, the incidences of respiratory illness have come down, because there is no indoor smoke. Children are able to study longer, and communities feel more 'safe' at night. We've seen that socialising continues later into the night.
To meet the growing demand for power, government encourage captive power generation by industry. What should it do to encourage power generation by individual households and small commercial establishments (traders, retailers, etc) through Micro-grid technologies?
Individual households already have solar home systems. Selco, Orb Energy and BP/Tata are some of the big players in this space. But existing solar systems cater to lower-middle class and rural households well above the poverty line. Traders in many large villages and towns already operate off grid using privately operated diesel micro-grids, though they are often polluting and offer a few hours of light for traders.
As with any emerging sector, the best thing government could do is to ensure the new sector is able to get off to a strong start. This means making sure that there is an enabling and favourable environment. It is not about regulating and trying to decide how companies should do their job. What we need is a hand’s off approach from the government. Some say subsidies are required. But MGP operates without subsidies and we believe any sustainable business model should not depend on subsidies.
MGP plans to crowdfund its projects. Why are you looking at crowdfunding, instead of tapping traditional channels like banks and stock markets?
The micro-grid sector is new and the markets MGP targets are not only off the grid but also the poorest of the poor. These factors present too many unknowns for traditional lenders. Traditional lenders and investors like to invest in a company with a 'product' like lanterns or solar home systems. But as a service company, we're unique in our approach and it'll take time before traditional lenders become comfortable lending to us.
That said we're also confident in our business model, the market we're operating in. Our model allows us to offer far better interest rates/returns to potential individual lenders. We've also established there's a demand for individuals to make 'social investments'. But unlike Kickstarter and Indigogo, we're able to offer more than a t-shirt, we can offer a 6-8% return with the principle paid back in three years.
What is unique of your microgrid model? What are your future expansion plans?
We're the lowest cost micro-grid in operation. We also offer almost twice the amount of lighting / charging time than competitors. This allows us to prove our service in accordance to what our customers can afford (or what they're willing to pay). Our near-term goal is to serve 100,000 households by 2015.