Making a clean profit

Deploying clean tech solutions like solar or bio-gas power in rural areas sounds more like a government welfare scheme or an NGO programme. But now entrepreneurs are jumping in as they see a business opportunity. R Krishna reports

Sam Goldman had his ‘Aha’ moment in a remote African village. One tool that was extremely important, and which he used everyday during his stint as a volunteer with the Peace Corps (a volunteer organisation) in Guinagourou village, Nigeria was the kerosene lantern. However, the lantern did not offer much respite. The light was too poor for cooking, gave out polluting fumes, and he couldn’t read in bed out of fear that the lantern might tip over into the mosquito net and cause a fire.

He realised that good quality, safe light was inaccessible for a large number of people around the world. In other words, it was a demand that had gone unmet. Here was a business opportunity waiting to be exploited.

After coming back home, Goldman enrolled into Stanford’s Hasso Plattner Institute of Design where, in a class on Entrepreneurial Design for Extreme Affordability, he met people who would later become the founders of the venture D.light Design.

Now, with offices in the US and India, and a manufacturing plant in China the company sells lamps that use light emitting diodes (LEDs). The LEDs consume lesser energy and have a longer life when compared to normal bulbs. The models can be charged by either plugging it into an electrical socket or via solar panels.

Deploying clean technologies like solar power and bio-gas plants in rural India till date has mainly been part of welfare schemes undertaken by either governments or NGOs.

But now a new crop of entrepreneurs in India see an opportunity to make profits. “We are trying to tackle a social issue with a business mindset. We realised that the only way to scale up our project, to tackle a problem that affects billions of people, is by making a profit. I think we are little more patient and may invest our profits differently when compared to other for-profit ventures. But we are driven by a for-profit model,” says Goldman.

Mohanjit Jolly, executive director, Draper Fisher Juvertson, a venture capitalist firm, believes that there is tremendous business potential in the clean tech sector in India. “Out of the $100 million fund that we have for India, I expect 30-40 per cent of it to be invested in the clean tech sector,” says Jolly, whose company has invested in four clean tech ventures in India.

According to the Cleantech Group, an industry body, venture capitalists (VC) invested around $428 million in clean technology in the years 2006 and 2007 in India.

Innovation is key
But clean tech revolves around innovation, which is crucial for clean tech needs to take off in India.

Jolly who says that he is seeing “nuggets of technological innovation”, however, says that innovation need not solely be in technology. A different way of executing things too can lend competitive advantage. That’s something that Sagun Saxena, director, Regenastar, is attempting to do in India.

Saxena is one of the founders of the UK-based company that has developed a biofuel conversion system which can be fitted on to vehicles and machines which operate on diesel. They can then use a proprietary bio-diesel developed by the company. In India, however, the company will initially offer only generators.

When the technology was transferred from the UK to India, a lot of work was needed to be done to adapt the product to Indian conditions. For example, unlike the UK where the oil is made from rapeseed, in India the company uses locally available jatropha and pongamia seeds. Moreover, the company also needs to establish a network from where they can source the seeds and also a distribution channel to deliver the fuel to consumers.

Goldman points out that the LED lamps they are offering are not technologically innovative. But then, very few people are taking the effort to reach out and build distribution channels to a market that’s remote and difficult to access. “Our primary target —rural customers — is hard to reach and is very demanding in terms of quality, price and service,” says Goldman.

Saying No to dirty tech
The biggest competitors for clean tech entrepreneurs are conventional systems, which are environmentally dirty, but cheap. This is partly due to government subsidies. It’s difficult to imagine the clean tech sector scaling up unless government policies stop giving subsidies to environmentally-dirty technologies. 

According to a report by the Cleantech Group, “Conflicting policy frameworks, coupled with uncertain long-term goals, price distortions, uneven subsidies and tax structures create an unfavourable environment for promoting and implementing clean technologies in India.”

According to Jaswinder Kaur, country director — India, Cleantech Group, “I think venture capitalists are reluctant to invest in sectors that can change at the whim of the government. They want a stable and consistent policy on clean technology.”

Ritu Mathur, associate director, energy environment policy division, The Energy and Resources Institute (TERI),  points out that the government is taking some steps to encourage clean energy. But she points out that other national priorities demand more attention and cannot be neglected: “The government has a limited pool of money... and you don’t want to spend it in promoting efficient technologies at the cost of providing adequate development.”

She, however, says that there are other measures that could be taken, such as removing the subsidy on kerosene and instead providing a subsidy to solar lanterns — a plan which TERI is pushing.

Whether to tackle rising energy cost, mitigate climate change, or simply conserve the earth’s resources — clean tech will play a crucial role in the days to come. And if you can make good money in the process — so be it.

r_krishna@dnaindia.net