Slow penetration of clean energy technologies in India
There are about 50 million households in India which still lack access to modern clean energy. Many energy access companies have been working in rural markets with attempts to reach out to the maximum number of households in order to bring them out of the energy poverty cycle. The technology in this space has advanced over the years, putting forth several solutions in the form of solar home systems, mini grids and lanterns. Although these solutions have been proposed and business models developed by energy sector entrepreneurs, none have succeeded in reaching the villages which continue to live in darkness. Despite a large part of the population having low or unreliable access, the reasons behind thin penetration of decentralised energy solutions remains a mystery.
A big reason for this is the lack of knowledge about the customer segment that is being catered to. In any industry, a clear understanding of the customer’s attributes, behaviours, needs, willingness and ability to pay, and customer segmentation is the basis for development of a compelling product offering and sales planning. For example, the FMCG industry has reached a level of sophistication where even within a sub-sector of a commodity, such as that of refreshment drinks, energy drinks and sports drinks are seen and addressed as different products for different customer segments, whose expectations are unique from that of a regular refreshment drink. Unfortunately, very little research has been carried out to date in scientifically understanding the needs, motivations and beliefs of target customer groups in the embryonic energy access sector.
Photo Credits: Simpa Networks
Practitioners still lack knowledge on the targeted population segment where the sales force should apply themselves. Answers related to the common behavioural and demographic traits among prospective customers for solar energy solutions are yet to be made clear. There is awareness regarding the need for exploration on the customer segment and many attempts have been made by dedicated market research organizations. However, most studies to date have provided a simplistic economic (wealth or income) segmentation of the customers, which is grossly insufficient to effectively develop accurate products, target the concerned population, engage them and meet their needs. In the absence of this guidance, most practitioners have been investing in expensive field resources in a strewn approach, with poor conversions.
Understanding of the right products for the customer is another challenge being faced. Energy access companies have been working towards developing products which are cost effective, easy to use, remotely monitored for better service delivery, customised as per customer group preferences, etc. However, most of the time there is a huge cost and risk involved in developing these products and introducing them in rural markets. The plausibility of positive responses to these products is contingent to several factors, and the product may require alterations. Such experiments are essential for the development of the sector as a whole, and meeting the demands of different types of customers. There is a need for further support and research into the acceptability of new products and technologies in rural markets.
Finally, last mile distribution is a daunting task for which solutions are globally being sought after. Enough innovation has taken place in the form of partnerships with industries with high penetration, such as telecom companies, micro finance institutions and charity establishments such as NGOs. The biggest barrier here may be the lack of awareness about solar energy, which is responsible for making it a ‘push’ industry rather than a demand driven ‘pull’ solution to lack of electricity.
This blog is a part of the July 2017 series on energy access in partnership with Hystra.
Read the full series for more lessons from practitioners, trends in business models, market penetration and understanding and measuring impact in the energy sector.