IT IS not every day that a young consultant at McKinsey & Co, one of the world's largest management consultancy firms, trades in a job at the firm's Seattle office for the rough and tumble of business in rural India. But that is just what John Howard did when he launched Duron Energy, a renewable energy company that has just started selling solar-powered plug-and-play devices for lighting and charging batteries in villages across Karnataka and Uttar Pradesh.
Elsewhere in rural Bihar, Gyanesh Pandey, chief executive officer and cofounder of Husk Power Systems, and his team of co-founders that includes Charles Ransler , a 2009 alumnus of the University of Virginia, Darden School of Business, and Manoj Sinha, also a Darden alumnus who earlier led microprocessor design teams at Intel Inc, are lighting up over 10,000 homes and small shops across three villages.
Husk Power owns and operates miniature power plants generating between 35 kw to 100 kw of electricity from paddy husk it supplies to consumers in off-grid villages. The start-up is expected to raise a fresh round of venture capital this month to scale up operations to more than 60 villages and to set up 50 plants to generate electricity--there are 22 now--by May 2010. " We have an open-source model of operations and can very quickly replicate across multiple locations," says Pandey, an electrical engineer from IIT-Varanasi who envisages Husk Power Systems rolling out services akin to a cellphone company.
India is emerging as a laboratory for innovations in the alternative energy space with entrepreneurs and investors looking to build innovative solutions to address a power-starved economy. This is happening at a time when globally investments in clean tech are losing their lustre. Investors are shying away while entrepreneurs don't seem so gung ho anymore.
North America's share of clean technology venture capital was down from 72% in 2008 to 62% in 2009, a four-year low. Doubts about viability are making investors wary, but India, with its huge energy problems, is offering hope and salvation to entrepreneurs and venture capitalists eager to establish the potential of alternative energy.
Pandey and Howard are a part of this growing tribe. Big bucks lined up
WATER and energy are clearly the two sectors of the future," says Vineet Rai, founder and chief executive office of Aavishkaar Venture Management Services, which will raise a $100-million fund this year to invest in social enterprises. It is such momentum that venture capital investors will aggressively target through 2010. In the last two months of 2009, venture capitalists put in $40 million in three clean energy companies, including the year's second-largest venture capital deal--$19 million invested in Soham Renewable Energy--according to data collated by Venture Intelligence.
Globally, too, the pace of investments in the clean technology sector is expected to quicken. Later this year, iconic venture capitalist Vinod Khosla is expected to launch a $1.1-billion fund for investments in the clean technology sector, according to CleantechGroup. A chunk of this is expected to be invested in India. "This year, we will invest between $8-million with a focus on alternative energy and healthcare," says Varun Sahni, India director, Acumen Fund, a global venture fund.
"We are very bullish on clean and green businesses," says Mohanjit Jolly, executive director of venture capital firm Draper Fisher Jurvetson (DFJ) India. DFJ invested $250,000 in Husk Power Systems, which bagged the 2009 Global Business Plan Competition for University students co-sponsored by networking major Cisco Inc and DFJ. " It was our only new deal in India in 2009," says Jolly, who aims to position his fund as the go-to fund for all start-ups in technology and the clean and green space.
Similarly, investors such as Helion Venture Capital, which is an early investor in solar power generation start-up Azure Power, is looking to hike its fund infusion. "We will invest more in Azure Power as it builds up capacity," says Sanjeev Aggarwal, managing director Helion Venture Capital.
Howard, a graduate from The California Institute of Technology, or Caltech, discovered that he wanted to sell affordable power solutions to Indian villagers during a fun-trip to the country some four years ago, and launched his company Duron Energy in 2008. Duron Energy was incubated by Bill Gross, founder of Idealabs and a Caltech graduate himself, and has received investments from Solgenix and David Gelbaum's Quercus Trust, a family trust .
"We wanted to launch a product that could be scaled, similar to mobile phones, and we realised that we could do this by designing a modular device that draws on solar power," says Howard. When fully charged, the Duron Energy device offers up to three hours of bright lighting and around 10 hours of dim lighting, depending upon the needs of the consumer. And if there is no solar light available to charge the device during the monsoons, consumers can even plug the device into an electrical circuit. Going forward, Duron will add several other accessories to its package, including chargers for a small fan and capabilities to play TV and video applications.
In Delhi, renewable energy start-up D.light sells solar-powered LED lighting to rural consumers at price points ranging from Rs 500 to Rs 1,600. "The value proposition of alternative energy solutions is now clear to consumers; we have early adaptors for our products from semi-urban areas such as Bulandshahr in UP to off-grid consumers in villages," says Sam Goldman, chief executive officer of D.light, who has over 10 years of experience founding and managing ventures across India and Africa and is an MBA from Stanford University.
"D.light is a leader in the solarpowered LED lighting market that is fast getting cluttered, a viable business model that offers a clear choice for consumers who can replace say diesel-generated power with solar power is the next opportunity," says Kunal Upadhyay, CEO, Centre for Innovation Incubation and Entrepreneurship, IIMAhmedabad, who feels the next generation of renewable energy companies will emerge from segments such as biomass-generated power. CIIE is currently incubating about 10 companies in the sector and has made seed investment available ranging from Rs 5 lakh to Rs 25 lakh. " Most of these companies are at a very early stage or in stealth mode currently," says Upadhyay. It is the opportunity in biomass-generated electricity that Husk Power Systems is chasing, with plans now to replicate its model in Bihar and other states such as West Bengal, Uttar Pradesh, Andhra Pradesh and Tamil Nadu.
"Our model works around involving local teams... there is no magic wand that we use, we just keep technology simple, generate power and feed it to consumers who have no access to state-grid power," says Pandey. Husk Power currently offers electricity at Rs 80 for 30 watts and Rs 40 for every incremental 15 watts. This allows rural homes to get about 6-7 hours of electricity. "The idea is to have a 40 kw plant that services perhaps four villages," says Pandey, who feels the price point makes it possible for consumers who depend on kerosene lamps or diesel-generated power to switch easily to this cleaner source.
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