One question that investors always ask us about micro-grids is, “Are you sure that they are going to be viable?” People from poor communities have never had too much electricity and therefore their demand for electricity is likely to be low.
The concern is not misplaced. Low take-up is the first challenge micro-grids face writes Anant Sudarshan of the Energy Policy Institute, University of Chicago, in a Forbes article.
Could the solution for micro-grid companies then lie in helping their customers become more productive, creating market linkages to increase income which in turn pushes up electricity demand? The strategy of creating a market for an innovation is not new. Peter Drucker, the father of modern management describes how DuPont created a market for Nylon in his book Innovation and Entrepreneurship. He writes that, “It did not sell Nylon, it created a consumer market for women’s hosiery and women’s clothing using Nylon, a market for automobile tires using Nylon, and so on. It then delivered Nylon to the fabricators to make the articles for which DuPont had already created a demand.” Drucker also goes on to note that Alcoa, founded by Charles M Hall (the inventor of the aluminium reduction process) immediately went into creating a market for pots and pans, rods and other aluminium extrusions.
Micro-grid companies can focus on catering to a rising demand for straight-from-the-farm organic products. They can help farmer customers use the electricity to produce value added products which can be sold in urban markets. This creates an ecosystem that allows incomes to go up that in turn, increases demand for electricity and ultimately lifts people out of poverty.
Mlinda, a social enterprise, is implementing this strategy in the Gumla district of Jharkhand, India. In this area, 71% of the population come from the most backward and marginalised sections of society and 90% of households rely on agriculture for their livelihood. Most of the produce is for their own consumption, very little surplus is sold and therefore there is limited disposable income. By investing time, effort and developing special skills in house to educate communities and create market linkages, Mlinda is catering to a rising demand for electricity from their microgrids. They help communities produce value added products like organic rice and mustard oil which are then sold to large urban markets.
Micro-grid companies do not need to do the entire work of creating the demand for agricultural products. We believe that there is potential for collaboration between companies in agricultural services and microgrid companies (e.g. Mlinda collaborates with EverythingOrganik). In the recent years, Farm to Fork companies like Leaf, allFresh and Waycool have received investment. These companies are trying to bring fresh and natural products to the market. Micro-grid companies who increase agricultural productivity should be natural partners to these organizations in a combined effort toi increase income and improve health.
