This year, Global Himalayan Expedition (GHE) continued its success by electrifying Shadé, one of the most remote villages in the Zanskar Valley and perhaps all of India. The team, representing over 13 countries, trekked over 60 miles to reach the village.
While the electrification was impressive in its own right, there are lessons to be drawn for microgrid proponents everywhere.
Lesson 1: Social entrepreneurship can (and does) work
People are often surprised when hearing GHE is a social enterprise, not a not-for-profit. However, I have witnessed first-hand the advantages and cost savings of working as a business. In remote areas without mobile communication, decisions must be made quickly to ensure the safety of the team. Additional regulatory requirements would put these processes at risk.
As a social enterprise, there is a need to create a self-funding, sustainable business model. Social enterprises cannot blindly install what donors want, but work with the recipients (aka customers) to determine what works best. Rather than an endless pot of donor money, GHE must actively seek partnerships. If anything, there is probably even more opportunity for co-branding with corporate sponsors.
Perhaps most importantly, as a social enterprise on a very tight budget, there is a strong incentive to minimize costs and generate value for money. Interestingly, the need to save money arguably drives better, more localized development.
Lesson 2: Develop local talent
While the trip to Shadé helps generate press and therefore partners, GHE is electrifying over a dozen villages in 2017. Unlike many non-government organizations with expensive foreign expats and consultants, GHE makes this happen by developing local talent.
The vast majority of installations are completed by local electricians working for GHE, some of whom were cooks prior to joining GHE, who speak the local language, have the knowledge and skills to quickly navigate the harsh terrain, and have a vested interest in the development of their communities and region. In every village, at least one local is trained to maintain the batteries and panels. Not only is someone using the system most committed to maintaining the equipment, this also saves the extraordinary expense of sending someone from a distant city.
Similarly, GHE, through a locally identified entrepreneur, operates a service center shop in Leh where those with installations can service their microgrids, purchase replacements and upgrades. The shop also has two local women as service engineers who have been trained at Barefoot College in India. Not only are there spin-off employment benefits to the local community, the development of locals minimizes GHE’s costs and engenders a strong sense of mutual respect. It helps to get away from the utility mindset into one that maximizes local value.
Lesson 3: Adapt your business model
Too often, microgrid organizers talk about competing directly with utilities, but retain a utility mindset for revenue generation and costs.
Traditional utilities tend to charge on a per kilowatt basis, a reflection of the historical costs associated with fossil fuel consumption, which scaled for every kilowatt used. However, for a wind, solar, or small hydro system with effectively zero marginal costs, this model no longer makes sense.
Instead, a monthly connection fee should be charged, to recoup a reasonable rate of return on the initial capital investment (for a social enterprise or non-profit, sponsorship may mean the rate of return is actually below the cost of capital).
Charging a monthly fee better matches revenues and costs and is more predictable for both the provider and consumer. Perhaps most importantly, it eliminates the extra costs associated with meters (the physical meter itself, meter reading, fraud detection, etc.).
Many otherwise economically viable small connections become non-viable when these ‘overhead’ costs are included. The model of eliminating this overhead is applicable everywhere. In GHE’s case, there is a nominal fee of 100₹/month (about $2 USD), which is invested in a fund to replace the system. Though the battery systems are projected to last five or more years, some customers have already saved up enough to cover the replacement cost in two to three years. This extra revenue can be invested elsewhere.
Capturing economic benefit
While almost everyone recognizes the economic benefit of electrification, it is often difficult to capture that benefit. Mountain Homestays, the livelihood initiative of GHE, seeks to help locals directly capitalize on the newfound benefits of electrification. One or two nights of homestay revenue is enough to fund the connection fee for an entire year. Other sources of revenue include local crafts and organic produce. By helping customers generate revenue from their new electricity, entrepreneurs can ensure they are paid for installing remote microgrids.
In this case, the social enterprise now depends on tourism as its major revenue source to sustain and scale itself. Combining tourism with energy access supports the enterprise with a sustainable business model and the rural community with sustainable development.
One final way to both minimize costs and maximize the environmental benefit of microgrids is a focus on minimizing consumption. GHE provides 3 W LED bulbs with their microgrids, which means that a 250 W panel and two 100 Ah batteries is sufficient for multiple homes. While DC microgrids like GHE may not be practical in every setting, the overall ethos of helping customers minimize consumption can be an active part of a microgrid installation. This is also made possible by charging a fixed cost, as opposed to the per kWh business model of the utility, which creates an inherent conflict between energy efficiency and utility profitability.
Remote microgrids can be installed in a way that is both economic and socially conscious. Global Himalayan Expedition illustrates one viable business model, but there are lessons for purveyors of microgrids everywhere.
Alexander Hogeveen Rutter is professional engineer.