Please find below the
Author addressed most of the comments of first round. Concept is clearer (basically leasing). Presentation has improved but could be improved further.
While it is key to provide efficient basic electricity to most of India and other developing and emerging countries, this concept may be too complex for clients who tend to be not very sophisticated. In fact, it is not clear whether users understand insurance and are interested in purchasing it.
In addition, more work would need to be done on the customer as many of these homes already have SHS (whether it has failed or not). Anytime the household is the primary customer there is a huge risk. It would be better for the author to focus more on partners or channel partners.
An interesting concept but needs further development. Have you done any market testing to determine whether users understand insurance and are interested in purchasing? This is very essential! Please describe further. Also, are there any competitors on the market? One risk is how to build trust in customers, how will this be dealt with?
The proposal needs more analysis of concept, quantification of impact and assessment of costs. There is no explanation of how the proposal saves GHG emissions (it provides access to electricity, so could instead increase GHG emissions). It is not clear who pays for the insurance. And if users cannot pay for SHS repair, will they pay for insurance?
An interesting proposal on how to deal with one of the challenges of SHS - i.e where consumers acquire the product and cannot repair in case of defect and thus stop using the product. The good thing is that they propose to start as a pilot project which will provide them with a number of lessons to learn from and improve on - that is if the pilot is successful. Some issues however need to be addressed:-
1. How financially sustainable is the project?
2. What is not clear is whether the proposal authors intend to supply SHS to consumers and together with it provide the insurance or whether they intend to provide insurance to already existing consumers who have been supplied by the existing SHS companies. In case of already existing consumers, how is the "recycling bit" going to work? For the existing companies providing PAYG schemes - the product is owned by the company until the consumer completes payment. So if it is defective before the consumer completes payment, is the project going to pay off the company or how will it work? Or even if owned by consumer already, will the project pay them for taking away the defective item (which the consumer still puts a value to it). If they pay off the company or the consumer, which will increase the cost, how will they cover the cost?
3. On sharing information - It is not entirely clear if people will be fine with their information being shared and there's likely to be legal challenges in terms of sharing information without consent. How will the project deal with this? In addition, there could be companies already providing this information to advertisers (whether openly and legally or not), how different is the information the project is going to provide and why would an advertiser buy the information from them rather than another company? Is it going to be cheaper or what value added advantage would they provide?
Phi Hung Ly
Nov 6, 2017
First of all, we would like to thank you for the valuable feedback. With the comments below, we would like to address the questions you raised.
It is not clear who pays for the insurance. And if users cannot pay for SHS repair, will they pay for insurance?
Users still pay for consumption of power through buying credits. Credits in this case are topped with a premium for the insurance. However, the premium is not as high as it should be.
Consumers pays this rate through buying credits. When credits run out, they have to top up the credit in order to get access to electricity.
The idea of implementing an insurance is a workaround for the sudden high costs involved with maintenance of a broken down SHS for an individual. The collective premium of all insurance holders should be high enough to cover the maintenance. With everyone paying premiums, users are socially covering each other. Consumers pay a premium at an affordable level, this entitles them to service. However, it does not mean that the device will actually break down.
Additionally, the customer has to pay a very high price to get access to repair currently, which is not seen as worthy of his time and money because the repair market of solar products is still struggling with issues as:
The reasons mentioned above make it very difficult case for providing access to repair services at affordable price for the customer. In addition to this, the cost of reaching to the technician and no guarantee if money is spent how long will the repair will last disincentives the end user to invest in repair.
See for the full concept under the header 'What actions do you propose'.
See for the case study under the header 'Related proposals'.
How financially sustainable is the project?
We are confident to achieve a positive balance sheet already with our pilot project. For our pilot project we will target a rural area of Odisha state, India and our objective is to gain 500 customers in one year. This implies providing access to electricity and thereby safety, information access, better education to 500 households and approximately 2,500 people.
Our main expenses for the pilot are purchase of 500 advanced SHS systems (80,000 USD) and cost for repair services (1,000 USD). On the income side we expect the largest income from credit purchase (72,000 USD), followed by initial payment (7,500 USD), insurance premium (6,000 USD) and commercialization of data (6,000 USD). This basic concept would lead to financial sustainability under the assumption that our customer will pay an initial amount of 15 USD, and 1 USD insurance premium per month. Our initial interviews conducted on the ground proofed that this customer base is existing.
Given the lifetime of our (7 years warranty from manufacturer) and an increasing customer base the financial sustainability will increase with every additional year.
What is not clear is whether the proposal authors intend to supply SHS..
At first, we intend to deploy SHS ourselves (see the full concept under 'What actions do you propose'). For our concept to work, we need the SHS to have certain characteristics (e.g. remote monitoring, PAYG with credits) as well as users to pay premium. Additionally we want to be in control of which products are deployed to overcome the repair barriers mentioned before. Overcoming the barriers combined with the exact characteristics are not commonly executed by current SHS companies.
Within the SHS market in India, we see other firms struggling with deploying and keeping the systems maintained. That is why we want to experiment with a new business model to see whether this will contribute in the electrification of off-grid areas.
Once our model turns out to be a succes, we want to explore different insurance schemes that enable us to cover existing solar home systems.
On sharing information...
Our customers have to give their consent prior to sharing the consumption pattern data. In order for doing so they will be comprehensively informed regarding the opportunities and risks of sharing their consumption pattern data. Since the consumption pattern data is one of our key products and essential for the viability of our business model, the consent of our customers to sharing consumption pattern data is a prerequisite for using the offered Solar-Home-System device.
Practically, our customers will be asked to give their consent the following way:
Our team is not aware of a competitor offering exactly the same information. The unique advantage of our dataset to be collected is that we can exactly understand the electricity consumption behaviour of our customers and allow the advertisers to offer to our customers exactly those devices which they are able to power and finance. Additionally, we are gathering data about a largely unknown customer base which will become very important as pristine customer base in the upcoming decades. As an example our pilot state Odisha faced the sharpest decline in people living below the poverty line from 2005 to 2012. From 57.2% to 32.6% this means that there is a new customer base growing rapidly.
Besides that we learn about:
Additionally, our collected data is of great value to the Indian and governmental institutions for infrastructure and electrification planning.They would be able to use the consumption pattern data to identify demand clusters which would allow for economically feasible extension of the national grid. Thus we consider governmental institutions as partners for long term development. Additionally we consider our “own” product as temporary. It has its value in a timeframe of 10-15 years before the grid arrives. As AALO’s objective is to contribute to socio-economic development foremost.
First, we are reducing the 'waste' of still viable parts by increasing maintenance rates.
Additionally, we are looking into alternative ways to use broken parts such as converting into educational toys to teach children about renewable energy sources and its usage (e.g. build your own solar powered device).
With our concept, GHG emissions are mitigated through the deployment of SHS. SHS as such are less carbon intensive as only few GHG gases are emitted during their production whereas electricity from SHS is generated carbon free from solar irradiation. With our concept, we are targeting rural households that used to use diesel generators, kerosene lamps and dry cell batteries before. In that case, our product can make a significant contribution to climate protection by replacing these conventional sources and offsetting their emissions. By the quick dissemination of large quantities, which we are targeting through coupling our product to the mobile sector, we expect a significant contribution to reducing GHG emissions. For entire India, experts expect that between 2014-18, SHS enterprises will offset 550,000 tons of CO2 equivalent (The Climate Group, 2015). With an even quicker adoption rate of SHS this value could be exceeded.
Figure: Carbon offset by SHS enterprises (The Climate Group, 2015)
Another very relevant aspect of our concept is that through the deployment of SHS we can contribute to decreased emissions that is causing the “black carbon” threat. Black carbon consists of ultra-fine particles produced by incomplete combustion. In India these particles are mainly emitted from small diesel generators, biomass and agricultural waste burning and coal use in small-scale industries. The threat is that black carbon gathers in the atmosphere and absorbs sunlight thereby contributing to faster melting of the glaciers in the Himalaya and affecting the Indian monsoon. These alteration threatens the livelihood of millions.
Lastly, we will contribute to environmental protection through afterlife processing of SHS parts. Thereby we mitigate that parts are left at landfills and pollute the environment and threat nearby living people. This is especially important regarding the applied lead-acid batteries.
We hope your questions are addressed.
With our concept we are tackling issues that current SHS competitors are facing. Overcoming barriers will hopefully accelerate the electrification of areas in rural India.
We'd like to thank you for your time and attention.
Phi Hung Ly
Nov 6, 2017
For customer trust, we'd like to refer to the text under "Related proposals"