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September 09, 2011

Sierra Club India: Energy Access for the Poor, An Interview with Jigar Shah

Jigar_shah I recently sat down with Jigar Shah (pictured at the left), CEO of the Carbon War Room, to discuss one of his latest ventures, KMR Infrastructure, which is focused on providing clean energy solutions for corporate and institutional networks in emerging markets. A key market opportunity for the company is replacing diesel with clean energy for off-grid cell phone towers (a concept I wrote about here) as well as replacing diesel consumption in mini grid applications.
KMR BusinessModel1
These market niches are rapidly developing as low cost, scaleable clean energy becomes the solution of choice for replacing the ever increasing costs of diesel. Firms like KMR are now poised to dramatically grow the market and increase the deployment of clean energy.
India Kerosene Prices v2

(Click above image to enlarge)

While KMR is a first mover, it will by no means be the last, as off-grid market opportunities will grow significantly in the years to come. I asked Jigar about the off-grid market, KMR, and solving some of humanity's most vexing problems - including delivering energy access for the poor. Check out his responses below.

What are your thoughts on current efforts to deliver on energy access goals?

Jigar: On our current trajectory we will see no perceptible difference in terms of rural electrification. We're not on track. We're celebrating providing 5-10,000 people energy access. In some places we celebrate a million, (see the Bangladesh Grameen Shakti solar program) but we're not figuring out how to get billions of dollars flowing to cost effective solutions that deliver energy access for the poor.

The [clean energy] technology we [KMR] are using has a payback period of two weeks to six months compared to purchasing subsidized kerosene. The problem is for every dollar the poor person is paying for energy access, there is another $1.50 of subsidies. Delivering on energy access goals for the poor is not just the billions that people are paying in hard currency, it's the addition billions in government subsidies. (see our outline for delivering on energy access goals here and here)

So how does the cell tower concept fit into reversing this situation?

Jigar: It's a good interim solution for the market place. Right now the market place is comfortable with large scale renewables generally, and small scale renewables in developed countries. We can now get them comfortable with $50,000 project investment, but not a $500 project investment. The cell tower concept represents 200,0000 towers where clean energy can be deployed.

We also have other opportunities like mini-grids in places like rural Tanzania, Sri Lanka, or the Seychelles that can be replaced with clean energy. This along with the cell towers concept is a stepping stone to getting traditional funding sources comfortable with rural electrification.

How do you see this market developing?

Jigar: Rural off grid solutions can develop a tremendous amount within the next three years. Private equity firms are getting into this space and moving hundred of billions of dollars. They are looking to generate 20% returns. The question is how you aggregate small scale investments so they can invest a hundred million at a time. Today there are many solar firms willing to do that.

What role should public money play in catalyzing this market?

Jigar: Public money should provide comfort to private money. It shouldn't be used to finance these projects, but to comfort the private sector through products like first loss guarantees, or co-investment in order to boost private sector returns in the initial years. Risk insurance from institutions like OPIC and MIGA are valuable products that represent a much better utilization of public money compared to direct investment.

So what does KMR Infrastructure’s competition look like?

Jigar: We have some of the most confident people working in this space on our team. But we will see over 50 firms copying us within 12 months. This is a great thing. You can only solve big problems by getting everyone involved.

What are your thoughts on the development of the Indian solar market thus far?

Jigar: They have put a cap on installation size and the vast majority are coming in at five megawatts, with some exceptions (Concentrated Solar Power). That's good, five megawatts is something everyone can handle. There are lots of rich Indian families that can actually finance an individual project. It's valuable in that it's large enough for people to care, but small enough that a section of India's upper middle class can finance it.

India is not doing a lot on distributed generation, they're not ready for that. They should focus on the diesel offset market (i.e. cell towers, mini-grids). The government is looking to remove telecom subsidies so they’ll pay over 45 cents/kwh for electricity. So for now India should do both large and small scale clean energy.

Learn read more about KMR Infrastructure or Jigar Shah and the Carbon War Room.

-- Justin Guay, Sierra Club International Program


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