July 26 (Bloomberg) -- Rice husks and solar energy funded by Draper Fisher Jurvetson and Cisco Systems Inc. are replacing kerosene and diesel as the fuel to power India’s rural villages.
The venture capital fund and computer systems provider are backing companies including Husk Power Systems Pvt. Ltd. and D.Light Design, which are helping India boost clean energy use. Renewables now account for less than 1 percent of India’s supply against 93 percent for fossil fuels.
The market may be worth “billions of dollars” as nations led by India and China boost energy supplies for their poorest residents, said Vandana Gombar, an analyst at Bloomberg New Energy Finance. These small-scale projects, which cost $40,000 for a power plant and as little as $12 for a solar lamp, can be easier to set up than alternatives using fossil fuels.
“When you’re talking about the number of people in India who are purely off grid or on unreliable power, it’s north of a half-billion people,” Mohanjit Jolly, managing director of Draper Fisher’s operation in India, said in an interview. “That is a significant market.”
At least 1.5 billion people accounting for almost a fifth of the world’s population live without access to energy, according to the United Nations. India and China are encouraging clean energy projects as they seek to cut carbon emissions from burning coal, which is blamed for damaging the atmosphere.
China increased funding for clean energy 28 percent to $49 billion and India by 25 percent to $3.8 billion in 2010, according to a UN Environment Program report. Draper Fisher is considering whether to back Husk Power’s next round of funding, and it’s also invested in D.Light Design, a maker of solar-powered lanterns, Jolly said.
“There is a fortune waiting to be made at the bottom of the power pyramid, and these are companies which have been able to spot, and tap, the opportunity,” said Gombar of New Energy Finance. “Once the wider investment community sees the opportunity, you’re going to see more private equity funding.”
In India, which last month increased diesel prices for the first time in a year, the UN estimates that 100 million families rely on kerosene to light their homes.
Selco Solar Pvt. Ltd. is making solar lighting systems for those communities. Managing Director Harish Hande said an average family burns about three liters (0.6 gallons) of kerosene a month for light. Each liter of kerosene produces 2.5 kilograms (5.5 pounds) of carbon dioxide, according to the Carbon Trust, a British environmental charity.
By that estimate, kerosene-powered lighting in India is responsible for emitting 9 million tons of carbon every year. While that’s a fraction of India’s total emissions of 1,602 million tons a year, it’s about as much as the world’s most-polluting coal plants emit in six months.
Husk Power is helping by providing clean electricity to about 40,000 households in rural India using discarded rice husks, the hard outer-shell that protects the grain.
An average 40-kilowatt plant costs just under $40,000 to install and can light as many as 500 households, Husk Power said. One plant can save about 3,500 liters of kerosene and 1,500 liters of diesel a month, according to its website. That means a single site can cut more than 150 tons of carbon emissions every year.
Investors in the alternative power technology employed by Husk Power in such Indian states as Bihar include Cisco, the largest network-equipment company, and the venture capital firm Draper Fisher Jurvetson, which contributed $250,000 in funding two years ago.
Power for Homes
Today, Sheikhpura-based Husk Power operates about 80 biomass plants in India. It plans to increase that to as many as 150 by March and more than 2,000 by 2015, enough to power 1 million homes, said Manoj Sinha, its co-founder.
Husk Power hopes to raise as much as $15 million in the next six months to expand in India and elsewhere, Sinha said. It plans to export its technology to Bangladesh, Tanzania or Uganda by the end of the year, he said.
“We’ve seen a tremendous shift in investor expectations and understanding,” he said in a phone interview from New York. “People are more willing to invest in social enterprises now.”
Investment opportunities to develop small-scale, off-grid renewable projects in developing economies are on the rise, E and Co. Inc. Chief Executive Officer Christine Eibs Singer said.
The Bloomfield, N.J.-based company, which provides business development and capital support to clean-energy entrepreneurs in Africa, Latin America and Asia including Selco, said it has seen an increase in demand as countries tackle energy needs.
Selco said leasing its solar lighting to low-income households is a cheaper alternative than buying kerosene or purchasing the system outright, which can cost up to $350.
The Bangalore-based company has installed at least 120,000 lighting kits in homes throughout the southwest state of Karnataka, costing households 200 rupees to 350 rupees a month ($5 to $8), Selco’s Hande said in a telephone interview.
Hande said the company is seeking to raise as much as $10 million in the next two years to increase its reach in an additional 200,000 homes, mostly through equity. The company plans to introduce financing models that would enable those living on less than $50 a month to access its services.
“There is a leapfrogging taking place in India as we speak,” Gombar said by phone from New Delhi. “This is an area that is going to grow and grow. In rural regions, where many people use kerosene to light homes, the economic argument for providing an off-grid renewable solution is compelling.”
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