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India’s Poor Is a Potential $2.1 Billion Clean Tech Market

Leon Kaye | Tuesday October 5th, 2010 | 0 Comments

India has huge economic potential while it exasperates those who fret about climate page.  The world’s largest democracy has experienced an impressive economic surge the past decade—some economists even surmise that it will surpass China this century as the world’s largest economy.  With that promise comes concern over what an industrialized India means for the world—especially by US politicians who oppose a shift in energy policy of any form.  After all, India supposedly is not doing enough to do its part in reducing its greenhouse gas and carbon emissions.

Of course that view is shortsighted.  Break down any metric and India’s per capita energy consumption or carbon footprint is tiny compared to that of North Americans’ or Europeans’.  An argument does exist that the construction of efficiency coal-powered plants would actually lower emissions in India, as many of the nation’s poor use much dirtier fuels like wood, kerosene, or animal dung for heating and cooking.  But the work of Saurabh Lall and his colleagues at the World Resources Institute suggests a workaround that could please everyone.

Lall recently co-authored a report that states renewable energy is a potential US$2.1 billion alone market for India’s poor.  Such opportunity exists because about 45% of India’s poorest rural households still do not have reliable access to the electricity grid, and 85% of them use free—and dirty—forms of fuel for cooking.  The last reliable statistics are from 2005, but even if those percentages have decreased, there is still potential for creative entrepreneurs.

These poor, or “base of the pyramid,” (BoP) collectively spend almost US$5 billion annually on fuel.  The available technologies are all over the map—and together have grown in value about 36% a year since 2005: energy-efficient cookstoves, solar lanterns, and solar home systems.  Then you add decentralized renewable energy (DRE) generation, such as small biomass or hydroelectric projects, and those who are willing to invest in companies serving this demographic could reap handsome returns—while building communities that have no access to safe and reliable energy.

Challenges lie in the way: distributing and marketing to a poorer consumer market; developing financing schemes that work for the region, and manufacturing systems that are affordable for the buyer and profitable for the seller.  Many consumers are not willing or able to pay an upfront premium for a product, even if it will save money in the long run.  Furthermore, subsidized kerosene makes it difficult for some technologies like solar lanterns to take root.

Domestic and overseas investors have taken notice, so expect this sector to grow even more over the next few years.  The adoption of these new technology’s by India’s poorest is a winner all around:  less pollution from the dirtiest fuels, a chance to build wealth sustainably, and opportunity for innovators to find markets for their products.  And for those who rail against overpopulation, another solution appears: after all, economic development and electricity are the most effective forms of birth control.  Lall and his co-authors may even find that their figure will prove to be on the low side in a few years.


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