Decentralising solar energy

Decentralising solar energy

Cloud computing is creating waves in the information technology (IT) services industry where software has moved from a capital intensive model to a revenue intensive model. Aspirations Energy (Aspirations), a Chennai-based enterprise that wants to make solar energy more affordable and accessible, works on a similar business philosophy. With an aspiration to be a leader in the off-grid solar solutions space, Bhoovarahan Thirumalai, chief-executive officer, has three pillars on which he operates his company – to offer solar as a decentralised source of energy, solar energy as a supplement and not primary source and solar energy as a revenue expense and not as a capital expense.

With entrepreneurial experience in the IT industry for over 15 years, Thirumalai wanted to diversify into other sectors. While his personal passions include a few sectors like clean energy, organic foods and naturopathy, the decision to enter solar energy was triggered by the opportunity that this sector offers. “The world has entered a high energy usage zone. And these inefficient habits need to change and solar energy offers that opportunity to change,” says Thirumalai. He also believes that in the last century, India has moved from decentralised production to centralised production for most goods. Time has come for the country to move back to decentralised production in certain cases such as solar energy.

“The world has entered high energy usage zone. And these inefficient habits need to change and solar energy offers that opportunity to change.”

Helping hand

“Unlike earlier ventures which we built ourselves, we wanted to build Aspirations in a networked way by roping in relevant partners,” says Thirumalai. While the promoters did not have experience in the solar energy sector, they knew that there is a strong need for solar energy going forward and decided to get help in the form of incubation. “After a lot of spade work on incubators, we approached the Centre for Innovation, Incubation and Entrepreneurship (CIIE), Indian Institute of Management-Ahmedabad as they were the only one focused on clean technology,” says Thirumalai. The Cleantech Incubation center is an endeavour by CIIE and MNRE (Government of India) to identify, encourage and incubate entrepreneurial ideas aimed at solving the energy crisis through use of new, clean energy technology as business models.  Aspirations was incubated in April 2010.

The incubation support gave Aspirations access to the Ministry of Power and helped it network with startups and established solar companies, both in India and outside the country.  It was also among the first 10 companies to be considered as channel partners by the Ministry due to its association with CIIE. “We could tap them for advice whenever needed,” says Thirumalai. More importantly, the networking helped the company to formulate and fine-tune its offerings to make it profitable and acceptable for customers.

“While the incubation program with CIIE is over, as it has invested a small percentage of the total capital, we will always be supported by it,” adds Thirumalai.  Incorporated in March 2010, Aspirations has been funded by the promoters. It is currently looking for funds either in the form of project financing, or venture capital or private equity to fund current offerings as they are capital-intensive products.

Operational factors

Solar energy is a sunrise industry. Typically, solar investments work on a capital expenditure (capex) model where the customer makes the investment and gets a payback after three to six years, depending on the investment made.

But, the company works on a decentralised model where it sets up solar power plants at a customer’s premises. The products are on an operating expenses (opex) model, where the company starts to own the system after a period of time. “We expect our business model to take some time to settle,” says Thirumalai.  The company makes the capital investment and recovers it through operational payments made by the customer. It does not have too many operational costs. And this is in keeping with how most solar investments work – high initial capital cost and near-zero operational cost.

The company has a tie up with 9REN, a leading European renewable energy company, to provide technical validation for all their designs, except thermal designs.

On offer

Aspirations has a pay as you save (PAYS) model which  caters to the process heat requirement of industries like metal working, oil and cement. “We give solutions in the 80 degree to 150 degree centigrade range on a pay as you save model,” says Thirumalai.  Its pay per unit (PPU) offering is a solar PV based electricity generation at rooftops of customer premises, targeted at urban commercial offices owned by profitable corporates, where they pay only Rs. 5 per unit (KWHr) solar energy to Aspirations.

A very recent offering is a pay per month model for telecom towers. “We have an agreement with one of the top three telecom operators in India to put up solar infrastructure for telecom towers,” shares Thirumalai. It will erect 220 telecom towers in the first phase and scale it to 1,000 towers in the second phase with this telecom operator. “This will be invested through a joint venture with another Rs. 500 crore public limited company, with 1,800 employees, that is responsible for the operations and maintenance of the telecom server,” he adds.

These offerings help its users save anywhere between 15 to 45 per cent of the operational cost. While PAYS and telecom towers are direct cost savings even without government subsidies, PPU depends on government subsidies.

Over the next six to seven months, the company intends to focus on its three offerings. It has a couple of products – solar airconditioners, non-tracking type concentrated thermal collectors and water sewage handling systems – in the research and development pipeline. However, it plans to take these up once it has settled down with its current portfolio.

Going forward

The industry is expected to witness significant changes though it is currently mired with grid non-parity. While the current cost of production of coal energy is Rs. 3 per unit, that of solar energy is Rs. 12 to 17 per unit, leading to non-grid parity.  But, if the production of solar energy is decentralised, the cost of production comes to Rs. 6 to Rs. 10 per unit, which is the price paid by commercial establishments for electricity. “So, this cusp of grid-parity will come quicker for decentralised production and when grid parity is achieved, it will change the industry in an exponential way sooner than we all think,” shares Thirumalai. Even with centralised solar energy production experts predict grid-parity in the next three to seven years.

Aspirations is gearing up to meet the growth that the industry is expected to witness.  The main challenge is to overcome the customers’ lack of awareness and comfort with solar energy. “There is a general perception that risk associated with solar energy is higher when compared to wind energy and this needs to change,” says Thirumalai.

While solar energy is not expected to substitute other energy sources, it will play an important role in the energy consumption of the country. Thirumalai expects solar energy to form around 25 per cent of total world energy production in the next 20 years and feels that the need for government intervention will diminish in a few years as solar energy products progress on technology and cost effectiveness thereby not needing subsidies. Aspirations is all set to capitalise on this trend and become a leading player in the off-grid solar solutions space with its innovative business models.


Concept in brief

Aspirations Energy aspires to be a leading player in the off-grid solar solutions space and operates on three pillars – to offer solar as a decentralised source of energy, solar energy as a supplement and not a primary source and solar energy as a revenue expense and not as a capital expense. The company’s offerings help its users save anywhere between 15 to 45 per cent of the operational cost. While the pay as you save (PAYS) model and telecom towers are direct cost savings even without government subsidies, pay per unit (PPU) depends on government subsidies.

Once the sector overcomes the grid non-parity that it currently suffers and gets used to the decentralised mode of operation, it is poised for good growth. While solar energy is not expected to substitute other energy sources, it will play an important role in the energy consumption of the country.


 

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