Patna-based Husk Power Systems (HPS) owns and operates 35 kW-100 kW mini power plants using discarded rice husks to deliver electricity to off-grid villages in the Indian ‘Rice Belt’. The company provides power to over 50,000 rural Indians in a financially sustainable, scalable, environment friendly and profitable manner, covering West Champaran, East Champaran, Muzaffarpur, Sitamarhi and Lakhisarai districts of Bihar and a few villages in Uttar Pradesh.

“We plan to extend to Assam, Orissa, Andhra Pradesh and West Bengal in the near future,” says Gyanesh Pandey, co-founder and chief executive.

At the beginning

Pandey hails from Dhanaha in West Champaran. He was sent to boarding school to study and went to the U.S. for his Masters and PhD. Subsequently, he also worked with a semiconductor manufacturer.

But, the urge to contribute to the development of his native village and state lead Pandey and his friend, co-founder and chief operating officer of HPS, Ratnesh Yadav, to explore options in 2002. They identified energy management as the key area that needed attention and since Pandey had experience in power management, it was decided that they would set up a power plant that would generate cheap and usable power.

We are going to float a semi-franchise model with the help of Ministry of New and Renewable Energy where local entrepreneurs will have to invest a small share of the capital cost and will get to run a plant which will be maintained and managed by the company at a small franchisee fee

Even though the destination was easily identified, the road to reaching there took from 2002 to 2007. They explored several options, from polymer to organic, solar to biodiesel. They almost settled for a Jatropha-based plant, but just in time, found out about gasifiers that used 40 per cent diesel and 60 per cent gas. “We felt that did not suit our model and that we should opt for 100 per cent gas. For this, we explored options and zeroed in on rice husk. But, research from leading schools suggested that this was not effective. I did not buy into that and with help from S.K. Singh, scientist at the Ministry of Renewable Energy in Bihar, we went ahead,” says Pandey.

This business model won a business plan competition and with the prize money, the American parent was formed in 2007, as a non-government organisation first, later to be made a private limited company, named HPS. It was co-founded by Pandey, Yadav, Manoj Sinha and Charles W. Ransler, the latter two being consultants.

The company was started with an investment of Rs. 50 lakh. Subsequently, HPS was funded to the tune of U.S. $ 2 million by DFJ, CISCO, Acumen Fund, Oasis Funds, LGT VP, IFC. Next year, the company may seek more funding.

Roadmap to expansion

“We are going to float a semi-franchise model with the help of Ministry of New and Renewable Energy where local entrepreneurs will have to invest a small share of the capital cost and will get to run a plant which will be maintained and managed by the company at a small franchisee fee,” says Pandey. The company has grown from one plant in 2007, to two in 2008, 17 in 2009 and 30 more by June 2010. They expect to scale up to 80 by the end of 2010 and 2000 by the year 2012.

Pandey believes that the opportunities in this segment are immense with over 1.25 lakh villages not having electricity and almost double the amount getting it sporadically. He estimates the market to be a few billion U.S. dollars.

There are not many big players addressing this segment, only random efforts. “National Thermal Power Corporation comes second to us – I believe they have 10 odd plants electrifying the same number of villages,” adds Pandey. One of the challenges, though, is sourcing mechanics and training them, as well as sourcing machines.

Pandey says, “It is a very tough road and rather counter-intuitive.” He explains that it took him over five years to find the right technology and while expecting something high end, it turned out that old technology was actually best suited.

“I would advise any enthusiasts in this field to think of contextual models and technologies. Getting hooked to one technology often ends up causing messy results. The statistics and data present a very lucrative picture of rural areas, but, the realities are most often just too different. Quick surveys and buying into data produced by others could often be misleading. Simplicity and cost effectiveness become the key,” he cautions.