“We forget just how painfully dim the world was before electricity. A candle, a good candle, provides barely a hundredth of the illumination of a single 100 watt light bulb.”

When Bill Bryson wrote this in his rather intriguing book, “At Home: A short history of private life”, he assumed that modernity had rendered this experience of a dim world extinct. However, India has a unique knack of making all the reasonably intelligent assumptions, made in the west, look foolish. People from India, especially Uttar Pradesh, surely can relate to the experience, whose absence Bill Bryson is reminding his readers of.

According to BP’s Statistical Review of World Energy 2013, India ranks number three, just behind China and United States of America with an electricity production of 1,102.9 twh. However, this impressive statistic gets over-shadowed by the complexities in the Indian power sector coupled with sheer number of consumers it has to cater to. With the recent coal shortage, shadows of blackout loom large even over some of the most productive Indian states – Maharashtra, Haryana, Punjab and Gujarat. The story in Uttar Pradesh, one of the Indian states with highest poverty rates, couldn’t have been any better. With news of twenty-hour-long power cuts and riots breaking out in response, there are many villages in Uttar Pradesh which are waiting for electricity for the last 68 years.

For such a scenario to change, a lot more has to be done by the private sector. Nikhil Jaisinghani and his colleagues are doing just that at the Bottom of the Pyramid.

The Story

Mera Gao Power (MGP) builds, owns, and operates micro grids in rural villages of Uttar Pradesh. As of November 2014, MGP is operating in more than 1,000 villages serving nearly 100,000 people with night-time lighting and phone charging services. The company still has a long way to go to reach its goals, which are both ambitious and overwhelming – but it has made good traction over the past few years and established itself as a company capable of scaling quickly to reach new customers at a low per customer cost.

The Beginning

Though the company started in 2010, the story begins much earlier. In 1999, Nikhil Jaisinghani went to Nepal as a Peace Corps Volunteer. He was assigned to a quiet rural village called Bokhim in the Bhojpur district of Eastern Nepal. The village was very rural, at a 15-hourwalk from the nearest road which required crossing two low lying rivers and climbing to the top of two ridges. Being so inaccessible, basic services could not be provided to the district, including indoor water and electricity. At night, Nikhil would try to read his books while other children in the village attempted to study using a primitive kerosene lantern such as the one below.

Seven years later, Nikhil moved to Nigeria where he began working on energy projects involving flared natural gas. In the process, he met Brian Shaad, a development practitioner who had worked for leading NGOs and was advising oil and gas companies on social responsibility projects. Together, they recognised their complimentary goals and enthusiasm for using available energy resources to provide necessary services to under-served communities. They also realised the advantage a service company had over a product company in reaching such communities; product companies limited risk to themselves by offloading it onto customers while resource poor customers could not accept the risk and often chose to do without improved technologies which had tremendous (but unproven in their eyes) potential to benefit them.

The two started a company, Value Development Initiatives, to capture flared gas and process it into consumable energy such as power and cooking fuel. After a few years of challenges, they realised that the model was too difficult as  it required coordination with the local government, donors such as the World Bank, semi-private oil and gas companies (the world’s largest oil companies work with the Nigerian government’s public oil and gas company in joint ventures), and financiers. This group of players proved too difficult for VDI to succeed in developing a commercially profitable social enterprise.

Nikhil then moved to India and started exploring opportunities. He recalled his time in the Nepal reading off of a kerosene lantern when he saw solar lantern companies trying to sell low cost products to the off-grid market, many of them struggling despite the obvious potential. It was clear that there was a great need if a company could provide electric lighting in a manner that was risk-free to the customer. Brian and Nikhil quickly designed and started a company that merged the offering of lighting with the service model they had been exploring in Nigeria. Further, they ensured that their new business did not require government, large companies as partners, licensing, or large scale financing to fund pilot projects. The two invested their own money to build their first proof of concept pilot project in Suwansi Khera, Kanpur Urban District, and Uttar Pradesh in August 2010. Over the next 15 months, they modified their technology and offering (to include mobile phone charging) and built two more pilot facilities.

A Journey with Challenges Galore

Though they had the lowest cost micro grid design at this point, there was little interest from investors. Brian and Nikhil had run out of money and the projects were not generating enough money to cover the cost of a full time manager in the field. The company had experimented with a local entrepreneur model that would in theory incentivise a local resident to collect from his or her fellow community members and ensure they abided by the company’s rules. Unfortunately, MGP misjudged the incentive structure of rural communities. The local entrepreneur was far more loyal to his neighbors than he was to the company leading him to take a soft stance on power theft, system abuse, and non-payment. MGP learned it could not use the village entrepreneurial model and advocated instead for an MFI (Micro-finance) model of in-house cash collection and customer relationship management. But to hire an MFI expert, MGP needed cash which it no longer had.

Fortunately, the US Agency for International Development (USAID) had started a new initiative called Development Innovations Ventures (DIV). USAID’s DIV team was looking for scalable solutions to development challenges around the world that could raise commercial financing if they were able to demonstrate traction with customers. USAID DIV made a grant to MGP for $300,000 in late 2011; had the funds not come through, MGP would have closed its doors in early 2012.

With the grant confirmed, Brian and Nikhil brought on a third co-founder, Sandeep Pandey who had worked in a number of high profile MFIs over the years. Sandeep would prove to be the company’s best asset and most critical to MGP’s success scaling up in 2012 and 2013. MGP built its first commercial micro grid which was installed in Kaharanpurwa, Sitapur District, Uttar Pradesh; the micro grid was commissioned on December 20, 2011. MGP’s first customer and system host was Om Prakash, still one of MGP’s greatest advocates in the area.

MGP entered 2012 with great optimism. With enough money to create the necessary track record to appeal to investors, a low cost technology, and an enormous market to serve (2% of the world’s population lives off-grid in Uttar Pradesh), the future looked bright. But a slew of challenges awaited them. For one of its first projects, MGP hired an EPC company to source the materials, confirm the micro grid design, and lead the construction. Unfortunately, despite charging for all of these services, it only procured half of the equipment which was not delivered to the site and offered no technical services on the design. It became clear MGP must develop construction expertise and develop its own supplier relationships if it were to succeed at scale.

An NGO that MGP had worked with to engage villages began turning villagers against the company, allowing them to send their staff in to save the day, thereby proving their value to the company. Mis-messaging by the NGO staff led customers to believe service would be unlimited and free. On top of these challenges, the NGO was charging MGP for each trip to the villages it made. MGP soon realised that it had to be able to create its own engagement expertise and could not be dependent on a third party organisation.

Suppliers sold MGP fake batteries, the tax office held the company’s goods at ransom claiming they did not like Delhi companies, local judges threatened to shut down the company if bribes were not paid, and politicians encouraged customers not to pay for service. Large, high profile NGOs complained that MGP should not be permitted to operate as a for profit, the federal government threatened to regulate the company, and Nepal let out water from its dams, flooding parts of Northern Uttar Pradesh (including Sitapur district where MGP had installed all of its micro grids). One constant, however, was a positive relationship with its customers. Customers proved willing to pay and new villages were constantly approaching MGP for service. Despite the challenges, the company endured because of its customers. By the end of 2012, MGP had over 100 micro grids and 3,000 customers.

In 2013, MGP raised a Series A equity of around $1 million from Insitor Management. With these funds, MGP raced to 15,000 households by the end of 2013. 2014 proved to be more difficult, however, as the rapid scaling up of 2013 was not complimented with more rigorous process and discipline. The company made the strategic decision to halt growth in order to allow itself to catch up on the rigor necessary to operate at its current size. Now, late in 2014, well on the way to formalising its processes, the company is well positioned for growth. The technology has been proven, the market is enormous, and the company is focused on a fuller set of activities which will ensure profitable operations at scale.

Way Forward

Looking forward, the company is positioning itself to scale multi-dimensionally. Sitapur is only the beginning; MGP will pilot operations in a new district, a new state, and potentially even a new country in 2015. Many of the things which make operations in India difficult (kerosene subsidies which artificially constrain MGP’s price point, in country transport regulations, employment tax on companies that employ poor people) are not present just north of Sitapur, across the Indian border. The future may lead back to the same quiet villages of rural Nepal which once nurtured the company’s very premise.

90% of startups fail in the first year. 90% of the remaining enterprises fail before the end of five years. MGP is approaching its 5th year and is still surviving. But entrepreneurs are not satisfied with being in the top 1%. They have to be the top 1% of the top 1%; the enterprises that don’t just survive, but thrive. MGP needs to scale; it needs to reach one million people before the end of 2017 to truly be a success. Whether it makes it there or not is still to be seen. The company has weathered challenges to date, but has many more to face ahead. The future is bright, but there are rain clouds on the horizon. The question is which direction the wind is blowing.