Manoj Sinha, CEO of Husk Power Systems, argues that mini-grids are the way for the energy-poor to prosper.
Growing up in a village in Bihar state, India, Manoj Sinha was well acquainted with power blackouts, but it could have been worse, he knew. Until recently, many thousands of India’s villages remained completely off the grid. The issue was still on his mind after he earned his B.A. in electrical engineering, moved to the U.S. –– and became the driving force behind Husk Power Systems, the company he founded with old college friends. Husk builds “mini-grids” that currently provide green power to some 120 communities in India and a growing number in Africa. He argues that the decentralized approach, using 100% renewable power, is the way to bring economic development to a billion people in weak-grid and off-grid rural communities, without adding to the climate crisis. What follows is an edited transcript of our conversation:
How did your path to Husk begin? What is the story behind the company?
In 2008 we started the company to solve this problem of lack of electricity by using decentralized power generation. We focused on households in the rural parts of my home state who were completely in darkness –– and nobody cared about helping them. We looked at many different technologies including solar PV at that time, but it was too expensive in 2008 and we were using our own cash. We didn’t have enough money to buy solar panels, so we decided to generate electricity using a biomass gasification process. So we utilized rice husks as a source for feedstock and one fine day we started generating electricity using biomass. We put up poles and wires –– up to a distance of a mile –– and connected a couple hundred households. These modular systems, providing 25-30 kilowatts each, would light 300 households for 6-8 hours each day.
And when we saw it working — and people were actually paying for the services that we were providing — that’s when we thought “oh if it can solve the problem of one or two villages in my home state, it can solve the problem for a billion people around the world.” So we raised some money, we expanded that footprint to 70-80 units by 2012-2013, in Bihar and Uttar Pradesh states.
What were some of the bumps along the way, lessons learned?
In 2008 we were focusing primarily on households, so mostly for lighting purposes. People who were super happy with 6-8 hours of power (in 2008) were completely unhappy in 2014 because they wanted 24/7. I don’t blame them. We want 24/7 so shouldn’t everybody else? That is something that we missed. So that was one learning.
Second, the solar PV price, which was $5 per watt in 2008 came down below $1 a watt in 2014-15. So we took a pause and went back to the drawing board. We changed our technology to what we now call a hybrid mini-grid system using solar PV to supply daytime power. We still use biomass gasification for evening time –– that’s between 5 pm and midnight –– and then we use storage, a battery (in our case lead-acid battery) for overnight. That’s how we are able to provide 24/7 power at 95% reliability. So that was a major pivot in what we did historically, to what we started doing in 2015.
We also shifted our customer mix from only households to commercial establishments, so shops, dispensaries or small hospitals, small factories, institutions and schools, who have a daytime need for power.
Is Husk primarily a climate solution or an energy solution?
Our goal from the get-go was to not use fossil fuels to electrify the next billion people and contribute to destroying the planet. From day one we were very conscientious about it and that’s why we took a lot of pain and effort to figure out how to generate electricity from biomass gasification, which is a carbon-neutral process. So the issues are intertwined. They are not mutually exclusive.
Our goal from the get-go was to not use fossil fuels to electrify the next billion people and contribute to destroying the planet.
What is the level of diesel use, what’s the mix?
When we started in 2008, India had 50-60,000 villages that were completely off-grid. That changed dramatically over a ten-year period and now the national grid does exist in practically every village in India. But it’s a weak grid, so there’s power but it is not reliable. The quality of power is bad, the service is pretty pathetic. So we compete in India with the national grid which is predominantly non-renewable (coal). Since the grid can only provide 12-16 hours of power supply and people really want to have 24/7 — especially commercial customers — they use diesel as a backup. So there are lots of diesel generators in the villages. We compete with both diesel and the national grid.
How does it work on the ground, competing with diesel and the national grid, as it is?
Competing with diesel is straightforward, we are about 25% cheaper.
But we charge more than the national grid because unlike them, we are not subsidized. The reason we have been able to compete –– we have been growing more than 80-90% year after year –– is because customers wanted 24/7 power that is high quality. And our customers do not default because what we promise, we deliver. When we say we’ll fix a problem in 4 hours or less it happens. If something happens to the national grid in India for example, it takes them days to fix it. So who wants to wait for 2 days to run their milling machine?
This is also a journey. Our mission has been to catalyze socio-economic development wherever we operate. Of course, electrons are the bedrock of everything, but also we provide additional services. For example, we have this carpenter shop connected to us –– they have 2 or 3 folks working there. They can produce 5 furniture pieces per month and when we go in they use our electricity only for lighting, and a fan if they have one. We help them understand that if they graduate from a manual to an automated process they can increase their productivity from 5 to 50 pieces per month. But for them to purchase a sawmill it costs say $1,000 and they don’t have that cash so we provide financing so they can purchase equipment, increase their income and in doing so they pay back the money that they borrowed from us. So this is programmatic for us. This is how we onboard our new customers.
Are there challenges to bringing this model to Africa that are different from India?
The pillars for success for the mini-grid as a sector include regulation that governs where we can build mini-grids and where we can serve customers. India enacted mini-grid regulations in 2016. The good news is that Nigeria enacted that policy, verbatim, in 2017. Why recreate something that has already been done? And in Tanzania, we had favorable regulation as well, but that completely changed in 2020, when the energy minister unilaterally changed the regulation by making everyone comply with the government tariff of approximately 4 U.S. cents per kilowatt-hour. That made our mini-grids unviable. We haven’t left the country. We are still fighting the fight. But regulation does pose a major challenge to any kind of commercial viability.
The second challenge is capital. We are capital intensive –– essentially a rural utility company — and availability of capital is of utmost importance. There are a lot of development finance institutions that are providing capital but when it comes to Nigeria for example, there is a lot of currency risk that nobody wants to take exposure on. And number two, Nigeria’s regulation prevents a lot of money from being expatriated. So in Africa, the challenge does exist in being able to bring debt capital for building these power plants and mini-grids.
If you look at the overall cost, mini-grids are cheaper to do in a decentralized fashion. And more resilient.
What are the key items in the India mini-grid policy that make it work for you?
They deregulated the mini-grid segment so we can build a mini-grid anywhere in India without having to go and ask for any license. We don’t even have to get environmental clearance certification because we are using renewable assets. And they don’t regulate the tariff, since customers have alternatives — national grid and diesel. So whatever the customers are willing to pay, can afford to pay, they will pay. So those are really good things in terms of removing the regulation where it is not required. And we are capped so we cannot build anything bigger than 100 kilowatts, without going through a regulatory process, which is lengthy and onerous.
When the telecom revolution happened in Africa, people moved from no phones to cellphones. That is what is needed for electrification in emerging markets. We have to leapfrog. We cannot use the model that was discovered in the 1920s, and try to use that now. If you look at the overall cost, mini-grids are cheaper to do in a decentralized fashion. And more resilient.
What does your competition look like? What are you up against?
When we were trying to raise money, even in 2016 and 2017 when we raised a $25 million Series C round of equity, this question would often come from investors. If what I said about mini-grids is true, then there should be a lot of competitors in the market. Right? Fast forward to 2018, we have more than a dozen competitors including large companies like Tata Power and Engie. So I used to have to describe what a mini-grid is to anybody that I could pitch, and now it is a recognizable asset class. It has become almost mainstream.
We need to do much more so that the coal that we are still reliant on is cut by at least one-half or 70% in the coming 4-5 years. We can’t waste any time.
So mini-grids can be seen as a win for them and not a threat?
If you look at it economically, yes. Where it becomes challenging is when it gets political –– in India and also in Africa. Politicians promise free electricity in the rural parts of the world to get votes. People for some reason always go for free electricity to their own detriment in the long run. That’s why the sector has taken so long to develop, but there is now a recognition that no country can afford $25-$30 billion of annual losses from national grids and not provide 24/7 power. If that is missing you cannot expect your GDP to grow at the level you want. So India is slowly moving –– that’s why we have a mini-grid policy. Nigeria has moved. That is the way to electrify your country at a reasonable price point and not destroy the environment by adding centralized coal plants.
What role do you think India can play in the pursuit of global climate goals?
Climate damage has happened to a large extent. We need to, if nothing else, slow that down dramatically. I think Indian politicians and government recognize that, so India did take a lead and a very good one on the renewable energy side with an ambitious target of 500 gigawatts by 2030. We need to do much more so that the coal that we are still reliant on is cut by at least one-half or 70% in the coming 4-5 years. We can’t waste any time.
Second, carbon pricing is all over the place. There’s a cost to society that is now obvious. In our own experience, where we serve customers at hundreds of sites now, about 10-15% are flooded every single year. If I go back to my 2010 experience we didn’t have this flooding. That cost needs to be factored in.
In terms of your company, is there anything concrete you hope to come out of the global climate conversation?
One is a recognition that every country on the planet will go through electrification like the U.S. and European countries did. Let’s not do it in the traditional form and destroy the environment more. Let’s do it in the most capital-efficient way, which is to distribute energy resources –– make mini-grids, microgrids a part of all the national electrification programs. The World Bank and all the multilateral institutions that do funding on the infrastructure side, I have seen that they usually end up succumbing to those national pressures because it’s easier to pump money into the centralized grid expansion. That narrative needs to change.