Selco

Promotes Lighting and Other Energy Services for the Poor With Custom-Built Solar Home Systems and Innovative Financing

About

SELCO links sustainable energy to poverty alleviation by providing quality customized solar home lighting systems to poor customers, partnering with banks to provide financing for increased affordability.

Energy Products/Services

• Customized solar panel and lighting systems, matching customers needs and price points

Target Market

• People living off-the-grid in Karnataka and Gujarat.
• Urban customers wishing to reduce power consumption and fees.

Value Proposition

• Delivers each customer a customized system suited to their individual needs.
• Has relationships with local banks to make it easier for customers to get financing.
• Provides customer service for a year and warranty for up to 8 years.

Problem Addressed

• Millions of people in Karnataka and Gujarat, India, lack access to grid electricity, and often cannot afford the up-front cost of solar panels.
• This means they are stuck using expensive, unclean, dim kerosene lamps.

Milestones

• 1995: SELCO founded
• 2000: Had installed total of 500 systems
• 2002: Broke even
• 2007: Began accepting soft financing mechanisms to provide loan guarantees and thereby reach poorer customers than previously possible
• 2011: Over 125,000 systems installed

Growth Plan

• Currently growing by 20%/year
• Plan to sell 10,000 systems/year by 2015
• Currently trying to grow vertically downwards, selling to poorer customers within the same market through more creative financing
• Introducing clean cookstoves- designed by Prakti Design

Product Sourcing

• SELCO procures parts on the local market and assembles them to deliver customized solar lighting systems based on the needs of individual customers

Distribution

• SELCO’s systems are sold by employee salespeople who get salary plus commission.
• SELCO also has business associates who have other jobs, but sell on commission part-time.
• SELCO’s distribution model is closest to that of an interior decorator or kitchen remodeler: salespeople go to a client’s house, discuss their power needs, and determine how many lights, plugs, etc, are right for them.
• SELCO’s systems are sold with a 1 year service contract (covering 2 panel and battery cleanings and 1 emergency call) and customers can buy an annual maintenance contract going forward.
• Warranty is 3 years for the battery, 8 years for the panel, and 1 year for lights.
• SELCO has 25 energy service centers around Karnataka and Gujarat and does not sell anywhere that it cannot provide service within 24 hours.

Revenue & Affordability

• SELCO recognized from the beginning that one of its biggest sales challenges would be the up-front cost of systems, which start around $150.
• Since SELCO does not control the price of parts and therefore cannot control the cost of systems, it has focused on increasing affordability through financing.
• SELCO does not provide credit itself, but branch offices have relationships with local banks and facilitate customers getting financed.
• SELCO had a difficult time at first getting banks to provide credit, but once it got the first bank to agree and it was proven that customers would pay back their loans, it became much easier.
• SELCO also convinced banks by doing research into the increases in income resulting from solar power (often 30-40% because of extra hours worked) and by targeting customers who would especially benefit financially, such as tailors and street vendors.
• When salespeople feel that a customer can pay their loan, but the bank won’t give them credit, SELCO sometimes offers loan guarantees.

Government Relations

• Taxes are a challenge for SELCO in keeping prices down, and they find it frustrating that solar products are taxed while kerosene is subsidized.
• Recently the Indian government introduced a subsidy program for solar electricity, providing subsidies for 22,000MW of solar energy by 2020, with 2,000 MW designated for off-grid (the rest is connected panels to be fed back into the grid, reducing its load).  The subsidy is provided directly to customers through their financing bank when they buy approved systems.
• SELCO is trying to get its systems below the per-watt price required to qualify for the subsidy (approximately $6/watt), but doesn’t want to compromise on quality.

Financing

• SELCO has been financed by investments from E+Co, Good Energy, and the Lemelson Foundation, and was the first investment Lemelson ever made in a private company.
• All profits are returned to the business and not to shareholders.
• SELCO did not take any soft money until 2007, when it partnered with REEEP, a policy organization, to provide financing to even lower income customers, with REEEP issuing SELCO grants to reimburse them for providing banks with loan collateral for these customers.

14W CFL Solar Home System

14W CFL SOLAR HOME SYSTEM

Description:

This is an example of one of SELCO’s systems, and consists of two 7W CFLs or 6W tube lights and a 12V 15-35Ah battery, charged by a 14W solar panel.  While SELCO’s systems vary in size and number of lights sold, this exemplifies the type of system sold for the home.

How It’s Used:

SELCO’s home systems are used for lighting and powering the homes of customers off the grid or with unreliable power.

Product Type:
Solar Home System

Technical DAta

Cost Data

Other Products

SELCO has a range of products and offers customers highly customized solutions based on an in-home consultation.  The size of system sold depends on customer lighting and power needs and financial capacity.