According to reports, Simpa Networks, a venture-backed technology company, launched an innovative product in Karnataka, India in 2011. Backed by a cutting-edge business model, the product supports their mission to mediate access to affordable and clean energy within emerging markets.
The company sells energy based on a “Progressive purchase” basis. Through this pricing model, consumers prepay for their energy service. They continue to top off the supply using their mobile phones to make incremental payments. These payments contribute towards the final purchase price of the product. Once it is paid in full, the product is permanently unlocked and produces energy free of charge for its expected 10 year life.
The progressive purchase model is applied once the user makes a small initial down payment for a high quality solar photovoltaic (PV) system. According to Needham, a typical system would have a solar panel, mounting poles, and wires. The solar panel is connected to a battery which stores electricity during the day when it is being charged. At times there will be a jack or a point where a cell phone charger can be plugged in as well. Coupled with a fan, this ensemble represents a typical home electrification system.
Simpa networks does not invent the solar home system. Instead, they work with companies that already have such as Selco India, a solar electric light company founded by Harish Hande. The partnering company integrates Simpa’s technology, and together they sell the product as a pay-as-you-go solar system.
A motivation behind this technology is to provide an alternative to battery powered flashlights and kerosene lanterns. Kerosene lanterns offer dim lighting, and are dangerous to operate. Still, consumers are locked into purchasing these sources of energy as they offer a low initial investment and flexible payments over time.
To capture the market dependent on kerosene, candles, and batteries, Simpa Networks’ progressive purchase model replicates the pricing method that is used by the former. People can then opt for a cleaner and more reliable option, and afford to do so without taking out a loan.
Contrary to what the company assumed, many people had access to loans. In theory then, they could pay for the solar home system for its retail price. Since there is a risk attached to doing so, they do not prefer this option. “Getting a loan from the bank for something like this is very risky to people because they are buying a new technology that they don’t yet understand. You can imagine yourself in that position. If the product you purchased stopped working, you would have to sit on broken equipment while remaining on the hook to the bank”, said Needham. Since the company has internalized the product risk, they have taken responsibility for maintaining the solar home system. “It’s in our interest to keep that system up and running. This is why consumers are choosing this pricing model over a bank loan”, said Needham.
This year and next, Simpa Networks is focused on building in India. They want to develop a stronger value proposition for people who invest in the equipment as well as consumers who use the energy. “There are a lot of innovations that we have planned. As a company were focused on developing and improving the prepaid payment platform for clean energy”, said Needham. By 2014, the company will be in a position to address other international opportunities as well.