What it takes to bring bold new ideas to the mainstream
Editor’s note: to find out more about the impact Husk Power is having on the communities of Bihar, read this post by Jacqueline Novogratz.
Husk Power Systems (HPS), a power company in Bihar, India, has just received its second infusion of capital from Acumen Fund. The company has already delivered electricity to over 200,000 people throughout some of the poorest areas of India and this new round of funding will help scale its operations to impact even more lives. Despite Husk’s success to date, the company began as little more than a dream and an unproven business model in one of the world’s poorest regions.
In the state of Bihar, around 80 percent of the households are not electrified. Villagers rely on kerosene lanterns and diesel generators for light and power, both of which are expensive and destructive to health and the environment. Seeing these challenges first-hand, Gyanesh Pandey co-founded HPS in 2007 with a goal of bringing light to his home state of Bihar.
Gyanesh started working on this goal by investing his personal savings to build the first biomass-fired generators which convert rice husks (a locally-available waste product) into a gas that powers a turbine to produce electricity. Each one of these mini-power plants can serve two to four villages. Costs are kept low by wiring the villages with bamboo poles and low-voltage insulated wiring.
Yet without a diverse set of funding sources, this innovative technology might never have developed into a successful social enterprise . Grant funding from business competitions and foundations allowed HPS to prove it was possible to deliver electricity to remote villages with this technology through a small number of pilots. However, HPS faced a major funding gap between the prototype stage and the stage at which it would be attractive to commercial capital.
As highlighted in the recent Monitor Group and Acumen Fund report, From Blueprint to Scale, this funding gap can be bridged using philanthropic capital in a variety of new ways. One of the methods mentioned in the report is “enterprise philanthropy,” which is grant funding that resembles investment through a focus on milestones and progress towards financial sustainability. Another approach is philanthropy-backed investment, which Acumen Fund deploys, which is an actual debt or equity investment with the flexibility to go where commercial investors won’t, driven by metrics like impact and innovation, in addition to financial performance. The report highlights the importance of diverse sources of funds at different stages of an enterprise’s development, with Husk Power Systems being a prime example of the necessity of grants, impact investments and commercial capital.
With the continued support of Acumen, along with many other foundations and investors, HPS has installed more than 80 plants, bringing power to over 300 villages in a region that the Indian government claimed was “economically impossible to reach by conventional means.” With Husk’s continued growth, they are on track to attract more commercial capital and bring power to more regions in India and throughout the world.
More important than the growth of this one company, however, is the fact that Husk’s success has changed how people think about energy access and the possibilities of bringing electricity to some of the poorest regions on earth. New innovators and entrepreneurs can now see the social, economic and environmental potential of bringing renewable power to remote regions. This creates new markets and new forms of empowerment, both figuratively and literally, for the communities that need it most.