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A startup’s plan to sell solar like cell phones

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Cell phones are one of the few products that have found mass success in developing countries; there are 600 million mobile subscribers in India out of the 1.2 billion population. So why not use the model to sell other stuff, like solar power? That’s the idea behind Simpa Networks, a startup based in Bangalore, India.

Simpa Networks is taking advantage of the popularity and standardization of pay-as-you-go cell phone plans and mobile payments in developing countries like India, and the group has launched a home solar system for off-grid customers controlled by a mobile, pay-as-you-go system. Customers pay for only the electricity produced by the solar panel at their home, in addition to a small upfront payment for the system.

The basic solar system size Simpa sells is around 25 watts to 50 watts, which can power a couple of CFL lights, a mobile phone charger and maybe a fan or a TV cable box, Simpa Co-Founder Jacob Winiecki told me in a phone interview. Remember, these are off-grid, often rural homes that don’t have access to the power grid, and the households commonly live on $4 or less a day. These customers often don’t have predictable income and are often farmers who only get paid when they sell their goods at the end of the growing season.

Simpa doesn’t make or install the solar panels, but works with a partner — Selco India — which installs a Simpa-powered solar system for Simpa’s customers. The customer pays a certain amount of their choosing as a down payment for the hardware — say, 10 percent of the total cost of the solar system (the total cost of the system can be between $200 and $300).

The customer then also pays for the solar power as they go, using purchased pay-as-you-go cards (similar to the kinds you’ll find for cell phone minutes in every gas station) commonly in the increments of 50, 100, or 500 rupees. Customers type the code on the cards into the keypad on the Simpa box, which unlocks the system. Over time — usually two or three years — the customer has paid off the system, then owns it outright and can use the solar power for free.

Simpa’s business model

The payment system is attractive to these customers, because many of them don’t have enough savings to buy a solar system outright, or can’t take out a loan to buy a system outright. Getting into debt isn’t something that many of these customers are willing to do, so pay-as-you-go makes sense to them. These customers are also very used to paying for cell phone minutes with cards.

But these customers are really interested in getting a better option for energy. Most of them currently use kerosene for lamps, or diesel or wood burning — all these things are more hazardous to health and more expensive than grid power and off-grid solar. These customers often end up paying a lot more per capita and per their income than someone with grid-connected power.

There are a few things that need to happen for Simpa to actually make money off this philanthropic-sounding business model. Simpa screens potential customers for those who will use a certain amount of electricity — for instance, those who have a few cell phones per household instead of one. That’s because if the customer gets a solar system installed but then doesn’t use the power and pay off the system, Simpa doesn’t make money. Simpa makes money by taking a small cut of the watt hours used per system, as well as the markup on the hardware.

Since Simpa is the payment system as well as the solar business model I could see the company working as the enabler for all sorts of clean power products in the developing world, like rural wind turbines.

Simpa is about a year old and has raised a seed round of  $1.3 million from angel investors (which it is calling a Series A round) to launch its product commercially. Winiecki tells me that there are about 50 Simpa systems installed in the Bangalore area so far, and about 8 customers are within months of paying off the systems.

Up next: Simpa is looking to raise a next round of equity funding of $4 million, which the company is looking to close by March, and which Simpa hopes will get them to the break-even point of selling 5,000 solar systems a year. Simpa also needs to borrow money to pay for the solar systems.

12 Responses to “A startup’s plan to sell solar like cell phones”

  1. Vasuki Nag

    For just lighting, it would be far economical to buy solar lanterns which you can get for around $5 (Rs.250). Users do not have to pay monthly fees and there is no need to install. Just place the lantern in the sun during day time. It can be rapidly distributed and sold to all over the country, especially rural places without electric grid connections.

  2. Sounds interesting. However, 50W system costs about $100 (Rs.5000) and good solar systems should work for 25 years. Why should users keep paying continuously, if they can install off-grid solar system for about Rs. 5000 and get power for 25 years? Instead, banks should finance solar panels so that cost can paid over 2 to 3 years. Also, banks should allow new home owners to add the cost of solar panels to the total house cost and amortize the cost over five or ten years. This would spur the growth of roof top solar panels in India.

    • KarateSnowMachine

      Well, that’s simple, because you didn’t read the article. It clearly says in the article that once people pay off the the system, they can use the solar panels for free.

  3. Karin Kloosterman

    This was the original idea of the Better Place car company – to pay for battery power rather than heavy lease or purchase costs of EVs. The cost of the technology development didn’t and couldn’t support the model. Will be interesting to see if this business model can make it work.