This is the first in the series ‘Developing India: from the Bottom-Up’, a cluster of articles authored by Rob de Jeu, business manager at Rural Spark in New Delhi, and a valued contributor at REIN. We here present bottom-up approaches in the bottom of the pyramid (BoP) of India. We begin by exploring the topic with practical examples. We will see how bottom-up approaches have the potential to improve, and are already successfully improving, lives at the bottom of the pyramid (BoP) in India.
This will be followed by a critical discussion of the BoP and microfinance in particular, where we explain the strength of cooperations, another form of a bottom-up approach. We then conclude the series somewhat more theoretically and explain what tools economists can use to study these bottom-up approaches.
BOTTOM-UP vs TOP-DOWN….
Bottom-up is the opposite of top-down, and both are means of understanding and approaching a system. Understandably, a Top-down starts with the bigger picture and decomposes its vital elements into sub-components, thus arriving at a micro-detailed state. On the other hand, a bottom-up approach starts by linking and grouping the very basic elements of a system, from which a larger and more complex system with multiple layers emerges. These approaches are used to tackle a range of problems in organizations specialising from product design to scientific thought to energy development. However, both these approaches often can and do exist for a single problem. This then means that they work towards each other and reach an outcome that is more effective and efficient than the one derived from using any single one of them. We will see in the following example why.
India lacks a good infrastructure of electricity: Most villages are yet not electrified. The current ‘Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY)’ program, which is actually a compound stack of existing policies, aims to achieve 100% electrification of villages by 2019. Gee, wow you must think, that is amazing! However, there is little hope this is going to happen on time. The RGGVY program is in itself a little bit of a hoax. A closer look into the program shows that 100% electrification of villages only means that the national electricity grid should have reached 100% of the villages, not 100% of the village households. The factoring in of a good, and stable electricity supply has not even been brought up. No, a village would be declared as electrified, if
- Basic infrastructure such as Distribution Transformer and Distribution lines are provided
- Electricity is provided to public places
- The number of households electrified should be at least 10% of the total number of households in the village.
So while this is another great marketing stunt of the government, it forebodingly hints at electricity access to a bare minimum; and this access is neither to an uninterrupted supply, nor the right voltage quality, nor for an affordable price. The huge sunk costs associated with a nationwide grid expansion throughout India might substantially increase the unit prices, putting the ‘affordable price paradox’ in jeopardy.
So, what did we just observe here? This is a typical way of implementing a system top-down. The government, which qualifies as top-down organization, (but let’s put that aside for now), starts with a large vision of electrification and decomposes it into elements to get the job done. From the previous paragraph it is doubtful whether the job will be done soon in a cost-effective way.
BOTTOM-UP ENERGY NETWORKS….
You might now be wondering what a bottom-up approach might look like. Currently, Rural Spark, a company in India led by Indian and Dutch people together, are creating an energy network from the bottom-up. Entrepreneurs at the bottom of the pyramid (BoP) are building the network themselves. Rural Spark merely designs and delivers the basic elements that the network needs.
These elements are supplied in energy kits, which would be at the disposal of a local entrepreneur called the Local Energy Supplier (LES). The LES finds in this kit a solar panel, rechargeable lamp batteries, rechargeable battery packs (also called cubes) and a charger controller to connect the solar panel to the aforementioned elements. The LES is also able to charge mobile phones and use LED bulbs to light up his local energy store. All these elements can be rented out to other villagers, especially to people with the lowest income of all and are at the very base of the BoP.
Woman cooking in an unelectrified village with the help of a portable and rechargeable lamp
bottom-up energy in the village – Rural Spark ©
Thus, electricity becomes available and affordable without ever needing a grid. The LES himself functions as the grid while earning an income, making the system more cost-effective. On top of that, the LES can share energy surpluses with his fellow LES’s who might have a temporary shortage. This ends up making up the network more reliable in the process. Of course, it does not have to stop here. The LES can also provide energy storage, mobile phone charging, light, etcetera, but the aspirations of the villagers are larger.
Once the demand and income of the villagers grows, the LES can easily expand his system because it is only built of elements i.e. there is high modularity. At some point he can also support fans and televisions as needed. The beauty of all this is that it does not even involve wires at this stage, just a simple exchange of energy elements.
TOP-DOWN and BOTTOM-UP TOGETHER …..
Once rural India understands that they are very able to create such energy networks within a village themselves, the next opportunity is ready to spring up. Lets call the networks of LES’s within the village the first layer. The second layer will emerge by connecting the villages with each other, most probably via wires and modern technologies like blockchain and internet of things for example. Villages could form microclusters to exchange and/or supply energy to each other. Now the most interesting and third layer shall arise: the village clusters could be connected to the main grid, if all the villages are reached by the grid as promised under the RGGVY program.
Now it wouldn’t matter that only 10% of the households are electrified, since that has already been taken care of from the bottom up. Most importantly, a connection can be made with the main grid, allowing exchange of energy on a larger scale.
A sufficient definition of a miracle would be these clusters of villages, powered by renewable energy sources, also supplying urban areas and thereby eliminating CO2-intensive coal and natural gas from the supply/demand equation. The challenge still remains in that an optimal outcome is reached only when bottom-up and top-down approaches work together.
There are however success stories of Rural Spark in Bihar, that have already reached the first layer where other organizations are also creating impact at the ground level in rural India. But most of these systems are stand alone, and not (yet) meant to be connected in turn to a second and third layer. Rural Spark thinks the future energy network should be a plug-and-play (lego time) network, and anyone should be able to connect their solutions regardless of its technology.
Still confused ? Check out this simple video on Rural Spark’s Energy Model !
COMING UP NEXT ….
Rural India is quite the impossible market to attack, and numerous challenges await Rural Spark and other organisations of the Clean Energy Access Network. In the next article we zoom into the challenges of the BoP strategy we outlined above. Then we move on to focus on microfinance, a potential catalyzer for developing these rural areas. Interestingly enough, microfinance might or might not work at the BoP, depending on who you ask.