Private sector electrification in Base of the Pyramid marketplaces in India: opportunities for energy and business to create Shared Value

Abstract

The aim of the PhD thesis is to evaluate the value propositions, motivations and opportunities of private sector electrification in Base of the Pyramid (BoP) marketplaces in India. The lack of access to modern forms of energy, known as energy poverty, can severely limit economic development. Globally, 1.2 billion people lack access to electricity, with 240 million of those residing in India. To highlight this issue, universal energy access has been explicitly included in the UN’s Sustainable Development Goals. Many millions more experience unreliable electricity supply with lengthy outages each day, even though they may be officially considered to have electricity access.The private sector has had an increasing role in both global development and in electricity distribution. In response to market opportunities and driven by a strong sense of social responsibility, firms may engage in distributing electricity to BoP consumers in areas where there is limited or unreliable access. The role and motivation of the private sector in the electrification of Indian BoP markets remains relatively unexplored. The thesis contributes to the field by examining why firms act in this market; what opportunities exist; and how firms’ activities create Shared Value that benefits both the firm and the wider society. In doing so, the thesis provides a contemporary assessment of the market and identifies key issues for private sector engagement.The thesis has four research objectives. Research Objective 1 aims to understand how electrification creates value that contributes to poverty alleviation, and how this can translate to private sector value propositions. An analysis of global literature and development of a conceptual representation of value flows found that electrification technologies that enhance income-generation activities are likely to produce greater poverty-alleviating effects. Indeed, firms operating in the electrification sector may implement interactive business models, where firms create productive ecosystems that enhance the income-generating potential of energy. This can magnify the dynamic effects upon which Shared Value, including a firm’s competitiveness, is sustained.The subsequent research objectives then focus on the Indian context. Research Objective 2 aims to evaluate the motivations and actions of Indian companies’ engagement with the BoP. A taxonomical model was developed to clarify the overlapping concepts used to explain corporate actions and motivations. Using this model, the BoP actions of India’s Top 100 firms, as evident in publically available reports, was analysed. Surprisingly, less than half showed evidence of being actively engaged with the BoP, with only a handful of firms operating at a strategic level that would support the creation of Shared Value.Research Objective 3 then examines document data and the views of key institutional stakeholders to determine the interaction between India’s electrification paradigms and the opportunities for the private sector. The analysis showed that household levels of electrification have not kept pace with the strong push for village grid connections by the government. Poor reliability of the grid, and gaps in connectivity to non-census habitations represent opportunities for private sector off-grid solutions, although evidence showed limited uptake in two Indian states.Research Objective 4 evaluates the role of private sector off-grid operators in the electrification of India. This was undertaken via semi-structured interviews with ten exemplar firms in India, providing a validation of the concepts developed in the preceding objectives. Some firms clearly responded to BoP household needs by selling affordable solar-based substitutes, and exhibited low concerns about the impacts of grid connectivity in the future. Other firms’ value propositions included a cultivation of the dynamic effects of energy, consistent with interactive business models and strategic corporate approaches. These firms exhibited stronger concerns about future grid connectivity, and sought to embed their off-grid technologies as a risk mitigation strategy.Critical insights that emerge from this work include the following: • Creation of productive ecosystems around electricity access is important to produce dynamic effects that can translate to Shared Value, sustaining firm competitiveness and alleviating poverty. • Electrification of the BoP is a high risk and highly uncertain market proposition that requires a strong social mission from firms to operate and attract investment. • Despite the espousal of BoP opportunities, the majority of India’s large corporations do not engage in this market, and very few show evidence of a strategic approach. • The centrally-planned grid contributes significantly to the business risks of the private sector in BoP off-grid markets, even though business opportunities exist due to grid unreliability and lack of reach to all households.The thesis concludes by recommending several policy changes to strengthen the role of the private sector. This includes greater transparency, integration and planning of locations suitable for private sector electrification; and changes to Corporate Social Responsibility laws to allow more strategic Shared Value approaches to optimise electrification efforts for India’s BoP.