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Monday, May 24, 2010

Entrepreneurs Wanted: Must be willing to think big to transform energy for the poor

A guest post by Hugh Whalan

When Apple transformed the music industry with the iPod and iTunes, and when Google revolutionized internet search capabilities, it was a win for everyone – consumers got better products and the companies providing them became rich.

There are billions of energy-poor consumers in desperate need of exactly this kind of industry transformation. The sheer size and growth potential of the market has the potential to create the next generation of huge energy companies – as large as BP, Shell and Exxon – which are focused on providing small scale energy solutions to the billions for whom this is the best solution.

The opportunity for the entrepreneurs who will build the next generation of energy mega-companies can be summed up with three simple points:

  1. Those at the Bottom of the Pyramid (BOP), people earning $1-$6 dollars a day, already spend a lot on energy. More than $US433 billion each year according to the World Resources Institute (WRI). WRI estimates energy is the second largest market in the BOP markets –bigger than the transport, health, ICT and water sectors combined.

  2. Studies show that the average BOP consumer would use more energy if they could afford to. This means that as the poor come out of poverty and as the price of each unit of energy drops, the market will continue to grow.

  3. The energy resources currently meeting BOP consumer demand are overwhelmingly archaic and inefficient (e.g. kerosene, dung, firewood, and charcoal).
In summary, the BOP energy market is huge, will continue to grow quickly and has underserved customers. It’s the kind of market that screams for innovation, and the stuff of dreams for entrepreneurs. Some entrepreneurs are already well on their way to addressing this market failure by providing cheaper, greener, and safer options for BOP consumers. Some examples include Barefoot Power’s efforts with solar, Husk Power’s mini power-plants, and E+CO’s investments in green energy technology companies.

I hope they all become billionaires because the more entrepreneurs who see the pot of gold at the end of this rainbow, the better. More entrepreneurial attention will result in more innovation and competition, which leads to better service and products for paying consumers. For the billions relying on kerosene, firewood, and charcoal, I guarantee you, this cannot come too quickly.

Hugh Whalan is the CEO and co-founder of Energy in Common, a non-profit allowing individuals to make micro-loans to fund green energy entrepreneurs in developing countries.

1 comment:

Unknown said...

Absolutely correct. There will likely be no one solution, but many, all at huge economies of scale in manufacture and making small power that is scalable from individuals to villages. The intersection with micro-lending is interesting.