How to build a sustainable business for rural electrification: A study of business models for rural electrification in India
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More than 1.4 billion people lack access to electricity (The International Energy Agency (IEA) 2010, p.248; World Bank 2008; Legros et.al 2009). With the current electrification policy, the total number of people lacking energy will stay at 1.2 billion people in 2030, due to the high population growth (IEA 2010, p.248). This is especially prominent in Sub-Saharan Africa and India, where population growth exceeds electrification rates (Barnes & Foley 2004).There is a strong correlation between energy access, the Gross Domestic Product (GDP) and the Human Development Index (HDI) (Aqeel & Butt 2001). Rural electrification (RE) is important in bringing both direct and indirect social benefits for communities, ranging from higher standards of living to better health facilities and education (Palit & Chaurey 2011). RE has evolved into both a practice and an area of research, with an increasing attention the last two decades (Schillebeeckx et.al 2012).It has been shown that to increase rural electricity access, renewable technologies will be cheaper and faster than fossil fuels, as the need for central grid expansion is removed. (Zerriffi 2007, p.18; Krishnaswamy 2010). However, the access to risk capital for up-front investments has been a problem, which calls for private participation (Barnes og Floor 1996).This master thesis aims to contribute in increasing the success rate of RE firms. This is done through investigating innovative business models for sustainable RE companies. The thesis is divided into two papers;Thesis Paper 1, we investigate how RE companies strategize, focusing on the dilemma of strategizing based on internal strengths or external constraints. To do this, a framework for RE business models is developed, and three solar cell device-based companies in India are investigated through interviews. The proposed framework based on strategy and RE literature is revised to fully depict the cases, giving an empirically and theoretically tested business model framework for this type of company. Furthermore, the results show an emphasis by the case companies on external (market-oriented) strategizing to adapt to customer and end user demands. It is also shown that after RE entrepreneurs have adapted their business to external constraints, their personal experience heavily influences how they form their business.Thesis Paper 2 investigates the factors for alliance formation between telecom tower operators (TTOs) and RE firms selling electricity to rural households. Such an alliance has the potential to increase economies of scale, predictability and access to investments for RE firms, and can be instrumental in increasing energy access. Using Transaction Cost Economics, the Resource Based View and Cluster theory, three important motivations for partnering are developed, and these are reviewed using interviews with OMC Power, an RE company in Uttar Pradesh, India. We find that especially three factors are important; the resources the RE firm can offer to their partner, as well as assuring that there are mutual motivations to the alliance. Most importantly, however, is the need for social capital; experience, relationships and trustworthiness of the management team.