SELCO creates energy access for under-served populations through tailored solutions.
01 | Brief Summary and Key Facts
SELCO India is a for-profit social enterprise focused on improving living standards of poor households in rural India through solar energy based interventions.
Location: Bangalore, India
Founded: 1995
Size: 553 employees, Turnover of Rs. 1,38,65,61,742 (about €15m)
Sector: Energy
Legal form: SELCO India is registered as a private limited company
SELCO creates energy access for under-served populations through tailored solutions. Key to their success is their focus on building the ecosystem for rural renewable energy by designing, developing and deploying customised solutions by understanding local energy needs. SELCO trains and supports the local technical workforce to be able to provide timely support and service to their customers in rural areas, and trains rural bankers to finance rural customers.
Highlights of their unique design
The organisation replaced its unaligned investors with long-term social investors, which brought in more flexible and patient capital that generates sustainable income and reinvests its profits in pursuit of its purpose.
02 | Founding Story
SELCO is a private limited company, working towards energy access in India, and beyond. Its business model has a particular focus on building the ecosystem for renewable energy, especially for under-served populations, and providing solutions tailored for that context.
SELCO India was established in 1995. Today, DOEN Participaties B.V, Good Energies Foundation and Lemelson Foundation and E+CO collectively own 99% of the shares of SELCO India, with management collectively owning 1%.
03 | Regenerative & Distributive Strategies and Actions
The ecosystem approach is central to understanding SELCO India. Since its inception in 1995, SELCO India has worked to build a strong foundation of the local ecosystem, which has allowed it to create impact in a sustainable manner.
Over the first 10 years, SELCO India was able to achieve this by fostering partnerships and training rural bankers so that they can finance rural customers’ purchase of SELCO’s renewable energy solutions. This also resulted in many of SELCO’s customers being financially included in the formal credit system - ie many of SELCO India’s customers opened bank accounts for purchasing solar energy systems, and took their first loans through engagement with SELCO. Becoming included in the formal banking system also ensured that these customers gained access to Government subsidies. Working over a period of time to open up financing, also ensured that SELCO was not at the risk of continued fund raising for sales. SELCO also trained and supported local technicians, and worked with suppliers to build local supply chains to ensure quality and servicing networks.
Through these initiatives, the enterprise has had a wide-range of impacts, including generating livelihoods for newly trained technicians and supporting people to be financially included. This focus on ecosystem building stands as a central pillar of SELCO’s business model, which it remains committed to irrespective of short-term profit considerations, even where ditching it could deliver greater financial returns for the company.
Tailored energy solutions is another distinguishing feature of SELCO’s approach. This means it works to create energy solutions specifically tailored to the needs of each particular client across rural communities. This is also recognised as an important aspect of the business, because for rural customers, the need is not just for energy, but for livelihood and economic growth opportunities. This is in stark contrast to solar energy companies focused on delivering larger renewable energy systems, which often excludes the actual felt needs of the low-income rural communities, like those SELCO serves. This focus on tailored and small-scale energy solutions may at times seem less lucrative than delivering larger systems, but it remains a core part of SELCO’s business model- which is focussed towards energy access for improved equity.
04 | How the Deep Design Enables Strategy and Action
In 2006, the German solar market spiked with high subsidies. This distorted the local markets as all Indian panel manufacturers began mass exports of high wattage panels while neglecting the production of smaller panels, which was the primary need for SELCO's rural customers. Suddenly, the costs of these panels rose by over 47%. At the time, SELCO India came under pressure from one group of investors to cut down on its focus on smaller panels, and to cut back on its workforce. The push from investors was to focus on larger system orders to grow rapidly and bolster profits. This was in direct conflict with the philosophy of SELCO to focus on under-served low-income rural communities, where a combination of social and ecological benefits could be achieved with tailored solutions and ecosystem partnerships.
In 2007, with the help of the IFC and E+CO, SELCO refinanced the business, replacing unaligned investors with long-term social investors: E+CO, Lemelson Foundation and Good Energies Foundation. In its fundraising pitch, SELCO focused on its measurable social returns and projected only modest financial returns. Because the funding was in the form of investments, rather than grants, it was agreed that the primary goal was social, but that financial sustainability was also key. Critically, the ownership redesign brought in more flexible and patient capital that generates sustainable income and reinvests its profits in pursuit of its purpose. This allows SELCO India to ambitiously pursue its business model of supporting the development of the rural renewable energy ecosystem and providing tailored energy solutions for lower-income rural communities.
Alongside ensuring that investors in SELCO are aligned with the mission and vision of the enterprise, it has been important to avoid focusing on quarterly assessments of performance and rather, opt for long term investments in its people and operations. It has also crafted ownership structure and the shareholder agreements that have cemented the inclusive nature of the organisation and protected the mission even if there are future changes among investors or management.
05 | Reflections and Lessons for other Businesses
SELCO’s story demonstrates the importance of being clear on the vision and accompanying business model, and having investors that match these. Under different circumstances, SELCO could have drifted away from its core focus and avoided the long-term work of building the renewable energy ecosystem. But it was able to retain this focus, whilst delivering sufficient growth. This isn’t a model that fits the usual venture capital model of pursuing maximum growth through all investments (e.g., 10x returns) but it is nonetheless a commercially successful model that delivers sufficient returns while delivering true impact. It has outlasted many businesses that have instead attempted to maximise returns to investors. Having investors that are able then to demonstrate flexibility and commitment to this is pivotal to unlocking the transformative model that SELCO has achieved.
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