An American solar company is showing the world how to get electricity to poor families cleanly and efficiently, and how to make money at the same time.
San Francisco-based d.light has stunned impact investors this year, forecasting a profit for the first time as the company enters its sixth year. Given that even seven years to profitability is exceptional in the industrial solar industry, this is certainly cause for celebration. The firm sells about 200,000 solar lamps a month and already has $20 million in funding. Its products are good enough to offer two- or three-year warranties, and its cheapest lamp is well within the price range of its 1.2 billion target customers--households making less than $50 per month. That’s a success story most startups can only dream of.
It also provides a cheery contrast to grim figures released this week by the UN, which claimed poor countries aren't doing enough to expand infrastructure, while rich countries aren't moving to renewables fast enough. India is one of the biggest culprits due to its skyrocketing demand for energy as the middle class expands, and world leaders recently gathered in Delhi to woo policymakers with their pet solutions. But there’s a sense of pessimism after a failed push to hook Indians on fluorescent lights cost investors billions, and skeptics say environmentally “sustainable” solutions are just too expensive. As one blogger put it:
Environmental economists have been struggling to sell their ideas of sustainability to the people at large, because their concepts are difficult to fathom. ...How much bang for the buck does the solution provide?
Quite a bit, if you’re in the solar business today. Solar has gotten cheaper, and the price will keep dropping thanks to economies of scale. In simple terms, as solar companies sell more lights, the lamps can be made more cheaply and more people will buy them. If this pattern continues long enough, companies start making a profit.
When d.light rolled out its first $12 lamp in 2008, the solar market was already more than 15 years old. Price was the key innovation: most competing lights cost $45, but d.light simplified the lamp’s design and only took a two percent cut, creating something that even the poorest customers could pay back in a matter of months.
Sales grew, costs shrunk, and d.light has now sold 3 million lamps at last count.
Technology improvements have also made solar more profitable. Take a 2011 UN report on Indian solar company SELCO, which priced the company’s home solar installations at $200-$500. A year later, those systems cost $150-$350, even as the company raked in margins of more than 20 percent.
In light of the massive costs of building electrical grid systems, individual solar lights and community charging stations are increasingly becoming the practical alternative for the world’s 1.2 billion people without access to electricity. As more households get their electricity off-grid, maybe it’s time to redefine the word “access”and focus on what’s already working.