South-East Asia, India & Bangladesh: Cleantech start-ups tackle real problems to build new markets
Start-ups tackle clean-tech challenges to take advantage of the growing market opportunity in South East Asia, India and Bangladesh. Could this be the solution to the region’s environmental pollution and population growth challenges?
What is the problem?
The region of Southeast Asia, India and Bangladesh, are altogether home to 2.1 billion people. About 20 percent of this population - 450 million people - does not have access to electricity and every year 21 million people are leaving their villages to move to the cities.
While rapid urbanisation is a concern itself, by 2030, the potentially-less farmers will need to increase the overall agricultural output by 60 percent globally and by 100 percent in developing countries, using diminishing water resources.
The water scarcity will affect particularly Asia, the Asian Developing Bank forecasting that by 2050, 88 percent of Asia’s population will be confronted with this problem.
Is cleantech the solution?
Start-ups in the region tackle the challenge head on by developing innovative solutions. The definition of clean-tech refers to innovative technologies, products, and services that enable a more efficient use and management of energy and natural resources, while reducing waste and providing superior performance at lower or comparable costs. An in-house research by the August Company covering twelve countries – ASEAN, India and Bangladesh - identified 160 start-ups, fitting this definition.
“A third of clean-tech start-ups we are tracking are based in India and mostly focus on proving renewable energy solutions. The remaining two thirds were equally distributed across the region, with Singapore, Vietnam and the Philippines leading the way.”
Energy – turning needs into opportunities
The main issue for Southeast Asia is that 20 percent of its population - 134 million people – does not have access to electricity. The populations without energy access in less developed countries, Myanmar, Laos and Cambodia, account for a large part. However, number of islands in Indonesia and the Philippines also make them very difficult and costly to connect. India’s electrification rate is 80 percent, while only 60 percent of the Bangladeshi population enjoys the privilege of electricity access. Though integrating the quality of access (reliability of electricity supply and hours of electricity supply per day), the overall energy access situation is even more challenging.
Start-ups across the region see this gap in the market and provide decentralized energy access solutions. Solar-powered micro-grids and green energy solutions are used for lighting, mobile phone charging, water heating, cooking or irrigation purposes by remote communities that used to depend on traditional biomass fuels. Remarkable success stories are made in India, as start-ups like MLinda, GhamPower and Mera Gao Power and are making electrification dreams in off-grid villages come true.
MLinda Foundation is currently piloting a new business model based on combination of mini-grid installation and productive use of renewable energy working with women groups in villages in Jharkhand. MLinda is not a new-comer, given it has already implemented over 300 projects at community level, both in Jharkhand and West Bengal. Its commercial arm aims to take the pilot of 9 villages and expand it to more than 40 in the next phase.
Gram Power, Founded by two engineering graduates of the University of California, the startup provides cutting edge Smart Grid technologies to address the electrification challenges in developing nations. In March 2012, the startup set up India’s first Solar Powered Smart Microgrid in the Rajasthan hamlet of Khareda Lakshmipura, providing energy for lights, buttermilk machines, televisions and fans. Currently, Gram Power brings smart grids to 30 remote areas in rural.
Mera Gao Power (MGP) – builds, owns, and operates micro grids in Uttar Pradesh, India serving off-grid villages with high quality, dependable lighting and mobile phone charging services. MGP’s unique model is able to provide service to a typical hamlet for $1,000, making its lowest cost design the first commercially viable micro grid targeted at the rural poor. The start-up currently serves 150,000 people in 25,000 homes across 1,600 villages in 8 districts of Uttar Pradesh.
Not only poor communities benefit from the offerings of the surveyed clean energy start-ups. Photovoltaic systems and energy management solutions help corporate and public customers to lower their costs of operations and make energy services more reliable.
An example from the Philippines shows how solar energy can significantly cut electricity costs. By generating about 32, 538 to 37, 803 kWh per year, the solar system designed and installed by One Renewable on the roof of Zuellig Building in Metro Manila is providing a major proportion of the electricity required by the office skyscraper. With this system upgrade, the building also became one of the first US LEED approved buildings in the Philippines.
In Myanmar’s Yangon, which is suffering from electricity shortages, a VC-backed Sunlabob is installing rooftop solar systems. Its latest project, a 117 kWp PV system at Junction City will supply clean energy to this mixed development by Shwe Taung Group serving commercial and residential customers. This comes on the top of Sunlabob’s off-grid work in remote areas in South-East Asia and Sub-Saharan Africa.
Another remarkable example from this category is Synergy Efficiency Solutions, a start-up based in Indonesia, which is on a mission to build the country’s energy efficiency market. The new university building of UMN designed by Synergy Efficiency Solutions is using 49% less energy than the Indonesian University standard. UMN has been awarded "Most Energy Efficient New Building" by the Indonesian Ministry of Energy in 2013 and was recognized as "The Most Energy Efficient Building in South East Asia".
Sustainability ranks high on the list
Sustainability ranks second on the list of business solutions explored by clean-tech start-ups in the region. Twenty percent of the enterprises analysed focused their operations on sustainability matters, taking a more holistic approach towards clean-tech. Singapore hosts the largest number of start-ups in this category. While the profiles of the companies are diverse, one start-up stands out for supporting the region’s growing hospitality industry go greener quicker and reach out those in need.
Papayapaths supports hospitality industry in the region to scale up their sustainability efforts. Its H3Rs Giveaways Programme links hotels that wish to donate unused items to organizations, which need them. Hotels increase their recycling capabilities while charities can access them more easily.
Obi Energy is helping large agricultural clients in Indonesia and Malaysia to monetize their waste. The company works end to end to study its clients’ waste generation and identify ways to manage it productively, for example for electricity generation which addressed in parallel the company’s energy needs and improves its environmental impact.
With the introduction of the mandatory sustainability reporting for all listed companies at the Singapore Exchange coming into effect from the financial year ending December 31, 2017 onwards, it is expected that more Singapore start-ups will embrace this line of service offerings.
In the less developed countries of this category, the business models meet the local needs, by providing practical solutions within the sustainability space. From bio-products for agriculture and fishery over lighting, water purification products and refrigeration systems and up to sustainable furniture manufacturing, the palette of products and services is wide and addresses underdeveloped areas of the respective societies. Some business examples are highlighted in the table below.
Agtech – next big opportunity?
While agriculture accounts for the principal economic activity in all surveyed countries except Singapore, this aspect is not reflected in the business focus of local start-ups. Only 10% of them address challenges in the agriculture sector and work on sustainable farming. The latest global investment report of AgFunder – an online investment platform for agri-food technologies – or agtech – pointed to a decrease in total global investments in this sector and despite enthusiasm from previous year regarding Southeast Asia, maintained its positions that the regional agriculture is under-funded.
New initiative are emerging to support this specific ecosystem. The Centre for Innovation Incubation and Entrepreneurship (CIIE) of the Indian Institute of Management Ahmedabad business school was one of India’s First AgTech Accelerator. At their launch in 2015, 200 start-ups applied to enroll in CIIE’s three-month accelerator programme. Only eight start-ups, which presented businesses ranging from farm mechanization and ICT for agriculture to food processing technologies and urban farming, succeeded to secure a spot in the programme.
Arise – Launch Pad for Agri-Startups is another example of this type. Under the umbrella of the Indian Agricultural Research Institute, Arise is an initiative aligned with the Government of India policy of "Start-Up India" and "Skill India". The accelerator was launched in the second half of 2016 and aims to provide a platform for budding agripreneurs to provide innovative solutions to today's market needs. Arise would identify young entrepreneurs and ideas at various stages of their development – Ideation / Prototype development / Expansion stage – and provide the much-needed mentoring support and industry exposure to develop a viable business proposition.
With more success stories in India, perhaps the ag-tech trend will spread beyond borders, reaching countries in Southeast-Asia and becoming the envisioned b(l)oom in the clean-tech field.
What we have learnt about cleantech start-ups?
Cleantech could bring solutions to some of the region’s most daunting challenges: Bringing electricity to communities without it, building sustainability solutions for commercial and industrial customers and improving the region’s agricultural systems.
The companies that have so far succeeded, have few things in common:
1. They have all had significant presence in the field working with the local communities. MLinda Foundation for example implemented more than 300 projects before designing its new business models centred on mini-grids and engagement with women groups.
2. They have partnered with powerful player with the capacity to bring in capital, scale and advise on accelerating the roll-out. For some organisations, this was a power co-founder with the right connections, for others a supportive industry association that opened doors to cheaper capital.
3. Serving bottom of the pyramid is a medium to long-term game where investors’ expectations must be mitigated. For example, the energy access with off-grid renewable solutions can pull off 10 to 15% return on investment while investors may expect 20% and higher.
Please contact us if you want to have more information about our clean-tech start-ups database for ASEAN, India & Bangladesh, suggest your business to be included or simply partner to promote cleantech in the region. You can reach our team at firstname.lastname@example.org
Table: Sustainability-focused start-ups (examples)