Decentralized Sustainable Energy Systems For Domestic Lighting In Rural India: An Explorative Study On Revenue Model Types And Components Employed By Indian Renewable Energy Companies

Although researchers have acknowledged the issue of commercial viability previously, it is only recently that they have laid emphasis on addressing the relative importance of commercial viability to catalyze the dissemination of decentralized sustainable energy systems to rural consumers in developing countries. A business enterprise is said to be commercially viable if its revenues are > costs. Here in this thesis these business enterprises or promoters of efforts are called as renewable energy companies (REC’s). Moreover researchers have failed to acknowledge or address the role of revenues even after acknowledging the merits of a market driven approach as opposed to donor driven approach. Given such a high relevance of revenues in a market approach to operate successfully and a lack of focus on the same by researchers, in this thesis we will analyze the practical issue of commercial viability of Indian REC’s through the lens of revenue model, while also addressing the literature gap on revenue drivers or revenue model components by exploring various relevant revenue drivers of commercially viable REC’s. This study takes an exploratory case study approach to enlist all the relevant revenue driver or revenue model components that are relevant for REC’s to attain commercial viability. This thesis primarily consists of three subsequent phases: first phase: theoretical gap identification. Second phase: identification of types and components of a revenue model and third phase: building a revenue driver – commercial viability framework. The aim of the first phase was to narrow in on the literate gap and also present relevant background literature. The first phase yielded the literature gap on revenue model components in addressing the practical issue of commercial viability. The aim of the second phase was to identify revenue model types and components. The result of which was that two types of revenue models namely: ownership and service revenue models was discovered. Most importantly six potential revenue drivers were also discovered. They are: consumer trust, pricing strategy, willingness to pay, flexibility of payments, number of users and revenue sharing. These six revenue drivers were derived on the premise that they would increase revenues such that REC’s attain commercial viability. This made up our initial conceptual model. Next, the aim of the third phase was to build a framework on revenue drivers or revenue model components – commercial viability of Indian REC’s. In order to do so firstly we analyzed cases where the initial conceptual model is leveraged into a more relevant context of Indian REC’s. The case studies were based on SIMPA Networks, Onergy, Rural Spark and MeraGao Power (MGP). All of these cases primarily are Indian companies exclusively catering to the Indian rural market otherwise also known as REC’s or Indian REC’s. The results of this section yielded us a relevant set of 12 revenue drivers i.e. six more in comparison to the initial set of 6 revenue drivers. They are consumer trust, supplier trust, pricing strategies, willingness to pay, flexibility of payments, number of users, revenue sharing, consumer financing, size of payments, service customization, after sales service/maintenance and discounts. Secondly, a cross case analysis was performed wherein findings from each case are pitched against each other to find the similarities and differences. The result of this section was firstly that, any sort of generalizations based on the type of revenue models was hard to come by and most importantly the type of revenue model only signified its affect on the source of financing and could play no role in explaining how and why commercial viability was being achieved. Moreover it also led to an inference that service revenue model poses more risk than ownership revenue model but however commercial viability was achieved by adopting both types of revenue model, which was quite the contrary to the outcome of literature survey. Secondly, list of revenue drivers was further narrowed to 10 from the previous list of 12. Basically willingness to pay was eliminated because it was already being considered in pricing strategies and number of users was also removed because it affected the commercial viability of REC’s in terms of both costs and revenues whereas the others only impacted only revenues. The final set of relevant revenue drivers are: consumer trust, supplier trust, pricing strategies, flexibility of payments, size of payments, revenue sharing, consumer financing, service customization, after sales service/maintenance and discounts. Lastly, a set of three factors was identified that actually contributed to the increase in revenues such that revenues were > costs. Or in other words served as a link between revenue drivers and commercial viability. They are namely: rate of adoption, recoupment of costs (regular payments) and retention. It is these afore mentioned revenue drivers that impact the three factors, which subsequently drive or increase revenues such that commercial viability can be attained. The ownership revenue model primarily derives its revenues from only the adoption factor, which subsequently brings in revenues to attain commercial viability. That said the adoption of DSE’s by the rural consumers is contingent or dependent on revenue drivers like consumer financing and size of payments among others. The revenues of REC’s employing service revenue model primarily depended on all the three factors like rate of adoption, recoupment of costs and retention. More specifically the revenue drivers should be conducive to rural customers such that they firstly adopt the product and/or service and most importantly make regular payments, which translates to revenues while retaining the existing customers. Moreover the retention factor only applies to REC’s that adopt a service revenue model with only a service platform like MGP unlike other REC’s, which adopt a only a product platform like Onergy or both product and service platform like in the case of SIMPA and Rural spark. In the backdrop of afore mentioned scientific implications several managerial implications can also be derived. Among many the key take away for incumbent managers and future potential entrants will be to look at each of the revenue drivers and adopt them carefully such that commercial viability can be attained contingent on the his/her appetite for risk and most of all focus less on the type of revenue model because that is not going to help achieve commercial viability. Future research should be aimed at firstly developing a more elaborate revenue driver- commercial viability framework. After which each of the revenue driver’s true affects on each of the factors should be quantitatively determined. This further helps to gain greater generalizability. That said the key limitation of this thesis is that it focuses only on one country i.e. India among other developing countries.