Business Models for Energy Entrepreneurship in Emerging Markets

Abstract

Access to electricity produces greater levels of economic value and increases the quality of life in emerging markets across the globe. Emerging economies have surpassed developed nations in clean energy investment and deployment1 , but based on our review of the literature, there is a lack of high-level study on the factors that most affect the success of these businesses. The goal of this project is to identify these success factors, and use them to inform entrepreneurs’ strategic decision-making as well as elucidate the environments in which these ventures have a higher probability of success. By better understanding what drives success in the renewable energy industry, both entrepreneurs and key stakeholders such as policy makers, investors, and interested non-governmental organizations (NGOs) can better prioritize their efforts and investments to drive increased levels of clean energy adoption. This project focuses on clean energy business models in two emerging economies: India and Uganda. These countries have significant differences in levels of access to energy and development of their entrepreneurial landscapes, and therefore, provide a broad scope for analysis. This report presents an overview of existing empirical research on factors that hinder or increase success of business models, identifies potential gaps in this research, and presents analysis based on qualitative, in-country interviews conducted by our team. Based on a comparative analysis between the literature review and interview findings, the team drew conclusions about factors that would benefit from better coordination and investment from industry players. The team also identified aspects of the entrepreneurial experience in developing countries that are strong candidates for further academic research. Throughout the project, entrepreneurs and industry experts (such as the stakeholders above) highlighted several of the key topics identified in existing research, including the challenge of attracting private investment, strategies for revenue collection given limited ability to pay among customers, the effect of domestic energy policy, and the industry’s lack of institutional support, whether it be nonexistent or ineffective small business associations, trade associations, lobbying groups, etc. While it was reassuring to see entrepreneur and stakeholder interviews validate what had been uncovered in the literature review, the key value created by this project was largely the nuance the interviews provided regarding the structural issues that were inhibiting growth for the renewable and clean energy industries, and provide context around how some of these issues were overcome in India and Uganda. Our research questions aimed to understand how entrepreneurs can directly improve their prospects for success and where their efforts require coordination with other partners in the renewable energy value chain or key policymakers. The interviews revealed a clear distinction between the factors that entrepreneurs and industry experts found to be most relevant and important to the success of clean energy entrepreneurs. Factors such as positioning/strategy, company structure, ability to collect revenue, and business model flexibility were by far more relevant for entrepreneurs than industry experts. This understanding of which factors are more directly in entrepreneurs’ control can allow them to prioritize which factors to focus their attention and resources on. In contrast, industry experts regularly mentioned factors that were not top of mind for entrepreneurs in interviews such as domestic energy policy, customer financial resources, and distribution and utility infrastructure. Despite the relative dichotomy between entrepreneurs and industry experts, there was some overlap among what factors the two groups found to be the most important. These factors include

talent attraction and retention, accessibility of private investment, competitive landscape, consumer education and strategic partnerships. The overlapping factors indicate the significance of these challenges, and highlights the potential areas where strategic partnerships would be the most beneficial to foster a healthier entrepreneurial ecosystem. Overall, the interviews raised new issues that were not discussed as in-depth in the literature. For example, the conclusion that there is a lack of product awareness and trust among most consumers, and that regulatory uncertainty of even the most well-intentioned policies can be extremely detrimental. In India, there were difficulties retaining employees. In Uganda, there appears to be a weak pipeline of educated, local talent. These issues demand comprehensive solutions that can only be realized by greater cooperation and coordination between entrepreneurs, industry experts, and policy makers. In sum, the hope is that this research will inform market players of key factors of entrepreneurial success and act as a catalyst for future research. In particular, what factors do entrepreneurs and industry experts see affecting success, where do they see greater opportunities for coordination, and how are the Indian and Ugandan experiences representative of other emerging markets?