Husk Power Systems (HPS): energy for everyone?
India still has over 480 million citizens (more than 44% of the population) without access to reliable power. The Indian government designated up to 18,000 villages as “economically impossible” to reach via conventional means.
One company set up to try to bridge this electricity access gap by unconventional means was Husk Power Systems (HPS). Their technology solution and business approach are profiled below.
The usual caveats apply: HPS are not the only company to be targeting these markets or utilising small-scale biomass (and now solar) solutions. When it comes to some of the numbers quoted (customer numbers, prices and so on), they can be reported differently in different sources and can quickly date – so it’s always worth checking for new information, if their absolute accuracy is critically important to you.
HPS in a nutshell
HPS was founded in India in 2008. Targeting rural households without access to electricity, or limited to expensive diesel-generated supply, it started by developing electricity generation using biomass waste, such as rice husks, straws, and other crop straws. The average monthly household income in their target communities – including states such as Bihar, Uttar Pradesh, Orissa and Jharkhand – is around US$50-100.
HPS designs end-to-end solutions by installing mini-power plants and operating mini/micro-grids and smart metering to deliver electricity on a pay-for-use service basis. It started out by acting as an electricity supplier to the communities it served. As it has scaled, it has also built and then sold systems to third-party owner/operators.
In its first five years, HPS reached 10,000 customers. By now, it has provided electricity to 15,000 homes and businesses in rural India and Tanzania and aims to provide a total of 30MW of power to 225,000 customers by 2020.
Since 2014, it started integrating PV generation with biomass (utilising solar power by day, then biomass at night).
The company’s initial vision was to provide people with an affordable service whereby they can light their houses and switch from kerosene lanterns to fluorescent lamps (avoiding fire and carbon monoxide hazards). For examples, by April 2017 HPS was running in 300 villages in Bihar and had saved over 9 million litres of kerosene.
Beyond energy substitution and access, they also aim for communities to be able to generate incomes by starting up businesses running small electrically-operated machines, by supplying the biomass fuel or by running and maintaining the systems. In short, their vision is to drive the wider benefits of economic activity that electricity provides, not just provide the electricity.
HPS has set up a training institute called Husk Power University to help train power plant entrepreneurs and technicians. As well as providing another major social benefit through up-skilling, this has also been important to enable the business to scale. Each power plant requires a local operator, electrician, fuel handler and fee collector to run operations and solve on-site problems. Without providing their own training, HPS would find a shortage of skilled workers in rural areas to be a major barrier.
Technology: a typical HPS system
The power plants are typically 25-100kW in size. An average plant providing 40kW of power provides enough electricity to illuminate about 500 homes (in three to four adjacent villages).
Biomass is used as a fuel because of its availability in farming communities: in particular, waste biomass such as rice husks, that would be otherwise discarded.
A key part of HPS’s strategy has been to engineer power plants that are simple to operate and repair. It means they can be run by local residents, who aren’t likely to have engineering backgrounds. So, while many start-ups focus on perfecting a new technology, HPS chose “biomass gasification”: a technology used since World War II.
The gasification of biomass takes place in four stages:
- Drying, where water vapour is driven off.
- Pyrolysis, where, as the temperature increases, the biomass decomposes into volatile and other gases, carbon (termed “char”) and tar.
- Reduction, where released water vapour reacts with the carbon, to producing hydrogen, carbon monoxide and methane. Released carbon dioxide also reacts with the carbon to produce more carbon monoxide.
- Combustion, where some of the char and other organic chemicals burn with oxygen to produce heat. This heat feeds back into enabling the other stages of the gasification to take place.
As an end result, a mixture of gases known as ‘producer gas’ or ‘wood gas’ is produced: hydrogen, carbon monoxide and methane. It is this gas mix that can provide the energy to drive a generator; even though its energy density is relatively low (about 4MJ per kg) compared to natural gas (methane: at 50MJ per kg). The producer gas also entrains particles of char and ash, as well as tars. It is filtered to remove the particulates and cooled to below 100°C to condense the tars, before it can be used in an engine.
HPS use what is known as a downdraft gasifier, whereby air is drawn downwards through the biomass. The main reactions occur in a constriction in the gasifier, where the tars and volatile gases break down into carbon monoxide and hydrogen at high temperatures.
Gasification needn’t be high-tech, sometimes simpler is better (image source: Acumen)
Converting biomass such as rice husks to electricity poses a problem: they have a high tar content, which means that they clog the engines (generator sets) that are used to burn the producer gas. To ensure that the engines remain clean means that operations need to be regular and mostly manual, with little of the technological complexity of other gasification systems.
Similarly, the gas needs to be maintained at a certain pressure and temperature. Rather than using hi-tech feedback systems which automatically adjust the conditions, which would be tricky to fix by a non-engineering villager, HPS plants are manually monitored and adjusted.
It’s worth noting that rice husk powered biomass gasifiers have been in use for a long time but – because of the tar issue – almost all previous systems have used the producer gas from the gasifier mixed with diesel (about 50-60% gas to 40-50% diesel). Through their manual maintenance process plus some other changes to the engine, HPS was one of the first companies to produce electricity using 100% gas (so completely removing the need for expensive diesel).
Distribution networks consist of insulated wires strung from bamboo poles. A typical single plant can serve two to four villages — approximately 500 households — within a radius of 1.5km (depending on size and population).
As well as their strategy of simplification and manual maintenance, HPS quickly decided that it could reach more people by building small plants in a decentralised manner, rather than try to build a few larger ones. Both approaches were disruptive to rural electricity access.
Among other innovations that HPS have pioneered is the removal of water usage from the gasification process.
Water has usually been used in gasification for gas scrubbing: cooling and cleaning the producer gas. However, deciding this was an unnecessary waste of clean water in locations where this might be limited, HPS designed a new plate-heat exchanger process. By 2016, while India’s gasification industry continued to use water for scrubbing, Husk was using a totally waterless process.
Finally, other innovations have included cloud-based monitoring systems, low-voltage transformers and the development of a smart meter costing less than US$8. The latter, able to detect current levels of few milliampere (mA) reliably, allowed them to cut down electricity theft to below 5%. In Bihar, the state where HPS started operating, theft from the conventional grid can be as high as 50% (and averages around 30% in India as a whole).
Although designed as “off-grid” systems, it’s important to note that HPS microgrids are not inherently incompatible with the wider grid: indeed, the company has already tested grid interoperability at the sub-station level in India.
24-hour power: hybrid solar/biomass
Husk claimed to be the first company in the world to offer 100% renewable energy by combining solar PV with biomass gasification systems, for 24/7 AC power. As well as for households, they aimed it at a range of small commercial customers from welding shops to rice and flour mills, or for the operation of mobile telecom towers. In addition, essential services, such as water, healthcare and education, are amongst those they hope will be enabled by such systems.
Between 2008 and 2012, customers seemed satisfied with 6-8 hours of power at night, as provided by the biomass-only initial systems. Then, in 2012-2013, HPS started noticing a shift in their customer’s aspirations.
Firstly, they saw a doubling of demand for power from customers in just a nine-month period. Secondly, and in particular, a large percentage of customers had begun aspiring for home appliances, such as refrigerators and TVs – and to use them when they liked. Power needed to be AC, so that appliances could be bought off-the-shelf. At the same time, the cost of solar PV had reduced considerably since HPS’s initial launch.
The solar/biomass hybrid system has been offered since 2014 and takes about a week to install. The reliability of the systems was tested to see if it could maintain a regular power supply for 20+ hours a day (including during flooding of some sites in the summer of 2016). The system’s usage is based on prices that vary depending on the time of the day. Surge pricing comes in after 10 pm.
The system has seen deployment both in India and in East Africa. An example of the latter is a collaboration between the Sustainable Energy Services Company Limited (SESCOM), a subsidiary of TaTEDO (Tanzania Traditional Energy Development Organisation) and HPS’s Tanzanian company, to install a 20 kW gasifier and 20 kW solar hybrid system at Kibindu village, in the Coast Region.
Although the number of sites at time of writing is only around 100 or so, HPS hope to reach 1,500 sites across India and East Africa within five years, serving some 3.25 million people. Beyond that, 5,000 sites within ten years’ time.
Within one year of deploying the hybrid systems in India, commercial customers, on an aggregate basis, doubled their energy consumption (when measured across all the operating hybrid sites). That indicates a significant level of latent, previously unmet demand.
source: Shell Foundation, one of HPS’s long-serving partners (shellfoundation.org)
The business approach (and some numbers)
It is important to note that over the years HPS have continued to develop innovations to lower their system costs. Although specific numbers are not publicly available, and vary according to customisations required for different locations, one source suggested (a couple of years prior to this write-up) a typical price of around US$20,000 for a 32kW system.
At the same time, a member of HPS’s management team was quoted as saying that each plant generates enough cash to be operationally profitable within its first three months of operation. With three employees to support the day-to-day operations of a plant, each would have an EBITDA margin of around 40%. It would take three to four years to recoup capital expenditures, depending on whether (and how much) government subsidy was received. (Indian government subsidies available for rural electrification can cover up to 50% of the total project cost).
A group of 5-6 plants constitute a cluster, requiring a manager and an accountant for maintaining operations and books. A group of 10 clusters forms a region, managed by a Regional Manager, Accountant and HR manager.
In terms of revenues, households and businesses pay monthly. The sale of char-based products such as incense sticks and bricks provide additional income.
HPS also underwent a CDM certification process in 2012, hoping to generate approximately US$1200 per plant each year.
Added together, non-energy revenue streams could potentially add up to 50–60% to the total margins of each plant.
From a customer’s perspective, the savings (and convenience) were large. Before HPS provided power, users paid on an average of US$0.15 every time they charged their mobile phone and had to travel as much as 15-20 kms to get that done. After the installation of a village microgrid, they could charge their phone multiple times and light two 15W compact fluorescent lights for a month (8 hours a day) for the same overall expenditure – and less travelling.
Unusually for an electricity supplier, HPS charge customers based on kW (maximum load) rather than kWh. The aim is to better compare customer spending on electricity with the expenditure they were making on kerosene. In India, every household pays a flat rate of around US$0.73 per month per 15W compact fluorescent lamp (CFL). Small businesses and shops pay a rate of US$1 per CFL. Households that want to operate additional appliances, such as fans or televisions, are charged according to the wattage of those appliances.
In its home state of Bihar, it was estimated (back in 2011, a few years after launch) that the average annual energy expenditure of each household for villagers using kerosene lanterns was US$38, whereas HPS customers paid closer to US$21 (a saving of 45%). This in addition to the economic opportunities created for power plant owners, operating partners and staff (operators, husk loaders, collectors, electricians and mechanics). For example, for farmers, HPS plants offer competitive prices for husks year-round, approximately $0.02–0.03 per kilogram.
In terms of business model, HPS has taken two approaches.
One is to build, own, operate and maintain the power generation and distribution system, with revenues coming from subscriber fees. The other is a franchise model. HPS build and maintain, selling the system to an independent owner-operator who becomes responsible for all costs and entitled to all revenues. Staff training is included in the purchase price and maintenance and repair provided on a fee-for-service basis. For a share of the revenues, HPS will also facilitate marketing of rice husk ash and obtaining carbon credits.
The second model is more suited to scaling up.
In terms of investment, in 2008 HPS initially received grant funding ($250,000) and technical assistance from the Shell Foundation, which continues to be a strategic partner assisting the company with research and development, management information systems, and training infrastructure. It has since attracted equity financing in various rounds from so-called “impact investors”; interested in social as well as financial returns – companies like Acumen Fund, Bamboo Finance, OPIC and First Solar. In 2010, IFC invested US$350,000 in convertible “quasi-equity”. The IFC’s role was in bridging the investment gap to commercial (debt) financing, for whom the off-grid power sector was (and often still is) considered too risky.
As it continues to grow, it continues to seek investment. Most recently, in May 2017, it announced that it was looking at raising $25 million of equity and $35 million of debt by the end of 2017. European utilities were being tapped as the source of this investment.
Last updated: November 2017