Shell Technology Ventures Leads $20 Million Investment in Minigrid Specialist Husk

Shell Technology Ventures has led a $20 million funding round for Husk Power Systems, a rural distributed utility company operating minigrids in Asia and Africa.

The equity investment, which is subject to regulatory approval, also saw participation from Swedfund International, a Swedish development finance institution, and Engie Rassembleurs d’Energies, Engie Group’s impact investment fund.

It is believed to be the largest cash injection so far for a minigrid developer. Rival Powerhive raised a similar amount of cash in 2016, including from Total. 

With a presence in India and Tanzania, Husk claims to offer one of the world’s lowest-cost hybrid power plant and distribution networks.

It has developed a proprietary system that combines and synchronizes solar PV with biomass gasification and batteries to deliver round-the-clock power.

The energy is sold on a pay-as-you-go basis via a mobile-enabled smart metering system and is said to be up to 30 percent cheaper than traditional alternatives, such as diesel generation.

Husk, which was established in 2008, is expecting to deploy 300 minigrids in India and Tanzania over the next four years. The build-out will cover 100,000 customers and 15 megawatts of renewable generation, potentially eliminating 56 million liters of diesel per year. 

In a press release, Husk CEO and co-founder Manoj Sinha said: “We are now confident of achieving our vision of becoming the world’s largest rural utility company providing 24/7, 100 percent renewable and affordable power to drive inclusive and sustainable development."

"We believe that minigrids are the most capital-efficient way to help reach 100 percent national electrification goals.”

Husk first started building minigrids in the Indian state of Bihar, where 80 percent of the 90 million people living there lack reliable power.

The company used its biomass gasification process to generate electricity from rice husks and notched up 10,000 customers in five years, before adding PV and batteries into its minigrid mix in 2015. 

Shell has backed Husk from the beginning, likely attracted by the startup’s gasification technology potential, which attracted accolades from Cisco and Draper Fisher Jurvetson in 2009 and an Ashden Award for sustainable energy in 2011.

The oil major’s support for Husk was originally through the Shell Foundation, a registered charity.

“Over the last couple of years, we’ve seen a lot of traditional energy companies taking a second look at these types of distributed energy solutions, and deciding they are a strategic opportunity,” said William Brent, communications director at Power for All, an advocacy group.

The Husk investment was something of a watershed for an industry that has so far tended only to attract modest levels of private-sector funding, he said.

Minigrid development historically has centered on India and sub-Saharan Africa, but project funding has been sluggish because of poor perception of the profitability of projects.

As minigrid and microgrid concepts become more established, though, there is growing interest among corporate investors to break into a market that could be worth up to $39 billion by 2022. Globally, minigrids could help bring electricity to around 1 billion people.

“We are at a turning point for minigrids,” said Brent. “We’re seeing bigger-ticket players coming into the market. One data point doesn’t make a turning point, but now you are seeing multiple data points.”

Previous corporate investments in minigrid project development have included Mitsui’s $9.3 million joint venture with OMC Power, unveiled in September last year, plus E.ON’s incubator backing of Rafiki Power and Engie’s Tanzanian startup PowerCorner.

And in April last year, Allotrope Partners, Facebook and Microsoft led the creation of a financing facility called the Microgrid Investment Accelerator, which is looking to pump $50 million into off-grid energy schemes between 2018 and 2020.

In press materials, Shell New Energies vice president of integrated energy solutions Brian Davis said the Husk investment was “an important step for our energy access portfolio.”

He said: “We see Husk as a leading player providing reliable and affordable energy to off-grid and weak-grid communities in India and Africa, and we believe they have a very credible business model.”

Note: This story originally claimed that Total had pulled out of the deal with Powerhive. According to Total, "we have been continuously supporting the company."