114 N. KONO ET AL.
inexpensive investments relative to those required for the main grid. In con-
junction with smart grid devices, microgrids may be better able to deliver
electricity to specifi c urban areas of developing countries while providing
utility companies and investors with opportunities to control technical and
non-technical losses in T&D.
There are certainly barriers to fi nancing microgrids in slum areas.
Investments in such challenging areas may require not only high social
motivation but also skilful strategies for ensuring returns on investments.
The collection of funds from slum dwellers can prove to be a particularly
diffi cult task for microgrid investors, as slum dwellers’ willingness to pay
may constitute a critical barrier. In rural areas, residents typically exhibit a
strong sense of residential solidarity, regardless of their income status. In
slums, however, residents view their dwellings as temporary, particularly
with respect to unidentifi ed slums and squatter settlements. Thus, it is
very diffi cult to expect such individuals to invest in upfront costs for long-
term facilities. The legal status of slum dwellers has been recognized as a
major issue, and allowing such individuals to secure tenure status (whether
permanent or temporary) is recommended to secure their access to cleaner
energy sources. In addition to offering them tenure status, it may be possi-
ble to reduce initial cost burdens through instalment payments. Suppliers
must reach out to poor customers, thereby breeding trust, including them
as part of a business portfolio, and encouraging them to make legal con-
nections (Dhingra et al. 2008 ).
It is diffi cult to expect existing utilities to overtake the microgrid busi-
ness. It has been well documented that the Indian government adopted
the Electricity Act in 2003, which introduced signifi cant changes to
the country’s industrial electricity structure. The act was developed in
response to a number of challenges facing the Indian electricity indus-
try. In India, the electricity industry had been dominated for decades
by State Electricity Boards (SEBs), which are vertically integrated
monopolies. The SEBs are experiencing severe fi nancial diffi culties and
even lack the funds required to invest in the maintenance of existing
infrastructure (Bhattacharyya 2005 ; Dubash and Rao 2008 ; Joseph,
2010 ). Investments in new microgrids installed in high-risk areas would
extend beyond their fi nancial capabilities. New energy and electricity
entities with viable fi nancial capacities are required for investments in
microgrids for the poor.
Microgrids may fi nd a better partner through social entrepreneurship.
Social entrepreneurship is a process whereby the creation of new business