When US President-elect Barack Obama announced his energy plan in November, which called for a $150 billion (about Rs7 trillion) investment in clean technologies over 10 years, it was not just clean-technology company executives in the US who were enthused. Indian start-ups welcomed the news, expecting more venture funds to seek investment opportunities here as green consulting comes of age in India. Obama called for aggressive targets for greenhouse gases (GHG), emission reductions and programmes to promote energy efficiency, low carbon biofuels and renewable energies.
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“Globally, the focus on alternative energy by the Obama administration will also catalyse the flow of investments into the sector,” says Ashok Das, co-chairman of the CleanTech Special Interest Group at The Indus Entrepreneurs (TiE) Bangalore chapter, a group that was set up last year to mentor clean technology start-ups.
Even the ongoing global financial crisis is unlikely to prove a deterrent to this growing green agenda, with clean technology being viewed as the vehicle of growth in 2009. India expects to add 15,000MW of electricity to the national grid from renewable energy sources by 2012. “The energy crisis has opened the government’s eyes, and energy security is a prime concern,” says Das.
Way to go: K. Subramanya, CEO, Tata BP Solar India, says that in 25 years, solar power will be the main source of energy. Hemant Mishra / Mint
“It is not just nice to invest in clean technology—it is now a must,” says Mohanjit Jolly, executive director of venture capital fund Draper Fisher Jurvetson India Advisory Services Pvt. Ltd, or DFJ, who says that even as investment slows down in 2009, funds for clean technology will be available.
Toward the end of December, Das moved beyond just mentoring to launch his own start-up, SunMoksha Power Pvt. Ltd, which aims to sell solar energy solutions to businesses and homes across India. “We have already bagged a multi-crore contract to retrofit a solar power solution for a company that retails e-governance solutions,” says Das, who is looking to raise $2 million for the roll-out of the SunMoksha brand. He declined to name the client, citing a confidentiality clause.
“In 2009, roughly half of all DFJ’s investments will be in the clean-tech sector,” says Jolly, who expects to close an investment in a clean-tech company by March end. “I want clean technology to be the single biggest focus area for DFJ in India this year.” This will be the fifth investment in the clean technology sector for DFJ in India.
In November, when AzurePower, Inc., a solar power generation company, received an undisclosed amount of funds from Helion Venture Partners, an India-focused venture capital fund, and Silicon Valley-based Foundation Capital, it was the latest in a series of private-equity deals aimed at the country’s growing clean technology sector.
While a consortium of investors, including CDC Group Plc., Credit Suisse Group and Morgan Stanley Private Equity Asia, or MSPEA, put in Rs411 crore into the solar photovoltaic panel-making subsidiary of Moser Baer India Ltd, in the second half of 2008, venture capital financing company Nexus India Capital is backing Sedemac Mechatronics Pvt. Ltd, a start-up that develops energy efficiency solutions for the automotive and renewable energy sector.
“This is Helion’s first investment in the clean energy and technology space,” says Sanjeev Aggarwal, managing director, Helion Advisors Pvt. Ltd, which manages the India-focused fund with a corpus of $350 million. “The market opportunity for solar energy and the policy impetus from the government combined with Azure’s expertise makes this a compelling investment proposition.”
Eco solutions: B.R. Raghav (left), co-founder and director, InnovLite India, and Sanjeev Keskar, country sales manager, Freescale Semiconductor. Hemant Mishra / Mint
In the third quarter of last year, venture capitalists invested $2.6 billion in 158 clean technology firms across North America, Europe, China and India, of which Indian companies received $6.3 million, according to Cleantech Group Llc., a global research and data firm. Globally, investments in the clean-tech sector are estimated to have touched $6.6 billion at the end of September 2008, up from $6 billion for a full year in 2007. Industry watchers reckon that a tenth of all venture capital investments in India, estimated at $190.9 million in the quarter ended September by Dow Jones VentureSource, was targeted at the clean technology sector. It is a trend that has steadily gained momentum over the past two years. Between 2006 and 2007, investments in clean technology in India more than doubled, growing from $140 million in 2006 to $290 million in 2007, a 107% increase, according to the Cleantech Venture Capital and PE Investment in India report released in April 2008.
Typically, clean technology is an umbrella term that is used to describe the generation of energy through renewable sources, such as solar, wind or biomass, water preservation and agricultural technology, which helps keep the environment clean. Clean technology also aims to produce less toxic and GHG emissions, reduce waste through recycling and enable water purification, sewage treatment, fuel gas treatment and solid waste management.
“Any technical improvement that reduces energy consumption, increases productivity and reduces waste generation is also clean technology,” says Sudipta Das, partner and national leader, climate change and sustainability services, Ernst and Young, the consulting firm.
It is this definition of clean technology that is fast gaining currency in sectors ranging from construction, automobiles, oil and gas, chemicals and fertilizers to the information technology industry.
“The average gap in power demand and supply is 12%, peaking to over 16%—this will drive the necessity to go for renewable energy sources to bridge the power deficit,” says K. Subramanya, chief executive officer, Tata BP Solar India Ltd. By 2032, India’s renewable energy capacity is expected to touch 80GW (1GW equals 1,000MW) that represents a tenth of the country’s total electricity generation capacity.
India’s participation in the Kyoto protocol (which required industrialized countries to reduce carbon dioxide and other GHG emissions) has also spurred demand for carbon credits associated with clean development mechanism, or CDM, projects. “India now accounts for 36% of the CDM projects in Asia, behind China that has 41%,” says N. Yuvaraj Dinesh Babu, chief executive officer of Singapore-based The Carbon Rating Agency.
“As news of carbon credits becoming sources of revenue for a company goes around, this trend will only become stronger,” says Subramanya. This combination of market forces and government policy is driving the green agenda across the Indian industry. “The idea is to create a scenario or risk planning model that can assist a company to inventorize their emissions (energy use), optimize costs of abatement and run alternate scenarios,” says Rajesh Nair, founder and managing director, Ecologix Knowledge Solutions Pvt. Ltd, a Bangalore-based start-up which has built analytical models to help companies and policymakers understand and evaluate the economics of energy and environment linkages.
At Wipro Ltd, the Eco Eye initiative, a comprehensive green policy, aims to convert Wipro into a company with an ecological surplus footprint across areas such as energy, water, waste and biodiversity.
“We are investing in businesses that seek opportunities created by the force of ecology such as green IT, clean energy solutions, water recycling and green lighting,” says Anurag Behar, corporate vice-president, brand and corporate communications, Wipro, and managing director, Wipro Infrastructure Engineering, a division of Wipro. “We are also working in our own way with communities, employees and peers to help them reduce their carbon footprint.”
A step forward: Rajesh Nair, founder and managing director, Ecologix Knowledge Solutions, which has built analytical models to help companies and policymakers understand and evaluate the economics of energy. Hemant Mishra / Mint
Other green players such as HCL Technologies Ltd offer services that help customers reduce the environmental impact of IT products by assessing, planning and implementing initiatives around their data centres. “These services result in cost savings of up to 20-30% in data centre operations, which can help companies deal with the present cost crunch,” says Swapan Johri, senior vice-president, transformation services, HCL Technologies ISD, the infrastructure services division of HCL Technologies.
Collaboration is also emerging as a major factor in green initiatives. For example, electric car maker Reva Electric Car Co. works alongside green-conscious companies in Bangalore to locate charging spots for their vehicles.
“Several software companies are now focusing on sustainable practices for internal processes and introducing green initiatives. Companies such as Wipro offer Reva customers charging spots at their campuses and have their Reva vehicles branded Wipro,” says Chetan Maini, deputy chairman and chief technology officer, Reva Electric Car.
Microchip maker Freescale Semiconductor India Pvt. Ltd has a network of partners to whom it provides technology support to develop products for energy conservation and emission control. “We are also driving an initiative for hybrid vehicles,” says Sanjeev Keskar, country sales manager, Freescale Semiconductor.
In Bangalore, Freescale works with two-year-old start-up InnovLite India Pvt. Ltd that develops low-emission lighting solutions to design products for specific markets. “Solid state lighting (which uses low-emission light emitting diodes) is a clean and efficient lighting technology. It has a perfect fit with solar power generation,” says InnovLite co-founder and director B.R. Raghav.
Renewable energy generation, though, is the biggest segment in the country’s clean-tech industry. Industry pioneer Tata BP Solar, with revenues of Rs910 crore, relies on exports to earn Rs680 crore of this. “By the end of this year, we will have a solar module manufacturing capacity of 125MW,” says Subramanya, who expects domestic demand to sharply rise as the government moves to ensure that 52% of rural households that have no access to electricity currently get access to solar energy. “In 25 years, solar power will be the main source of energy,” says Subramanya.