Cleantech Forum Delhi: Solve India’s problems, and you can solve the world’s

Cleantech Forum XXIV happened in Delhi last week. Nick Parker, in his opening remarks, said “Solve India’s problems, and you can solve problems for another 2 billion people of the world.” That to me signifies the economic promise that cleantech holds for India.

Below are key takeways I gleaned from the event’s keynote speeches, panel discussions, entrepreneurs’ pitches, and networking breaks. Time permitting I will post more detail later.

Cleantech investment in India will overwhelmingly focus on bringing existing technologies to the Indian markets. Innovations involved, if any, can be classified as technology modifications, aggregating multiple technologies or business model innovation. Fundamental technology innovation remains rare, even in large companies. Only one India-based company presenting at the event, Carbon Clean Solutions, was based on technology innovation.

Large scale power generation and industrial/commercial energy efficiency dominate. Many 10-50MW solar power plants are being funded, supported by central and state governments intent on building up solar demand in large chunks. The CDM mechanism has provided additional revenue streams for both renewable energy and energy efficiency projects.

Green buildings (and related technologies), rural/decentralized power, and waste-to-resources (including energy, water and valued materials) are gaining momentum. GreenSpaces, Rehact, Barefoot Power, Sustainable Energy Solutions Afghanistan and Genesyst Ecotechnologies that presented at the conference fall in these categories.

Water, though acknowledged as a huge challenge, remains a hard nut to crack, for entrepreneurs and investors. (If you know of a company making money doing rain-water harvesting, give me a shout!!) WaterHealth’s CEO was at the event, but no other sustained success story comes to my mind in terms of providing decentralized drinking water solutions to rural poor.

Agriculture, a leading consumer of energy and water, is a sector that needs innovation in many pre- and post-harvest areas. But small farm size and counter-productive (and politically untouchable) government incentives remain key impediments. Incidentally, an India company Jain Irrigation made the Global Cleantech 100 list chosen from 60,000 companies worldwide. Representing the company at the event was Dr. D. N. Kulkarni, president “Sustainable Agriculture for Small Holders.”

“Lot of ‘dry powder’ is looking for investment opportunities” said several investors representing VC/PE firms at the event. But don’t expect a flurry of deals. Patience and pragmatism were in no short supply among those I talked with, given that global markets are just emerging from a severe cash crunch.

Global entrepreneurs are beginning to look for capital and strategic partners in India. Six of the eleven companies that presented at the event were based outside of India. While the Cleantech Group should certainly take credit for bringing them to Delhi, I think it does show that entrepreneurs now see India’s value both as a market and source of capital. The ones I talked with understood the importance of local strategic partners and connections to succeed in India.

India’s solar industry eyes huge rural opportunity

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I was at ICORE 2009, a renewable energy conference organized by Solar Energy Society of India (SESI). This year’s focus: Renewable Energy for Rural Development.  

I heard industry leaders talk passionately about potential for solar to truly bring electricity to rural communities and catalyze grassroots social and economic development. Plenty of discussion circled around industry’s demand for adequate support, recognition of its potential, “leveling the playing field”  and inclusion on policy discussions. Overall, the energetic conversaion between industry and government reps was indicative of an evolving sector keen not to miss growth opportunities during a time that many see as the inflection point.

The following observations are not new, but are notable because they were made by industry representatives and collectively signal that India’s solar players “get it.”

1. There are more villages and rural population without electricity or access to quality electricity than government statistics let on. The need is such that the entire “20 GW by 2020” goal could be met by rural systems and hardly make a dent in demand. We need more aggressive goals.

2. Decentralized solar can more cost effectively make a difference than centralized multi-MW solar power plants because of the grid’s poor quality. Transmission losses are as high as 50-60% in some states where the need for rural power is greatest.

3. Government’s policy framework should recognize the above facts and incentivise rural electrification via decentralized solar deployment accordingly. Today it does not.

The hot button issue of the event clearly was about how central government should support both manufacturing and usage (including rural) of PV and solar thermal. The lively conversation between MNRE (Ministry of New and Renewable Energy) representatives and industry leaders bordered on an open negotiation.

The following were the broad themes in this regard.

1. Comparison with conventional energy sources, especially coal: It is wrong to compare solar with coal simply on upfront costs alone. Costs associated with fuel (coal), operation & maintenance, grid losses and cost of grid need to be accounted for. MNRE’s response was mixed. While acknowledging the need to devise “apples to apples” comparison, they maintained solar is costly and that their goal is to reduce costs for the consumer.

2. Consistent support for on-grid & off-grid solar power generation: Given the poor quality of the grid and significant hours in a day when the grid is “down,” government should provide consistent tarriff for solar energy produced & used irrespective of grid connection. MNRE’s reps were amenable to the idea and said this may require a certification mechanism via independent 3rd party entities that are able to verify useful electricity produced from distributed power generation.

3. Support for Indian manufacturers to compete, especially with Chinese manufacturers: Industry reps feel Indian goverment needs to do more to “level the playing field” for them to compete with Chinese companies, which apparently receive free land and very cheap capital from China’s government. MNRE reps gave a sneak peek into November announcements stating that “generous” support is on its way.

4. Anti-dumping / quality laws: As PV prices tumble, manufacturers are feeling the pinch. Some industry reps clearly were enraged by what they called “low quality, low cost” products entering India. MNRE indicated new quality certification programs will help here, but ultimately consumer should remain the decision maker.

Both MNRE directors and SESI officers repeatedly referred to an upcoming MNRE policy/tarrif announcement expected around November 15, 2009.  I can’t wait to see its details!

In the next couple of posts, I will focus on the most interesting speakers/conversations of the event from my perspective.

Selling Solar in India

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Selling Solar is the title of a new book by Damian Miller, an entrepreneur who built successful businesses selling solar energy systems to consumers in developing nations like India and Sri Lanka.

Coincidentally,  Selling Solar was also the title of a pioneering report published fifteen years ago by the Rockefeller Brothers Fund. It explored how projects such as those of then newly formed SELF (Solar Electric Light Fund) in India and Sri Lanka could be scaled up dramatically to provide widespread affordable power in developing nations. In fifteen pages, it highlighted the need for innovative and accessible financing mechanisms.

SELF was founded by Neville Williams, who co-founded SELCO-India with Harish Hande around 1994. Today SELCO is widely feted and Harish has won numerous accolades over the years and finally entered the mainstream media’s consciousness this year when Financial Times recognized him with the Arcelor Mittal “Boldness in Business” award this year.

It wasn’t easy for Harish. Especially during the initial years when he needed to find organizations willing to partner in enabling a business model based on innovative financing and linkages. Even recent years have been challenging. They were the same years photovoltaic manufacturers industry as a whole enjoyed a resurgence. I talked with Harish in early 2006 as part of a study for the BoP Lab when I was at Cornell’s Johnson School. He lamented how European subsidies pushed photovoltaic prices beyond the reach of people who really needed it and were using the technology well before . Ironic, I thought. He also expressed frustration at how many bilateral and multilateral organizations that try to help don’t understand how important the financial innovation and linkages are.

But three years hence, things are looking up. For his customers, that is. With the fall of photovoltaic prices and recognition of the vast rural and sub-urban markets under-served by grid power, there is a huge interest from entrepreneurs and investors in “distributed power generation.” Solar technologies are at the center.

In his book, Selling Solar, Damian Miller uses diffusion theory to explain the spread of solar in developing world, and credits entrepreneurs like Harish Hande for driving technology innovation and policy along with market penetration. His company Orb Energy, backed by London based Zouk Ventures, entered India in 2006 and has field offices in Andhra Pradesh, Karnataka, Kerala and Maharshtra.

Venture backed activity has definitely picked up. Venture East funded Hyderabad Intelizon founded by Kushant Uppal an entrepreneur from Silicon Valley. Meanwhile, Idealab – the California company credited with pioneering the incubator model – is backing Ahmedabad based Distribute World Power.  So SELCO, operating in Karnataka and Gujarat, has competition now!! SELCO itself has gotten an infusion of new capital from Good Energies and Lemelson Foundation, both non-Indian entities.

Finally the floodgates seem to have opened.  Are we at the tipping point? I think so.

How many years before every child in every village and slum has a bright light to study by without breathing in noxious kerosene fumes? Hopefully, that day will be here soon with many more entrepreneurs and companies selling solar.

Let there be light!

By the Numbers: Jatropha

Just want to draw your attention to the new page on this blog “BY THE NUMBERS” (see title bar) I come across a lot of statistics/numbers related to cleantech while researching for my blogs. Instead of losing them, I thought it isn’t a bad idea to park them on separate page.

The first set of numbers compares Jatropha oil yield per hectare to other crops. Check it out.

Can the Poor Afford Cleantech?

That’s a question I get often from friends and family in India and the US. “We need to feed our masses and eradicate poverty before we can worry about the environment,” the logic goes. That there must be a trade-off between the economy and the environment is the entrenched public and political opinion in India.

On the surface, there appears to be plenty of evidence to support this view: Solar costs aren’t at grid parity yet. LED and fluorescent lamps cost way more than incandescent bulbs. The poor will never pay for water, leave alone the latest purification technologies. And the fact that electricity and water are both government-controlled utilities makes matters worse with red tape and inefficiency.

My response to this usually involves two examples: SELCO India and WaterHealth International. SELCO has been bringing photovoltaics to the poorest customers for more than 10 years now, while thousands of villagers are paying for water purified by WaterHealth’s technology.

How? Well, the secret sauce in their success, other than of course the extraordinary commitment of their leadership, is what Stu Hart terms “radical transactiveness.” To put simply, radical transactiveness is to dive deep into your customers’ experience, often with stakeholders other than just the company, to co-create/evolve a business model that works for the customers at the “base of the economic pyramid”(aka BOP).

SELCO recognized that its customers had no access to grid and were instead heavily reliant on kerosene! He recognized that with the appropriate microfinancing mechanism, daily payments toward a solar home system cost his customers less than what they shelled out for kerosene. The improved quality of light and air also enabled additional income generation and healthcare cost avoidance. (Click here for an awesome first hand account of how SELCO works by Raj Melville)

“Grid parity” simply does not matter to the approximately 100,000 villages of India that aren’t yet connected to the grid! Even in urban India, the cost of backup power generation from diesel or petrol must be accounted for to draw a fair comparison in many cases. (See article regarding India’s dependence on liquid fossil fuels for backup power generation.)

WaterHealth did not create a home purification system for the poor. Instead they discovered by engaging local communities and NGOs, that even the poorest were willing to “pay per use” via a community-level water purification system. The source of water itself does not change from before the project.

At 1 Rupee for 15 litres, 60% to 80% of total village population uses WaterHealth’s facilities. Turns out the poor will indeed pay for basic necessities such as clean water. Villagers reported improved health and ability to work for a living.

Any venture capitalist or entrepreneur will tell you that a superior technology does not ensure market success. That’s true for cleantech as well. I am not down playing the difficulty of introducing new technologies in the BOP market. But it’s not the technology’s fault if the business model imposed is inappropriate.

The poor certainly can afford cleantech. And as the examples above prove, often they stand to benefit the most from clean technologies.

Punjab to Invest 51 bn Rupees (US$1.2 bn) in Renewable Energy by 2012

Punjab Energy Development Agency (PEDA) has recently announced it plans to invest 51 billion rupees in renewable energy by 2012. PEDA has set a goal to generate from renewable sources 10% of total energy generated in the state by then.

(For readers unfamiliar with India’s geography, Punjab is a state in north India bordering Pakistan. Economically, it’s one of the most advanced states in India with thriving agriculture and industry.)

This announcement has followed several aggressive moves by Punjab in recent months. Among them were 21 MOU’s for 250MW of “Mini” hydro-power projects (most recently with TOSS Hydro for a 20MW project).

PEDA has already invited proposals for 100MW of grid-connected solar power, and has chosen Moser Baer, PQES Inc, India Bulls Electricity and Azure Power for project(s) making up 17MW of that with a 30 year PPA. According to Bikram Singh Majithia, Punjab’s Minister for Science, Technology and Information, the agency will soon seek proposals for large-scale solar thermal plants.

In case you were wondering, Punjab’s definitely pursuing biomass too as part of its ambitious goals. And it’s no surprise for a state at the forefront of India’s agriculture sector. Agreements are already in place for 338MW of biomass power projects according to New Energy Finance. EnviTech (a German contractor) has a 30MW piece of that pie with GE supplying its Jenbacher biogas engines for the project. It’s not clear if the 147MW projects granted to Mumbai based Green Planet Energy Pvt Ltd are included in that 338MW.

No – PEDA has not left out wind energy either. In December last year (2007) it signed a MoU with Suzlon for 100MW of wind energy projects in the state.

So all these solar, biomass, wind and hydro projects added up to approximately 780 MW to 930 MW (based on whether some of these agreements are couched within other announcements or not). Based on Punjab’s announced goals of 1500MW from “non-conventional” energy, there are 700-600MW projects either yet to be granted, or I haven’t done my homework. Either way, Punjab is clearly setting a great example for other states in India to follow. Punjab’s neighboring states – Haryana and Rajasthan – have been just as aggressive. Stay tuned for more on them in upcoming posts.

India’s Moser Baer – a solar energy giant in making

Moser Baer Photo Voltaic’s current capacity is at 40MW and the company recently announced it’s aiming for 600MW by 2010. That’s a fifteen-fold increase in capacity! If you have been following solar production capacity announcements over the last couple of years, this will come as no surprise. This is even less of a surprise if you’ve been watching Moser Baer’s moves.

To get the 600MW capacity goal, MBPV has recently announced partnerships for sourcing wafers as well as production equipment. For multicrystalline silicon wafers, MBPV signed an agreement with the LDK Solar based in China. An unnamed equipment maker is to supply equipment adding 565MW of thin-film capacity. (I believe Applied Materials is that unnamed equipment maker.)

These are just the latest in a series of strategic moves MBPV has made since it’s parent Moser Baer India Ltd first announced its move into solar power in 2005. By the end of 2006, MBPV had made strategic equity investments in early-stage startups based on CPV (Solfocus, Solaria) and Multi-junction (Stion a.k.a. Nstructures) technologies with an eye to have access to a portfolio of cutting-edge technologies. Then came the acquisition of 40% stake in Solarvalue AG’s then wholly owned Slovenia-based silicon producing subsidiary. That along with the latest deal with LDK ensures that MBPV has access to high quality solar grade silicon.

In March 2007, it entered into a partnership with Applied Materials for equipment supply to enable rapid ramp up of thin-film capacity to coincide with the thin-film PV market growth from 250MW in 2007 to 2GB ($5bn) in 2010. So the unnamed equipment supplier in the latest capacity expansion (40MW to 600MW) announcement is almost certainly Applied Materials.

While MBPV is already supplying both mono- and multi-crystalline silicon cells and modules, it’s clear its long-term strategy is to gain market leadership by becoming a vehicle for rapid scale-up and cost reduction of next generation of solar technologies. Large area thin-films and concentrated PV (CPV) will enable it to target several markets: large-scale solar power plants, BIPV (building integrated PV) and, with the right cost and business model, even rural electrification. (In the medium-term I think large-scale solar is most attractive as it allows rapid ramp-up & cost reduction while benefiting from power purchase agreements (PPA’s), policy incentives, and carbon credits.)

By all measures, MBPV’s seems poised to be a long-term player. With India’s huge power-hungry domestic market at its doorstep, it almost certainly will grow into a global solar energy giant.

Cleantech VC and PE investment in India grows 58% in 2007

So says the Cleantech Group in its new report titled “Cleantech India Venture Capital and Private Equity Investment.” 2007 investments stood at $210 million when compared with just $133 million in 2006.

And finally, here is an interesting article by Alexis Madrigal at Earth2tech regarding Reliance Energy’s recent “cleaned out” IPO.

KPMG survey shows Cleantech and India have VC’s mind space

In a recently concluded survey conducted by KPMG, venture capitalists responded that they are most interested in directing capital to cleantech (24%), biotech (15%), internet (13%) and mobile technology (11%). In the same survey, China (29%) and (23%) were voted top destinations for capital outside of the U.S.

What the snippet on Yahoo does not tell us is: What is the % of all VC’s that said they will invest in cleantech in India? Venn diagrams anyone?

Israel and Sweden eye cleantech potential in India

Israel Business Arena reports that Granite Hacarmel Ltd has signed an MoU to invest $6 million of the initial $20 million investment to set up a company that will invest in renewable energy projects in India. Granite Haracmel is one of Israel’s largest holding companies with interests in energy, petroleum products, chemicals and infrastructure. It owns Sonol and GEC. GH itself is owned by the Azrieli Group.

According to Esmerk Swedish News, Sweden’s Minister for Enterprise & Energy, Maud Olofsson, has promoted the concept of sustainable cities during visits to India and China. She hopes to create opportunities for Swedish companies with relevant expertise in these huge markets.