Cleantech Priority

Need to promote innovation and entrepreneurship

As global markets transform rapidly, various non-traditional markets are opening up, bringing new products, services and business models. These changes, which have been largely driven by the opportunities arising from the challenges of rapid urbanisation, fast shrinking natural resources and the looming threat of climate change, have paved the way for cleantech markets.

Cleantech largely defines products, pro-cesses and services that reduce negative environmental impacts and ensure resour-ce efficiency in the activities of an economy. Globally, cleantech encompasses the entire value chain of clean energy generation, transmission, distribution and storage as well as smart power analytics and services, energy efficiency, clean water, waste-to-energy, waste recycling, conservation technologies and the sustainable use of resources, among others.

Given India’s rapidly expanding economy that relies heavily on natural resources, it needs to develop innovative clean technology solutions. As the country continues to grow at 7-10 per cent annually, its energy and water demand is likely to increase further owing to industrial growth as well as the burgeoning middle class with its insatiable appetite for everything electronic. Around 97 per cent of the country’s ra-pidly increasing energy demand is met by fossil fuels, which account for about 4.5 per cent of global greenhouse gas emissions. These emissions threaten to exacerbate the climate impacts, thus adversely affecting the country’s agriculture, water resources, cities and large coastal ecosystems, among others. Acute water shortages are already becoming a norm and there is an urgent need for clean water interventions in various parts of the country. The Central Water Commission indicates that a total of 1,123 billion cubic metres (bcm) of utilisable water is available in India annually (as per 2002 estimates), while the total demand for drinking water is expected to cross 1,400 bcm by 2050, along with a 400 per cent rise in the demand for water for industrial use.

Besides, there is a need to address the issue of large amounts of organic and inorganic waste that is being generated in the country. Hence, clean technologies that ensure higher productivity, better water quality, energy efficiency, enhanced life of systems, and reduced pollution and waste, need to be given priority in the country’s economic and political objectives. As the developed world is in “maintenance” mode, India is still being “built” (both greenfield and retrofitted), thus creating opportunities for leveraging cleantech in a big way.

More importantly, on October 2, 2016, India ratified the Paris Agreement and committed to lower its emission intensity of GDP by 33-35 per cent by 2030, below the 2005 levels, as part of its Intended Nationally Determined Contribution. The government has committed that by 2030, at least 40 per cent of the country’s electricity will be generated from non-fossil sources. The leapfrog to such ambitious goals points towards massive opportunities for the cleantech industry to incubate and thrive in India, driving the country to become a viable global cleantech leader.

Accelerating cleantech innovation

Small and medium enterprises (SMEs) in India are leading market players in clean technology innovations. SMEs are also target businesses where much of these clean innovations are necessary. Hence, the Ministry of Micro, Small and Medium Enterprises (MSME) has an ambitious vision for all 26 million such enterprises to adopt energy efficiency and clean technology measures by 2025. To achieve this goal, innovations in technology, business and policy will be crucial. To support India as well as other countries in realising this vision, the United Nations Industrial Development Organization (UNIDO) developed the Global Cleantech Innovation Programme (GCIP) – a platform to encourage the creation of a formalised, structured, enabling ecosystem for promoting clean technology innovations in the SME sector.

The GCIP for SMEs is a global multi-stakeholder partnership that leverages the power of innovation and entrepreneurship to address the world’s most urgent energy, environment and economic challenges. UNIDO, with support from the Global Environment Facility, is currently implementing the GCIP in seven countries – Morocco, India, Malaysia, Pakistan, South Africa, Thailand and Turkey. GCIP India was launched in May 2013. In India, over 534 applications were received and 64 innovators from 44 cities were shortlisted by 2016, for “mentoring” under the GCIP. These innovators were supported by and connected to potential investors, customers and partners, while being continuously trained, mentored and assessed. Thus, the GCIP has played a significant role in creating a small but robust sustainable innovation ecosystem to nurture ideas and prototypes. In doing so, it has highlighted and enhanced green aspects of Indian micro enterprises and SMEs, and prepared Indian entrepreneurs to leverage investment and outreach from the emerging global cleantech market.

The results have been extremely positive and encouraging with a cadre of cleantech entrepreneurs and innovations being nurtured. Each year, the best start-ups from India participate in the finals of the Global Competition in Silicon Valley, California, where they meet participant SMEs from other countries, compete for the global prize, and connect with potential partners, customers and investors from around the world.

Ecosystem enablers

Given the exciting opportunities, the ecosystem for cleantech is slowly developing in India. Coupled with initiatives by the central government to promote “home-grown” technologies through the Make in India and other similar programmes, several entrepreneurs have entered the fray. Some of these start-ups have taken off using their alma mater engineering platforms (IIT incubators), while others have pioneered technology applications and are trying to find a niche in the sector. Thus, entrepreneurs who generate intellectual capital that is both indigenous and imported are addressing the cleantech opportunity.

For example, Promethean Energy, a GCIP 2015 participant, makes fuel-saving energy-efficient products for industrial applications. Over 50 per cent of input energy for industrial applications is typically wasted as heat in the environment. In cooling and air utilities, a large amount of energy is wasted through cooling towers and radiator panels. Promethean Energy’s flagship product ChillerMate is an innovative waste heat recovery system, which can recover waste heat from chiller and compressor units, and convert it to useful heat energy, thereby reducing the fuel required by an industrial plant by up to 70 per cent. This rapid payback product (typically a few months) has wide applicability across several industries including chemicals, food, textiles, hospitality and automotives.

Led by a team of IIT and IIM graduates, Promethean Energy was ranked among the “top 10 innovative companies in India” in 2014 by India Innovates partnered by Stanford Business School, Lockheed Martin, Department of Science and Technology, Government of India and Federation of Indian Chambers of Commerce and Industry (FICCI), among others. This is just one of the several innovations being pioneered in India.

Key challenges

Indian clean technology firms are avid innovators. As per a World Bank report based on a survey of 50 clean technology firms in India (see box), about 70 per cent of the firms have, over the past two years,  introduced new or significantly improved clean technology products and services, methods of manufacturing their clean technology products, and process-based activities to enhance clean technology product delivery. Such innovation across a broad spectrum of functions suggests that firms are responding to the dynamic market conditions in India.

The primary cleantech products in the Indian market are in the areas of clean drinking water and effluent treatment, distributed power generation, waste-to-fuel conversion, clean coal, biomass technologies, and smart power analytics and services. The numerous stories of clean technology interventions by industries, urban growth centres and rural hinterlands are not only inspiring, but also bring to light the many challenges in their widespread implementation. Strong market access programmes are required for cleantech start-ups that need to begin tapping into early-stage product development grants. They also need to patent and validate their technology through government institutions, follow industry standards, and generate awareness about their product through global, national and state programmes as well as online and other media.

Many cleantech innovators feel that even though the government seems willing to help startups get off the ground through initiatives like startup India, the country does not have a demand push for cleantech and is more focused on technologies like solar power. Also, a network to help cleantech start-ups and relevant end-users identify each other is needed. A stronger product development ecosystem, including integrating academia, providing grants for research and development (R&D), and facilitating access to scientific manpower, would go a long way in accelerating early-stage product development.

As with any market, there are barriers to the rapid scale-up and deployment of clean technologies, as stated by the firms surveyed. The most commonly cited challenge was gaining access to finance, which is particularly problematic considering that 84 per cent of the surveyed firms plan to raise funds in the next two years. This problem was much more acute for the surveyed clean technology firms as compared to average Indian firms, which considered access to finance to be the fifth biggest obstacle to their business. To overcome this barrier, finance providers need to be educated about the real risks posed by investments in cleantech, including those associated with the strength of contractual guarantees on product performance. In addition, developers could benefit from support in writing detailed and realistic business cases that meet the standards of lenders. Corruption, and customs and trade regulations access to land, were also significant barriers for clean technology firms.

To translate an idea into a “product” and increase its outreach, funding is needed for R&D of new technologies, investment in companies to scale up manufacturing of market-ready technologies, and develop and construct infrastructure and other facilities. In India, private sector financing is available in the form of venture capital (including angel funding), private equity, mezzanine financing and debt financing. These agencies evaluate a potential investee company looking at the three “T’s” and an “M” – a team that can execute, technology that is differentiated, traction based on validation from customers, and the market, which should be large enough to provide meaningful returns to venture capital investors. For example, in many cases the payback periods can be decisive and in some cases, the potential market may be large, but the team, although small, may be very capable. However, a key challenge faced by cleantech innovators is that these financing firms are yet to find the confidence in clean technologies that they have in internet-based technologies, which have proven shorter payback periods. The success of cleantech business models relies on economic viability, with technology that is reliable and has excellent returns on investment for customers. Distribution is also a key factor, as it leads to scale, which is important for achieving unit economics that make the business viable.

The real catalyst for the adoption of cleantech at the consumer level will be financial incentives. Take the example of India’s LED programme under the power and finance ministries. To proliferate LEDs in the market under the country’s Domestic Efficient Lighting Programme, Energy Efficiency Services Limited procured bulbs from manufacturers across the industry at rates lower than those in the retail market. These LEDs were then distributed to customers. India set a game-changing example for LED market penetration for the world. These lessons can be applied to cleantech-starved markets with the help of entrepreneurial ventures, and the support and collaboration of various ministries including MSME, the Ministry of New and Renewable Energy and the Ministry of Water Resources, along with other relevant agencies.

Thus, we now need to focus on enabling such an ecosystem and deploying clean technology applications that are scalable and replicable, and have a significant impact in a country like India. We also need to build consensus on an enabling policy environment that would catalyse investments in clean technology and highlight opportunities for global cleantech companies and investors to engage in the Indian market. n

Based on inputs from Amrit Raj, National Project Coordinator, GCIP India, UNIDO

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