Spotlight on innovation in non-solar areas in emerging green energy sector

Businesses built on renewable infrastructure are gaining traction but banks are still figuring out ways to finance them

The renewable pitch in India has moved from a rush to produce or use solar panels and green energy to plenty of innovations in other sectors related to green energy, particularly among small and medium enterprises (SMEs). “The next level growth avenue for all of us is the SMEs,” said Rajiv Anand, deputy MD, Axis Bank, at a banking conclave on the theme this week.

Since banks often do not understand if a project is genuinely in the renewables sector or is a case of “greenwashing” — decking up a project with light green standards — his preference is for a system in which banks could work with multilateral agencies that could give guarantees to make project proposals bankable. Also, many of these projects are not particularly technology-intensive but build a cornucopia of social action in the renewable space. The suggestion for vetting them makes sense, going forward.

Many of them also offer a quick payback, which could be a red herring especially in public transport that is run by cash-strapped municipal and state administrations. Kolkata, for instance, has signed a contract to procure 1,180 e-buses, the largest allocation of e-buses in India. A World Bank report on the project estimates the price of an electric bus at about three-and-a-half times that of a diesel bus, “which means a payback period of eight years compared to four years for a diesel bus”. Yet, the city plans to convert all its 5,000 buses to electric by 2030. The lure of low maintenance costs is attractive for state transport departments to jump in.

Despite the risks, there is no doubt these are good numbers. Energy and city issues think tank WRI India estimates the country will require over 100,000 e-buses by 2030, which is 100 times the current deployment. Government-run CESL CEO Mahua Acharya, who is running out mega tenders for these buses, banks on financial support from the heavy industries ministry’s Faster Adoption and Manufacturing of Hybrid and Electric Vehicles scheme to finance these buses.

More financially viable options look like the ones Maruti Suzuki has tied up with companies such as Cogos to encourage driver owners of commercial cars to switch big time to compressed natural gas-run models. Prasad Sreeram, CEO and co-founder of the company, estimates the market size at close to $50 billion in the short-haul and last-mile delivery sectors. Most of these cars outside the metered app taxis provide point-to-point services, running on diesel.

In the competing electric space, start-ups such as MoEVing are building what they call a driver-centric platform that provides tech-enabled charging services, fintech, analytics services, and EV lifecycle management services as a one-stop package for driver owners of commercial vehicles.

Away from transport, the terrain is tricky, especially in ventures that are in the proof-of-concept stage. Bankers face similar challenges. Ashwini Kumar Tewari, MD, State Bank of India, said what was needed was a standard framework for the banking industry. There were several opportunities in renewable energy, but relatively less had been done in these spaces. “There is a lot of opportunity not only in the renewable energy space, but also in terms of the other elements plus a lot of transition opportunities that we haven’t looked at.” The bankers were meeting with industry chambers to spur these options. They want the Reserve Bank of India to help them figure out what qualifies as green investment.

For example, Villgro, which describes itself as one of the largest social enterprise incubators, is using a cash grant from Cisco India to offer rural women the support of capacity building and business planning for what they call a go-to-market strategy. An Asian Development Bank analysis notes these are in the right direction of climate financing but need more. Gender analysis of green lending shows that women are usually being loaned small amounts of money for one-off investments. Lead author of the report Gisela Garzon de la Roza notes “she needs patient capital from a trusting financial partner until the returns on her energy investments start to kick in”.

Again, in the SME space, start-up company SugarBox is working on a strategy to miniaturise the cloud from huge data centres that can be typically installed at dark spots like rural areas. Rohit Paranjpe, CEO and co-founder, said even if a village doesn’t have internet or cannot afford it, it can get access “at a minimum speed of 10 mbps. This solution is easily scalable over a Wi-Fi router and takes out the need for installing a telecom tower”. Towers tend to be diesel-powered, so a cloud-based solution would be more environmentally attractive.

The investment climate is more stable in setting up and usage of data centres. The draft policy for India to become a global data centre hub has seen state governments providing incentives to industry players for setting up data centre parks.

Or take the case of the concept of district cooling. UAE-based Tabreed and others plan to offer large-scale cooling solutions for buildings and large covered areas without using thermal power. The push for green infrastructure by the Centre encourages these ventures.

These developments are most necessary to find the ecosystem to use the 500 Gw of renewable energy that India plans to deploy by 2030. A report written by Patrick Herhold, MD and partner at Boston Consulting Group, said, “We need to massively accelerate green investments across all sectors.” Herhold pointed out the need for an accelerator for green infrastructures such as renewables, grids, hydrogen, charging, and more. “If we can build LNG (liquefied natural gas) terminals in a matter of months, we should be able to do the same thing here.”

This accelerator could be the support of guarantee for bankable projects, especially in newer areas, as Tewari pointed out — such as building efficiency, bio-energy or plain vanilla transportation projects. If the bankability of a project was attractive, investment solutions would fall into place, bankers said.

Green Finance

World Bank provides $165 mn to support renewable energy in India’s residential sector: Jun 2022

TP Renewable Microgrid partners SIDBI to set up 1,000 green enterprises: Aug 2022

Parliamentary Standing Committee on Energy asks for setting up green banks as innovative tool for accelerating clean energy financing: Feb 3, 2022

Council on Energy, Environment and Water estimates investment requirement of more than $10 trillion in the sector to meet India’s net zero commitments: Nov 2021