India is the third-largest producer and third-largest consumer of electricity in the world, with surplus power generation capacity, but it lacks adequate transmission and distribution infrastructure.
India’s electricity sector is dominated by fossil fuels, in particular coal, which during 2018-19
fiscal year produced about three-quarters of the country’s electricity. The government is making efforts to increase investment in renewable energy and the 2018 National Electricity Plan states that the country doesn’t need more non-renewable plants in the utility sector until 2027. It is expected that non-fossil fuels generation contribution is likely to be around 44.7% of the total gross electricity generation by the year 2029-30.
According to the IEA report, India is becoming increasingly influential in global energy trends. The country’s energy demand is expected to double by 2040, and its electricity demand could triple. Indian oil consumption is expected to grow faster than any other major economy. This makes improving energy security a key priority for India’s economy.
The government has also taken several measures to induce foreign investment in this sector. It signalled its commitment to the promotion of green energy by declaring an aggressive target of 450 GW of green energy capacity by 2030 and announced several welcome measures such as tax breaks for setting up mega-manufacturing plants for solar cells, lithium storage batteries, electric vehicles and charging infrastructure. It is also focusing on strengthening the grid to enable seamless and increased integration of renewables.
In a continuous effort to build solid bridges between European innovations and the Indian market, EU-India Innocenter brings another interview with an expert in the sustainability sector.
Somasundaram R is Chief-Strategic Initiatives for Mytrah Energy, one of India’s leading Independent Renewable Energy Producers. The following interview is very informative and gives us a realistic view of what European startups can find in this market: much more opportunities than challenges.
Tell us about the sector in which you are currently operating and what you think European startups should know about it.
I am currently associated with a renewable independent power producer. Our company is into the production of wind and solar power. For the larger power projects, which can run into 100s of MW, our typical counterparties are state electricity boards or central agencies like the Solar Energy Corporation of India (SECI) which acts as a counterparty on behalf of the central government. We also do smaller projects (including rooftop solar projects) where the counterparties are corporates or other private entities.
Some of the things that European startups need to know about this sector are:
- The Indian renewable power sector, and the large space of sustainability in the country, has grown significantly in the last decade. This presents an interesting set of opportunities for startups that are looking to be a part of a large and growing market.
- However, any startup needs to be equipped with ground-level knowledge and resources to be successful here. Some points to consider are:
- While a startup may have an elegant solution, it needs to be clear about whether that solution would work in the Indian context. Apart from the initial installation, it needs to have the resources to meet the ongoing support requirements of Indian clients. For this, it needs to have a support setup of its own or partner with a local firm to make the necessary support available.
- Even if a solution is superior to those currently available in the market or offers an entirely novel way of addressing an issue, it will take time for companies to become receptive to the idea, try it out, and then adopt it. This would be true for any industry and any country. In India, the additional point that startups will have to be prepared for is the cost-consciousness of players – this may be a good bit higher than what the companies are used to seeing in other markets and may present a significant additional hurdle in the adoption of their offerings.
What do you think are the biggest opportunities for European startups to add value to this sector?
If European startups can identify and address the typical pain points of Indian firms in areas like renewable power generation, as well as emerging areas like electric mobility, and try to address them. In power generation, typical issues are related to:
- Optimizing generation
- Reducing downtime due to controllable factors (i.e. not due to grid being down which is beyond the control of the power producer)
- Better ways to collect, scrub and analyze performance data so that lessons can be drawn for improving performance in future.
If a startup has any solutions that can address these issues in a meaningful way, and have already been proven to work, then they may be able to attract the interest of Indian power producers.
I have repeated the point about the cost-consciousness of Indian power producers to the extent that people may think I am overdoing it. However, there are a few reasons due to which I emphasize this point:
– First, startups need to understand that even in general Indian companies tend to be fairly price-conscious. Convincing a company to adopt a new or innovative solution, which is more expensive than the existing ones they are using, is a challenging task in any case.
– Added to this is the fact that the renewable power sector has seen a steep fall in power prices over the last 5-7 years. For reference, the price per unit of power supplied by utility-scale solar power projects has declined from approx. Rs. 4.5-5.0 per unit in 2014-15 to less than Rs.2.5. Given this sharp decline in prices, it is natural that companies are very conscious about any additional cost burden.
– Startups will need to convince Indian companies to look at these additional expenses as investments that offer long-term benefits rather than as short-term cost items. However, this is a time-consuming process and winning customers over will take time.
Given the above situation, it really helps for startups to have the following:
- Proven solutions with clear use cases where they have worked
- Enough funding to be prepared for a long sales cycle
- If they can enter the market in collaboration with established multinational firms that have a track record and business networks in India, that would be a big help.
What are the growth trends of this industry and what is the future according to you?
The overall growth trend of the Indian renewable power sector over the last decade has been very healthy. It has seen a slowdown in the last 2-3 years due to a variety of factors e.g. extreme price contraction, supply chain issues (especially for solar power where a large number of components are sourced from China), and more recently the Covid-related slowdowns. However, the Indian government is very bullish about the renewable power sector and associated areas of sustainable development like e-mobility, which is likely to further escalate power demand. Hence, the long-term outlook for these sectors is robust.
Would you like to share your experience about establishing your business in India?
Our company entered the renewable power generation sector in 2010 when the sector was in a nascent stage in India. Along with some of the other emerging companies (some of which have become established mainstream players now), our firm did things like
– Raised the initial tranche of equity funding from abroad since it was impossible to raise it for this sort of play in India at that time
– Raised debt and mezzanine funding in India – this was an exhaustive process that actually involved familiarizing the lenders with the prospects of the sector, the business risks involved etc. So, the companies which started their business in that period did some pioneering work in terms of not just establishing their businesses but also laying the foundation for the development of the overall sector.
All the above work was being done in the very early stages of the firm’s history when it did not have a significant scale of operations. So, companies that want to set up shop in India need to think through the following points:
- Do they have a product/service/solution which is clearly proven and for which they think there may be a significant opportunity in India? (If the opportunity isn’t large enough, it may not be worth the effort)
- Do they have the resources to do the groundwork that may be needed to get the Indian market warmed up to the idea of availing of their services? The resources may not be available in-house. If they can collaborate with established Indian or multinational firms that can do this, that’s fine too. But this may require a significant amount of time, effort and resources so its importance should not be underestimated.
- Can the solutions be offered at competitive prices?
What are your views on Cybersecurity infrastructure in the Energy Sector, do you foresee any challenges/threats associated with it?
This is an emerging area, that has been getting a lot of attention. There have been some disruptions in parts of the Indian power grid in recent times that have been attributed to cyberattacks by malicious overseas actors. Players across the power sector are now waking up to the issue of cyberattacks and their potential to hurt their businesses. Notably, while there has been some ongoing work in the area of IT cybersecurity, the area of Industrial Control Systems and Operational Technology (ICS / OT) is still in a nascent stage in India.
Given this current scenario and the fact that India is likely to see the continuing build-out across the infrastructure spectrum (energy, transportation, manufacturing etc.) this seems to be an area with significant potential, for startups with relevant products and services
How Geographical Climate conditions play an important role while generating Solar Power?
Vast parts of India have a significant number of days of sunny weather which helps with renewable power generation. But factors like dust and other pollutants can impact the efficiency levels of plants (plant load factors). So ongoing cleaning and maintenance activities are essential for plants to generate power at an optimum level. While various automated solutions are available for the regular cleaning and maintenance of plants, many plants still use manual methods – another indication of a cost-conscious approach and a nod to the kind of challenges startups from overseas are likely to face as they try to set up shop.
Wind power in India follows a clear seasonal pattern that tends to coincide with the monsoon or rainy season in the country. The period from April to September is considered the peak wind period during which 60%-65% of the annual power generation takes place. The remaining 6 months account only for 35%-40% of the total power generation through the year. Over the last few years though, some changes have been observed in this pattern. Power generation in some months of the peak period has been lower than during the same months in prior years. Clearly, this has had an impact on revenue generation. So, it is important to not just understand the climatic conditions but also to get a sense of how those conditions may be changing with time.
Key Government initiatives/subsidies provided to boost renewable energy in India.
Renewable plants have a must-run status and states are officially obligated to prioritize the purchase of renewable power. There are various other incentives in place to encourage the adoption of renewable power. However, it is important to note that power is a ‘concurrent subject’ in India. This means that the central government can introduce policies and legislate measures but the implementation also depends on the commitment of the respective states where projects are located. So, it helps for firms to know details like
– Where a specific plant is located
– Who the counterparty or power purchaser – a private enterprise, an entity affiliated with the state government or the central government (like SECI) – since this can have quite an impact on how seamlessly the plant is able to operate.
What is the International Solar Alliance and what role does it play in the Energy Collaboration between the EU and India?
The International Solar Alliance is a multilateral organization that counts around 150 countries among its members. The ISA’s founding was championed by France and India. The stated objective of the ISA is to facilitate collaboration among member countries to enable to adoption and growth of solar power at a global scale through steps to facilitate sharing of technology and best practices, financing and implementation of projects among all member countries. Further details can be found on the ISA website.
The EU-India Innocenter aims to bring innovative solutions to the Indian market. Our programmes are free and help your startup to prepare for internationalization and enter the Indian market with a safe and well-designed strategic plan and a solid and reliable network.
Check out our programs here! We can help you in all the steps of this journey, regardless of the maturity of your company.
*Text by Roberta Mellis – Pictures by Pixabay and Unsplash