[The Outline By Inc42 Plus] Indian Cleantech Startups & Their Moment In The Sun

Dear reader,

In early April 2020, citizens in Delhi woke up to a pleasant surprise. Just a few weeks into the lockdown, the air was cleaner, the visibility was higher.

Due to the mandatory lockdown imposed across the country, 88 Indian cities observed a similar drastic reduction in air pollution, as per an independent study, and the AQI improved 44%, 33%, 29%, 15% and 32% in north, south, east, central and western India, respectively. This kind of improvement was seen in other countries as well, but with the reopening of the economy the temporary gain was lost due to retaliatory emissions.

The temporary gains of 2020 raises the question of how far India is from the sustainable development targets for 2030 or the Paris Agreement signed in 2015. While there have been several independent developments in this area through policy and new ideas, the role of tech startups is also becoming more prominent — be it cleantech solutions or renewable energy platforms or the rise of electric vehicles, or even the green initiatives announced by other consumer startups (ecommerce, delivery). But in reality much more needs to be done.

And this World Environment Day (June 05, 2021), it’s time to take stock of the situation and see how the Indian startup and cleantech ecosystem has grown, but also the challenges along the way. More importantly, it’s about the goals and milestones that we need to achieve together to solve this challenge for all humanity.

India’s Growing Energy Appetite

In 2021, India is ranked 117 among 192 nations in terms of sustainable development. Experts pointed out that this data clearly indicates a lack of action over the years to control and reduce pollution and arrest environmental degradation. For instance, coal power projects approved last year resulted in 19,614 hectares of forest land diverted, over 1 Mn trees felled, and loss of lives and homes.

Energy use in India (world’s third largest energy consuming nation) has doubled since 2000, but 80% of the demand is still being met by coal, oil and solid biomass.

As India looks to bounce back from the Covid-induced slump in 2020, the clean energy sector will be one area that is likely to see more investments and startups. But it cannot afford to wait too long for technology to improve distribution and supply — the need for action is clear and present.

Startups Backing India’s Clean Energy Mission

For one, India can look to decarbonise the grid through a collaborative approach, according to the Council on Energy, Environment and Water’s Abhishek Jain, who is directing ‘Powering Livelihoods’, a $3 Mn initiative with impact incubator Villgro to transform India’s rural economy with clean energy solutions. Startups such as RenewPower, 75F, Smart Joules, ZunRoof, CleanMax and others are looking to improve penetration of renewable energy and energy efficiency through their tech-driven algorithms, but the truth is the market is far too fragmented at the moment, with most contractors procuring panels independently. Besides this, these startups do not own the grid and have to work with legacy players to make an impact, Jain added.

Secondly, as a solution to the reliance on coal, India has already embraced solar power. The IEA further states that India could lead a global “solar-powered revolution” and it is set to provide for 70% of the country’s power needs by at least 2040.

India’s largest renewable energy producer in terms of generation capacity, cleantech unicorn ReNew Power can generate up to 8 GW of power and has assets across 16 states in India. The IBEF says installed renewable power generation capacity has seen annual growth of 17.33% between FY16 and FY20.

Investors are bullish on the sector too. Masayoshi Son-led SoftBank is looking to raise up to $750 Mn for SBG Cleantech, a joint venture (JV) between SoftBank, India’s Bharti Enterprises and Taiwan’s Foxconn. This week, impact investor and entrepreneur Harsha Moily launched a $200 Mn venture fund that will invest in sustainable agriculture, green buildings, energy storage and alternative energy in India.

Startups such as Cleanmax, Log9 Materials, Zunroof, Oorjan, ION Energy, Gegadyne and others are also looking to introduce new portable power solutions to power the next-generation of electric vehicles with clean energy. Similarly, a number of cleantech companies have emerged in the past few years and they are working with mega corporations as well as government agencies to reduce the reliance on fossil fuel or other non-clean energy sources.

Emobility Hits Covid Speedbreaker

Most of India’s initiatives for clean energy and electric mobility did take a backseat last year as the pandemic delayed procurement, certification, testing and monitoring. But it’s likely to bounce back this year. The key is to focus on the right areas.

According to Sushovan Bej, an emobility expert with German development agency ‘Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH’, who works closely with Indian government to implement EV-related policies, while Delhi is likely to have as many as 2,000 electric public transport buses by the end of 2021, the need of the hour is fast charging points as that will reduce charging time and bring more confidence in EVs. Without fast chargers, adding more EVs is futile, he claimed.

Other experts suggest that India needs to set up a single department to monitor the developments in the electric mobility space across India. “It is different for each state and union territories  — different news, different policies, and different ways/methods of implementation. We need a single electric mobility task force here,” according to Vivek Chattopadhyay, senior manager for the clean air programme at the CSE.

But EV adoption has only grown at a glacial pace in India thanks to the combination of lack of infrastructure, local manufacturing and the fact the currently more expensive electric vehicles don’t have specific financing products that make it easier for consumers to purchase them and pass on the savings over time, according to Bej and other experts.

How Green Are Food Delivery, Ecommerce?

Beyond the consumer sector, where electric two-wheelers have outsold cars, adoption of EVs among the two major delivery companies — Swiggy and Zomato — is abysmal, experts said. One EV manufacturer, which makes two-wheelers for ecommerce and ride-sharing, says the companies don’t have more than a few thousand units. It may be less than 5% of their total fleet.

A VC, who invests in the mobility sector, said that the 5% number is perhaps right, and this will not grow overnight. A lot needs to change. There are not enough vehicles in the market suitable for commercial use, he added. A handful of startups such as Dispatch, Mumbai-based Dexpress, and automakers such as Okinawa are focussing on the commercial EV sector, but the number of consumer-focussed EV makers is far greater.

Other analysts also agree that at least some of it is just a PR exercise and about creating an image of being eco-friendly. Neither Zomato nor Swiggy responded to our questions on how they intend to boost the EV share in their fleet. Amazon had said that it would add 10K EVs to its fleet, but there’s no clarity on how many it did add and the company did not delve into specifics when we asked it for a number. Same is the case with Flipkart, which has committed to deploying 25,000 electric vehicles by 2030, but there’s no clarity on how many have been deployed.

Faster transition to EVs by these major stakeholders in the transport ecosystem will be a signal for investors and increase the appetite of consumers as well. But beyond this, there’s another reason why food delivery and ecommerce needs to become greener than it is now.

The Waste And Plastic Problem In Ecommerce

The Indian ecommerce packaging market was estimated to reach $975.4 Mn by 2025, growing at 13.8% annually, according to IBEF. With billions of parcels delivered every year by Amazon India, Flipkart, JioMart and others, the threat of packaging waste is increasing due to which, the need for waste management and recycling is on the rise.

Further, the ecommerce sector has come to a tipping point as smaller D2C brands, even traditional shop-owners and retailers are shipping more items, so the need for ecommerce-specific packaging is high. As per Mintel’s Global New Products Database, 82% of food launches in India in the last five years have used plastics as a primary packaging material.  But companies claim they are minimising waste in every part of their operations.

“Amazon India has introduced several initiatives to reduce packaging waste, improve packaging transit-worthiness and reduce overall environmental impact,” an Amazon India spokesperson told Inc42.

The ecommerce giant has invested in inventory placement technology and infrastructure to optimise the processes within the supply chain every year. Further for waste management, the company added, “Many of Amazon India’s fulfillment centers have the ability to collect and recycle water; and the company uses this as a baseline for new buildings that are added to its fulfilment network.”

The Indian government has managed to extract plenty of positives through its various measures over the years. India’s ‘Perform Achieve and Trade’ (PAT) scheme has resulted in INR 9,500 Cr in energy costs savings over the past eight years. Siddharth Singh, an energy and climate policy researcher who is the lead India analyst and coordinator at the International Energy Agency (IEA), said Indian companies have actually done very well because of the incentives created.

The PAT scheme is something that India can showcase to the world as a good instrument of policy, he added, because many other advanced countries don’t have schemes like that. But it focuses on energy efficiency and you need to extend this towards other desirable goals like reducing greenhouse gas emissions or in India’s case, air pollution.

There’s no time to waste and the relevant stakeholders need to incentivise each other to start the work now as the hard part is about to begin.

The Net Zero Conundrum – What India Needs 

By the end of the year, it is expected that a roadmap for net zero emissions or NZE will be set on a global level. For developing countries like India, the problem is not just about setting targets that seem unachievable but also balance those targets with the economic development goals.

According to CEEW research, if 2050 is chosen as a net-zero year, the share of fossil energy in India’s primary energy mix would have to reduce to 5% in 2050, 83% of electricity would have to be generated from non-hydro renewable energy sources by 2050, and biofuels would have to account for 98% of India’s oil use compared to negligible share currently. Further, over two-thirds of India’s industrial energy use and new vehicle sales would have to be electrified, which is a huge task given the current state.

Many feel India should take a less aggressive course for economic growth in this light, but experts believe this notion is borne out of a fallacy. “One of the most important things is the understanding that action on the climate track is not anti-development, not anti-growth and it’s not anti-economy. In fact, evidence shows the exact opposite, that whenever we have acted towards sustainability or invested in clean energy technologies or into decarbonisation, the economy has done better, it has brought more jobs, it has improved people’s health. It has improved people’s productivity,” said IEA’s Singh, who is also the author of The Great Smog of India, a book on India’s air pollution crisis.

The best way forward for emobility is focussing on bringing EVs to public transport as this ensures the biggest coverage. And investors need to look beyond the low-hanging fruit that is electric mobility manufacturing and on to innovations that will likely have the biggest impact such as battery systems, material science and next-gen fuels.

Without a major acceleration in clean energy innovation, getting to net zero by 2050 will not be possible. As such, major innovation efforts will be needed in the current decade to build next-gen technologies such as carbon capture, eco-friendly production material or next-gen fuels for shipping and cargo movement ready.

And just like in the global geopolitical scheme of things, even in the Indian context, success will be about grassroot citizen-led action along with corporate initiatives and policy that enables the creation of sustainable businesses. Ultimately, the fight is everyone’s equally, and it cannot be left to just the few in power, or businesses with deep pockets.  

Hoping For A Greener Tomorrow,
Nikhil Subramaniam

Featured image & graphics: Aprajita Ashk