The Drivers of India's Booming Cleantech Market

The pandemic has made consumers understand the benefits of adopting environmentally friendly products

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The Indian renewable energy sector is the fourth most attractive renewable energy market in the world, says an IBEF report. It also says that the installed renewable power generation capacity has gained pace over the past few years, posting a CAGR of 17.33 per cent between FY16-20.

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The pandemic has made consumers understand the benefits of adopting environmentally friendly products. This has led to an array of companies tapping into the opportunity by offering eco-friendly solutions. Further, the government has also been playing a huge role in promoting green solutions through incentives for startups.

What's driving the growth?

The Government of India has been driving Green energy initiatives actively by administering sector-specific policies & schemes to facilitate growth in solar, wind, energy efficiency, and electric mobility. Waivers, permits for FDIs up to 100 per cent under the automatic route, project development cells for investments, Think Tanks & investments, etc. are just a few examples of government active participation in building the Cleantech ecosystem in India, which have been garnering interest from startups and investors," said Nandini Mansinghka, CEO and co-founder, Mumbai Angels.

Gaurav Singh, founder, JPIN, agrees. "One of the key drivers of growth in this sector is the policy support provided by the government. The government has resolved to achieve 175 GW of renewable energy by the end of the current year. For this, it has set up large-scale sustainable power projects and is striving toward getting 40% of its power capacity from natural resources," he said.

Sustainability is becoming a key driver in business strategy as well as consumer preferences. Avaana Capital believes that affordable technology is making wider adoption of climate-friendly alternatives possible, as seen with solar power and Li-ion batteries. "There is support from policy tailwinds for the transition towards net zero, as laid down by Hon'ble PM in the Panchamrita framework at COP-26. We are also seeing a new set of innovators and entrepreneurs emerge, who are building upon the learnings of their predecessors, determined to solve deeper challenges in climate and sustainability," said Swapna Gupta, partner, Avaana Capital.

Experts believe that the cleantech sector holds the most promise in ensuring we create the impact necessitated by the times today. "While policy push and net-zero targets are obviously helping clean-tech to thrive, additional factors in driving the clean-tech space's growth include C&I's internal sustainability goals, availability of capital (equity/debt) for cleantech products, increased operational efficiency of (and monetary savings provided by) sustainable technologies resulting in higher adoption from the user's end, and latest developments in carbon markets that create an altogether new market mechanism for cleantech adoption," said Akshay Singhal, co-founder and CEO, Log9 Materials.

Investor interest

The growth is also backed by large-scale investments and infrastructural developments in this sector. "For example, in 2017, private equity investments in the field of solar and wind power, in India increased to 836 million dollars. This sector is expected to create over 0.3 million jobs by the year 2022. ReNew Power signed a deal amounting to 837 million dollars, with the intent of acquiring Ostro Energy, in 2018. India has also received a loan of 1.05 billion dollars from the German Development Bank, to implement its green corridor projects," said Singh of JPIN.

Over the course of five years (2017-20), the sector received 6.7 percent of the total funding accrued to the startups in India, he added.

Experts opine that investors are now aware of the rise in demand for energy from renewable sources and have clasped on the fact that a one-time investment can yield good returns.

"India is one of the most vulnerable countries to climate change and investors are aware that innovations in Indian agriculture need to evolve beyond digital technologies such as farmer platforms and B2B marketplaces. We are seeing very positive early signs of investors including climate and sustainability as part of their thesis, and should hopefully lead to more deal flow getting funded in this space," said Subhadeep Sanyal, partner, Omnivore.