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Energy Alternatives India 16th Mar, 2010

Here's our next edition of EAI Newsletter. For more news items and updates, visit our blog @ http://www.eai.in/blog and our forum @ http://www.eai.in/forum


EAI India Solar PV Report

If you are an entrepreneur or investor exploring the fast growing solar energy opportunities in India, this report is for you. More from here - http://www.eai.in/ref/reports/solar.html


Renewable Energy Opportunities for Small Businesses

I was a speaker at a recently concluded event for Private Equity investing in the Indian energy sector. The event was held in New Delhi, Mar 11 & 12. (see details and summary of the event here - http://eai.in/blog/2010/03/workshop-on-private-equity-for-power-projects-summary-highlights.html )

(If you are interested in obtaining a copy of my presentation, please send a note to narsi@clixoo.com. Thanks!)

I had spoken on the challenges to investing in the Indian renewable energy sector, with a focus on wind and small hydro. My objective was to make entrepreneurs (small and large) as well as investors aware of the key challenges they should be aware of in these renewable energy sectors.

Most other speakers were into investing in medium and large scale projects - with investments of $50 million and above. Well, private equity companies normally do only big ticket investments, and usually in growth opportunities and not in early stage, risky opportunities.

To small and medium entrepreneurs who had come down to listen to them, it was fairly clear that many opportunities in core energy and renewable energy required scale. For instance, it is said that solar CSP would require a minimum of 20 MW to be anywhere near economical. That would require plonking $60 million in capex. Solar PV could possibly start lower, but at $3 million per MW, it is still going to require a minimum of $10 million to start off. Now, the point is, both solar PV and solar CSP are currently risky investments, with a number of technological uncertainties in tow. How could a small entrepreneur take a bet of $10-20 million on domains that carry a lot of risk? Cutting a long point short, he cannot.

This had obviously dawned on those entrepreneurs who were in the audience. Thus, it was not surprising that during the lunch break on the second day of the conference ( I had spoken on the first), there were about 4-5 small entrepreneurs keen on discussing with me what the best way could be for them to invest in renewable energy in India. I'm sure this is a question thousands of other small entrepreneurs have in India. I am hence providing the gist of what we discussed over that lunch break.

My opinion was, if you were a small entrepreneur, solar (PV and CSP) were out, at least for the time being, until they reach a stage when the technology risk is far lower and the business can be reasonably viable (right now, neither of these is anywhere near viable without humungous government incentives). They can count out sources such as geothermal, wave, tidal etc as well. These are pretty much in the nascent stages (wave and tidal are in nascent stages world over, geothermal is sort of established in countries such as US and Philippines, but pretty much nascent in India). That leaves them with wind, small hydro and bio-based power and biofuels.

I am of the opinion that all three of the above - wind, small hydro and bio-energy - have potential for small and medium scale investments, where investments could range anywhere between 50 lakhs (mainly for small biomass power plants) to 100 crores. These have varying profiles, however. Both wind and biomass power plants can be up and running fairly quickly (within a few months), while it might take anywhere between 3 to 5 years for a small hydro plant to be operational. Within wind and biomass, the characteristics and challenges vary as well. For wind, capacity factors and grid connection efficiencies are key challenges, while for biomass, the key challenge is the feedstock availability and the prices at which they are available. While small hydro takes longer to start off and carries more risk initially (geological surprises, societal and law and order issues etc), they possibly provide the most returns long term owing to the lowest operational costs among the three and much longer plant life times (some plants can remain for almost 50 years, while for wind it is about 20 years).

I thus told the entrepreneurs that it would be impossible for me to provide one single answer for "what is the best renewable energy business opportunity I should pursue?", because the answer depended on the time horizon upon which you were seeking investments, whether you were looking at investments only from a financial point of view or from a strategic point of view (for instance, if you are the owner of a sugar factor/distillery, generating power from bagasse-based biogas makes sense because of the synergies). The answer might even depend on the region (for instance, if you are in a region where biomass is in plentiful supply thus solving the key bottleneck, biomass power might make more sense). In short, it depends!

While that was one way of answering the question, the other dimension was to look for opportunities outside of being an energy producer. I told them not to miss out the opportunities in the concentric domains. Support industries for renewable power - be it in terms of core equipment supplies or maintenance provider for wind farms etc. - could be attractive opportunities that carry far less risk while providing good returns, especially if your service is a niche value having minimal competition (I know of a company in Chennai who introduced the concept of craneless maintenance for wind farms, which is a huge benefit given the high costs and efforts required for the use of cranes. I believe he is doing very well). Don't miss out on support opportunities, that was my point.

Another area that entrepreneurs could focus on is the set of green business ideas that are mature but are not as high profile. Solar water heaters is one such example. India instals about 20,000 solar water heaters every year in households. China has over 25 MILLION households with solar water heaters installed. India probably has a hundred manufacturers for solar water heaters. China has 4000! (Source: http://bit.ly/bL8bO2 ). This is not a problem, it is an opportunity for small businesses in India to look at this fairly low-tech, well, proven and economically sustainable green opportunity right in front of them. Look beyond the obvious, was my point in short.

I know it is easy to be a consultant as I all I need to is to talk. Walking is an entirely different matter of course, but I am only hoping that the entrepreneurs who met me at the conference were able to take at least a few useful insights.

Hope you are liking our EAI newsletter. You can send me your responses and feedback. My co-ordinates are provided below.

Have a nice day!

Narasimhan Santhanam
EAI - Energy Alternatives India @ www.eai.in
Mob: +91-98413-48117
Email : narsi@clixoo.com


Market Entry Strategy for Indian Renewable Energy Industry

Is your company keen on exploring the fast-growing renewable energy industry in India? Are you looking for expertise to evolve a comprehensive entry strategy for this industry? You should be talking to the EAI Consulting Team. More from here - http://www.eai.in/ref/services/ime_consulting.html

Updates on the latest in the Indian renewable energy industry

Tatas To Pump Rs.13,000 Cr. For Generating Wind, Solar Energy - India's largest private sector thermal power-generator, Tata Power, plans to increase its wind-and-solar-energy-generation capacity to 2,000 MW and 250 MW respectively by investing over Rs.13,000 crore. This is to produce 25% power from green sources by 2017, report say. More - http://bit.ly/9IydUZ

ONGC to invest $20 bn on assets abroad - India's energy behemoth, the Oil and Natural Gas Corporation (ONGC), will invest $20 billion (Rs.90,000 crore) in assets abroad over the next decade. More - http://bit.ly/cSe905

Venture Capital Investments In The Alternative Energy Industry Declined By Around 60% In 2009 - Investments in the alternative energy market saw a 59% increase in deal value, reporting $678.1 billion in 2009, compared to $425.5 billion in 2008. The move towards greener sources of energy has gained momentum, driven by environmental necessity, coupled and the recovery in the economy in the last quarter of 2009. This resulted in the announcement and completion of major deals with high deal values in 2009. Further, the number of deals witnessed a marginal decrease from 3,494 deals in 2008 to 3,122 deals in 2009. More - http://bit.ly/cREa7o

IIT Kharagpur plays leadership role in advancing renewable energy in rural India - IIT KGP has been working on Bioenergy research for several decades now and with the recent launch of the PK Sinha Center for BioEnergy (PKSCB), the institute today conducted a symposium on Energy for the powerless: Entrepreneurship and Innovation, on the occasion of the fifth year celebration of the Entrepreneurship Cell at IIT KGP. More - http://bit.ly/coN9m3

IPL goes green - Mumbai (India)/ Nairobi (Kenya), Mar 12 (IBNS) The launch of the Indian Premier League’s (IPL) third season Friday night in Mumbai marks a milestone in cricketing history – the IPL is going green. Tipped to become the single largest environmental awareness campaign in the Indian subcontinent, Batting for the Environment is a partnership between the IPL and the United Nations Environment Programme (UNEP). More - http://bit.ly/bkQXO8


Enexions - Enabling sustainability

Enexions helps you take sustainabe actions everyday and lead sustainable lifestyles. Use the simple Enexions Update and Enexions Diaries to join the sustainability movement, and share and network with like-minded folks in your city and worldwide. More from here - http://www.enexions.com

 

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