ET: You became the head of GEAPP almost a year ago. Tell us about your experience this year and what initiatives have been taken by the organisation during this time?
SK: We were born two years ago as a global outfit during the Glasgow COP. We started to look at whatever was happening in the energy transition or clean energy space and identified gaps that needed to be filled up. Our interventions have been designed accordingly.
Starting with renewable energy, India had announced in Glasgow that we would do 500 gigawatts of non-fossil fuel energy by 2030. We are almost at the end of 2023. We have not even reached 200. Most importantly, the run rate is just 10 to 12 gigawatts a year.
Everyone wants to achieve that 500 gigawatt target. I mean everyone. The government is committed, the industry is committed, but there seems to be a gap because you need to raise this 10 to 12 gigawatts per year to 50 to 60 gigawatts. How do you do that? This switch is not easy. It needs a massive amount of project development, including land identification. It needs five times the capital currently going into renewable space.
This is where we have started with distributed renewables. We picked up two sectors — agriculture and SME rooftop. The potential in these two is 200 gigawatts. This also has a lot of impact on the macroeconomic health of not just the utilities but also of the state. Why? Because today agriculture is subsidised. The average cost of a utility to provide electricity to farmers is Rs 7 to Rs 8 per unit and this is all documented across. The states get subsidy at a normative level ranging from Rs 3.5 to Rs 4 which means the balance Rs 4 is either pure losses or it is cross-subsidised from commercial industrial consumers.
So, there is an unfunded loss and you are increasing the tariffs for industries, which is making them uncompetitive around the world. You may know that in some states in India such as Maharashtra, industrial tariffs are much higher than in Europe or the US. So, if we are able to theoretically provide agriculture power at Rs 3-4, this will be a massive change in the economic health of the utilities and the state. Also, there is a social factor. Today, most utilities provide electricity to agriculture during the night, when demand is low. Now, imagine a farmer has to wake up at 10 pm and irrigate the land . That is not ideal. With solar, that whole thing changes to daytime. So, we have started helping the Maharashtra state to aggregate projects. If you ask why these projects were not happening earlier, it is because they are small projects — half a megawatt, one megawatt, five megawatt. No private sector will get interested in doing these small projects. So, we are aggregating these land banks near the farms, near the substations and putting together a bundle of projects as one and bidding it out, so that the private sector, the developers would get interested.
The first such aggregated project is of 100 megawatt, we have issued on behalf of a Maharashtra government entity. And we are in the process of doing more in states like Odisha. So in six months, if we are able to figure out a template and nudge 20 states to do four or five gigawatts each in the next six years, we are almost 100 to 200 gigawatts.
ET: There have been a lot of startups coming up in the energy sector. What are your thoughts on this rise of energy-related startups?
SK: India is obviously one of the better ecosystems for startups. However, most venture capital money is not going into climate projects. Within the climate sector, energy’s ranking might be even lower. And it is not very hard to understand why. This country has seen more than 100 unicorns in the last two years or so. What are these? They are all tech-based aggregators or marketplaces.
The nature is very simple. I am a VC. You have a brilliant fintech idea, I will invest in you $5 million, for example. In three years’ time, my $5 million will become $25 million. And I exit and everybody is happy.
Now, the solution does not lie only in tech. Tech, of course, is a very important part, at least in clean energy. But you need an infrastructure. Now, that is something where there is a clear gap — infrastructure-based startup. For example, a new battery system that is absolutely necessary.
But for a venture capitalist, to make five times return or three times return in three years is not possible in an infrastructure sector.
So, that class of investing is still very nascent in this country. GEAPP has a programme called Entice. The winners are those creating infrastructure-based startups to solve these problems. We are thinking to fill the gap of venture capital by having a longer term horizon, maybe seven years, 10 years, before you get a 5X return.
ET: We talked about solar and affordable energy access to rural areas. At the same time, the cost of production in both solar and hydrogen is very high. How can we bring this down?
SK: Green hydrogen cost is about $5 per kg and it does not make it commercially viable unless it comes below a dollar. Yes, it needs water. I think the key input is the electrolyser. That cost will come down, but it needs volume. So, it is a chicken and egg story. And I think the government has come out with a hydrogen mission with a significant capital outlay just to make sure that there are enough projects, pipeline that are built up so that the costs go down.
The other way is — is there any other way of producing hydrogen instead of the electrolyser? And that is what I mentioned to you, the startup space. I have not studied chemistry in the last 35, 40 years, but I am sure there is some other way of making hydrogen, maybe through biomass, for example, where you do not need an expensive electrolyser.
ET: While the focus on India and the Global South is not new, do you feel that in recent years, this focus has increased, especially before and after the G20?
SK: So, it is very simple. I was listening to the DG of International Solar Alliance yesterday that last year about $380 billion went into renewable energy investments around the world. India got 3% of it and Africa got 2% of it. Now, this is a cause of big concern. If 80% of the money is going to the developed countries, including China, that is not correct. We are not saying that you do not do that, but increase that 3% to something more substantial.
Coming back to India, India has 1.4 billion people, one-sixth of the global population. By 2047, India’s population will increase by 70%. We will have a lot more responsibility.
Now, tell me one developed country that has developed without fossil fuels. Everyone has developed using cheap coal resources, including China. In India, you and I have a right to better living. Our children should live much better on a much more inexpensive fuel.
So, that is the reason why I think India did brilliantly well with the G20 presidency, to give this vision out.
And the last point — which I just heard NK Singh (Chairperson of Fifteenth Finance Commission) and Jayant Sinha (former minister of state for civil aviation) say — World Bank, ADB and the Bretton Woods Institutions were all created for a very different objective. They came right after World War II. Now the challenge is very different. It is no longer just social development. It is no longer poverty. It is, but the focus is climate, too.
That is the reason why I feel a lot of countries are looking up to India as leading the way, being their voice in the new world order.
