Turning Green to Gold

Green field investing in clean technology

Published: Dec 4, 2009

Energy alternatives are no longer in the realm of `soft choices'. Instead investing in green energy is the next great playfield. Recently, an alum venture capitalist, an entrepreneur, and an industry professional got together at the Startup Forum organised by the Wadhwani Centre for Entrepreneurship Development (WCED) at the Indian School of Business (ISB) to discuss the challenges of starting out in this segment. Green investing is becoming a green pasture for entrepreneurs in India. According to Solar India Online, in the next 10 years India will require at least an additional 10,000 MW of capacity. As an acute energy scarcity slowly affects India's industrial growth and economic progress, sustainable renewable energy is projected as the vital link to usher in the country to the next phase of growth.

The WCED and the Entrepreneurship and Venture Capital (EVC) Club at the ISB recently hosted a conversation on `Green Business Ideas' to assess when green entrepreneurship makes good business sense. The talk was the debut event of the Startup Forum of the WCED. The Forum is an initiative of the WCED that aims to connect "innovation and ideas in new and existing segments".
The speakers at the event were Sreekanth Beeram, Investment Manager, Venture East Capital and Private Equity, Sekhar Nori, Managing Director, Skyshade Technologies, and Vice Admiral A K Kalra, Founder, Grene, an engineering firm that provides energy efficient and green solar energy solutions. Gireesh Shrimali, Assistant Professor of Information Systems at ISB moderated the discussion. The discussion spanned topics ranging from choosing a business opportunity in the green energy sector, and the major challenges that face startups, all the way to marketing and funding strategy for this sector.

Image: Reuters/Tony Gentile
Krishna Tanuku, Director, WCED said, "The main motive of the Forum is to introduce our students to opportunities and challenges when starting a venture.

Green energy is a great area for entrepreneurs to come and play in, and India and the ISB can take leadership in this venture." Going forward, the WCED aims to identify specific market needs in the sector and encourage startups and entrepreneurs, as well as engage the investment community. According to Dr. Tanuku, the WCED hopes to create a body of knowledge in this area that could even be incorporated into the general management curriculum in the near future.

The panellists noted that while there are a number of potential power sources in India, which kind ¬ nuclear, solar, hydro, energy from waste - will emerge as the best bet remains wide open. The talk offered a brief history of the Indian renewable power covering three phases - the 1970-80s, when the emphasis was on research and development, the 198090s when large-scale demonstrations and propagation of renewable energy were undertaken, and the current phase when wind, biomass, small hydropower and to some extent, solar have matured.

The consensus was that solar and micro grids are the way forward for future renewable energy sources in India, even though as panellists pointed out, solar policy in India is still rudimentary. "Solar is clearly here to stay," Professor Shrimali concluded, partly because of the high costs of peak power. Clean water management is another area of great promise for India, with increasing demand and a strong skill-base in chemical technologies.

Turning to the financing of green ventures, panelists addressed a frequently asked question - what do venture capitalists look for when they see a project?
Either of two kinds of proposals, they suggested, could interest a venture capitalist ¬ a unique solution or a business model which will scale up. Professor Shrimali however argued that the solar power space was getting saturated for venture capital firms, with several companies already in the fray. According to him, hydro and wind were more attractive options for VCs because these sources are close to cost parity without having to deal with subsidies.

A variety of new and interesting financing models in this sector also came up for discussion, carbon credits among them. Panellists agreed that renewable energy may not replace fossil-fuel technologies in the immediate future, but as they become more costcompetitive over time, it will make economic sense for utilities to deploy them in hybrid grids.

Sector-relevant policy was another hot subject for discussion - what kind would encourage business ideas and what kind would hinder entrepreneurs? In particular, Professor Shrimali noted the increasing involvement of city governments in solar power through discounts on property taxes for property owners who invested in solar power.

The discussion ended with an interesting business assignment from Shrimali - the case of Diya energy, a battery technology to power cell phone towers in rural India. "Think about the whole value chain and see where the gaps are, and that will tell you why a VC will come to you," he challenged the audience.

[This article has been reproduced with permission from ISBInsight, the research publication of the Indian School of Business, India]

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