We had discussed earlier this year that most of the fund-raising in Renewable Energy and Cleantech in India is happening in mega project developments and developers.
Renewable Energy is at an interesting stage in India where the question is now on how best we can tap the potential and convert the opportunity available into actual projects being developed and scaled on the ground.
Investors have also shown a lot of interest in this sector and according to data from Venture Intelligence, $1.5 billion has been invested by venture capital and private equity firms into clean energy developers from 2008 to date. Indian Cleantech sector has witnessed an investment of about $465 million from 2008.
However, deals have been hard to come by and most of the funds are crowding around the same kind of available deals that are far and few between.
According to this report, Venture capitalists have raised $24.5 billion since 2009 to invest in clean technology or renewable energy in India, and would like to invest more than a fifth of that capital in solar-energy projects, according to researchers VCCEdge and Preqin.
Their investment is based on the thesis that India will need more energy than it now generates if it is serious about maintaining its economic growth rate of 9%.
While this opportunity to be part of a new and rising industry has attracted droves of investors—domestic and foreign—attractive targets are in short supply. Funds such as Blackstone, TPG Growth and Reliance Venture Asset Management Pvt. Ltd. have all paid high premiums on portfolios that involve long developmental pipelines and few operating assets.
The solar sector has seen only eight transactions amounting to $100 million in the last three years—a fraction of the money that has been raised to invest in this sector.
Shivani Bhasin Sachdeva, chief executive of private equity fund India Alternatives, says solar-power-based power generation needs greater economic support than say, wind-based and small-hydropower projects, as the latter sources are on the verge of reaching grid parity—the point at which an alternative means of generating electricity is economically on a par with a conventional technology such as coal-based-generation.
The Indian government is doing its bit. In 2009, the Central Electricity Regulatory Commission—which promotes efficiency and competition in bulk electricity generation and transmission— launched the ambitious Solar India Initiative to be deployed over 19 years. Its three-phase plan works toward generating 20 gigawatts of solar energy within 12 years.
“When the solar policy was announced 15 months ago, there was a kind of gold rush into the sector,” said Alan Rosling, founder and chairman of Kiran Energy Solar Power Pvt. Ltd.
His company received $30 million this year from New Silk Route Advisors Pvt. Ltd, Bessemer Venture Partners India and Argonaut Ventures LLC and is engaged in developing solar projects.
Initially, new entrants thought it would be easy to reap quick returns but the first round of bidding, led by the government, for the purchase and sale of power under the National Solar Mission (dubbed the Vidyut Vyapar Nigam scheme) “was a very good way of shaking out players who were not serious,” Mr. Rosling said.
Indeed 418 applicants competed for 30 government contracts for the purchase of solar power from private industry, said Sanjay Chakrabarti, leader of the national clean technology practice at Ernst and Young. This indicated a high level of interest in a relatively underdeveloped sector that had few experienced players, he said.