By Rakesh Kamal, Clean Energy Policy and Programs Consultant at The Climate Reality Project’s India branch
Even as many Indian companies bridle at environmental regulation, many of the major industries players today are broadly committed towards working for a sustainable future. The same certainly can’t be said of all major Western economies, so what makes India different?
Two factors stand out. The first is government policy. In 2014, India passed the first-of-its-kind bill turning corporate social responsibility from an admirable (voluntary) objective into a formal mandate. The law requires companies with annual revenues exceeding 10 billion rupees (approximately $156 million) to donate at least 2 percent of their net profits to charities working in areas including hunger, education, and the environment. Debates continue on the law’s overall effectiveness, but one result has been to direct resources directly to environmental causes, including climate action.
The second is good old-fashioned self-interest. Recognizing that business becomes much harder in a world shaped by destructive floods, dangerous heat, and other climate impacts, many companies have begun embracing clean energy and other solutions to help address the crisis.
One result is that businesses are helping de-carbonize the economy faster than anticipated. Another is that India is actually seeing business opportunities grow, rather than shrink through climate action.
This year, India overtook the US to become the second-most attractive country after China for renewable energy investment, according to Ernst and Young. No wonder, when you look at what’s happening on the ground. In just three years, India quadrupled its solar-generation capacity from 2.65 GW in 2014 to 12.29 GW in 2017. In the same period, wind grew from 23.35 GW to 32.17 GW. The story doesn’t end with power generation either, as the country has come up with a plan to produce only electric vehicles from 2030, which will mean a seismic change in the way industries function.
India now faces the challenge of accelerating its efforts on climate while also pursuing a path of sustainable development for the population. Business again has a key role to play here, in particular, in four areas.
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It’s a basic truth of the market: The more you buy of something, the less it costs on a per-unit basis.
Recognizing the power of aggregating demand to cut costs in a big way, India – through its work leading the International Solar Alliance – is bringing together buyers for solar equipment from across the country and in many developing nations. The effect has been to cut equipment costs by 30—40 percent, thanks to the tremendous volume.
This approach has not been confined to the international stage either. Thanks to a government program that promotes LED bulbs, India has become one of the world’s largest markets for the technology and changed 260 million inefficient light bulbs. This effort has not only helped create jobs in the manufacturing, service, and maintenance industries, but has also saved money and carbon emissions. With the lessons learned, India is now looking at replicating this success with solar pumps and street lighting across the country and developing nations worldwide.
Easing Capital Crunches
One of the biggest challenges facing Indian businesses lies not in technology or supply, but in accessing credit at affordable rates, thanks to perceptions of risk from lenders abroad. Without affordable credit, businesses are frequently hamstrung, unable to expand or move quickly to seize opportunities, ultimately slowing broader economic growth.
To overcome this obstacle, Indian financial institutions have partnered with the government, World Bank, and other global financial agencies to secure multimillion dollar loans at low interest rates. The good news is that international investors who recognize the real risks of climate change also see the value of clean energy and other solutions-focused assets rising by the year. With India a growing market for solar and wind, investment is becoming an increasingly attractive proposition as demand for renewables helps reduce perceptions of risk. Along with reducing risk by promoting clean energy, India is also turning to innovative products like green bonds to raise capital for businesses.
For any technology to successfully scale up, companies require a large pool of skilled and semi-skilled labor. Indian businesses – along with the Indian government and universities –understand the importance of a skilled labor force and developed a range of policies and programs to both train existing technicians for new careers in renewables and other solutions-related fields and also recruit new workers. To accelerate this process, India is also training workers in other developing countries. As more and more major businesses embrace sustainability, they have the opportunity to raise awareness and educate their supply chain partners on the benefits of choosing clean energy and other pro-climate measures.
As a nation, India adapts to technological change very rapidly, with new technologies penetrating major segments of society extremely quickly. One example is the shift from landline to mobile phones, which saw the number of active mobile phones connections grow and exceed the size of the entire population in just over 10 years.
Today, there are more than 300 million Indians living without access to electricity. That’s more than 300 million people who can leapfrog fossil fuel energy and learn to live with energy efficient equipment and decentralized renewable. The need is there. The technology is there. And the entire sector is just waiting to explode.
Thanks to strong signals from the government and growing demand, the cost of solar energy is already under 3 Rupees per Kwh. But with greater policy support and new technologies emerging from the Indian renewable sector, this price can go even lower.