The Business of Better Environment

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opportunity/environment

The Business of Better Environment Call it concern for environment or plain economics, many a businesses around the world are striking gold in ‘green’ pastures /Vimarsh Bajpai

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hen the United Nations Environment Programme (UNEP) released its report on the global flow of capital into the sustainable energy sector, a few months ago in Paris, the figures established firmly the grow-

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opportunity/environment ing clout of a new breed of businesses.

Fast depleting natural resources, particularly oil and coal, rising crude petroleum prices and dramatic climate changes have been instrumental in the sharp growth of a new category of commercial activity called environmental business.

According to the UNEP’s Global Trends in Sustainable Energy Investment 2007 report, global investment capital flowing into sustainable energy rose from $80 billion in 2005 to a record $100.4 billion in 2006. This breaks up into $70.9 billion invested into companies and new sector opportunities in 2006, a 43% jump from 2005 and 158% over the last two years, the report said, and added that an additional about $29.5 billion entered the sector in 2006 through mergers and acquisitions, leveraged buyouts and asset refinancing.

Renewable energy is just one of the various business opportunities that have grown around all the hue and cry over energy security, global warming and pollution. Others tapping the huge market for environmental goods are automakers with their electric and hybrid car models and consumer electronics companies with their energy-efficient home appliances. If US is the role-model for business trends the world over, then the recent figures by the American

DARE/sunrise businesses Green sectors / opportunities Wind power: Wind turbines, supply of components, spares, accessories, consultancy Solar power: Solar photovoltaics (PV), solar thermal systems such as solar heaters Hydro power: Small hydro-power plants Nuclear power: May open soon for private participation Biofuels: Large scale production of ethanol for petrol, and jathropha for bio-diesel Biomass: Power plants based on fuel wood, crop residues and bagasse Rural energy technologies: Biogas burners, lamps, engines Waste management: Power generation from urban and industrial waste New energy technologies: Fuel (chemical) cells, hydrogen energy, ocean energy Auto: Electric cars and three-wheelers, hybrid cars, two-wheelers run on CNG Consumer durables: Fluorescent lightbulbs, energy-efficient home appliances Industrial products: Water treatment plants, air pollution control equipment etc Construction: Design, construction of energy- and water-efficient buildings Consulting & engineering: Assessment, project management, O&M, monitoring etc

Solar Energy Society (ASES) are heartening and could be seen as an indication of things to come in developing countries such as India. According to ASES, renewable energy and energy-efficiency industries generated $1 trillion in revenue in 2006 in the US, and the figure could reach $4.5 trillion by 2030.

US-based Environmental Business International, the publisher of Environmental Business Journal, has coined a new term – Healthy Products, Healthy Planet Sectors (HP2) – those consumer goods and services that are offered in the name of environmental sustainability. It even includes services like eco-tourism in its list of businesses that have grown around the concern for climate change.

Renewable energy The hottest sector in environmental business today, renewable energy refers to the optimum utilization of natural resources such as water, wind, sunlight and biomass. The sector is bound to witness exceptional growth given the government’s efforts to reduce the country’s dependence on crude oil (India imports 70% of its crude oil requirements and pays one of the highest prices in terms of purchasing power parity) and meet its growing energy needs.

According to estimates, renewable

Global Capital Flow in Sustainable Energy* in 2006

Total inflow: $100.4 billion All figures in $billion Source: UNEP Global Trends In Sustainable Energy Investment 2007 * Includes biofuels

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opportunity/environment Sustainable Energy Investment in India (2004-2006)

$ million

sources contribute only 7.7% of the country’s total power generation, as against the world average of 13%. This leaves scope for massive growth of the solar and wind energy sector. Currently 11,000 MW of power is being produced from renewable sources. During the 11th Five Year Plan, 15,000 MW of capacity addition is being targeted by the Plan panel. A renewable energy SEZ is also in the offing.

No wonder then, the wind power sector has seen some good action lately. It began with the completion of Suzlon Energy’s acquisition of Germany’s REpower Systems in June this year.

Pune-based Suzlon now has the global market share of 6% in the wind power sector. Kalyani Group, parent of the world’s second-largest forging company, Bharat Forge, has grown its presence in the sector by recently acquiring Germany’s wind turbine maker RSBconsult GmbH. NTPC and leading developer DLF are also said to be exploring the possibility of entering the lucrative wind power business. Tata Power is setting up a 100 MW wind power project in Maharashtra with financial assistance from Asian Development Bank and Indian Renewable Energy Development Agency (IREDA). ONGC has taken up a 100 MW wind project of 50 MW each in Gujarat and Karnataka. Reliance Energy

Source: UNEP Global Trends In Sustainable Energy Investment 2007

has commissioned a 8.37 MW project in Karnataka besides other projects.

All this action comes in the backdrop of India being the world’s fourth largest wind energy producer with an installed capacity of over 7,000 MW. However, there is potential for 45,000 MW, according to government.

Worldwide, the installed capacity of wind power is 78,728 MW as on March 31, 2007. A National Renewable Energy Policy, now under consideration, envisages 10% of total installed capacity through renewables.

Renewable Energy Potential 2,700 MWe 5,000 MWe

16,881 MWe

45,195 MWe

15,000 MWe

Biofuels MWe: Mega Watt Equivalent Source: Planning Commission

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Thanks to the plenty of solar energy that India gets, this is one segment of renewable energy that is high on both the government’s and private sector’s agenda. This can be gauged by the recent statement of Minister for New and Renewable Energy Vilas Muttemwar, who said the government was contemplating providing solar energy to 25,000 unelectrified villages by 2012. Reliance Industries is also mulling foraying into solar power generation and is likey to start some pilot projects in Maharshtra.

Opportunities in the solar energy sector are in the development of Solar PV (photovoltaic) and solar heating systems. SPV systems have found applications in households, agriculture, telecommunications, defence and railways among others. In the last two decades, the cost of manufacturing of PV has gone down significantly, increasing affordability for dispersed rural applications. Non-grid solar thermal technologies include water heating systems, solar cookers, solar drying applications and solar thermal building designs. These technologies on the other hand help conserve energy in heating and cooling applications, especially in urban and semi-urban environment.

Rising prices of both petrol and diesel have been rattling consumers and indus-

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opportunity/environment DARE/facts Ethanol Produced from: sugarcane, molasses Big players: Shree Renuka Sugars, Bajaj Hindustan, Ballarpur Chini Group etc Demand from oil marketing firms (for 5% blending with petrol): 550 million litres annually Current production capacity: 1,500 million litres approx Bio-diesel Produced from: Jatropha, Pongamia, Karanja plants Big players: Reliance Life Science, Mohan Bio Oils Ltd, Southern Biotechnologies etc Market projection: Growing at CAGR of more than 33% from the year 2007, world biodiesel production is likely to touch the mark of 12 billion litres by the end of 2010

try alike for a long time now. To reduce the country’s dependence on imported petroleum, the government decided to promote biodiesel and blending of ethanol in petrol. In 2003, the Ministry of Petroleum and Natural Gas introduced the scheme of supplying 5% ethanol blended petrol in nine major sugar producing states and four Union Territories. It was further extended to ten states. Later, in November last year, the programme was approved for pan-country implementation. The government is now considering raising doping level to 10% in 2008.

Thus, according to reports, the three state-owned oil marketing companies had agreed to lift a total 1,700 million litres of ethanol from sugar mills over a three-year period from last November.

In India, ethanol is mainly produced from sugarcane and molasses, a byproduct of sugar. However, it can also be produced from wheat, corn, beet and sweet sorghum. India is the fourth largest ethanol producer after Brazil, the US and China, its average annual ethanol output amounting to 1,500 million litres. For a 5 per cent ethanol blend in petrol nationally, the ethanol required is 550-640 million litres annually. The sugar industry wants the government to also approve ethanol blending with diesel, as due to higher production

Climate change and carbon credits None of the concerns about global warming and oil crisis are misplaced. Experts believe that average global temperature is likely to witness an increase of 0.6-2.5°C in the next fifty years, thanks to a host of factors including a sharp rise in greenhouse gases (GHG) such as CO2.

Although the US has been the biggest emitter of GHG, growing economic activities in India and China are also blamed for the rise in GHG. Generation of electricity from coal-fired power plants, emissions from automobiles and booming industrial activity results in the release of heat-trapping gases into the atmosphere. “Global atmospheric concentrations of CO2, methane and nitrous oxide have increased markedly as a result of human activities since 1750 and now far exceed pre-industrial values,” according to the Intergovernmental Panel on Climate Change (IPCC).

On the energy front, the situation is equally dismal. Supply disruptions and rising demand from China, the US and India, the main guzzlers of energy, has caused crude oil prices to touch record levels this year. It is believed that the Organization of the Petroleum Exporting Countries (OPEC), which produces more than a third of the world’s oil, has been pumping less oil this year compared to 2006, putting additional pressure on supplies. Thus the need for reducing energy consumption while preserving the climate has led to the rise in development of sustainable and environment-friendly products, services and technologies.

Carbon credits The Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC) imposes mandatory limitations on emission of greenhouse gases (GHG) for the signatory countries. As of December last year, a total of 169 countries and other governmental entities have ratified the agreement, with the exception of the US and China. From this Protocol germinates the idea of carbon credit trading. This mechanism is aimed at making developed countries, which are the biggest emitters of GHG, shell out money which in turn is passed on to countries cutting down on harmful gases.

World-wide share of CDM projects

Total Number of Projects: 788, as on September 17, 2007 Source: United Nations Framework Convention on Climate Change

For example, if an Indian company cuts down or prevents the emission of certain amount of carbon in the atmosphere, it can sell that amount (called carbon trading points) to a company in the developed world. This process is called Clean Development Mechanism (CDM). This is turning out to be a huge opportunity for Indian companies who get paid for adopting clean technology.

Carbon credits or Certified Emission Reduction Certificates (CERs) are awarded by the CDM executive board, an arm of the United Nations, to projects in developing countries. These credits are traded like stocks in the international market. JSW Steel received 5.4 million carbon credits in June this year for reducing greenhouse gas emissions between 2001 and 2006. The global carbon credit market is expected to grow to $100 billion by 2010. As of September 17, India has the largest number of registered CDM projects in the world, accounting for over 35.28% of 788 projects, followed by China (14.34%), Brazil (13.58%) and Mexico (11.42%).

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Toyota Prius is the world’s largest selling hybrid car there is a glut in the market. This would quadruple the demand for ethanol, and could cause supply side constraints.

As for bio-diesel, Jatropha cultivation is gaining pace because its seeds are used to make the fuel. Other non-edible oil seeds such as Karanja and Pongamia are also used. It is estimated that India will produce 2 million tonnes of biodiesel in the next five years. For this to happen, huge swathes of land will be needed for Jatropha plantation. Since plantation of Jatropha has been taken up only in recent years, the situation may improve in another 3-5 years. According to estimates 0.4 million hectare of land is under jatropha cultivation.

An Accenture study, which examined the key factors that will shape the emerging biofuels industry said, com-

ing nations such as China, India and Japan do – are most likely to succeed in the biofuels industry by 2012.

The International Energy Agency (IEA) estimates that the share of biofuels in road transport globally will increase from 1% in 2004 to 7% in 2030.

Electric & Hybrid Vehicles Vehicular emission has become a major concern in developing countries, particularly India and China that are witnessing a surge in the number of automobiles every year. This has raised the need for electric and hybrid vehicles in India.

The Maini Group owned Reva Electric Car company took the lead by launching the country’s first electric car in 2001. It manufactures two-door

trants. Electric two-wheelers have been launched by Hero Group and TVS. Electric vehicles are zero emission vehicles, almost noiseless, easy to charge, service and maintain due to the absence of spark plugs, clutch and gears.

Meanwhile, hybrid cars, for which the US is the biggest market, may hit Indian roads soon. Mahindra & Mahindra is mulling the launch of its hybrid SUV Scorpio while Honda Siel, Toyota and Ford are exploring the Indian market.

Hybrid vehicles, as the name suggests, have internal combustion engines and electric motors. Experts believe that hybrid vehicles cut air emissions of smogforming pollutants by up to 90% and reduce CO2 emissions by half.

Hybrid car sales in the US jumped 49% in the first seven months of 2007. Toyota

BIG IDEA/ IT IS TIME NOW TO MAKE MONEY AS YOU TREAD THE ROAD TO A GREENER ENVIRONMENT panies who can navigate the patchwork of local regulation and are flexible enough to deal with a broad range of unknowns – including the emergence of second-generation technologies, the development of the hybrid automobile market, and what key energy consum36

hatchback and can accommodate two adults and two minors. The company sells its cars in the UK, Italy, Norway, Spain and Ireland among others. The market is bound to grow in leaps and bounds as there is a dearth of players and the segment is open for new en-

Prius is the world’s most successful hybrid car. The US government provides tax benefits to hybrid vehicle buyers. However, in India, the government is yet to plan out subsidies for this sector. Probably this is keeping Toyota and Ford from getting their models in India. DARE

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