‘We are trying to understand the DNA of low-carbon leadership’
The Climate Group is an international not-for-profit organisation that brings together many national governments, the corporate sector and the public sector to make clean energy and sustainable development a reality. Its CEO Mark Kenber was in India recently to take stock of the ongoing project and test the waters for new ones. In conversation with Keshav Chaturvedi, he discusses the importance of energy efficiency, the role of electric vehicles and how Climate Group is trying to create a global alliance of leaders through its “Clean Revolution” clarion call
Q: Currently you are working on lightemitting diodes (LEDs) in Kolkata, Haldia and Thane, and you also plan to work on electric vehicles (EVs). How do you visualise the future for LEDs and EVs in India?
The work on LEDs that we rolled out in India in the last two years was started as a global pilot programme with multiple objectives. We know that by deploying LED lamps, you can cut lighting bills up to half and if you use smart technologies and controls as well, you can reduce the energy use by upto 80-85 per cent. So we did this pilot experiment to demonstrate that it’s not just a theoretical opportunity but a practical opportunity too on the ground. It also serves its users, particularly when placed at pedestrian crossings, making women and children feel safer. Our project has taught us many new lessons and we looked at some technical and regulatory barriers too. For example, in some places one of the big barriers was people measuring light output from energy use, so clearly, LEDs failed because they weren’t consuming enough energy. In other places people were interested in yellow light and LEDs produce a lot of white light so LEDs were left out. So we had to look at some of the technical and regulatory barriers to overcome perceptions. However, in terms of energy and emission reduction potential and savings, we found that across the board, the savings were huge. In India there is a lot of interest. Of the ten pilot programmes around the world, four have been initiated here and the biggest one is being conducted in Kolkata. On the back of our pilot, the Kolkata Municipal Corporation secured a loan from the ADB (Asian Development Bank) and we have helped design the specifications of the tender process to install around 15000 LED bulbs. We are also working in West Bengal more generally and in the state of Orissa as well as other parts around the country to look at what are the more macro-level policies that can be put in place to drive LEDs. These include tariffs, trade policies related to imports and also figure out ways and means to stimulate the domestic manufacturing of LED because we believe that it’s not the question of deploying LEDs and saving money and saving energy but also to create an industry that in course of time satisfies the demands of the domestic market. Apart from this, there are issues of financing as there is a big upfront cost involved in such projects and we are working with the Bureau of Energy Efficiency (BEE) at the national level and with the state and city governments in this area too. We will continue with this work for at least a year or two and we hope that at the end of two years we have worked with other organisations to drive a standard for street lighting, proper financing mechanisms and also creating domestic capacity.
The electric vehicle work is something we started later. We have done work in the UK, the US and Australia. In the UK, we published a report this year which was a guide for the owners of fleets and the focus we have taken is – rather than looking at individual private drivers, we are trying to figure out how we can get the scale. We know that there are lots of supermarkets and newspapers, postal services that work inside a city space and have quite large fleets and so we can create a procurement alliance which can then provide sufficient demand for O&M (Operations and Maintenance) and car manufacturers to invest in producing scales that can bring the costs down. And the nice thing about these fleets is – rather than individual users who will have to have their charging stations and so forth, these fleets will have depots where they can have their charging facilities and if they have a range of 120-150 miles, then you can do a lot of delivery in urban areas. It’s not at the moment a substitute for long distance transport but if you think of cities like Delhi, Kolkata, Mumbai or Chennai with a lot of intra-city delivery and transport, this could be an ideal solution. It deals not only with the emissions issues but the vehicles can also be used for energy storage and you can think about renewable energy electricity sources like solar panels in depots too. We know that it can work out cheaper and we can build this on scale. In India we have just begun exploring this and in the last few months, we have felt that not only within the national government, but also at the regional level people are interested to know whether this procurement alliance is applicable here; I believe it will be. We have to then work out and put finances in place and also work with manufacturers.
The third area that we are looking at is the use of information technology. In 2008, we published a global report called Smart 2020 which focuses on how information technology can help us reduce global emissions by around 15 per cent. India has a strong ICT (Information and Communications Technology) industry. We believe that not only are there opportunities within the country to increase energy efficiency and balance different energy supplies and demands, but there is a substantial potential to export this skill too.
Q: You have talked about the need of a local production base for LEDs in India, but there are companies here facing stiff competition owing to imports from China. At a time of such intense competition and uncertainty, what according to you is the future of the Indian LED industry?
Well, we have to be company neutral and product-neutral. What we advocate is — what are the best products at the best prices. My hope and my belief is that it should be possible for Indian companies to produce high-quality LEDs at a good price. I mean for example, technical capacity exits, you have great engineers, great entrepreneurs, big industrial companies, and it is not that you are starting from nowhere. Obviously, there are some barriers to entry. But I think there is scope and the reason why I say this is the same as it is with renewable energy where one would hope that on the back of incentives for deployment of solar and wind, you will see a growth in the domestic solar and wind industries which can supply to the domestic market and can export as well, so it helps in the balance of payment and trade balance issues and creates a strong base in long-term streams of employment. The whole world is moving towards cleaner energy despite recession at least in the West. In 2009-10 and 2011, investments in clean energy continued to grow. In 2011, half of all the energy investments were in the clean energy space, so there is a demand for these products. Now, like any other market, in renewables, too, we are beginning to see that solar prices have gone up and down, companies have come and gone. They have overextended themselves, got too excite. These things are always going to happen. I think there is an opportunity for India in not only providing greater energy security, satisfying the energy needs of 400 or so million people who don’t have access to clean energy and deal with those specific issues as well as diversify the energy base, but also in creating an industry and a set of businesses that are able to compete domestically and internationally. Maybe there is a role for the government in some way. It can create a level-playing field and make sure that the investment environment is solid and reliable enough for international players to come in joint ventures. So going back to what you said about influx of Chinese LEDs, well, isn’t the answer then that Indian companies go into joint ventures with Chinese companies, bring the technology and manufacture the product here?
Q: You also talked about the possibility of big cities like Delhi, Mumbai, Kolkata or Chennai having a kind of government fleet or public transportation fleet turn to electric vehicles because they have the necessary facilities like depots and they can have renewable energy as a source for charging stations. Can you explain this further?
I wasn’t thinking so much about the public transport or passenger transport. It’s more about light-use vehicles. While at the moment, EV technology is evolving very quickly, it seems to work well for medium to small vehicles. So if you think about small trucks that deliver perishable goods, newspapers and supply to small grocery shops, these actions could be carried out by an electric vehicle which only has to cover maybe 70 to 80 miles and then it goes back to the depot where it can get a fast recharge. In fast recharge, it can charge up to 30 per cent within half an hour or an hour and can do another round.
Q: So while talking or initiating these discussions, what kind of reactions did you witness from people in India?
Well, as I said, in India, we are really in very early days. I am hoping to come back at least two or three times this year and my team here and my colleagues here in Delhi would be exploring opportunities. We are going to float this idea to see what sort of appetite there is for this kind of projects. If there is and I believe there will be, then we will explore with the city government and I am hoping to meet the chief minister of Delhi to find if there is an opportunity to do a pilot which will have a political backing. We are not asking for money but political backing, and where there are municipal governments or municipal corporation’s fleets, we would try and find out if they would be interested in participating. Then it would be a question of attracting finances and building up a model for working on that. It’s a midterm project but something about which we are quite excited even if it’s not powered by renewable, and my hope is, in time there is an expanding share of renewable in supplying power for charging these vehicles, thereby contributing to reduction in GHG (greenhouse gas) emissions. Also, in an increasingly polluted city, this initiative will help in bringing down particulate material and other emissions.
Q: Energy efficiency projects face huge problems in terms of getting finances. Banks are extremely wary of supporting such projects. How have you done things differently so others can learn and replicate them further?
What we found with the LED experience and I would go back to the example in Kolkata. There it was the ADB that provided the loan and despite the programme being in its early stage, ADB sees it as a venture that can be successful. So you do need external finance. Similarly, you can imagine a situation where BEE uses a part of its guarantee that it has already created to work with an anchor investor like ADB to attract other investors. When you have created this fund, institutional investors can invest and spread the risk to a number of projects. Till the time it is done, most people, excepting some international investors, would continue to view LED as just another technology out there. But within a year or two, as the technology is evolving, I think the providers of technology would come forward and do something. You can also think of a mix of finances provided by technology providers and anchor international institutional investors like ADB plus local and international banks perhaps associated with a combination of institutional investors chipping in for these projects. In a way the example of LED is less complicated then some others like if you work with the municipal corporation or with owners of apartments. They pay the bills so they know what the benefits are. But when you take up building efficiency especially where you got one or more owners and many tenants, then of course it becomes much more complicated. There is an interesting work that the Deutsche Bank climate change advisors and the Rockefeller Foundation together published a month ago. It has a new model of finance. Recently, I was in Connecticut (US) and they also have a model so lot of experimentation is happening. The way India is growing at 8 or 9 per cent per annum, its energy demand is going to double every 10 or 15 years. We are not going to meet that demand if we don’t use energy more efficiently. Also at a time when you have more and more middle-class population living in urban areas needing air conditioning, tablets, computers mobile phones and other things, we are not going to suppress that need either, so efficiency is an absolute key and therefore financial support is also a key. What I am not clear myself is whether there’s enough interest in Indian financial institutions to find those models? Because I think they would play a key role between attracting international investors, who want solid, fundamentally reliable fund manager intermediary in the country, and the projects on the ground itself. So there aren’t easy solutions but there are solutions. In many cases the government will have to set standards and create a timeline to show private players how policies would pan out over a period of time. It can’t happen that you set one measure this year, another next year and go back on it the year after so for example, in vehicle fuel efficiency, the manufacturers know that in 2013 they have to do this and so on. If they get a long trajectory, then it’s easy to weave these efficiency measures in their basic plan and it becomes a part of their normal business planning rather than a separate energy efficiency project.
Q: Your organisation has launched the India-UK Business Partnership. Where does renewable energy fit into the scheme of things?
Well, on the India side, Suzlon is a member of the group. I think Indian companies would like to be suppliers for both offshore and onshore projects in the UK while the UK would like to see the financing of projects in India, including energy efficiency. Energy efficiency is something we would be talking about more because while we know the opportunity is there, as you have suggested the opportunity is not always matched with the reality on the ground because there are perceptional barriers, technical barriers and financial barriers. So one of the things we have to do is to find out how to overcome these barriers. What government needs to do and what business needs to do.
Q: Climate Group has initiated a clean revolution campaign from June 2, in Rio de Janeiro. What has been the response of national leaders and people in general?
We have been working with the heads of regional and local governments and not the national governments. We have a network of 50 to 60 state leaders, 23 of them are members of the Climate Group, ranging from Sao Paolo to Kwa Zulu Natal to California to New York to Northern Australia. We are very pleased that this year the chief minister of Gujarat said that his state would also join the Climate Group. We believe that a lot of action can happen at state and regional levels and they are very excited about it. When the Climate Group started working, one of our main objectives was to change the way people think about climate change. While we definitely need to do something about climate change, we tried to put this thought forward that instead of it being a moral obligation with high costs, it’s about the opportunity to act and do something in the business arena. We wanted to change the way national and international politicians think about it and change the argument about who pays for mitigation to how we can create business. We always provided lots evidence of companies, states and citizens that reduced their emissions and made or saved money in the process. And the clean revolution campaign is taking it to the next level. We are helping create a coalition of 200 leaders around the world from cities, states, governments and corporates who don’t just believe it is necessary to do this, but they also think this is the only way for long-term sustainable economic growth. So we will be creating a network of leaders providing an evidence base that shows that solutions exists, they are scalable and economically attractive. In fact, in many cases they are the best options available. On the basis of that, try and understand the DNA of low-carbon leadership, what or where does that success come from, what are the basic elements of that success, and then, work with our partners around the world with just a few scalable projects.