A Midsize Company that’s a Microcosm of the Energy Challenge

Author ; Hari Haran Chandra, The columnist is Trustee, AltTech Foundation and Prem Jain Memorial Trust, and Senior Fellow, CII IGBC. A senior executive of a mid-size company reached out to us. He sent the energy audit report with a seemingly simple predicament of an energy bill of about Rs 31 crore a year and 30 million units a year of power use. As an engineer, his intent was to secure a peer review on the audit. It was a company into vegetable oils processing. My first response, without seeing the building [somewhere north of Chennai into Andhra] was that there was potential to save Rs 6 Cr, or about 20%, annually. with an investment of Rs 13-15 crore and a payback period of 30+ months. The IRR caught his CFO’s attention, but the engineer got a no at the first instance: how do we raise the funds that will be needed for installing those ‘green assets’? Is there a way of raising this money without collateral supports that a bank or an NBFC will ask? How do we beat the cost of interest that such a loan will mean? Will the returns outrun the cost of the fund no matter where it comes from? What will be the questions that a funding agency will have, if they were to agree to offer a collateral-free ‘loan’ or investment in the green asset? What will they do with the asset if we default on our monthly payments that are a re-juggle of what we are paying as water or electricity bills every month?

Energy Efficiency measures can pay rich dividends, with your own investment or with investor back for such ‘green assets’. Well, the CFO understands that the instalment will be worked out in a way that the saving from the energy efficiency measures will be the amount that he has to pay instead of to the ESCOM, to the ‘investor’ in the green asset. How can he be sure that the monthly outflow will be within the current monthly energy bill amount of Rs 2.5 Cr, with one part of it going to the ‘lender’ or ‘investor’ of funds for the green assets post such installation? It took a bit of talking and gentle persuasion, but the engineer and his CFO were interested enough to take this up with the promoter-CEO of the company. Chalking out the technology roadmap of installation, with costs and timeframes and the savings outcomes was easier, although the effort had to bring together some fine, experienced minds who had addressed such needs across high- and low-induction energy appliances in different buildings over different times. The team of energy professionals, led by a stalwart, knew that it could focus on solutions that were regular, simple ones that the team within the company could understand, and not any fangled innovation or out-of-the-box ‘technologies’ that could raise uncertainties in the mind on reliability of defined deliverables. There are many such examples across India, and across many industry segments. One luxury hotel head of over 20 hotels in South Asia, confessed, “It is not without shame that I admit that we continue to buy about 35-40 million litres every year from borewells outside of the hotel premises and from deep borewells that contractors extract water from, to feed our daily need at the hotel. Let me also add that the problem is so firmly entrenched that at one of these hotels we even have a tanker of 12,000 litres that the hotel owns!” And why did he not think of solutions where he could harvest water at one of the hotels that had as much as 30 acres as part of the property, and had the potential of over 60 million litres of rainwater that could be harvested annually? His answer was plaintive: “We do not know that such a thing can be done in a way that it meets the exacting standards of hygiene in a luxury hotel.” I did not dare to ask him if drawing water from a borewell in the town and outside the hotel, and at depths of 800-1200 feet, assured him of water quality that meets those ‘exacting’ standards! While such needs across various segments of bulk water- and energy-users are real, as a nation we cannot accelerate adoption of solutions if we did this as a business practice with IPRs held by one company keen on buildings its valuations... How do we take this to 50,000 companies is the question we should be asking... And how do we take it to thousands of apartments? How do we train thousands of green or sustainability managers who can initiate such thinking from within in companies? Experts in the business call it ‘demand-side management’ as against the horrors of supply-side solutions where you seek more of energy and more of water from the Govt, or the Govt spends senseless billions to ‘augment’ water supply or energy that is fed to the grid. Talking of buildings valuations leads me to a meeting that had a young bright engineer presenting his pitch deck on an ‘invention’ that had got the attention of enough experts land him at this key meeting that could spell the clearance of Rs 1 crore as start-up equity if the jury of experts were to ‘clear’ the ‘proposal’. The expert panel was hearing him out on the economics and business viability. His team had worked for over two years on an arsenic remover that had the capacity to deliver one million litres a day of water that is free of this lethal, cancer-causing chemical contaminant that is naturally present at very high levels in districts like Benares and Ballia in UP and all along the Gangetic basin. After the usual round of questions on the economics, the scale of investment and the market for the ‘product’, one of us asked him a simple question: “So where does the arsenic come from?” The young entrepreneur promptly said, “Arsenic is a geological deposit that is dredged with the groundwater extraction from deep borewells at depths of over 1000 feet, especially in the alluvial soils of the Gangetic basin.” Our next volley of questions had him silenced: “Why would you invent an arsenic remover when you know the challenge is with groundwater extraction. Why don’t you attack the basic problem of groundwater extraction, instead of solving the challenges that extraction causes? Why would you not work on a system of ponds, tanks and lakes that will harvest and store surface water, and work on watershed practices that will enhance water retention capacity of subsoils at the shallow levels for open wells to be revived?” His silence was eloquent. There was no money in such watershed practices, nor will it be seen as a business. There would be no place for ‘technology’ and all the fangled equipment that his invention will mean. And of course, there will be no valuation at the end of some 5 to 7 years that investors would be interested in, and which would make him personally rich. So where does the challenge lie? As a discerning reader, I will leave you to make your own judgement.

Hari Haran Chandra The columnist is Trustee, AltTech Foundation and Prem Jain Memorial Trust, and Senior Fellow, CII IGBC. He is a green building pioneer and a Net Zero Water exponent guiding over a billion litres of low-carbon water for a variety of projects today