Global Warming: Investment Options

Being Cool: Investment Opportunities and Policy Imperatives to Combat Global Warming

Recent studies find that a steady rise in temperature across India will significantly impact socioeconomic productivity and GDP growth. Importantly, heat-related stress produces corresponding cooling demands. In this regard, the World Bank recently identified opportunities for the India Cooling Action Plan (ICAP) to encourage private investment in key sectors, such as space cooling in buildings, cold chain and refrigeration, passenger transport air-conditioning, as well as refrigerants. Nevertheless, such investments may be constrained by the country’s international obligations, such as those in respect of HCFCs and HFCs. Besides, India’s climate mitigation strategy, including its thrust towards renewable energy and decarbonization, remains inadequate by itself. Emissions from short-lived climate pollutants (SLCPs) need to be addressed as well. Accordingly, strategic investments in innovative ventures, such as seaweed start-ups that focus on reducing agricultural methane, can be explored further. In addition, the waste and agricultural commodities sectors, along with their critical interface with technology, may be significantly scaled up in the next few years.

Electric Vehicles Sector

Renewed Focus: New Norms Directing the Electric Vehicles Sector

The Indian government has shown a continued commitment to its national mission on e-mobility and battery storage, including with respect to establishing a comprehensive roadmap for the increased adoption of electric vehicles (“EVs”) in the country. However, unlike the impressive roll-out of Chinese EV charging infrastructure, India’s has lagged. Further, with respect to EV battery production, India remains heavily reliant on Chinese imports to satisfy domestic demand for lithium and lithium-ion, as well as other raw materials. Nevertheless, several new laws and policies, formulated by various ministries and government departments over the past few months, have provided the necessary impetus towards an improved ecosystem – including through initiatives by the Ministry of Heavy Industries & Public Enterprises, the Ministry of Power, the Ministry of Housing & Urban Affairs, the Ministry of Road Transport and Highways, the Bureau of Indian Standards, the Ministry of Environment, Forest and Climate Change, as well as NITI Aayog. This note provides a snapshot of some such key government initiatives. 

Electric Vehicle Sector in India

E-Vroom! An Overview of the Electric Vehicle (EV) Sector in India

Over the last few years and months, several policies and laws related to electric vehicles (EV) have been introduced in India, spanning several discrete pivots, such as in respect of: (1) local manufacturing, (2) emissions and waste reduction, and (3) charging infrastructure and batteries. This note aims to highlight some of the key initiatives undertaken by the government in the Indian EV sector, along with existing concerns and future opportunities.

India’s Debut Sovereign Green Issuance

Building Bonds: The Mechanics of India’s Debut Sovereign Green Issuance

India’s debut issuance of sovereign green bonds by auction provides a significant opportunity to ascertain the current market appetite for such sustainability-linked initiatives, including among institutional investors. Indeed, such bonds have been successful in the past in the context of an eclectic set of sovereign issuances. Among other things, standards established by such issuance may lead to welcome improvements in the Indian bond market in general terms. For instance, Indian companies may want to ride on enhanced credibility standards, as applicable, and seek to better address persistent concerns related to greenwashing. Such broad advantages notwithstanding, in this piece, we look at some of the finer details related to India’s debut sovereign green bond issuance.

Power Purchase Agreements

The Promise of ‘Virtual’ Power Purchase Agreements

In the US and elsewhere, ‘virtual’ power purchase agreements (VPPAs) have appealed to a wide variety of corporate buyers, including for the purpose of meeting renewable energy (RE) targets quickly. Further, compliance with ‘green’ mandates by procuring renewables through a VPPA has become an important element of business branding across the world. With regard to India, too, recent reports suggest that VPPAs are essential to meet corporate needs and wants, particularly in the country’s expanding commerce and industry (C&I) segment.
However, in response to investor demand with respect to environment, social, and governance (ESG) standards, if a company seeks to shift completely to RE, it may not be able to do so for various reasons, including on account of inherent risks in RE generation. Further, ‘physical’ PPAs are not viable for projects below a logistical minimum. Accordingly, C&I consumers with lower load requirements and/or fragmented demand may not yet have a cost-effective mechanism to procure RE, despite India’s newly democratized ‘open access’ regime. In this regard, VPPAs may still be the answer.
Nevertheless, given that your company needs/wants to acquire or generate RE – should, and can, you enter into a VPPA in India?

Indian Renewables

How Green is Your Money? Capitalizing on Indian Renewables

Consistent with India’s ambitious climate-related targets, significant investments are being made in the domestic renewable energy sector, driven largely by private sector activity. Acquisitions and bonds represent a large portion of this capital, along with foreign equity, traditional loans, and mezzanine financing. Enabled by an encouraging FDI regime as well as locally-targeted regulatory schemes – such as incentives introduced by the government to bolster domestic capacity and manufacturing – self-sufficiency and foreign capital now constitute an integrated ecosystem. Along with conventional means of financing, newer frameworks such as infrastructure investment trusts specifically set up in the renewables space could be better explored in the future, especially in light of the urgency with which India needs to catch up towards its climate targets. Legislative changes in respect of the power markets – such as those related to trading in renewable energy certificates (RECs) – may also be curated by appropriate regulatory bodies to expand upon existing revenue streams.

Power Purchase Agreements

The Continued Rise of Renewable Corporate PPAs in India

‘Corporate’ Power Purchase Agreements (PPAs) – as opposed to traditional models of energy procurement by state-owned electricity distribution companies – have proliferated over the past few years. With respect to renewable energy (RE) in particular, India appears to have witnessed one of the largest spikes in the world. Why are so many corporate PPAs getting signed here? Why now, and why specifically with respect to RE? Will this trend continue, and if so, what are the things to look out for? This note seeks to address such questions, including in light of recent (and anticipated) legislative and regulatory developments.

Renewable energy in india

Great Expectations: India’s Tryst with Climate Change

India appears to be on the right track in respect of its accelerated pivot towards renewable energy (RE). However, going by present trends, national capacity-addition with regard to RE is not even close to the annual rate required for achieving its ambitious climate-related targets. Even as the country remains poised to witness a massive increase in electricity demand over the next few decades, in order to remain on a sustainable path, it needs much more funding than what is available in the current policy environment. Further, significant foreign investment is essential to address a developmental change as paradigmatic as achieving carbon-neutrality, especially given the country’s fundamental anxieties related to local industry and energy security. While its climate-related initiatives have mainly been funded through domestic capital so far, India now requires, in addition, both capital and technology from outside. Accordingly, sovereign and international development finance institutions, as well as foreign lenders and investors, need to play a key role towards funding India’s clean energy transition, over and above the government’s own legislative and regulatory interventions.