Pharma and FMCG Companies Could Lead the C&I Market Recovery in Rooftop Solar Segment
Companies operating in segments like pharma and FMCG are better positioned in the current situation and are keen on adopting solar to reduce their operational cost further
As the economy dwindles, industries worldwide are looking frantically at cost-saving measures to keep profit margins from getting thinner. While some segments of the commercial and industrial sector witnessed a slump in business in the past few months on account of the imposed lockdown, others performed relatively better. Companies operating in segments like pharma and FMCG (fast-moving consumer goods) have seen a surge in demand with the lockdown. FMCG includes packaged food items and health and hygiene products, and consumers across the world have been stockpiling these items ever since the pandemic started, causing a demand-supply deficit in many cases.
After the lockdown, several segments like pharmaceuticals, FMCG, and textiles have had an increased demand for solar. MSMEs are now taking another look at solar mainly because it offers cheaper power, resilience, and flexibility.
Speaking to Mercom, Eric Hoegger, Global Renewable Energy Manager, at global food corporation Cargill, said, “From the agriculture and food industry perspective, we need to examine the implications along two dimensions: demand and supply. While rebuilding consumer confidence and shaping demand is a long-term task, we need to ensure a robust supply response is in place. From when the lockdown was announced until today, there have been a lot of relaxations in the food supply. Initially, we could not get trucks to move, could not load or unload due to labor issues. The Indian government has been quite receptive to understanding on-ground challenges and making necessary amendments to support the free flow of essential food items. In a country where agriculture supports most of our population, we need to pull the right levers to reduce the possible impact on the economy.”
While the lockdown triggered the slowdown, the mass exodus of the workforce, and lack of transport, further exacerbated the problem. Many businesses shut down as they could not keep up with the accruing rent, power bills, and other fixed associated expenditures. This is where businesses harnessing solar power could have an edge over the others.
Utilizing solar power to meet their energy needs can serve a twofold purpose of cost-saving and reducing the carbon footprint. While many big companies have already set targets for reducing their carbon emissions, others have yet to incorporate sustainability into their portfolios. And, now would be the opportune time for them to get serious about sustainability.
Companies like Cargill, for instance, have set a goal to reduce greenhouse gas emissions from operations by 10% by 2025, as measured against the 2017 baseline. The food corporation is currently using 15 different renewable energy sources around the world to make their facilities sustainable besides purchasing renewable power.
“We continue to invest in renewable energy projects to change the way we power our operations, harnessing the economic and environmental benefits of renewable power. Solar power, and renewable energy in general, helps put is in a growth position in an increasingly competitive marketplace and allows us to invest in changes in our supply chains to more sustainably and efficiently serve our customers,” the Cargill spokesperson said.
Another FMCG giant, ITC Limited, has adopted renewable energy on a large scale. According to the company, over 41% of ITC’s total energy requirements are met from renewable energy sources such as biomass, wind, and solar. It eventually wants the share of renewable energy to reach 50%.
“All factories incorporate appropriate green features, and premium luxury hotels and office complexes continue to be certified at the highest level by either the U.S. Green Building Council or Indian Green Building Council. Continual efforts are ongoing to progressively enhance our renewable energy footprint by reducing our specific energy consumption (energy per unit of product/service) through energy audits, benchmarking, and target setting while also making strategic investments in renewable energy assets,” a company spokesperson told Mercom.
While their sustainability portfolio goes a long way in decreasing their operational expenses, adopting renewable energy through rooftop solar systems, would also help the installers garner business in this lean period. The rooftop solar segment has been sluggish, and the pandemic has further reduced the momentum. Cumulative rooftop solar installations in India reached 4.6 GW as of Q1 2020. In the first quarter of 2020, India installed 194 MW of rooftop solar, a decline of 36% compared to 304 MW in the fourth quarter of 2019. In a year over year comparison, the installations decreased by 26%, compared to 263 MW installed in Q1 2019, according to Mercom India Research’s Q1 2020 India Solar Market Update.
Talking to Mercom, Shri Prakash Rai, Head Distributed Generation Business, Amp Energy India, said, “More than 70% of distributed generation in India has been contributed by C&I customers. We expect this trend to continue in the foreseeable future since C&I have the highest power needs as compared to other categories, and they also pay the highest tariffs. Also, renewable energy enables them to reduce their electricity costs and carbon mitigation. The pandemic situation hasn’t really affected the non-negotiated contracts yet, and we expect that the solar uptake by FMCG, pharma, or any other sector would not be affected due to this.”
Notably, there has been an increased interest in rooftop solar systems from such companies in recent months. “We have initiated talks with a few customers across different segments and are in advanced stages of discussion with some. Although the process has slowed down a bit with people working from home and not being able to move around physically for meetings and site visits, the interest and intent remain the same,” Rai added.
Given the times we are now in, rooftop solar systems should be the preferred choice of electricity supply for all commercial and industrial establishments. Besides being cheaper, consumers can also earn revenue by supplying the surplus power back to the grid through the net metering mechanism.
“Switching to solar is not just an environmental decision but an economical one as well. Companies are now looking to cut their costs by any means possible to remain afloat and ride this pandemic. Under the OPEX model that Amp Energy has, the customer has to pay only for the energy consumed, and this results in significant savings for them and hence is an amazing value proposition for them, especially during these times,” Rai explained.
Reiterating the importance of adopting solar power for such companies now, Andrew Hines, co-founder, and chief commercial officer of CleanMax, said, “While the current crisis presents challenges for all industries, at times like this, cost-saving renewable energy solutions are as attractive as ever. Businesses are more focused than ever on achieving operating cost savings, and zero-CAPEX renewable energy solutions are an excellent way to achieve this.”
Hines also told Mercom that there had been a renewed interest from this segment in rooftop solar. “Rooftop solar remains an attractive option for these sectors, and we have seen a continued interest in rooftop and offsite solar solutions even during the lockdown period,” he added.
The market is exceedingly challenging for businesses, both big and small. Measures like the adoption of solar systems to power their facilities can easily put these companies in an advantageous position and increase their overall efficiency. Currently, the priority of businesses across the world is to minimize operational expenses and ensure that they can bounce back to their pre-COVID levels of output as soon as possible. While cutting back on several expenses could seem non-negotiable, adopting solar is a sure way to gain a competitive edge for many of the C&I companies.
Ankita is an editor at MercomIndia.com where she writes and edits clean energy news stories and features. With years of experience in the news business, Ankita has a nose for news and an eye for detail. Prior to Mercom, Ankita was associated with The Times of India as a copy editor for the organization’s digital news desk. She holds a Bachelor’s degree in Psychology from Delhi University and a Postgraduate Diploma in journalism. More articles from Ankita Rajeshwari.