Renewable Energy Can Boost Bottom Lines of Small Businesses
Developers and lenders are in pursuit of an effective communication strategy with the C&I segment
January 5, 2023
Businesses in the commercial and industrial (C&I) segment often pay a heavy price by delaying the adoption of renewable energy as an alternative energy source.
Although the economics of installing a rooftop solar system or sourcing renewable energy through the open-access mode undoubtedly improves a business’s bottom line, smaller firms are too focused on their daily operations to be decisive.
Additionally, the dithering is often rooted in the lack of perspective on the opportunity cost. The concern for small businesses is more on benefits that can be realized immediately than projects that require capital expenditure now but would deliver benefits only in the long term.
The situation is further compounded by a lack of awareness about existing regulations and the associated costs and return on investment of such an undertaking.
Mercom has been trying to address the C&I consumer pain points to go green, including helping them network with the clean energy solution providers, and lenders, educating, and creating awareness.
Lack of Information and a Communication Platform
Small businesses often assume that adopting renewables is challenging even though information exists to the contrary. However, developers and other stakeholders have not been effective in communicating the benefits of renewables to C&I consumers.
The industry has acknowledged Mercom India’s Clean Energy Meet as the appropriate solution to bridge this knowledge gap.
“I found that people do not have enough knowledge, and awareness is very less, especially among most small-scale and medium-scale businesses. Such sessions by Mercom are needed to bring awareness. Generating deeper awareness is very important,” Jigar Deliwala, Head of Sustainability at Gujarat Fluorochemicals, said.
Ajay Kumar Sinha, AGM at Solar Energy Corporation of India (SECI), who participated in a discussion at the C&I Clean Energy Meet in Ahmedabad, said that small businesses are often confined to their respective fields of expertise, and renewable energy comes across as a gray area to them. He suggested that informed inputs must be available to the sector to ease the transition.
Deliwala concurred. “The knowledge within the industries about all the renewable energy policies and their amendments has not reached the right people. The other problem is that if small businesses don’t understand the policy implementation and the funding mechanism, they cannot project their appropriate requirement to the management.”
Providing further insight into small firms’ reluctance to adopt renewables, an officer from the Small Industries Development Bank of India (SIDBI) said that these businesses are vulnerable to changes outside, so their focus is on survival rather than looking ahead.
“However, convincing them that such an investment is essentially an earning right away because it saves on cost, can bring more businesses into the fold,” the executive added.
Gokhula Krishnan, a Bengaluru-based consumer, lamented that the main reason for the delay is that the return on investments often surpasses three years, making it unsuitable for his business.
However, experts point out that renewable solutions can be customized for each business. If a business wants a shorter period for recovery of investment, it can choose to install a smaller capacity system.
Subrahmanyam K V, Vice President of Business Development at Radiance Renewables, said that the massive savings are attracting businesses towards renewable adoption. “For instance, in Gujarat, a group captive wind-solar hybrid power project can result in savings of ₹3 ($0.036)/kWh for a consumer. That is massive.”
Shankar Sivan, Founder, and CEO of Welfund.org, a rooftop solar loan marketplace, explained that rooftop solar makes economic sense to C&I consumers facing high retail tariffs by the power distribution companies.
An executive at the Coimbatore- Sri Kartikeya Mills said, “To make a speedy transition, we must be provided with some low-interest loans. More than the period of return on investment, the main problem is we don’t have working capital, so while we are interested, we are not in the position to move.”
According to the SIDBI executive, the bank provides 100% of the project value as loans at an interest rate of 6.7% to 7.4%. “Lower lending rates are available for businesses with healthy balance sheets where the unit must be making profits and show that going green would result in substantial savings.”
For relatively larger businesses, the State Bank of India provides about 70% of the loan for captive or group captive projects with 15-30% of the promoter’s equity.
“When funding a project, the bank evaluates the quality of modules and the health of the off-takers as two of the most important aspects,” a bank official speaking at the C&I Clean Energy Meet in Noida said.
Understanding the knowledge gap, Mercom India’s industry events aim to offer deep market insights that help executives make informed and data-driven decisions.
Mercom India will host the ‘C&I Clean Energy Meet’ series across major cities in the country in 2023.