Gajanan Nabar, CEO, CleanMax Solar, reflects on growth opportunities and the economic rationale for using solar energy.
We understand that you seek 40% revenue from overseas business alone. What are some of the steps you are taking to achieve this?
Currently as India’s No 1 rooftop solar developer with 24% market share (as per BTI 2017 report), our focus is to grow our market share and maintain leadership position in the rooftop solar developer category. We are expanding our open access solar farm segment in India by pursuing growth in international markets mainly the Middle East and South-East Asia.
Our operations continue to grow and with the recent $100 million funding from private equity player, Warburg Pincus, CleanMax Solar is eyeing up to 40% revenue from overseas business in the next three years.
We have several multinational companies as clients, who have facilities in the Middle East and Southeast. Since skillsets are common, it makes sense to go international with the same clients, and be client-led in our strategy. The initial focus was on the UAE, and we began our operations in Dubai, which we intend to use as a springboard for other Middle East markets. We enjoy a 24% share in the domestic market.
What is the willingness of Indian companies to switch to solar energy? Brief us on the kind of investment required for manufacturing companies.
The RE100 vision has gained traction among corporates and solar energy solutions are gaining popularity. Furthermore, solar power generates a value proposition like no other, due to the following reasons:
Monetising dead assets: With rooftop solar power plants, corporates are able to now monetise the otherwise dead assets such rooftops, carports (sheds) and barren waste lands. This proposition has gained massive traction amongst corporates, manufacturing companies, education institutes and, recently, we are witnessing a strong trend at public infrastructure facilities like airports, Metros and tourist hubs to go solar.
OPEX model: Our OPEX or ‘zero investment’ model helps solar adopters garner energy which is 30-40% cheaper than grid tariffs. Known also as the ‘pay-as-you-go’ model, it is hassle-, risk- and CAPEX-free, which means a win-win proposition for clients. Companies do not have to invest in a non-core asset, and at the same time can enjoy power at significantly low tariffs.
Maintenance of rooftop solar plants: Typically, rooftop solar plants have a life span of 20-25 years with moderate maintenance. Moreover, our state-of-the-art service delivery coupled with high-end technological innovations from our vendors has resulted in several plants seeing an elongated lifespan and outperform the predicted design by an average of 8-12%.
Government vision: With the Government’s vision of aiming to achieve 100GW of solar energy by 2022, various state-level policies have made solar power adoption a lucrative alternative. For instance, in Karnataka, where we have two solar farms, the Karnataka Electricity Regulatory Commission’s (KERC) policy to waive transmission charges for open access solar farms has created a proposition of massive savings for corporates adopting the same. With the current tariffs of Rs 6.90 for industrial consumers and Rs 8.50 for commercial users, solar power available to corporates today would be 30-40% cheaper. But with the policy coming to an end in March 2018, the landed cost of solar power from new projects would jump by 40-50%, wiping out most of the savings for consumers. Given that developers need roughly six months to set up a project, consumers in Karnataka have only till October to contract for solar supplies to avail the current waiver. So companies there who have less rooftop or on-site space for in-house solar plants are now sourcing up to 100% of their power requirements from our open access solar farms at 30-40% cheaper rates than the prevailing grid chargers.
Keeping in with our OPEX model, small and large scale manufacturing units can start availing the solar power benefits with no investment.
Considering that you have 24% market share, what are some of the challenges in the rooftop solar industry?
When we first started in 2011, we knew we had entered a niche space, which was relatively unknown to the corporate sector. Today, we have overcome the initial challenge of awareness, and enjoy a 24% market share. However, we do continue to face a few hurdles.
Net metering, for instance, is one such challenge we face. Net Metering is a mechanism of selling the surplus power back to the discoms when users don’t have adequate load, e.g. Sundays at factories and summer vacations at school. Here the meters measure the power exported to the grid; the consumer is given credit for the exported power in his electricity bill. Although we have seen positive developments in terms of regulations, we continue to face challenges in implementation. Many state regulations have dictated artificial restrictions on the size of the plant, which can be installed with net metering, beyond a technical necessity. Net metering approvals are also a slow and cumbersome process and are a hurdle for corporates to adopt solar energy on a large scale.
Solar power has become one of the cheapest new source of power in India (BTI India Solar Compass 2017 Q2), since solar panel prices have fallen drastically over the last few years. What this has done is create unrealistic expectations among customers that prices will further fall. This delays the adoption of solar power, which is a risky trend. In fact, earlier this month solar panel prices rose by 2-3 cents (US dollar) per watt peak, which is the first of its kind in many years.
The solar Industry is highly dependent on imports and that is one element which is beyond the ambit of the Indian economy. Trade relationships and other geo-political challenges come into play. What is required is more clarity on vision, alignment of discoms with state governments and boards of the central government.
Could you tell us about your procurement policies and also after-sales service?
Quality of the panels are of utmost importance to us. For optimum performance, we use global tier-1 solar panels that come with a 25-year performance guarantee. High-efficiency panels are used to maximise the total capacity of the plant for a given size of the roof. Not only does this significantly reduce our installation time, but also brings down costs, which keeps customers happy. We also use a remote monitoring system for seamless monitoring and O&M for large projects. During installation, our system is set such that it allows for easy maintenance and the basics can be taken care of by users themselves.
How does 2020 look for the solar industry and for CleanMax Solar in particular?
Renewable energy is definitely the way forward. There is tremendous potential in the country, and the government’s backing on enhancing solar power by 2022 is helpful. As for India, the benefits associated with rooftop solar systems are manifold. It includes reduction in the land and interconnection costs. Rooftop solar plants assist discoms by reducing the peak demand during daytime and decrease transmission & distribution (T&D) losses as the power is consumed at the point of generation.
At CleanMax Solar, we recently received $100 million from Warburg Pincus which is a major validation of our credibility and reiterates our leadership position and our reputation as corporate India’s preferred sustainability partner. The funds will be utilised towards fulfilling our growth plans in the commercial & industrial segment of the solar market in India. We are also seeing an increased interest from the infrastructure sector including airports, metros and other public spaces.
As sustainability partners for leading corporates and PSUs, our penetration into the market has been good and the future looks bright. We see huge potential for our expertise in the region and are working on our first rooftop project in the UAE.
We are keen to increase our sustainability offerings to corporates clients and are building a new business vertical of energy storage solutions, which is an evolutionary step for us by combining it with our rooftop solar plants.