Businesses in all industries have suffered in the previous two years in the face of the COVID-19 pandemic, and the Decentralized Renewable Energy (DRE) industry is no exception. However, DRE businesses have shown grit and resilience during the crisis, according to the State of the Decentralized Renewable Energy Sector in India – Insights by CLEAN. Thus "Grit and Resilience" were, in many ways, the theme of the report.
The fifth edition of the report presents the findings of a market survey that captured insights from 70+ DRE organizations. The DRE businesses, amid the waves of the COVID-19 pandemic, have shown a lot of resolve. The grit shown by the DRE enterprises, coupled with innovative thinking, has well and truly led businesses in the sector to evolve and succeed.
With demand picking up and businesses realigning strategies for the next financial year, end-user financing has been identified as a crucial factor for aiding growth and scale-up. Organizations reported that end-consumers are willing to pay between 23% to 30% of product costs upfront as a down payment. Alternative investment opportunities need to be molded to cater to the funding needs and demands of the sector. Donors, investors, and debt providers can play a much greater role in scaling the sector.
From all the responses received, it was observed that a capital of approximately USD 2 million was raised by 21 DRE enterprises. More than 85% of funds were raised through a combination of debt finance and private equity mode. Debt finance came out as the most popular form of fundraising adopted by DRE enterprises and fulfilled by private and public sector banks for the 2021 and 2022 Financial Years (FY).
It was observed that even though the Indian government did not impose a stringent lockdown, enterprises still faced challenges of reduced demand from customers and supply chain disruptions— the two key reasons why financial performance continues to be sub-optimal. As a result, the total number of organizations running into losses increased by 3.1%, and those making profits decreased by 4% from FY20 to FY21.
As the sector is looking towards DRE livelihood applications, more than 10,000 dryers, 3,500 solar water pumps, and 5,600 other livelihood appliances and equipment were deployed. 46% of the respondents stated that they were able to leverage central or state government programs to deploy their products. Most of these solutions were solar-based, highlighting the need for policy support for other subsectors. There also are increasing interventions aimed at improving rural communities' health and well-being. CLEAN members solarized 2,500 health centers in the last FY.
The sector's growth and sustainability necessitate an increase in the number of skilled workers on the ground; 72.5% of respondents agreed that skill development in product after-sales services is required, which would help to create extra employment in the sector.
As the world begins to emerge from the pandemic, CLEAN has put some thoughts, with inputs from members and sector experts, on the way forward. Growth will require an increase in the flow of capital for both enterprises and end users' financing. Increasing the trained workforce, building standards for the productive end-use appliances, and regular support from policies and governments will help create a larger impact on the ground.