Eversource is powering progress towards Net Zero with strategic investments

In an interview with ET Edge Insights, Dhanpal Jhaveri, Vice Chairman of Everstone Group and CEO of Eversource Capital, highlights the organisation’s unique position as the home to India’s largest team of climate professionals. He details Everstone’s accomplishments in spearheading the development, expansion, and proficient management of platforms across renewable energy, e-mobility, waste-to-energy, water management, and green financing sectors. Moreover, he applauds the supportive policies and incentives for startups by the Indian government, coupled with a dedicated focus on sustainability, which further catalyses capital flow into this burgeoning ecosystem.

Excerpts:

1. What, in your opinion, are the main factors contributing to the growing trend of climate investments in India? Considering India’s attainment of 175 GW in renewable energy assets and its goal to reach 500 GW by 2030, what types of proactive measures and investments do you believe will be necessary to achieve this ambitious target?

There has been a global narrative change around climate from “Gloom and Doom, if we don’t act now” to the “Biggest Commercial Opportunity” as seen during the recent COP28 in December 2023.

An emerging set of organisations are joining the ecosystem to contribute towards blended finance. Gatekeepers for climate change now include philanthropists as well as big oil companies who are channelising capital as blended finance. They are playing a critical role in crowding in $250 billion to be mobilized for private sector investment in the Global South by 2030 for climate action. India ranks fourth in the world in terms of the installation of renewable energy assets. India has delivered over 175GW of renewable energy assets and continues to add 15-20GW approximately of renewable energy annually. The aim is to move from 200 GW to 500 GW of renewable energy by 2030 which means adding 300 GW i.e., 40-50 GW per year for the next 6-7 years.

For this, the country needs to shift gears to 1) raise climate capital to address the need for a massive climate investment and 2) create more lubrication in policy frameworks on the consumer demand end to build, transmit, and consume energy assets over the next 6-7 years. 3) phasing out fossil fuel production.

According to the International Energy Agency, annual clean energy investment needs to reach $4.5 trillion by 2030 to limit warming to 1.5°C. In 2021, annual climate finance flows surpassed $1 trillion for the first time. A report by the Climate Policy Initiative estimated that India needs approximately USD 2.5 trillion to achieve its Nationally Determined Contributions (NDCs) under the Paris Agreement.

The current annual subsidies, both explicit and implicit, for fossil fuels in the global energy market amount to 7 trillion dollars. In contrast to the immense amount allocated to fossil fuel subsidies, an estimated investment of 4.5-6 trillion dollars in climate initiatives is required to advance towards net zero goals. This raises a critical question: how can we establish an equitable framework to address this twin balance sheet challenge? Creating a balanced and fair structure becomes imperative to navigate the complexities and disparities inherent in this juxtaposition of subsidies and climate investment needs.

2. What are the vital factors for organizations to consider in climate investments? How does Eversource Capital approach them?

Eversource is a leading climate impact investor in the region which aims to make investments in climate-positive businesses. Every investment we make is carefully chosen to match our philosophy of making a transition to clean energy for the economy with an equal focus on providing returns to our investors.

With the largest team of climate professionals in India, Eversource has a successful history of building, scaling, and operating platforms across renewable energy, e-mobility, waste-to-energy, water management, and green financing along with best-in-class climate and societal standards.

Through our unique owner-operator model and ‘control investment’ approach, we develop impactful and viable businesses through which we deploy innovative, pathbreaking technologies and business models that are critical to making the climate difference. We lay a strong emphasis on achieving financial profitability and delivering value, which is fundamental to sustainable and scalable impact. While we are building at a pace and scale that few others can, we also ensure that ESG and Impact are hardcoded with a strong culture of purpose and commitment.

Eversource aims to mobilize and deploy capital at scale to combat climate change and accelerate towards Net zero goals driving twin outcomes of impact and returns. In a short span, we have built and scaled platforms across renewable energy, energy efficiency, energy storage, e-mobility, resource conservation, and associated value chain sectors.

Through the 741 million that we raised, we have been able to mobilize about $2 billion of debt and co-invest PE capital. By the time we deploy all our capital, we intend to mobilize about $5 billion across our entire portfolio. We have avoided 5.4 million of tco2 emissions equivalent, generated 5.3 million (MWh) of renewable energy, powered 8.7 million kms of e-miles, and treated or recycled 8.8 million tonnes of waste. All of this has benefitted 57.1 million people to date.

3. How does the regulatory environment in India promote or hinder climate investments, and what improvements could be made?

India has emerged as a global leader in climate action, exemplified by its pioneering initiatives such as the establishment of the International Solar Alliance, comprising 124 nations. Spearheaded by the National Solar Mission, the country is on track to achieve an ambitious target of 450 GW of solar power capacity by 2030, solidifying its position as a solar energy powerhouse.

In tandem with its solar ambitions, India has undertaken bold strides towards electrifying its transportation sector through schemes like the FAME II initiative, aimed at accelerating the adoption of electric vehicles (EVs). The proliferation of EV charging infrastructure, with over 12,000 charging stations operational nationwide as of February 2024, underscores the government’s commitment to promoting clean mobility. To further bolster the transition to sustainable transportation, the Ministry of Heavy Industries has boosted the funding for FAME India Phase II, increasing the outlay to Rs. 11,500 crore.

Moreover, India’s Biofuels policy, geared towards achieving a 20% blending of green fuels by 2030, signifies a multifaceted approach to reducing carbon emissions and fostering renewable energy sources. Despite these commendable efforts, there remain challenges, such as the sluggish uptake of rooftop solar installations. However, initiatives like the Pradhanmantri Suryodaya Yojana aim to address this gap by facilitating the sale of surplus solar energy from 10 million households, thereby incentivizing greater participation in rooftop solar initiatives.

Looking ahead, India’s transition to a sustainable energy landscape is poised to accelerate, with solar power projected to constitute a significant portion of the country’s renewable energy capacity, reaching 292 GW out of a total of 500 GW by 2030, as outlined in the government’s energy transition plans.

However, India needs to raise its ambitions beyond the current NDCs toward a net-neutral future. The actual cost of carbon needs to be priced into everything we do. Policy and regulations need to be tightened to squeeze out carbon emissions, drive up energy efficiency, and encourage sustainable alternatives. More fiscal outlays need to be provided to innovative technologies and business models with market uncertainties while they mature, scale, and come down the learning curve in cost. E.g.: storage, second-life EV batteries, and green hydrogen. Budgetary allocations will be required at a vastly greater scale in public goods and infrastructure such as a reliable smart grid and EV charging networks.

To democratise climate financing to SMEs and ordinary consumers, the Government can develop credit enhancement and risk mitigation schemes through guarantees and insurance. Most importantly, to mobilize the global green capital available at low or concessionary rates, we need solutions for the inefficiencies and uncertainties of the forex market. Either we need to be able to raise long-term liabilities in Rupees offshore, or we need a deep and predictable forward market to hedge Rupee risk. As an example, most renewable assets have a life of 25+ years with local financing from 8-18 years. As against that, there are no long-term and efficient measures to hedge forex costs.

4. Could you elaborate on Eversource Capital’s previous investment activities in India, particularly focusing on their strategies for supporting businesses and platforms that contribute positively to addressing climate change?

With Eversource, our objective is to invest in rapidly scalable and sustainable businesses in India, across four focus sectors: Renewable Energy Generation, Resources & Environment, Electric Mobility, and Climate Finance. In the renewable energy sector, two of its portfolio companies, Radiance Renewables and Ayana Renewable Power, have collectively generated 5.3 million MWh of renewable energy. Radiance Renewables operates as a Renewable Energy as a Service platform with a capacity of 405 MW (DC), targeting commercial, industrial, and residential consumers. Ayana Renewable Power develops utility-scale renewable energy projects with a total capacity of 3,690 MWac, including 1,290 MW in operation.

Resource efficiency is another focus area, with EverEnviro leading in waste management and environmental services. EverEnviro’s innovative approach extracts value from waste, including Asia’s largest urban organic waste to RNG plant in Indore.

In the electric mobility sector, Greencell Mobility and Lithium are prominent investments by Eversource Capital. Greencell Mobility operates as India’s first integrated mass electric mobility as a Service platform, deploying over 1000 buses across various segments. Lithium focuses on shared EV adoption, particularly in corporate employee transportation and last-mile logistics.

To make green energy and technology accessible and affordable, Eversource Capital supports Ecofy, a digital-first retail lender focused on green financing. Ecofy aims to bridge the gap between ambition and achievement by partnering with individuals and businesses to reduce carbon emissions. As of December 2023, Ecofy has acquired over 12,000 customers and saved over 4403 tonnes of carbon emissions.

5. How could the recent $85 billion pledge during COP28 expedite global green initiatives for a net-zero transition? What opportunities and challenges might arise due to this substantial financial commitment?

COP28 was a platform for countries to come together and take decisive action on climate finance to keep pace with the Paris Agreement. It concluded with a total of US$800m committed to the loss and damage fund by several governments, with UAE and Germany contributing US$100m each. It also comprised USD 129.3 million for the Least Developed Countries Fund and USD 179.06 million for the Special Climate Change Fund. This will help in funding commercially proven climate business models to address the changing way in which we consume energy.

Furthermore, six countries promised to recapitalize the Green Climate Fund with USD 3.5 billion. This brought total pledges to USD 12.8 billion. In support of nature-based climate action, the summit mobilized USD 186.6 million of financing for forests, mangroves, and the ocean. Furthermore, six countries promised to recapitalize the Green Climate Fund with USD 3.5 billion. This brought total pledges to USD 12.8 billion. In support of nature-based climate action, the summit mobilized USD 186.6 million of financing for forests, mangroves, and the ocean.

These financial commitments across various climate areas highlight the need and the critical role played by blended finance in the climate sector globally. Eversource received catalytic concessional capital from the U.S. Department of State and the United States Agency for International Development (USAID) through its programme – Blended Finance for Energy Transition (BFET) and the Investment Fund for Developing Countries (IFU) under the Danish Development Finance Institution (DFI). This was announced at the COP28 by John Kerry, U.S. Special Presidential Envoy for Climate.

It also witnessed 11 pledges and declarations on climate action. These covered everything from finance to agriculture and, for the first time, food systems and health. The capital raised will give the needed push to fulfill the pledges signed on to and overall make for a transition away from fossil fuels to cleaner sources of energy.

6. There has been a massive surge in startups focussed on building and strengthening the climate-tech ecosystem. How will this surge push the envelope for climate investments in the country?

India’s climate-focused startup ecosystem is rapidly expanding, driving momentum towards sustainable solutions and attracting significant investment interest. With 50,000 startups registered under DPIIT’s Startup India initiative as of June 2021, and 16,000 gaining recognition in fiscal year 2020-21 alone, there’s a notable emphasis on areas crucial for decarbonization like E-Mobility, Energy Efficiency, and Waste Management.

These startups, demanding both early and late-stage capital, are presenting disruptive business models challenging traditional norms in energy, mobility, and industry. They mirror the transformative impact of mobile telephony, aiming to leapfrog carbon-intensive technologies with innovative solutions.

Supportive government policies and incentives, along with a dedicated sustainability focus, further fuel capital inflow into this burgeoning ecosystem. This collective momentum signifies India’s transition towards a sustainable, environmentally conscious future.

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