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Dr Steven Fawkes is the Chair at Energy Pro Asset Management, a specialist investment management company focused on increasing investment into energy efficiency in the UK and India. In this interview, he discusses areas of potential for UK-India collaboration in the energy sector, the Indian energy market's potential for growth and the company's plans for expansion.
EnergyPro Asset Management (EPAM) is set to raise £2 million in an equity fund. Can you elaborate on how EPAM is planning to use the fund to open the Indian energy market to UK firms?
EPAM will use the funds as working capital to build out its teams in the UK and India. The business model of EPAM is to use its Indian network to identify key energy efficiency opportunities in India, particularly in the key areas of sustainable cooling, smart metering and use of data, and e-mobility. Then we actively search out UK companies that have technology that could be applied in India. We undertake the initial matching of companies to opportunities and work to develop and build the bridge between UK and India, which can take the form of a straight forward supply agreement, a technology transfer or a JV for which EPAM will attract investment.
What is the larger focus of EPAM's investment strategy and how does it view the Indian energy market?
EPAM's strategy is to focus exclusively on technologies and companies that improve energy efficiency, or energy production. Energy efficiency in this context means any technology that reduces the amount of energy needed to undertake any economic activity, this can include things like efficient lighting, controls technology, industrial heat recovery and distributed generation through Combined Heat and Power and/or renewables, as well as energy storage. Energy efficiency is relatively neglected compared to renewables which have become mainstream. Energy efficiency is not yet a mainstream but here and in India, it is emerging as an important asset class. We are at the start of a mega-trend that will rebalance investment in the energy system away from purely energy supply and towards reducing and optimising energy demand. EESL is a world leader in energy efficiency but the untapped market remains huge. The World Bank estimates the Indian energy efficiency market at $12 billion. India has the opportunity of leapfrogging countries like the UK and moving to a far more efficient, decentralised energy system.
What is your outlook for the Indian renewable sector in the next five years and what role will EPAM play in it?
There will be big growth in the renewables sector, the target is to achieve 220 GW of renewables by 2022 compared to about 73 GW now, but as outlined above EPAM is focused on energy productivity rather than energy generation. We do see large opportunities for distributed, local solar combined with storage which are much more in line with our investment theme than large scale renewables.
What are some of the energy-efficient technologies India should be looking at?
With the roll-out of smart meters which is now happening in India (a planned investment of $21 billion), there will be big opportunities in the use of smart meter data to help manage demand. The smart meter infrastructure will enable new markets for demand response and energy efficiency as a service, areas that the UK has a lead in due to our competitive energy markets. The spread of gas infrastructure means there will be opportunities to use and transmit gas more efficiently and one of our partner companies has a technology that can save 50 per cent plus of the energy used in parts of the gas network. Other opportunities include - more efficient electric motors for appliances and industry, electric vehicle charging and energy storage technologies, and grid-scale energy storage.
As part of the Paris Accord, India has committed to reducing carbon emission intensity by 33-35 per cent from 2005 levels by 2030. Where are we on our specific targets ?
The three specific targets were:
- to achieve 40 per cent of electricity generation capacity by renewables by 2030
- reduce emissions intensity by 33-35 per cent by 2030 (compared to 2005)
- to create an additional 2.5 - 3.0 billion tonnes of carbon sinks
India is set to surpass the first two targets. The rate of renewables installation (9.39 GW in 2019/20) is very positive and the proportion of renewable capacity should meet 43 per cent by 2027. If India maintains the pre-COVID rate of reduction of emission intensity, 2 per cent per annum, the country will achieve its Paris commitment several years early.
Can you shed some light on the 20 projects that you have in the pipeline for the Indian energy market?
We can only talk about a few of them. The first one is a radical new process heating technology that can reduce energy consumption in gas pre-heaters by 50-70 per cent. This is an area that is invisible to most people but consumes large amounts of energy. The technology is proven in the UK gas grid and has applications in the petrochemical industries. It is also well suited to be made in India.
The second is a high-efficiency electric motor that has many different applications including air compressors and turbochargers. Again, this is well suited to be made in India.
We are also working with a company that has software and hardware for integrating electricity storage and e-mobility. This could enable the convergence of the electricity industry and mobility which is happening in India as in all countries.
Your take on PM Modi's 'One Sun One World One Grid' vision.
I am a big fan of India's efforts to decarbonise its electricity system. The rollout of solar and wind, as well as the energy efficiency programmes run by EESL such as the UJALA LED programme (and many others) really, are world-beating. The future of electricity is a highly decentralised, flexible, and responsive system with local generation, and storage, and producers and consumers blending together as “prosumers”. This will be based more on smaller-scale micro-grids which in turn will be part of larger grid systems.
Although there will be regional inter-connectors using HVDC cables as set out in the PM Modi's vision, but the vision of one global grid is a bit dated - a sort of large scale, a centralised idea rather than decentralised. Also, local and grid-scale storage is becoming more viable which will reduce the need for long-distance imports. The power of solar, storage and energy efficiency are that it can be small scale, decentralised and democratised. The answer is - to misuse the old Chairman Mao phrase - to 'let one hundred flowers bloom' and encourage business models and capacity building that allows local communities and businesses to develop and run their own highly interactive energy systems, and then to interconnect them in a highly decentralised, intelligent network. In places where it is sensible to inter-connect regions or countries, it will happen.