GEAPP’s Saurabh Kumar on energy transition investments, policy woes and more

Saurabh Kumar, India head, GEAPP

The Global Energy Alliance for People and Planet (GEAPP) was founded by the Rockerfeller Foundation, the IKEA Foundation and the Bezos Earth Fund to work in areas of climate change and energy transition. The GEAPP is backed by about 20 alliance members including multilateral lenders like the Asian Development Bank and development finance institutions such as the World Bank Group’s International Finance Corporation and British International Investment.

While the three founding members committed $1.5 billion to accelerate climate action, the other alliance members committed another $10 billion, said Saurabh Kumar, the organisation’s India head.

The GEAPP operates in seven countries and India is its most important market, Kumar told VCCircle in an interview. Kumar, an IIT-Kanpur alumnus and an Indian Revenue Service officer who has worked with the power ministry and the Bureau of Energy Efficiency in the past, talked about the GEAPP’s India plans in detail and how it plans to deploy capital to drive change in its focus areas. Edited excerpts:

What is the GEAPP looking to do in India? What kind of businesses are you putting
monies into?

The organisation has three major goals. One, reduce greenhouse gas emissions. Two, create green jobs. And three, increase access to commercial electricity. India, certainly, is our most important and the largest country. We became a legal entity in India in May this year. So far, we have looked at India’s commitment to 2030 [reduce carbon emissions as per the Glasgow declaration] to begin with and looking at the trajectory of growth to achieve those targets, where are the potential gaps.

What is the scale of money GEAPP is looking to deploy in India?

We are not even six months old here, so the process of deployment is only beginning. Till now, we have only deployed a few million dollars. All these are infrastructure projects that take time. For now, these projects are going through our internal process, some of them require regulatory approval

What kind of returns is GEAPP targeting on an overall portfolio basis and from
India, in particular?

The GEAPP is basically a philanthropic organisation. So, there is no return expectation at all here. The first expectation is about the impact that our catalytic capital will entail. Second, how much leverage will we achieve from other philanthropies, the private sector and so on.

The total capital, as I have said, is $1.5 billion, but it is not allocated to any particular country. Wherever the impact is much higher, capital will be deployed. And $1.5 billion is the starting point. We are in the process of taking this fundraising to $4-5 billion in the next two-three years. So, I don’t think capital is an issue. Right now, there is no target as far as capital is concerned. The target is on carbon access and jobs.

Which businesses are GEAPP likely to invest in India?

We would very rarely invest in a particular company or a particular project. The reason is simple. Given the scale of a country like India, our capital is a very small amount. We want to maximise our impact and our leverage. So, we are looking at ecosystem changes. Let’s take a real example of a project that we have initiated. We have signed MoUs with Odisha and Maharashtra, whom we are helping build 1GW each of distributed renewable energy

There is a scheme called PM-KUSUM (Pradhan Mantri Kisan Urja Suraksha and Utthan Mahabhiyan) for solarising the agriculture sector, which has not taken off at all. There is $4 billion of government allocated money sitting there but it is not happening as there is no institutional capacity at the state level to aggregate these projects which are small, of sizes 0.5MW-2MW. So, if you bid out one or two projects, it is not viable. You need to put together an aggregated set of projects, let’s say 100MW.

We are supporting these states through a digitised way of aggregating land parcels or rooftops using GIS data and putting together a model which can then be replicated to various states. Once that happens, then we will help states to find developers. In the rooftop segment, where we are targeting micro and small enterprises, we are also putting together a risk guarantee fund.

So, most of the use cases for our funds will be going for risk guarantees and to technical assistance to support the stakeholders in aggregating demand. This is where we would like to play, more than just investing in a company or a startup.

Green hydrogen is an important theme that GEAPP is backing. What is the addressable market in India and globally?

No one knows as of now, honestly speaking. A mission was launched earlier this year with a target of 5 million tonnes of green hydrogen by 2030.

The issue is where is demand coming in for green hydrogen? That will happen when steel or cement plants start to decarbonise. Second, demand will be in the transport sector. So, yes green hydrogen is extremely important for a fuel switch and for decarbonization. Our feeling is it will be four-five years from now before we start seeing commercialization of green hydrogen.

Until then we feel there is enough to be done in fields like decentralised renewables and battery energy storage systems, which is needed almost immediately. We also need policies and regulations that can hasten it all. Globally, we have not started looking at green hydrogen yet. We will, at some point in time.

Second, very large corporates and governments are putting in massive investments into green hydrogen. So, the use case of our small little capital at this juncture is not very obvious.

What are the key policy bottlenecks that India faces vis-a-vis solar and wind energy as well as e-mobility?

The biggest regulatory and policy challenge before renewables today is the fact that the grid does not have any flexibility. That will limit how much renewable energy you can actually push into the system. Some states are already seeing these problems, particularly states like Rajasthan and Gujarat that have high renewable energy. What is needed immediately is a separation of the two markets-the energy market and the ancillary services market or the flexibility market. Number two is storage itself. There is a storage obligation that has been put together. As far as electric mobility is concerned, two or three things need to be tweaked. What is lacking is the rollout of the charging infrastructure. One of the key reasons for charging infrastructure not being rolled out as it should is the change in the state grid codes. There is a need to change these grid codes.

The last point would be access to financing for electric vehicles. The government is now addressing that as it is going as part of priority-sector lending.

What, if any, is the mandate that GEAPP’s backers have given it? Is the mandate country specific or is it an umbrella mandate?

It is an umbrella mandate. Our mandate today is basically on four different elements that we are pursuing. One is about decentralized renewables. Just agriculture alone can give you 150GW of decentralized renewables. It also has a social angle. Farmers start getting power during the day, most discoms give it during the night. Also, the cost to the state government, which subsidizes agriculture, goes down significantly.

Our second focus is battery energy storage. The government’s own assessment is that they need 50GW of battery storage by 2030. The third body of work is electric mobility, looking at public transport, particularly seeing how we can create mechanisms along with the government of India, so that large flows of private investment can come into this sector.The fourth one is an innovation fund.

What is the sectoral split of the investments (renewable energy, battery energy storage and e-mobility) GEAPP is likely to make in India?

Roughly one-third each.

How big an opportunity does the sustainability space present in India? Is there a viable business case for sustainability yet?

Or do you think a tipping point is yet to be reached?

That’s exactly what our goal and goal in India is, to create these tipping points in sectors where commercial capital is still not going. For instance, in electric buses there is no private investment happening. We are trying to work with the government of India to put together a risk guarantee fund and recreating a SECI (Solar Energy Corporation of India) in transport.

Once that SECI in transport happens, there is a viable business case for private 5/5 investment in transport flowing. This sector needs massive investments. For example, just look at the 50,000 buses that the government of India is trying to convert. This itself will need about $10 billion of capital. Again, commercial capital is not going towards decentralised renewables.

Our vision is to create a business case which has reduced risk and a much better return and we hope to replicate the utility-scale solar story into decentralised renewables. The third case is the battery energy storage, which is costly. So, we are creating with the utility and the regulator a regulatory regime which can then help develop these business cases.