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Cleantech investors set sight on solar and water related companies

Catalysed by new government policies favouring solar energy and multiple demand-driven opportunities for water-related companies, private equity and venture capital firms are focusing on these cleantech sectors, a report from Venture Intelligence shows.

The private equity and venture capital firms surveyed recently by Venture Intelligence chose water and wastewater engineering, energy efficiency, waste management and recycling, energy infrastructure, pollution control and cleantech in manufacturing/industrial environments as their favourite sectors within the industry.

Articles by private equity and venture capital investors and advisory firms in the report point to rising investor interest in solar energy.

Citing how the accelerated depreciation incentive has helped India to become one of the top players in wind energy, Parag Sharma of KPMG says the new government policies relating to solar energy are set revitalise that sector.

“The large solar capacity addition plans by centre and state governments ensure that there is a lot to play for and for a lot of players,” he writes.

Rama Bethmangalkar and Siddhartha Das of venture capital firm Ventureast point out that with technology rapidly bringing down the cost, there are already many applications – be it powering remote villages, cell phone towers, or street lighting – where solar already is the least expensive source of power.

Kalpana Jain and Sandeep Negi of Deloitte highlight how the launch of the National Solar Mission provides an investment and revenue generating opportunity of over USD40bn across the solar value chain from polysilicon manufacturing to generation.

The article by Shivani Bhasin, chief executive of private equity firm India Alternatives, says that from a private equity perspective cleantech presents both good news and bad news. The good news is the market is huge and growing fast. The installed generation capacity from renewable energy has increased over ten-fold during the last decade and will continue to grow steadily, leading to an investment requirement of USD20bn over the next few years. The bad news is that certain aspects of cleantech are still reliant on government subsidies and the gestation period for cleantech projects may be longer than the average holding period of private equity funds.

The Aloe Private Equity article on the waste management and recycling opportunity points out how, as nearly ten million Indians subscribe to a new mobile phone line every month, the amount of waste batteries will become tremendous. The article also says that it is important to integrate and capitalise on existing systems while building the waste management models of the future.

Writing on the carbon credits opportunity, Ritesh Banglani of venture capital firm IDG Ventures India points out that while India’s role in the carbon market is currently very small compared to the size of its economy and its power industry, its registered carbon credits is expected to grow to 33 per cent by 2012, by when it is also expected to be the world’s fastest growing CER supplier. Banglani feels there are several significant opportunities for Indian services companies in every part of the carbon value chain – from carbon advisory to IT services.

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