The battle for resources is growing fiercer across the globe, driven by rising demand coupled with rapidly dwindling sources. Businesses will need to take a long-term view by securing their future sources of supply and shifting to next-generation fuels and alternative energy sources. Seeking out creative ways to transform waste into profit and satisfying the huge demand for energy-efficient products and services can present profitable business opportunities. The concluding part of the Accenture series, “New Waves of Growth for India”, discusses how the quest for resource efficiency can become an important source of economic growth and job creation.
As the world’s resources grow scarce, India faces an uphill battle to secure its resource supply for the future. On the demand side, growth in population and urbanisation is increasing competition for all kinds of resources. Meanwhile, resource supplies are being strained by geopolitical factors and inadequate complementary infrastructure to support resource exploration and generation at a fast pace. As a result of this double-edged scarcity, concerns are growing over the availability and prices of resources.
Yet, approached imaginatively, the quest for resource efficiency can become an important source of economic growth and job creation. Accenture research shows that, with appropriate regulation, skills development, investment incentives and technology spillovers, this sector could raise India’s GDP by Rs 458 billion ($10 billion) by 2020, 0.3 per cent above the current trajectory. This could help generate 821,000 additional jobs by 2020.
To prepare for the future, India needs to explore alternative resources, source traditional resources from new locations and leverage efficiency-enhancing technologies. The Indian government is working to expand supplies of alternative energy sources such as wind, solar and nuclear, while also overhauling the country’s energy infrastructure through technologies such as the smart grid to improve supply efficiency. Agriculture and agribusiness sectors are working on next-generation solutions in collaboration with sectors such as biotech and IT to catch up with the racing demand.
Intelligent solutions
Several important growth sectors stand to benefit from the burgeoning resource economy: Intelligent energy solutions will promote India’s low-carbon agenda while also addressing its inefficient power supply. At present, energy losses during transmission and distribution in India exceed 30 per cent, one of the highest in the world. The advent of a low-carbon economy will accelerate the growth in smart grids, carbon capture and storage, remote sensors and meters.
Alternative energy sources such as wind power, hydro power, bio-energy (biomass gasifiers) and next-generation solar power can create new markets and export opportunities as well as provide a much-needed impetus to India’s domestic manufacturing sector. Alternate fuels such as bio-fuels and shale gas will help reduce dependency on scarce, high-priced conventional fuels and can turn India’s energy situation into a position of surplus. More futuristic technologies, particularly hybrid cars, can play a critical role in reducing dependence on oil.
The shift to a resource-efficient economy will spawn demand for a host of green capital goods and infrastructure, such as photovoltaic systems, wind turbines and green buildings. India will be a major manufacturing hub for wind turbines in Asia. Annual production capacity will rise from the current level of 7,500 MW to more than 17,000 MW by 2013.
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India’s growing population, coupled with changing diets and lifestyles, will drive demand for higher-value agribusinesses such as processing, handling, packaging, transporting, marketing and distribution of food products. Logistics and warehousing companies are also proliferating around major agricultural hubs across the country. The government has stipulated the creation of 2 million tonnes of additional storage for agricultural produce through modern silos.
Land degradation, climate change and water scarcity will put a premium on efficient land and water use. Water, waste and land management solutions will find growing demand in the “low-carbon economy”. Estimates suggest that India’s total water demand will double between now and 2030. Newer sources of water are scarce, so the water treatment and management sector will need to step up.
Making it happen
India’s resource economy has significant growth potential and abundant opportunities for the corporate sector. Yet the growth possibilities could easily be squandered. Supply-side gaps persist on various fronts — a lack of appropriate complementary infrastructure (such as inadequate power grids to support renewable sources including solar, limited facilities for electro-vehicles) and inadequate technical skills.
Organisations can enormously benefit by pursuing innovative approaches to manage the resource scarcity:
* Shift to next generation fuels and renewable energy sources: Indian companies must plan for a future where pollution-causing fossil fuels will be prohibitively expensive and regulated. They have an advantage in not having to deal with legacy systems and can base their growth on clean technologies that will help them tackle future resource scarcity.
As these companies expand operations beyond geographical boundaries, their clean, energy-efficient operations will help them gain access in developed economies and avoid stringent environmental regulation.
The companies should also benefit from government incentives to increase production of renewable resources. For instance, wind power projects have received many concessions, such as a 10-year tax holiday, accelerated depreciation, concessional custom duty and power buy-back from states.
* Diversify supply sources: Intensifying demand for resources and concerns about future resource security are driving Indian companies to scout for coal, iron ore and other assets abroad in sectors such as power generation, oil and gas, and metals and mining. Companies are forging strategic alliances and key partnerships with suppliers and even competitors to secure resource supply in the long term. NTPC, for instance, plans to import 5-10 million tonnes of coal from Australia and Indonesia in the next three to five years. The company aspires to ramp up its capacity from the current 30,000 MW to 75,000 MW in 2017.
* Develop energy-conserving products and services: New patterns of consumer demand are unfolding. Consumers are becoming increasingly conscientious, choosing and preferring to buy energy-conserving products and services. Be it the semiconductor industry that supports the solar PV systems market, or green building construction companies, the market for green technologies is expanding. Even consumer durables companies are developing products that use less electricity than ever before. Energy-star ratings are no longer good-to-have features; they are must-haves.
* Turn scarcity into abundance: Typically, as use of resources grows, so does generation of waste. But by using resources in creative ways, companies can transform waste into assets, helping to provide food, raw materials and energy. In India’s large agrarian economy, biomass — wood, agricultural residues and animal waste — is available in enormous quantities. Indeed, over 40 per cent of India’s total energy requirement is met through biomass burning. The Energy and Resources Institute’s (TERI) biomass gasifier system uses biomass for power generation. Such systems could make up for the absence of grid electricity supply in many remote areas in India.
* Shape pro-growth approaches to regulation: Organisations need to engage with each other and the scientific and academic communities, as well as work closely with policymakers and regulators, to help create a regulatory environment that is favourable to growth. They can also work with the regulators to create a joined up approach to educate other stakeholders, including customers and investors, about the value of sustainable business models.
The ministry of environment and forests in India is helping to advance such efforts. The ministry is piloting a market-driven emissions trading system in three states that will allow different companies to cut emissions as much as they can and to benefit accordingly. System administrators will take into account the different scales of emissions, rather than penalising companies for not meeting fixed emission-reduction numbers. They will grant emission-reduction permits to companies that reduce emissions. Polluting companies can choose to reduce emissions or buy permits through an auction.
To conclude, realising the growth potential of the resource economy will require greater coordination and collaboration among stakeholders across the value chain — policymakers, businesses, academia and R&D institutions — and sustained investments in next-generation technologies. Businesses will need to take a long-term view by securing their future sources of supply and shifting to next generation fuels and alternative energy sources. Seeking out creative ways to transform waste into profit and satisfying the huge demand for energy-efficient products and services can present profitable business opportunities in the years to come.
The author is chairman and managing director, Accenture India
