Building Innovation Partner- ships with India
This report aims at putting together a stronger understanding, for both policy makers and business actors, about what to expect when engaging with emerging markets like India. It provides an overview of the Indian landscape for innovation and technology development, and then uses the Swedish Energy Agency’s Indo-
Experiences from the Indo-Swedish Innovation
Platform – Phase I
Dnr 2013/104
Swedish Agency For Growth Policy Analysis Studentplan 3, SE-831 40 Östersund, Sweden Telephone: +46 (0)10 447 44 00
Fax: +46 (0)10 447 44 01 E-mail info@growthanalysis.se www.growthanalysis.se
For further information, please contact Martin Flack Telephone +46 10 447 44 77
E-mail martin.flack@tillvaxtanalys.se
Förord
Indiens energikonsumtion domineras av fossila energislag, främst kol, och bedöms göra det under överskådlig framtid. Utöver de negativa miljö- och klimateffekter detta medför innebär kolberoendet en stor påfrestning på den indiska ekonomin eftersom merparten av kolet, och oljan, i framtiden kommer att importeras från andra länder. Mot bakgrund av detta satsar den indiska regeringen betydande resurser på att bryta kolberoende, framförallt genom olika initiativ för energieffektivisering och utbyggnad av system för förnybar energi.
Medvetenheten om att utländsk kunskap och teknik behövs för att lyckas med de högt ställda ambitionerna är god och man söker därför aktivt internationella partnerskap, fram- förallt inom ny teknik och innovation. Sverige har identifierats som ett intressant land att bygga upp sådana partnerskap med.
Från svensk sida finns likaledes ett växande intresse för Indien och modeller för hur man ska närma sig landet diskuteras i många olika sammanhang.
Denna rapport diskuterar och analyserar ett praktiskt exempel på hur innovationssamarbete med Indien kan se ut, The Indo-Swedish Innovation Platform (ISIP). ISIP drivs av Energi- myndigheten i samarbete med ett flertal intressenter både på den svenska och den indiska sidan. I skrivande stund har den första fasen av detta projekt avslutats och nästa steg håller på att utformas. Rapporten visar på vilka erfarenheter och lärdomar som går att dra från fas ett och presenterar ett antal rekommendationer för fas två – rekommendationer som även är giltiga i den bredare diskussionen om hur svenska aktörer kan närma sig, och agera i, In- dien.
Projektet har bedrivits på uppdrag av och i nära samarbete med Energimyndigheten och kopplar till dess arbete med att utveckla ett tätare och mer långsiktigt innovationssamar- bete med indiska aktörer inom energiområdet.
Rapporten har författats av Arati Davis, analytiker vid Tillväxtanalys kontor i New Delhi.
Projektledare har varit Martin Flack vid Tillväxtanalys kontor i Stockholm. Värdefulla synpunkter och bidrag har lämnats av Ludvig Lindström, Energimyndigheten, och Stefan Jonsson, tidigare utsänd analytiker för Tillväxtanalys i New Delhi, nu vid Tillväxtanalys kontor i Stockholm.
Stockholm, mars 2013
Enrico Deiaco
Avdelningschef Innovation och globala mötesplatser
Table of Content
Summary ... 5
Sammanfattning ... 6
1 Background: India’s Need for Innovation ... 7
1.1 Huge investments necessary to realise future growth ambitions ...7
1.2 Global value chains in energy innovation – potential for cross-country collaboration ...7
2 India’s Innovation Landscape – Policies and Practice ... 9
2.1 Integrated Energy Policy (IEP) ...9
2.2 Twelfth Five Year Plan (2012-2017) and the Spaces for Innovation ... 10
2.3 Science, Technology and Innovation Policy 2013 (STI 2013) ... 10
2.4 Lessons on triggers for innovation, technology and new markets – National Solar Mission and National Mission on Enhanced Energy Efficiency ... 11
2.5 Lessons on challenges and triggers for innovation, technology and new markets ... 13
3 The Indo-Sweden Innovation Platform (ISIP) ... 15
3.1 ISIP Background ... 15
3.2 ISIP – the process ... 16
3.3 Technology selection and the value of local knowledge ... 17
4 Lessons from ISIP Phase I ... 18
4.1 Pre-market due diligence; developing the early confidence of Swedish innovation companies ... 18
4.2 From discussion to deployment – the realities of project development ... 19
4.3 The role of policy; Indian innovation development and the value of policy as a market trigger ... 20
5 Conclusion and Implications for Swedish Policy ... 21
Summary
India is poised to be one of the world’s largest economies by 2050. With an expanding consumer base, ambitions for economic growth within a relatively new landscape of lim- ited access to fossil fuels and the need to move to low-carbon pathways are forcing India to embrace renewable energy and energy efficiency. The need for new technologies and in- novation in this process and the potential of this market have not gone unnoticed. India is number three in the world in terms of attracting foreign direct investment (FDI)1. Over 30 countries have bilateral agreements with the Indian government in the area of alterna- tive/renewable energy.
India has made clear its continued reliance on coal for its future energy roadmap. How- ever, with decreasing international supply and rising costs, India has also understood the value of developing capacity and technology in alternative energy mechanisms and has declared 2010-2020 the ‘Decade of Innovation’. The establishment of the cross-discipli- nary National Innovation Council, greater ambition in Research and Development, and the role that innovation and international partnerships have been given in the overarching planning documents for the country, make a clear statement about India’s commitment to leapfrog from “business as usual”.
Sweden has identified India as a key partner for the future. In addition to the Swedish En- ergy Agency’s programmes in the country, Vinnova, the Swedish Environment Protection Agency, and the Swedish Environmental Research Institute (IVL) are among the agencies and actors with formal bilateral engagement with counterparts in India.
This report aims at putting together a stronger understanding, for both policy makers and business actors, about what to expect when engaging with emerging markets like India. It provides an overview of the Indian landscape for innovation and technology development, and then uses the Swedish Energy Agency’s Indo-Swedish Innovation Platform, Phase I as the case study through which lessons can be learned. The report concludes by charting out key steps for consideration when developing technology and innovation partnerships with India.
1(2012) ‘Ready for the transition.’ Ernst & Young’s India attractiveness survey 2012. Ernst & Young. http://emergingmarkets.
ey.com/wp-content/uploads/downloads/2012/03/india-attractiveness-final-version1.pdf Accessed February 2013.
Sammanfattning
År 2050 kommer Indien att vara en av världens största ekonomier. Den ökande konsum- tionen, strävan efter ekonomisk tillväxt i ett relativt nytt energilandskap med begränsade fossila resurser, och behovet att sänka koldioxidutsläppen tvingar Indien att satsa på förny- bar energi och energieffektivisering. Behovet av ny teknik och innovation i förändrings- processen och potentialen i denna marknad har inte passerat obemärkt. Indien ligger trea i världen när det gäller att locka utländska direktinvesterare (FDI)2 och över 30 länder har bilaterala avtal med den indiska regeringen inom området alternativ/förnybar energi.
Indien har tydligt klargjort sitt fortsatta kolberoende även i landets framtida energiplan.
Men med minskande globala tillgångar och ökande kostnader har Indien även insett värdet i att utveckla kapacitet och teknik för alternativa energilösningar. Indien har utsett 2010–
2020 till ett innovationsdecennium. Inrättandet av ett tvärvetenskapligt nationellt innova- tionsråd, höjd ambitionsnivå inom forskning och utveckling samt den roll som innovation och internationella samarbeten har tilldelats i den övergripande planeringen, är tydliga tecken på Indiens vilja att ta ett ordentligt kliv framåt.
Sverige har identifierat Indien som en framtida nyckelpartner. Utöver Energimyndigheten är innovationsmyndigheten Vinnova, Naturvårdsverket och Svenska Miljöinstitutet (IVL) några av de aktörer som har formella bilaterala avtal med indiska motsvarigheter.
Syftet med den här rapporten är att öka förståelsen hos både offentliga beslutsfattare och företag om vad man kan förvänta sig av innovationssamarbete med aktörer i Indien.
Rapporten ger en översikt över landets innovations- och teknikutveckling och visar vilka lärdomar man kunnat dra av första fasen i Energimyndighetens projekt Indo-Swedish In- novation Platform. Slutligen kartlägger rapporten de viktigaste faktorerna att ta hänsyn till för att teknik- och innovationssamarbeten med Indien ska kunna gå från ord till handling.
2(2012) ”Ready for the transition.” Ernst & Young’s India attractiveness survey 2012. Ernst & Young. http://emergingmarkets.
ey.com/wp-content/uploads/downloads/2012/03/india-attractiveness-final-version1.pdf Senast tillgänglig februari 2013.
1 Background: India’s Need for Innovation
1.1 Huge investments necessary to realise future growth ambitions
India has been growing at an average of 6% a year over the past decade. Between 1990 and 2010 the number of Indians living below the poverty line of $1.25 has decreased by 17%, and the average annual income has tripled from 2001 to 20103. At the same time, the urban energy gap with 40% transmission and distribution losses, overstretched urban local bodies, and high levels of rural to urban distress migration undermine the country’s ability to sustain economic growth. It is estimated that the cost of achieving the desired level of growth, associated urban development, and infrastructure revisions, will be in the range of
$ 1.2 trillion over the next 20 years4. Urban development, infrastructure growth and most importantly energy security are seen to be the key drivers for policy discussion in the next decade.
India’s growth ambition comes at a time when climate change is forcing a rethink of tradi- tional development roadmaps. Climate change has brought with it a challenge to business as usual that impacts the dual, and at times competing, areas of economic growth and sus- tainable development. Given the landscape of limited ‘traditional’ options for growth, in- novation and technology partnerships are seen as the critical component to achieving de- velopment objectives. In recognition of its need to leapfrog the development pathway, India has introduced a number of policy-supported market-based mechanisms to encourage actors to think differently.
The National Innovation Council, set up in 2010 and made up of India’s leading business representatives, is mandated to develop and reinforce an enabling environment for innova- tion across sectors. India has declared 2010-2020 the Decade of Innovation. Policies such as the Jawaharlal Nehru National Solar Mission and the Perform Achieve and Trade Scheme5 for energy efficiency are aimed at attracting new actors to the market through the development, deployment and diffusion of new technologies. Research and Development centres across the country are being strengthened with increased budgets, and relatively more autonomy for project selection and development.
All of these components together seek to move India from its jugaad, or ad-hoc, culture of innovation to a more systematic and institutionalised process of development and deploy- ment. This mind-set opens up new potentials for the processes of partnership in the tech- nology innovation space.
1.2 Global value chains in energy innovation – potential for cross-country collaboration
With the traditional markets of Europe and North America stagnating and still suffering from financial turmoil, India, China, and Africa will in the near future become increasingly
3 www.censusindia.gov.in
4 (2010) McKinsey & Company, India’s Urban Awakening: Building inclusive cities, sustaining economic growth
5 For an in depth discussion of these two initiatives, see Growth Analysis WP/PM 2013:02, Innovation in Indian Energy Policy: Case studies on solar energy and energy efficiency technology deployment (forthcoming)
attractive options for businesses looking to expand their operations6. It is expected that India’s middle class will triple by 2040, and with it private spending7. Rising incomes pro- vide increasing disposable income and consumer choice. A price-sensitive and discerning middle class is proving to be a strong domestic consumer market as India is poised to be- come the world’s fifth largest consumer market by 2025.
Many countries have understood the value of moving beyond traditional market boundaries to develop new relationships with emerging economies such as India. Sweden’s 2012 In- novation Strategy highlights the need to expand the innovation ecosystem for multiple gains: contribute to the international knowledge economy, work to develop resource- and cost-efficient public services and generate employment and economic growth8.
The Approach Paper to India’s Twelfth Five Year plan has highlighted the need for inno- vation to usher in India’s new era of climate-sensitive, cost-efficient growth. It used the specific example of the “Swedish model of Innovation” as one worth emulating. Consid- ered to be one of the world’s most innovative nations, Sweden has been given a special place in the Indian policy vision of holistic and sustainable development that focuses on economic growth, while being committed to innovation that pushes inclusive growth.
Market-based policies such as The Integrated Energy Policy, the National Solar Mission and the National Mission on Enhanced Energy Efficiency argue for market incentives to help develop confidence for new initiatives. Such policy objectives on renewable energy, solar technology and energy efficiency rely on the strong role of the entrepreneur and business development. Although policy can set the stage for discussions around questions like new markets in order to reassure potential actors, technical and financial viability of solutions will be central. Despite the innovation-friendly environment, there continue to be some key challenges when introducing new technologies to the market; proof of concept, access to start up finance, timeline for recouping investment cost and pace at which in- vestment can be replicated are all cited among concerns in an increasingly risk-averse economy. The next section lays out the policy environment for technology innovation, and some of the learning that can be drawn from experiments undertaken by the Indian gov- ernment when developing market-based mechanisms for energy.
This report aims to review the policies developed in India to support innovation and the experiences of entrepreneurs and innovation companies engaging with India. Using the case study of the Indo-Swedish Innovation Platform (ISIP), this report makes the point that while partnership in India continues to be seen as valuable, certain key factors need to be taking into consideration when developing a roadmap that involves a change from ‘busi- ness as usual’. Reducing risk perception and building a stronger familiarity with the tech- nology solutions have been noted as the main components of successful technology part- nerships by the stakeholders interviewed.
This report takes renewable energy and energy efficiency as its baseline for discussion in relation to technology innovation.
6 Interview with Banmali Agrawala, CEO, Energy, GE India,
7 (2007), Next Big Spenders: India’s Middle Class, McKinsey and Company,
8 (2012), Swedish Government Offices, available at www.government.se/sb/d/2025/a/202558
2 India’s Innovation Landscape – Policies and Practice
Innovation is fast becoming the country’s catch-all phrase for cost-effective and resource- efficient replacements for business as usual. Overall technology development and pro- curement are seen to be critical components of India’s innovation landscape. This section outlines some of the existing policy components that should be considered when develop- ing Innovation partnerships with India. It will also review the private sector’s record on innovation and the increasing focus being placed on the need for private sector participa- tion in the research, development and deployment space, if innovation is to be robust and long-term.
Concepts such as ‘inclusive growth’, ‘bottom of the pyramid development’, and ‘frugal innovations’ are common themes that run through India’s innovation landscape. This in- digenous focus of growth and demand should be taken into specific account when looking to develop partnerships with the country.
India’s recent embrace of market-based mechanisms to support growth and energy devel- opment has introduced a number of new actors into the field of technology development and deployment. As will be discussed later, one of the stumbling blocks to policy-spon- sored innovation is the bounded knowledge of the actors given the responsibility for facil- itating change. New actors can introduce new potentials and new thinking. Innovation in the Indian context is slowly moving out of the laboratories and onto the streets. This is good news for international actors looking for like-minded partners to commercialise inno- vation.
Market-based policies focus on providing incentives for action and stable frameworks around which actors can base investment decisions. The main components of India’s ena- bling environment for technology development are listed below and together paint a very promising picture for actors looking to engage with India.
2.1 Integrated Energy Policy (IEP)
India’s Integrated Energy Policy (IEP) broke ground in two ways; it advocated the central importance of renewable energy and new technologies as a backbone for India’s long-term energy mix and it strongly advocated for the introduction of market based mechanisms to support India’s targets for energy security9. In keeping with the IEP’s blueprint of actions, in 2009 India committed to a 25% reduction in carbon intensity by 2020, from 2005 levels, prior to the Copenhagen climate change negotiations.
The IEP is key to understanding the long-term trajectory of the Indian market for energy technologies as it sets out a path of market development for the energy sector. Market de- velopment will have to include the transfer of technology, at a government level, but it will also have to allow for easier integration of global best practices if India is to both develop its energy supply and reduce the intensity at which it consumes energy.
9 (2006) Planning Commission, Integrated Energy Policy, Report of the Expert Committee
2.2 Twelfth Five Year Plan (2012-2017) and the Spaces for Innovation
The Twelfth Plan has to meet the aspirations of millions of young men and women. This cannot be done by following a business as usual approach. All sectors of society – government, farmers, business, labour – have to adopt new, more effective ways of pursuing their activities. Planning Commission, 2012
The Twelfth Five Year plan institutionalises changes that have been taking place in the Indian context for some time with regard to governance for innovation and energy. In- creasing international energy prices, continued currency volatility and a deteriorating do- mestic macro-economic landscape have heightened the Government’s understanding of the need for private sector participation in all energy-related development and technology partnerships. The shift in the role of the government, from regulator and enforcer to market facilitator, has been evidenced in across sectors in recent policy development.
To support and take forward the first year of the Twelfth Plan, the 2013 budget had an overall reductionist outlook. With the recognition of the declining growth rate, many sec- tors lost money compared to the year before. However, in cognisance of the very real need to develop new ways for low carbon growth, attention was paid to creating an enabling environment for innovation.
A technology fund of INR 200 crore (SEK 235.4 million)10 was put forward to bring Innovations ‘from lab to market’11. The clear focus was to develop commercially viable solutions, through effective field-testing and proof of concept. Previous partnerships were seen to be primarily focused on research, rather than the full supply chain of research to commercialisation. In this context, the role of business incubators and new structural mechanisms has been recognised to build bridges between academia and business12. No single agency or ministry will be given the task of mainstreaming innovation in this regard.
Rather, it will be the task of the National Innovation Council to manage applications and for ministries to advocate innovation strategies within their line agencies. Although this does open up the landscape for potential partnerships, it can also be seen to complicate ensuring that the best partner for the given objective is chosen.
2.3 Science, Technology and Innovation Policy 2013 (STI 2013)
STI 2013 looks to bring together research, development and deployment under the same umbrella to catalyse innovation commercialisation. Resources for innovation have been largely led by the public sector and have been considered to be quite low. Up until 2009, India’s expenditure on research and development had been less than 1% of GDP. STI 2013 aims to have India in the top 5 global scientific powers with 2% of GDP being spent on R&D by the end of the Twelfth Five Year Planperiod13.
10 www.xe.com, conversion made on March 11, 2013
11 Feb 28, 2013, IANS, Rs 200 crore fund to take science to the people, New Indian Express, available at http://newindianexpress.com/nation/article1482564.ece
12 (2013), Twelfth Five Year Plan (2012-2017), Planning Commission, Government of India
13 (2013), Science, Technology and Innovation Policy, Department of Science and Technology, Ministry of Science and Technology
STI 2013 clearly lays out the need for contribution to R&D to be upscaled. In contrast to low levels of public sector spending, private sector contributions to R&D have increased by 250% between 2005 and 201014. To increase the participation of the private sector, both domestically and through international partnerships, is one of the key motivations of STI 2013. The Department of Science and Technology (DST) is the nodal agency for opera- tionalising STI 2013. This will be done with the development of, and stewardship by, a Policy Implementation Group.
Main Objectives of STI 2013
Establishing world-class infrastructure for R&D for gaining global leadership in some select frontier areas of science.
Positioning India among the top five global scientific powers by 2020 (by increasing the share of global scientific publications from 3.5% to over 7% and quadrupling the number of papers in top 1% journals from the current levels).
Linking contributions of science, research and innovation systems with the inclusive economic growth agenda and combining priorities of excellence and relevance.
Creating an environment for enhanced private sector participation in R &D.
Enabling sharing of IPRs between inventors and investors.
Provide incentives for commercialization of Innovations with focus on green manufacturing.
Developing strategic partnership and alliance with other nations, through bilateral and multilateral operation in science, technology and innovation.
2.4 Lessons on triggers for innovation, technology and new markets – National Solar Mission and National Mission on Enhanced Energy Efficiency
India has made clear its continued reliance on coal for its future energy roadmap. How- ever, with decreasing international supply and rising costs, India has also understood the value of developing capacity and technology in alternative energy mechanisms. Policy development in the area of renewable energy and energy efficiency seek to create ‘new’
markets for action. With limited public sector support, policy objectives focus on the in- centives needed to launch market actors to develop the course of policy action. In a forth- coming report from the Swedish Agency for Growth Policy Analysis that investigates both solar energy development in India, and energy efficiency,15 it is argued that although the government is stepping back from its role as policy regulator, it is still a strong force whose presence and active engagement is required to reassure a nascent market.
The Jawaharlal National Solar Mission (NSM), launched in 2010, aims to add 20,000 MW of grid-connected solar by 2022. This is one of the world’s largest development schemes for solar grid connectivity. India’s desire for growth and the country’s need for energy security have pushed the government to look for ways of reducing fossil fuel dependence16. The NSM indicates a mainstreaming of renewable energy into India’s future energy roadmap.17 The initial impacts of the NSM were an extensive enlargement of the solar market and more local manufacturers. Market confidence was seen to be at an all-time high
14 Ibid.
15 Growth Analysis WP/PM 2013:02, Innovation in Indian Energy Policy: Case studies on solar energy and energy efficiency technology deployment (forthcoming)
16 Basu, Sambit, India’s Solar Policy: Elements Casting Shadow on Harnessing the Potential, IDFC, Sector Note, No. 1, November 2011
17 (2010), Deshmukh Ranjit, Ashwin Gambhir, Girish Sant, Need to Realign India’s National Solar Mission, Economic and Political Weekly, Vol XLV No. 12, March 20, 2012
given the clear direction of government policy and the transparency of market-based mechanisms to facilitate growth. As of 2012, at the end of the first phase of the NSM, there is a worrying situation of oversupply and contraction of the local manufacturing market.
Rather than introduce changes to NSM, specifically with regard to domestic manufactur- ing, the government has spearheaded a recalibrated change of direction with the same ob- jective of domestic market expansion. This growth phase is being made possible by in- creasing focus on resource mobilisation, legitimation and knowledge diffusion18.
While energy security continues to be one of the main drivers for growth, India has taken its place in the international climate change community by acknowledging the limits to traditional growth, and the need for sustainable development. In 2008, India committed to a reduction of its carbon intensity by 25% from 2005 levels and released its National Ac- tion Plan on Climate Change (NAPCC). The NAPCC comprises 8 missions that seek to promote development objectives, while also yielding climate co-benefits19. Of particular importance were the 3 missions focused on energy conservation, efficiency measures, and augmenting energy supply through the development of viable renewable energy measures.
The National Mission on Enhanced Energy Efficiency (NMEEE), focuses on achieving efficiency gains through a market-based approach and energy trading. The NMEEE will do this by creating sector efficiency targets for selected industries, and enabling trading be- tween over-compliant and less compliant industrial units. The Perform, Achieve and Trade (PAT) Scheme, which is the flagship of the NMEEE, aims to introduce efficiency measures in 8 selected industrial sectors (table 2-1).
Table 2-1 Number of Designated Consumers and targets by sector, millions tonnes oil equivalent Sector No of DCs in PAT Phase I Energy-saving Targets, PAT Phase I
(million toe)
Aluminium 10 0.456
Cement 85 0.816
Chlor-Alkali 22 0.054
Fertiliser 29 0.478
Iron and Steel 67 1.486
Pulp and Paper 31 0.119
Textile 90 0.066
Thermal Power Plants 144 3.211
TOTAL 478 6.686
Source: Ministry of Power, PAT Scheme Document
In the first five years of implementation, the NMEEE aims to save 23 million tonnes oil equivalent and up to 19,000 MW of additional capacity. Combined NMEEE would reduce CO2 emissions by 98.55 million tonnes annually. The market potential for energy effi-
18 For more details, please refer to Growth Analysis WP/PM 2013:02, Innovation in Indian Energy Policy:
Case studies on solar energy and energy efficiency technology deployment (forthcoming)
19 2008, Government of India, National Action Plan on Climate Change, available at www.pmindia.gov.in/climatechange.php
ciency is pegged at INR 74,000 crore20 (SEK 87.5 billion21). Efficiency standards are set to be achieved through technology development and partnerships. These numbers can be put into relative perspective when we consider that in 2011 India imported 59.5 million tonnes oil equivalent, which is set to increase to 130 million tonnes by 2016-2017. 22
For both of these frameworks, and in order to ensure sustainable new market development, India has focused on facilitating entry by new actors and de-risking investments for tech- nology uptake. This is a relatively new role for the government. Although the current im- pacts of both the solar and energy efficiency policies are still in process, it can be expected that the focus on government-led market facilitation is here to stay. This is in comparison to its earlier position of central command and control. This is a positive ecosystem devel- opment for international actors looking to develop partnerships for resource efficient tech- nology development.
2.5 Lessons on challenges and triggers for innovation, technology and new markets
The literature on diffusion of technology and innovation is vast. While this report cannot do justice to the width and breadth of the findings on triggers for technology innovation and adoption, it can highlight certain key criteria that are of relevance when considering developing partnerships in India. In addition to technology, culture, geography and com- munication become critical components for diffusion. The most important components for the development of interest and partnerships by a technology and business facilitator be- tween actors are listed below:
The challenge of distance between supplier and client is one of the key concerns when looking to develop technology partnerships23. Newer technologies and increased distance increase the frequency of contact required between the technology and the target audience.
The importance of local presence in the Indian condition cannot be underestimated. As a risk-averse economy, new technology adoption, irrespective of its technical value and fi- nancial savings, will require a change to set practices.
As an example of this, in 2010 GE began a process of restructuring and took as its baseline that traditional markets in Europe and North America would no longer be competitive by 203024. GE-India was established in order to localise production and products. Rather than moving staff from overseas headquarters, GE-India would be India-based – ‘In India, For India’. The results of ‘being local’ have been stark. In the two years since GE-India has been in place, sales have increased two and a half times. Local production and local re- sources have helped GE to be flexible with regard to project discussions, be present to help develop trust-based relationships and save costs by being based in the client country. Fur- ther, GE has also discovered that products developed in India, for the Indian audience and price point, can find other markets in countries in Africa and the Middle East. GE is of the
20 2010, Press Information Bureau, Government of India, available at pib.nic.in/newsite/erelease.aspx?relid=62791
21 www.xe.com , Feb 21, 2013
22 2012), Indian Chamber of Commerce, 'The Indian Coal Sector: challenges and future outlook', presented at November 2012 4th India Coal Summit
23 (2013) Comin, Diego, Mikhail Dmitriev, Esteban Rossi-Hansberg, The Spatial Diffusion of Technology, HBS Working Knowledge, Harvard Business School
24 Interview with Tom Mitchell, Head of Operations, GE-India
opinion that if two thirds of the world share the same product quality and price concerns, it makes sense to develop ‘for that market, in that market’25.
Although the GE example might not be replicable by all actors, the message of local pres- ence and value of reducing the spatial distance between supply and demand is one that has been echoed by all stakeholders interviewed for this paper.
Influencing adoption through product ‘desirability’ has been raised as an issue for tech- nology partnerships by both Indian and international actors. A strong technology solution, which is not understood by top management, is unlikely to be taken in26. An example of the power of packaging can be provided by Volta’s air conditioners. Volta’s product de- velopment to create energy-efficient air conditioners, prior to the Government’s energy efficient appliance labelling scheme27 struggled to receive any market response, due to lack of consumer knowledge about the benefits. However, when information packages were developed to help consumers understand the money being saved on household energy bills, sales for Volta’s equipment increased 200% between 2008 and 2010. This is despite the unit being more expensive than the other brands.
In order to take in new technology, old technology or processes will need to be displaced.
The openness of the recipient to new technology will determine the speed of diffusion and uptake. In India, the power of the recipient within the industry/firm should be taken into account. Technocrats within the Indian firm are rarely the ones making the budget deci- sions.28
Stakeholders consulted focused on the time spent in developing their Indian target audi- ence. Solution packaging to create a brand identity and develop product desirability has been shown to go a long way to achieving successful technology uptake and bridging the divide between traditional ways of doing business and possible change29.
Finally, the degree of similarity between the supplier and the target audience the greater the likelihood of diffusion, and the willingness to innovate, was put forward by all stake- holders interviewed as a key determinant of positive business development. They all ad- mitted to extensive due diligence and client filtering before engaging in business discus- sion. This filtering was done to determine the capacity and commitment of the partner in understanding the technical and financial potential of business in India and in relation to the landscape around a given technology solution.
At each stage of development of the technology partnership, different challenges will apply when looking to develop international partnerships with India. Once an initial relationship has been formed, questions of demonstration sites, proof of concept, intellectual property rights will dominate the business development discussion. While the role of the facilitator can still be important to ensure that there is no lapse in momentum, action at this stage is more likely to be led by business-to-business.
25 Ibid.
26 Interview with Kevin Sullivan, CEO, ECO3 Design; Interview with Deepak Boird, Head – R&D, Voltas India
27 www.beeindia.in
28 (2000), Geroski, P.A., 'Models of Technology Diffusion', Research, Volume 29, pp 603-625, London Business School
29 Shiv, Baba, Between Boredom and excitement; how to coax the risk averse manager to innovate, Economic Times, March 4, 2013
3 The Indo-Sweden Innovation Platform (ISIP)
Sweden has identified India as a key partner for the future. Vinnova, the Swedish Envi- ronment Protection Agency, the Swedish Environmental Research Institute (IVL), and the Swedish Energy Agency are among the agencies and actors with formal bilateral engage- ment with counterparts in India.
In June 2012, the Swedish Energy Agency (SEA) began a process of innovation match- making with India: the Indo-Swedish Innovation Platform (ISIP). The first phase of the ISIP was to run until December 2012. The objective was to bring small Swedish innova- tion companies, with established technologies, to meet with interested Indian partners and develop joint applications and new solutions to address some of the challenges facing In- dia. In order to do this, the SEA had enlisted the assistance of the Confederation of Indian Industries – Green Building Centre in Hyderabad (CII), and Cleantech Scandinavia (CTS).
It was envisioned that this matchmaking would take place along multiple channels. The first of these was business-to-business matchmaking, facilitated by the CII and CTS repre- senting company interests. The second modality for matchmaking was seen to be the intro- duction of Swedish and Indian universities involved in the questions of research and de- sign, innovation and business. Their relative ‘external’ position would bring in potentially interesting ‘out of the box’ ideas for innovation matchmaking.
As of December 2012, at the end of the first phase of ISIP, no tangible business results were evident. However, an enabling political framework for discussion had been devel- oped with relevant ministries and agencies of the Indian government. Specifically, support had been forthcoming from the Ministry of New and Renewable Energy (MNRE) and the Bureau of Energy Efficiency (BEE) under the Ministry of Power. This section reviews lays out the modalities through which ISIP Phase I was developed. Section 5 will then draw out both the lessons learned and the challenges for programmes such as ISIP and describes both the opportunities gained with Phase I and some of the challenges experienced during its implementation. It will review the actions taken, outcomes, and potential areas for fur- ther development.
3.1 ISIP Background
The inspiration behind the ISIP concept was derived specifically from the discussions held in Stockholm with Indian National Innovation Council leaders Sam Pitroda, Arun Maira and Dr Samir Bramacharya. Each of these individuals has been involved at the highest levels of India’s policy thinking on innovation development across the spectrum of healthcare to energy systems. During their visit to Sweden in June 2011, discussions cen- tred around how Sweden’s innovation companies working in the area of energy efficiency and energy storage could be of great value to India. Informal brainstorming between Indian and Swedish actors led to the development of what was seen to be a down-to-earth, practi- cal innovation strategy.
The Swedish Energy Agency (SEA) has been involved in India since 2009, when they brought a delegation to India focusing on biogas for vehicle fuels for urban infrastructure.
With experiences from Swedish public transport running on clean fuel from waste, and with India experiencing a waste management crisis, the discussion was a win-win solution for business development and local management of urban services.
The experiences from discussions held in Bangalore, Pune, and Delhi led to joint efforts by the SEA and Sida to develop a formal programme on waste to energy, India-wide. Con- crete discussions are under way in Delhi for the commissioning of India’s first biogas for vehicle fuels programme, and involve the participation of the Government of Delhi, and large-scale private sector players.
The waste-to-energy process has been part of the SEA’s understanding of technology part- nerships for sustainable development. It was clear from the Delhi biogas project that tech- nology is not necessarily the determining factor for uptake but rather a clear business case.
With this in mind, and with an appreciation for India’s interest in developing technology in line with energy security, the Indo-Swedish Innovation Platform (ISIP) was developed to shorten the process of product development and deployment. Small-scale innovation com- panies would be brought to India to meet with potential partners. Matchmaking at a rela- tively early stage would allow joint growth and effective adaptation of the product for local conditions.
3.2 ISIP – the process
The first step of ISIP was to contract partners for business-to-business work in the country.
For Phase I, Cleantech Scandinavia (CTS) and the Confederation of Indian Industries – Green Building Centre (CII) in Hyderabad were selected.
Cleantech Scandinavia is a consultancy service catering to Nordic actors. Their focus is on early stage and growth companies looking to expand their market base both in the Nordic area and internationally. They were signed with the SEA in spring 2012, with a project objective of developing the operational arm of ISIP. CTS was to communicate with inno- vation companies, liaise with their Indian partner, and develop the appropriate outreach strategy for business development.
The CII Green Building Centre in Hyderabad was set up to specifically address the ques- tion of clean technology development and business in India. It offers advisory services to its industry members in the areas of green buildings, energy efficiency, water management, renewable energy and incubation for new technology actors. The institutional objective of the CII – GBC is to pave the way for India to become a global leader in green business by 2015. The CII is one of the main industry actors brought into government confidence when developing new market-based policies focused on industry and business. As such they have a unique overview of the Indian business community.
The role of the CII in the ISIP was to provide feedback to a long list of Swedish innovation companies, provided by CTS and the SEA. This feedback was to be based on institutional experience and on the ease with which selected innovation companies could expect to con- vert discussions into projects on the ground.
The objective of the first phase of ISIP was to culminate in a launching ceremony during the Sweden-India Nobel Memorial Week 2012. At this time it was planned to have a po- litical showcase of an active business-to-business platform for ongoing engagement.
The first meeting of companies and Indian investors was scheduled for August 2012, at the CII Energy Efficiency Summit in Hyderabad. More than 300 Indian industry and business representatives were present for the event. At the time, although innovation companies could not be present, a memorandum of understanding was signed between the CII, CTS, and the Swedish Energy Agency for a partnership on innovation development in India.
3.3 Technology selection and the value of local knowledge
An important component of ISIP is the matching of demand to technology solutions. The Confederation of Indian Industry’s (CII) role of validating the Swedish innovation compa- nies interested in coming to India is a key component of the success of the ISIP thus far.Companies offered very different solutions in the area of renewable energy, energy storage and energy efficiency. The CII’s role was to put potential technologies into a local/real- time context for the development of best project results.
In July 2012, 700 million Indians were plunged into darkness as a multi-grid failure left most of the country without electricity for up to 2 days. India was made painfully aware of the limitations of its grid infrastructure, the lack of management of State Electricity Boards, and the need to rethink its energy management. The India Smart Grid Task Force was revived and given the urgent task of investigating how to move forward with India’s prime ambition of energy security30. It is perhaps not surprising that this landscape was not a conducive environment for innovation companies whose product relied on electricity.
Energy savings and energy efficiency were seen to be more necessary than electric vehi- cles and charging stations. Local feedback such as this helped to develop a final shortlist of companies to work with in Phase I of ISIP (Table 3-1). This context-specific discussion will also have to be time-specific.
Table 3-1 Swedish innovation companies shortlisted for ISIP Phase I
Company Name Product Potential Indian context application
Absolicon Solar collector Decentralised energy security. First
plant in India, in joint venture with Bergen Group. ‘In country’ proof of concept established.
ClimaCheck Sweden Performance analysis of air- conditioners, heat pump systems, compressor-driven refrigerators.
Green building application.
Application in National Mission on Enhanced Energy Security (NMEEE), and Bureau of Energy Efficiency demand side management measures.
NLAB Solar Dye-sensitized solar cells National Solar Mission, Industrial application
Opcon Energy Systems Technology for small-scale production of electricity from waste heat.
Industrial application
30 www.desismartgrid.com
4 Lessons from ISIP Phase I
The first phase of ISIP, from June 2012 to December 2012, has laid the groundwork for business development between India and Sweden in the areas of innovation partnerships for the 4 selected SME innovation companies. In addition to reviewing the actions taken as part of ISIP Phase I, stakeholder consultations helped to develop a stronger analysis of actions and reflect upon the needs for future action.
What is interesting to note is that scale aside, companies face a similar set of issues when conducting business with India. Size matters in each actor’s ability to respond to these challenges, and this can be the tipping point for continued engagement for smaller entities.
Not surprisingly, country expertise is developed over time and over repeated interactions.
Companies who have been in India longer have the resilience mechanisms to understand how best to deal with the potential challenges that arise in business transactions. Stake- holders clearly referenced the extensive time that can be taken from discussions to de- ployment. A time horizon of 3-5 years for financial closure is an average expectation of companies who have now achieved market entry31. Smaller companies make up for pres- ence through partnerships with Indian entities, as well as public multilateral partners whose work it is to facilitate relationship-building between countries.
With recognition of shrinking access to finance, localisation becomes a critical component for competitive practice. In order to better understand what to take into consideration when looking at India, this section puts together a stronger understanding for both policy-makers focused on internationalising their country’s portfolio and actors interested in knowing more about what to expect when engaging with emerging markets like India.
4.1 Pre-market due diligence; developing the early confidence of Swedish innovation companies
Small innovation companies, with limited bandwidth, have to filter their international en- gagement based on criteria such as maximum returns for time spent. The lack of clear ‘low hanging fruit’, risk of engagement, and weak legal mechanisms to support IPR are all rea- sons why the Swedish innovation companies that came to India put forward for their initial hesitation regarding India as an export destination.
However, upon completion of their tour of India, facilitated by the SEA, the CII and CTS, the companies reaffirmed their active interest in continuing engagement with India. Nlab Solar have returned to India independently to follow up on business intelligence. All com- panies have indicated to the SEA their clear interest in being a part of future actions under ISIP. Initial hesitation could be understood to be a response to a lack of information about the country prior to direct engagement. Misconceptions and a lack of confidence could be greatly avoided with a longer-term entry plan for the country in question.
All of the companies shortlisted had prior interaction with the Indian private sector. The companies did not however have a three-dimensional perspective of how their specific product could strategically align with larger policy objectives set by the country and
31 Interviews with Mr Fredrik Agerhem, Jarven EcoTech AB; Tom Mitchell, Supply Chain Management Leader, GE-India
thereby meet Indian private sector needs. A macro-understanding policy perspective would assist companies in packaging their work in a context understood by potential partners.
Ideally such information would be provided on an on-going basis, such that companies become comfortable with India as a potential commercial destination before the start of specific programme deliverables. Information exchanges on issues such as intellectual property rights, legal requirements on shareholdership, state of the market in relevant sec- tors, and a background of companies broken down by sector would go a long way to help- ing companies make the best use of their time when in the country.
Actors such as the European Business Technology Centre (EBTC), an EU-funded project with an office in Delhi, work to develop matchmaking partnerships between member or- ganisations and companies in both India and Sweden. The EBTC has developed an IPR Advisory with the aim of helping new actors in the Indian market understand the practical and legal realities of business development. It was made clear that the traditional concerns of IPR theft and joint ventures are of decreasing concern for partners coming to India. IPR legal frameworks still need to be strengthened and their enforcement varies by city across the country, with Delhi being the strongest32.
Trust-building is an important first step in business engagement strategies. This is normally time-consuming, but activities such as webinars, online company information and interests, as well as virtual meeting places would go a long way to help bridge the trust gap on both sides. Actors such as the EBTC, Business Sweden and the CII could be considered to de- velop such mechanisms with ICT platforms.
4.2 From discussion to deployment – the realities of project development
The Indian private sector, with its ’price point’ baseline, will be the first to understand the potential of new technologies. However, the tendering process for implementation of new technologies in the energy efficiency, water and waste sector is handled by the public sec- tor and its line agencies. Despite the fact that policies stipulate the importance of concepts such as life cycle cost, many tenders today, put out by the government, still focus on initial cost assessments. As a result, new technologies, whose core advantage is long-term cost savings will not be competitive in the market. For this reason, it becomes important to engage with the relevant public sector agency prior to the point of tendering. This can be done most effectively ‘up stream’ of technology deployment and would require longer time horizons on the part of the supplier. This ‘up-stream’ engagement should be seen as a potentially valuable way of developing market confidence for longer term results.
Proof of concept, financial viability, and information transparency are all components that can go a long way to reducing transaction time between actors and project development.
Currently, apart from Absolicon, none of the Innovation companies selected have devel- oped proof of concept ‘in-country’. This will add to the time taken from initial discussions to project deployment.
Agencies such as the Indian Renewable Energy Development Agency (IREDA) have been in place for over 30 years and facilitate disbursement of much of the financing linked to policy priorities, and most recently as part of the government’s push on market-based pol- icy. It is not surprising that, although IREDA has been given a central role in facilitating finance options to catalyse the renewable energy market, the capacity to do so is limited by
32 Interview with Arvind Chopra, IPR Desk, EBTC, Delhi
experience. Expanding the awareness of public stakeholders and showcasing alternative technologies and techniques will be an important first step in engagement with India in the energy efficiency and renewable energy space.
The Swedish Energy Agency’s role as facilitator, both in ISIP Phase I and in waste-to-en- ergy development, is a clear example of how many of the potential risks faced by small and medium-size technology companies can be mitigated, to allow sustainable focused discussion between partners with an effective facilitator. The facilitator takes up initial and early stage contact and communication with the interested partner. The facilitator acts as a nodal contact for technology-related and operational queries and provides real-time en- gagement when the company cannot. As in the Delhi biogas project, which aims to have the first biogas for vehicle fuel demonstration in India, the facilitator has been responsible for ensuring on-going confidence by all shareholders through clear and consistent brand- ing, technical packaging, and business model development.
4.3 The role of policy; Indian innovation development and the value of policy as a market trigger
Perhaps the most valuable feedback from the first phase of the ISIP, building on the previ- ous experiences of the Swedish Energy Agency and the case study work developed on solar energy and energy efficiency33, is the role of policy as a trigger for the development of new market areas and technology. Policies act as clear road markers for investment and deployment decisions. In the case of the Delhi biogas project, positive market potential has led to bottom-up and evidence-based policy discussions on a potential subsidy structure for Compressed Biogas (CBG). This is a longer-term process than would have been the case if project discussions were framed, in the initial stages, by an existing policy framework and related incentive packages.
Feeding into an existing policy framework will reduce the time taken from first stage dis- cussion to final project deployment. The shortlisted companies in ISIP Phase I can make use of the policies developed under the National Action Plan for Climate Change 2008 and other related market-friendly policies as an entry framework for engagement with Indian partners. Of specific relevance would be the National Solar Mission that will in its second phase provide attractive incentives for Concentrated Solar Power (CSP) technology such as that provided by Absolicon. With its focus on clean energy and energy efficiency, the NMEEE will provide another valuable point of strategic integration for companies like OpCon and Nlab Solar.
33 Growth Analysis WP/PM 2013:02, Innovation in Indian Energy Policy: Case studies on solar energy and energy efficiency technology deployment (forthcoming)
5 Conclusion and Implications for Swedish Policy
Innovation partnerships offer a potential for mutual benefit for countries like Sweden on the one hand and India on the other. The challenge of sustaining high enough growth rates in emerging economies requires new thinking and new doing – international collaboration can be a crucial factor in achieving this. For industrialized countries the growing econo- mies in Asia, South America and Africa represent a vast market potential, but in order to fully realize this potential, some modified approaches will probably have to be adopted. By analysing a practical experience of innovation partnership, this report shows that there are in fact ways to find common ground and that each party would benefit from more openness and in-depth collaboration throughout the innovation value chain.
From the perspective of facilitating technology innovation matchmaking, the key elements for consideration are elaborated in the table below.
Table 5-1 Main conclusions and suggested points for the way forward
Finding Way Forward
Outreach/Knowledge diffusion for
confidence-building
Objective: Reduce initial hesitation on the part of innovation companies and decrease time between discussion and deployment Modality: Webinars/web portal/real-time exchange of information Neutral knowledge facilitator as nodal point for both India and Sweden Technology packaging
for ease of exchange and understanding
Objective: Decrease transaction time between supplier and investor Modality: Disseminate technology potential within a 3-dimensional understanding of context around investor, including potentially viable policies and business models
Spatial challenge Local presence for ongoing relationship development
Objective: Confidence building to showcase ownership of innovation company and presence in country
Modality: For the facilitation phase, local neutral partner to be contact point for interested investors
Filter partners for maximum return
Objective: Diversification of ISIP partners to increase returns/reduce risk
Modality: Look to increase partnership opportunities within existing frameworks
In this case, in addition to the MNRE, investigate potential of the Department of Science and Technology (DST) and other like-minded agencies that have frameworks for joint programmes
Successful facilitation will bring the discussion to the point of ‘in country’ demonstration.
A demonstration project is potentially the first major achievement for new technologies and actors coming into the Indian market. Government agencies understand the value of the demonstration project for both the technology provider and the client. For this reason, especially where there is a government agency on the side of the technology provider, there are multiple fast track options for establishing a demonstration site. Once the demon-
stration site and the business model have proven to be sustainable, clients will have the option to put that on an open bid for competitive applications. However, the provider that has been able to secure the demonstration model clearly has ‘first-mover’ advantage.
When looking to find spaces for the most effective leveraging of programme results such as ISIP, governments should consider the actions that pre-empt the opportunity to put demonstration sites in place. These actions could include feasibility studies that help show- case the technology, sharing of potential business models indicating revenue generation and returns on investment, or indeed first person study trips, all of which help individuals understand the technology in practice and the technology providers.
ISIP Phase I has started a process that has focused on initial matchmaking. Continued work with the shortlisted companies will need to undergo the confidence-building steps re- viewed above. These would include bridging the challenge of distance, developing confi- dence in the product through strong technology packaging, and, most critically, conducting due diligence such that partners understand and share project objectives.
Proof of concept for all interested parties will go a long way to push business discussions.
In order for effective business discussions to be undertaken, neutral facilitators and local representatives will need to be in place to ensure no loss of traction.
ISIP Phase I has taken strong steps towards its objective of innovation matchmaking and reduced the transaction costs of international engagement, which would otherwise have been faced by the 4 companies selected. The buy-in by the Indian government, most nota- bly the Ministry of New and Renewable Energy at the ISIP Launch during Sweden India Nobel Memorial Week 2012, has ensured that the initiative is visibly anchored at the high- est level. Experiences from stakeholders and the Swedish Energy Agency indicate that there is still more work to be done to take the discussions forward to concrete project de- ployment. It is likely that in order for the companies selected to continue early stage con- tact with India, and primarily because of their limited resources, they will continue to rely on the ISIP framework and the support of the facilitator.
Given the relevance of the technology discussions within India’s larger growth ambition and low-carbon mind-set, as well as the synergy between technology solutions and existing market-friendly policy frameworks, there is every reason to expect that the strong positive potential for international collaboration will continue.
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