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The energy and natural resources sector has experienced significant growth and transformation in the past few years. A pivotal factor in this upswing is the global shift towards renewable energy and environmental sustainability. Driven by growing concerns about climate change, the evolution of electric vehicles, technological innovations in smart grids, energy storage solutions, solar panel efficiency, and the expanding applications of green hydrogen in various industries, clean tech is no longer a niche sector. For many investors, investing in cleantech is not only a chance to fetch attractive returns but also a way to contribute towards a sustainable environment. Nations worldwide are leaning towards sustainability and implementing policies to support cleantech development, such as subsidies, tax breaks, and carbon pricing.
The drivers of cleantech adoption are strong, and investors have recognised the sector's potential. As the awareness of climate change grows, the need to switch to cleaner energy sources is becoming more urgent, leading to increased investments in cleantech companies. After a drop in values in 2022, the sector showed resilience and recovery in deal activity, with a rise from USD 2.7 billion in 2022 to USD 6.1 billion in 2023, doubling in number of investments. With just one month into 2024, the sector has already witnessed three deals valuing USD 207 million. Solar energy accounts for a significant portion of the deal activity in the sector and shows promising signs of continued growth. Despite annual fluctuations, there is an overall upward trend in the volume and value of deals from 2019 to 2023, signaling a positive outlook for the future.
Source: Grant Thornton Bharat Deal Tracker
Changes in policies and continuous government support have positioned the sector as an attractive investment destination. The shift towards solar, wind, electric vehicles, and hydro is expected to accelerate in the coming years, driving advancements and funding to make cleantech solutions more affordable and efficient. Simultaneously, Environmental, Social, and Governance (ESG) investing is gaining momentum, driven by increased awareness, regulations, market performance, and a wider array of investment options. India's cleantech industry presents a promising future for PE and M&A activity, with expectations of a significant number of deals and foreign direct investments. The broader goal of achieving carbon neutrality by 2070 may lead to future investments in new and emerging cleantech like green ammonia, Energy storage, and biofuels.
Recent initiatives in the Indian government's Budget for 2024, 'Pradhanmantri Surydaya Yojana' to generate electricity through solar power for one crore houses, viability Gap funding for harnessing India's offshore wind energy, allocation of INR 19,744 crores to the National green hydrogen mission, setting up a 100 metric tonne coal gasification and liquefaction capacity by 2030 and introducing a new scheme called Bio-manufacturing and Bio-foundry are all the big boost to the sector Overall, this interim budget offered encouraging signals for the sector, but everyone is waiting to see if these initiatives will truly take shape as the year unfolds.