While conversations on climate and energy transition are gaining traction more recently, the concept of ‘just energy transition’ reveals a complexity beyond initial appearances. It intertwines the layers of socio-economic inequities, which exist irrespective of climate change but get further accentuated due to it, with the marginalisation resulting from the existing skewed development model—an underlying driver of climate change itself. This complexity intensifies in regions undergoing energy system transformations and striving for renewable energy adoption.
The challenge is to harmonise development priorities with overarching emission reduction goals. It’s crucial to distinguish two aspects: Firstly, at the energy system level—approached on a national and global scale—progress is evident, albeit slightly delayed. However, this trajectory often becomes obscure at sub-national and regional tiers, particularly in areas like India’s coal-rich states. Whether this transition brings prosperity in the short and the long run,, is now an intensely debated topic. How do we work on solving layers of historical inequities while preparing local economies for the future of energy? How can we ensure this transition is ‘just’ for a country that must provide universal energy access while transitioning towards a greener grid for over 1.4 billion people? And while a large part of the answer lies in innovation, technology alone isn’t going to address it as the be-all and end-all. These innovations are vital not only for mitigating the environmental impacts of climate change but also for developing adaptive solutions that can protect and uplift the disadvantaged communities most adversely affected by its consequences.
While conversations on climate and energy transition are gaining traction more recently, the concept of ‘just energy transition’ reveals a complexity beyond initial appearances.
Having said that, for science and technology-based innovation to play its part, an entire orchestra is needed to play along, most of the components of which are either missing or heavily disjointed and out of sync in India as of now.
Ironically, one of the most significant barriers confronting start-ups with innovative solutions and business models is the need for comparisons and benchmarks. This paradoxically hampers the innovative mindset, often constraining the commercialisation of potentially successful solutions. In the larger gamut of innovative solutions, too, there is a heavy skew in favour of services or platform-based solutions rather than products. This preference stems from the lower risk appetite and patience of capital providers, which discourages entrepreneurial risk-taking in this space. This also ends up making some sectors, such as electric vehicles (EVs), with a quicker and more assured returns prospect, a hot favourite for investors.
While the climate sector seems to attract investor attention, a closer examination reveals a more nuanced reality. Use cases and markets such as MSMEs (Micro, Small and Medium enterprises)—more than 99 percent of which comprises micro-enterprises—accounting for about 48 percent of the total energy consumed by India’s industrial sector, are screaming from the lack of attention when it comes to innovation and funding. Deep-tech, high-risk, long-gestation areas such as energy storage and alternative materials are at risk of running out of funding once the government grants dry up. The same is the fate of solutions working towards serving the underserved; for example, 85 percent of India’s smallholder farmers. These solutions, often classified as “incremental innovation” or “social innovation” with unforeseeable markets at scale, are typically cast aside for funding, be it philanthropic grants or institutional credit.
When we started Social Alpha seven years ago, one of the objectives was to break this dichotomy of for-profit and not-for-profit and make capital of all kinds available to startups working on solving some of the most historically unsolved challenges. The allocation of funding needs to be based not solely on capital availability, but on actual necessity, relevance, feasibility and impact potential. Set up as a non-profit, Social Alpha makes both dilutive and non-dilutive capital available to early-stage startups based on recommendations after a needs assessment, impact potential, and a thorough business plan review.
Deep-tech, high-risk, long-gestation areas such as energy storage and alternative materials are at the risk of running out of funding once the government grants dry up.
It is essential to note that early-stage climate startups operating within an evolving market landscape often possess limited visibility into their cash projections. Therefore, adopting an objective yet adaptable approach to multi-year planning is crucial. To bridge the gap between investors and startups, there’s a compelling need to move beyond the mainstream investment playbook and create space for the unknown rather than relying heavily on extrapolation that may lead to disconnection. Another shift we’ve embraced as investors, and recommend to the broader community, is to expand the scope beyond mere business goals and outcomes when finalising milestones and terms of definitive documents. Inclusive growth agendas encompassing impact, workforce inclusion, and the company’s ethos hold more promise than what mere numbers might reveal.
At the heart of Social Alpha’s climate strategy is a goal targeted towards net-zero, of supporting over 100 start-ups by 2025 with a combined emission avoidance potential of more than 1 Gigaton. Simultaneously, the strategy ensures that a minimum of 35 percent of these innovations directly contribute to enhancing the climate resilience and adaptive capacities of the most vulnerable communities. This expanded climate agenda pursues two crucial paths. First, it advocates for the prioritisation of high-emission sectors and underserved user groups. Second, it underscores the importance of ensuring access (to energy, water, health, education and quality of life to all), security (of food, livelihoods, jobs), and de-risking those most likely to bear the brunt of the energy transition. Each of these solution segments requires a continuum of support from their development in the lab to their introduction in the market and eventual integration within communities. Social Alpha’s climate architecture, comprising multiple R&D labs, thematic incubators, venture accelerators, blended capital pools, and deployment engines, is an attempt in this direction. This multifaceted approach endeavours to mitigate innovation risks, stimulate demand, and foster market entry.
It advocates for the prioritisation of high-emission sectors and underserved user groups.
Science and technology innovations are indispensable in tackling the challenges posed by climate change. This imperative extends beyond achieving net-zero emissions; it also encompasses safeguarding the interests of the most vulnerable segments of society who bear the brunt of climate change despite having played no significant role in causing it. So, while the rest of the ecosystem will have to come closer and move in sync, funnelling support for start-ups from one stage to another, the innovations for tomorrow—which are ironically the innovations we needed yesterday—will also need to reimagine the needs of the growing population. This entails forging a more equitable and sustainable future in the face of this pressing global issue.
Smita Rakesh is the Vice President and is a Partner at Social Alpha.
Social Alpha architecture is built around a not-for-profit platform, Foundation for Innovation and Social Entrepreneurship (FISE) and operates through a nationwide network of technology and business incubation infrastructure, sponsored and enabled by Tata Trusts, Government of India and a number of academic, philanthropic and corporate partnerships.
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