This podcast is a recorded version of Avaana Climate Corner's fireside chat with Rajat Gupta on India's Road to Net Zero. The podcast will cover the viability of India's target of Net Zero by 2070, the growth of renewables, particularly solar, in India, and mitigating emissions in hard-to-abate industries such as steel. It will also touch upon the white spaces and gaps where startups can innovate and create meaningful impact, providing key insights into opportunities for growth. The transcript of the episode can be accessed here:- https://avaana.simplecast.com/episodes/indias-road-to-net-zero
[00:00:00] Swapna Gupta: The idea is for everyone who is interested and excited about building in climate to hear from folks who have already been there, done that, and you are an old hat at McKinsey and now you're a senior partner, you've been 30 plus years with the firm building around sustainability.
[00:00:14] Swapna Gupta: So for our audience, Rajat leads the energy and material sector at the firm, as well as the sustainability practice. You also set up India's national solar missile mission. I correct that, there is attribution, helped set up. Of course from last year, when the firm and you put out decarbonizing India and a pathway for sustainable growth, it's already been six months. A lot has happened in the country. We as Avaana are seeing a lot of things happening on the ground in terms of technology startup building for climate and sustainability.
[00:00:45] Swapna Gupta: So the idea for today's conversation was just to talk further and double click and peel the layers to understand what's really happening, is enough happening, and what needs to happen to get to that mythical or real goal of 2070, whatever way we would like to put it. So that's where we'll get started Rajat and most of the audience today are founders, mostly for building in the climate space in the country, are researchers, academicians who are very passionate about climate and are thinking about various sectors within climate and what to build for. So I'll get started and start shooting questions straight off. I think the first is really 2070? What's your view on 2070? Should it be 2050? Should it be 2090? Where are we on our journey to 2070? And how do we get there?
[00:01:35] Rajat Gupta: So look, I think a few things that come to my mind on this question of 2070. I think the first thing is the, what matters is that there's a bookend, right? And by the way, whether we get to net zero or 2070 or not, who knows, there's 50 years away.
[00:01:50] Rajat Gupta: I'll be dead for sure by then. Younger people on this call will still be around. So who knows, right? But the fact that there is a bookend gives us something to work towards. In the absence of that bookend, which was announced, when was it, about a year and a half ago? In the absence of that bookend, there was just, there wasn't a pain point to work with.
[00:02:09] Rajat Gupta: So I think what is important is that. Now, look, if you look at our report, we have a scenario, which we call the line of sight scenario, where we tried to say, look, what are the elements of getting to net zero by 2070? We don't get to that 2070. It's not like the world may get to, India may get to net zero by 2070, but we just couldn't see it.
[00:02:31] Rajat Gupta: It's obviously 50 years out. So at one level, it doesn't matter. Whether the date was 65 or 70 or 75, it doesn't matter. The fact that there is a date, I think, concentrates our minds. Now, it clearly cannot be 2050, right? Because... In the world of common but differentiated responsibilities where India has a lot of India to build and hasn't been responsible for a lot of the stock of carbon and methane that's up there, it's only appropriate that it not be 2050.
[00:03:00] Rajat Gupta: Beyond that, it's good. It's out there. And what it does is it actually hopefully gets us moving on a few things.
[00:03:07] Swapna Gupta: So I think that's a fair point. I think 2050 is good for the Europe and US to follow. I think we should stick to our 2070 and frankly gives us a goal post, which is great. I think the key question is, how will India's low carbon development journey look different from the rest of the world?
[00:03:24] Swapna Gupta: We constantly get questioned around this, right? There is a path which the West follows, which is more mitigation. I think for us, it's more mitigation, adaptation, resilience. In your view, how does this all align with country's target? How are you seeing that sort of?
[00:03:38] Rajat Gupta: I'm not even going to go to adaptation yet.Obviously, that's a very important topic by itself. But I'm just going to say that on the mitigation aspect itself, there is a huge difference between us and let's say, certainly Europe, to some large extent, the U. S. And so if you take the G7, for example, and many other parts of the world, we are going to be different.
[00:04:00] Rajat Gupta: We're going to be different because 75 percent of India of 2050 hasn't been built yet, right? So we're going to need 7, 8 times the number of steel plants that we have today. We're going to need 3x the amount of cement, number of cement plants that we have today. We're going to have many more roads.
[00:04:18] Rajat Gupta: We're going to have 5x, 6x as many cars on the street as we today have. We're going to need that many more bridges and so on. So this goes sector after sector. We're going to need much more. And so therefore Europe's not in that position. So they haven't built a new steel plant in 20, 30 years, they have just been rebuilding what's there.
[00:04:41] Rajat Gupta: So I think that's different. And what does that do? That gives us the opportunity for us to build wrong or build right. If we build wrong, then at some point of time, we're fighting the world and polluting the environment and leaving behind more legacy carbon. Or we could be, "Hey, we built India right!"
[00:04:59] Rajat Gupta: In some ways, China is building China right. Not, I shouldn't say that because obviously in, the case of coal mines and steel and others, China has built China wrong, if I may say in quotes. But if you look at, for example, last year, 27 percent of the cars sold in China were electric, right?
[00:05:22] Rajat Gupta: So China's moving very quickly on clean technologies. So we have an opportunity in front of us. We are 15 years behind, 20 years behind where China is today, right? And we're going to add capacities in these areas. Again, whatever has to be done for this decade is broadly done. We can tweak it a little bit here and there, but we can do things today.
[00:05:44] Rajat Gupta: As far as regulation is concerned, as far as technology absorption is concerned, as far as investments are concerned we can do things today so that the next decade and the next decade we build India right.
[00:05:55] Swapna Gupta: Absolutely. And that's what we've seen in the startup world. We're seeing amazing examples of how you're thinking about building for the next 30, 40 years and building smart versus how it was built in the past.
[00:06:10] Swapna Gupta: Thinking about sustainable journey and renewables and how they will play a key role given you were also part of this when you helped set up the solar mission, how do you see the part renewables will play? Of course, it's cheaper now to deploy solar. Solar has become more understandable. But how do you see general renewables play a role and especially solar in this journey?
[00:06:32] Rajat Gupta: I think maybe a good place to start is a bit of the journey, right? And we often forget the journey. I remember when we were helping Mr. Sarang, set up the solar mission, this is in 2010 or thereabouts. The solar power was 15, 16, 17 rupees. And the only use case for solar power that was economic was substitution of diesel generation, predominantly in telecom towers, and which is where also, by the way, some of our companies originated; the current large renewables companies originated in some of that.
[00:07:06] Rajat Gupta: So that's where we started and a whole host of things happened. Of course, perhaps the most important driver was the fact that China expanded solar equipment capacities, modules, cells, capacities dramatically. The costs of those dropped, the prices dropped. I think India did a smart thing at that point of time, through the solar mission, setting up a method by which there was continuous price discovery and that power that was bought at 13 rupees, then 11 rupees, then 9 rupees, progressively lowering costs as generated when it was bought, was then blended with other power that was available. So the overall power costs went up by a few paces and was therefore not visible in a sense. The cross subsidy wasn't visible, which allowed them for industry to come up on the one side, and then the government put other institutional mechanisms like the second to make it happen.
[00:08:07] Rajat Gupta: So the same method was then used by many states, by the wind on the wind side, and that led to basically us adding 9 10 gigawatts of capacity a year and now having set the aspiration to add 50 gigawatts a year. And in fact, not just the aspiration, but the MNRE wants to put bids out for 50 gigawatts a year, which is amazing. Just to put this in context, even the US added in something in the range of 25, 30 gigawatts.
[00:08:37] Swapna Gupta: And I remember reading in your report that is the only way to get there, put out 50-60 gigawatts every year out there.
[00:08:44] Rajat Gupta: Yeah. So that's the path we have to go on. And ,then when we go down that path, this is an infirm source of power. So we have to form that power. And so how do we form and what kinds of stories will come to play?
[00:08:54] Rajat Gupta: What role will pumped hydro play to firm up that power? How will demand management work? What kind of transmission that we have to add so that you know if power has been generated here and being used in here in different part of the country, this can be appropriately done. So the whole host of challenges right and if you look at it, the investment and by the way, we made very little assumptions on nuclear in our report, though I do believe that should be a part of the solution and a substantial part of the solution, 50 or 60 percent of the total investment is not in generation. It's in transmission and distribution and in stabilization of the grid. So I think that's the path that we will have to go towards.
[00:09:36] Swapna Gupta: And maybe further delving deeper. What is the role of startups? What kind of startups you are seeing emerging?
[00:09:42] Swapna Gupta: For example, we have invested in a rooftop solar play called Aerem because we saw rooftop is a place where solar could be organized, we could do something. Are you seeing something? Is there anything for our startups here where they could think about ideas to go work in?
[00:09:56] Rajat Gupta: Yeah, maybe let me start with the generic and the conceptual here, to say that look, this is a very different revolution from the digital.
[00:10:04] Rajat Gupta: The digital revolution was millions, tens of millions, maybe hundreds of millions in terms of investment. This starts at billions and ends up at trillions. So in the previous revolution, which we've seen in our working lifetimes, I think the startups had a very core and central role to play. Here, the startups will have to figure out what is their core and central role.
[00:10:30] Rajat Gupta: So I certainly see two roles. I see the role of stimulating technology development and bringing that technology to market. And then, of course, some of those technologies with scale and, but the scale money, billions that have to get invested behind electrolysis, will have to come from somewhere else. They will not come from startups. They will not come from venture capital. They will not come probably from PE unless PE is expanded by 10x, 100x. Which they may, by the way, the industry may also reshape itself. So I think that's one sets of things that startups will do. The other sets of things that startups will do is provide the little bit of the nuts and bolts of the big machinery, right?
[00:11:11] Rajat Gupta: So some elements of software, some components, some widgets that kind of fit into this broad frame. This is how I think about it. And by the way, the previous revolution, I personally invested in several colleagues of mine who were leaving McKinsey to do these startups in the digital world.
[00:11:28] Rajat Gupta: I see much less of that possibly in this. So I think this is something to figure out for startups, right? The areas are immense, right? So if there's going to be a huge electrolyzer revolution, if there's going to be a huge battery revolution, there's going to be little bits and pieces of materials. But there's also going to be software, battery management systems, electrolyzer management systems.
[00:11:46] Swapna Gupta: Where are the gaps where you as a startup can create some impact? So switching gears from renewables or energy to the other piece I remember reading in your report, there were four key sectors you really pointed out: green hydrogen, there was nature based solution. I forget the other one, I think there was one around circular materials. Has that view changed? Are you seeing or adding or deleting anything there? And what is India Incorporated doing in some of these areas? What are the things we can learn or take leave from on the innovation curve?
[00:12:16] Rajat Gupta: No, I don't think the areas are going to change because we know what generates carbon and we know what abates carbon. Of course, maybe in a 10 year period views will shift. Like for example, I'll give you an example of what we got wrong in the solar mission helping with that. But luckily the government also set up a very good mechanism to be agile. We said first time when we put things down, we said, oh, 20 gigawatts by 2020 sounds like a good aspiration 2020 20. But then somebody said, "oh, 20 gigawatts, we're at 15 megawatts total for solar capacity". So we said, okay, fine let's make it 20 gigawatts by 2022. It still sounds nice. Anyway, that's just an aside, but we had that point of time set 50/50 as far as CSP and photovoltaic was concerned, but it was the mission was put in small pieces.
[00:13:08] Rajat Gupta: So there was a phase one within that phase one A, phase one B. And then as price discovery happened and costs went down for PV, but did not go down for CSP, a lot of the investment shifted and attention shifted to PV. Nobody talks about CSP. 90 percent of people don't probably even know today what CSP stands for.
[00:13:29] Rajat Gupta: But then in 2010, it was as competing a technology. So I think the point I'm making here is this is going to be an uncertain world. We don't know which technologies will succeed, breakthrough, and move forward. So I think for governments to be agile and to be able to accommodate shifts as they come, for us to learn as we move forward is going to be critically important.
[00:13:56] Rajat Gupta: And I think startups have no trouble with that, being agile, so there's no lesson to be learned here for startups. But for the ecosystem to have the right sets of lessons is very important. And there are many things that are happening that we learn from, right? For example, one of the things we look at in our report is that there's an implicit carbon tax. If you account for the excess taxation on transportation fuels in India, implicit carbon tax of 140 to 240 dollars a ton, which is a lot. EU ETS emission trading scheme is at 80 to 100 dollars a ton today, and it used to be at 20.
[00:14:29] Rajat Gupta: Yeah. So think about it that in that context, we have 140- 240 dollars a ton. What does that mean? That means that battery based makers are going to fly off the shelf. If somebody can make them and if somebody can make them without there being fires. And light side what I mean is right sets of products can come out, charging infrastructure can be made available. The upfront costs, which are high can deflate in some appropriate financing manner and so on. So I think there will be these pockets where there'll be tailwinds of some sort. In this case caused by unintended regulation or unintended finance raising from the government for the right sets of things, for food subsidies for education for health and so on, or explicit things like the 50 gigawatt push for renewables, right?
[00:15:18] Rajat Gupta: That happens, maybe there'll be a large solar module industry, module and cell industry, an ingot industry, wafer industry that will come into place. And so as that happens there'll be shifts that will occur. We can become a global supplier for this. We can be China plus one on some of those things. So there will be opportunities that will open up as things move.
[00:15:39] Swapna Gupta: Yeah. And I think this budget, I think, honestly, we heard green so many times. So there is that regulatory policy push towards this capital is being deployed. And that is one part. I think the other part of the puzzle is really in the India Incorporated. So when we look at it from our lens we say sustainability is the next digital. How India incorporated innovated on digital, and I guess those who did not and were found sleeping at the wheel had to perish eventually. I think we are at a similar point. We feel that corporates need to adopt sustainability in every part and parcel of their work. So given you talk, this is your bread and butter, right? You talk to every large industry, every large enterprise corporate out there.
[00:16:18] Swapna Gupta: What are you seeing? What is pushing them? How are they thinking about in house versus out, outsource innovation around sustainability? And how serious are they? Or are we still maybe 5-10 years behind the curve?
[00:16:31] Rajat Gupta: It varies by company, but if I think about the stages of thinking, their first stage is compliance. You know I have to report X, Y, and Z. Or I have a CSR report or a sustainability report in which I have to talk about this and that and the other. I think that's the first stage. It's a very early stage. I would say pretty much all companies are thinking that boards ask questions and so on.
[00:16:57] Rajat Gupta: I think the other side of it is where people are reinventing themselves completely and saying, I'm going to sell this business and I'm going to buy a new business or create a completely new business in a different area and I'm going to use cash flows from my core business to invest in a different direction.
[00:17:13] Rajat Gupta: And there's every flavor of this. I think the ones that are, some are looking at this as a huge opportunity. I am an incumbent, big incumbents in industry X, automotive for example. Can I use this as an opportunity to look around the corner and create a large position here, which I missed in the previous generation when this industry was created in India in the 90s, 80s and 90s, right?
[00:17:38] Rajat Gupta: So I missed that opportunity. Can I grab it at this point? So I think there's a full range of thinkers. The way I see my job is to inspire leaders to move from the left to the right, from compliance, thinking to saying, look, this is going to be the largest capital investment revolution or capital reallocation. Certainly in our business, my business lifetime, and perhaps in the last 70 years post World War Two, but potentially after industrial revolution, in terms of the magnitude of capex shift that will happen and the capital investment that has to occur.
[00:18:14] Rajat Gupta: All of these are more capital intensive than the capex plus opex type industries, power plants, et cetera. And so this idea of let's build new businesses is something that everybody has to be thinking about, in the relevant sectors. It's not a huge deal for IT services or within the bank's own workings. It is very important for banks lending, corporate lending, particularly a business and project lending. It impacts most sectors that comprise 30 percent of the world's GDP. It doesn't impact everybody as much, right?
[00:18:49] Rajat Gupta: It's not a top five issue, for example, for IT services. On the other hand, for some large emitters, this is a top one issue.
[00:18:58] Swapna Gupta: Absolutely, hard to abate industries. We need to think hard. So another question in there, and I think you are, you're doing most of the hard work for us so that's a great thing. Please continue the good work. Tell them that they need to do it today versus tomorrow. But I think the other question, is the other place where I and we as a firm are seeing corporates becoming more sustainable, other than compliance, is their supply chains. Or industrial automation where I think it started from industrial IOT and moved to industry 4.0 and today's industry 5. 0, where they're saying, how can we make it resilient, sustainable and digitized, right? It's more, it's also thinking about sustainability versus just digitization. A lot of it I'm seeing already in the West. I want to hear your view on what's happening in India. What are you seeing around Industry 5.0, putting the climate lens in there in every industry?
[00:19:49] Rajat Gupta: I think my answer is very similar to what I said, already in the previous one.
[00:19:54] Swapna Gupta: No, but specific examples, right? For example, if I think of a packaging industry .Consumer while is using a product, maybe consumer is thinking, do I need to use this plastic bottle every day?
[00:20:04] Swapna Gupta: Some of these have more urgent need versus the others and similarly what COVID showed us that supply chains are not resilient and they can be vulnerable, but also they need to be made resilient for the new world order where they need to be more efficient, less climate impact, and everyone is thinking.
[00:20:19] Swapna Gupta: Those are the two or three areas where I feel there is that immediate need to think about future. In there, what are you seeing in terms of adoption versus compliance?
[00:20:26] Rajat Gupta: So look, again, and just to elaborate a little bit more in the range of compliance to complete portfolio shifts or creation of new businesses.
[00:20:34] Rajat Gupta: In between also, there is the step of decarbonizing my own operations, right? And I think a lot of companies are thinking about it, but they're also recognizing that most of the decarbonization, some of the new business build may not be in the money today. So for example, setting up a renewables company, renewables project can, and often is in the money. While on the other hand setting up a hydrogen facility and selling hydrogen on the open market, if there is one, is not in the money. There you need bilateral deals, somebody to pay for your high cost hydrogen like we did in the case of solar power 13 years ago . So I think the conversation here again varies widely, right?
[00:21:23] Rajat Gupta: And it's very specific by sector on what is the opportunity, where is real money to be made, or to be lost if there is a downside. And maybe one other point I'll make, and we can come back to discuss it a little bit further out, is the multiples are shifting for some of these hard to abate sectors, or not hard to abate, high emitting sectors, let me say.
[00:21:45] Rajat Gupta: The multiples between the companies that are moving fast versus not are 3x different.
[00:21:50] Swapna Gupta: Maybe anecdotally, so I will put you on a spot here, maybe Rajat. Cement industry, when you talk to them, what are you seeing there? Steel industry, right? Each of these industry, because the idea of this is there something which you know there is a pain point and tomorrow five startups could build in that space and create value.
[00:22:07] Rajat Gupta: In both these sectors companies are struggling because these are hard to abate sectors and yet they have no choice but to add capacity because the capacity is needed today, tomorrow, yesterday. And the options for abatement either don't exist or they're very expensive. And that said, therefore they're not in the money.
[00:22:27] Rajat Gupta: Take cement, for example, biomass. If they set up to use biomass in their plants their worry is that I'll buy up all the biomass within a hundred kilometers of where I am and next year it'll be too expensive. Much more so than coal, which my alternative, which gets substituted. So setting up supply chains for this, which keep the costs low and potentially keep the prices low for the cement sector, for the industry that's buying it and sets up the supply chain, is an idea.
[00:22:57] Rajat Gupta: And then there are a whole host of esoteric ideas within the cement chain. For example, are there alternate materials that can be blended into the cement which lead to the same outcomes? And so people are looking for those materials. The obvious ones are fly ash and cement and steel slag, which, on which action is already happening.
[00:23:15] Rajat Gupta: But, it's not 100%. Can you move on that and make that happen? Maybe the big companies will make that happen, not the startups. New materials that the startups can blend into these cements, if there's technologies that are out, there that could be one. So I think there's a whole bunch of things there in the steel side.
[00:23:31] Rajat Gupta: In some of the large furnaces, can you blend new materials? Recently, there was a newspaper article where Tata Steel talked about the fact that they had used hydrogen in their blast furnaces and done a large experiment, use hydrogen and it should be successful, and many of you may have read it.
[00:23:50] Rajat Gupta: So helping companies perform experiments of that nature, because, this is, you're taking current equipment and abating carbon within that. Again, something like this, my question would always be the cost of hydrogen. Is this economic or not? And then thinking about what can you do to make it economic?
[00:24:08] Rajat Gupta: Some of it may not be possible without the appropriate regulation or blending mandates. So I think there are ideas everywhere. There are problems to be solved everywhere.
[00:24:20] Swapna Gupta: So both input and output, like you said is where innovation will happen in this industry. Just to put a bug in the ear, in some sense, what we see, say with an HUL or ITC or Marico or PNG, FMCG sectors which are consumer centric and consumer first, we're seeing a lot of these innovation cells which are being put together.
[00:24:37] Swapna Gupta: Let me experiment with the new range of products for the tomorrow's consumer who is thinking climate and sustainability. Are you seeing this innovation cells, innovation parks being set up out of some of these emitting industries where startups can leverage or is there something we can do there to ensure that there is more adoption on the newer technologies, more research and development happen there?
[00:25:00] Rajat Gupta: Okay, let me give you an orthogonal answer to this. I am not much of a believer that the consumer will pay a small proportion, but in substance, the consumer will pay for this. The fact of the matter, I think, is that this is going to be somewhat inflationary. Costs are going to go up, prices therefore have to go up.
[00:25:17] Rajat Gupta: And the way this revolution will come about, is at the B2B interface. What I mean by that is that a carmaker, either by virtue of consumer push, or by virtue of regulator push, or by virtue of financier push, will set a target and say, I want 30 percent recycled material in my car by 2027, X day.
[00:25:41] Rajat Gupta: And when enough carmakers do that, then they go run around and look for that recycled material, either plastic or steel or glass or whatever it may be, right, that the car uses and the car maker uses to build a car. And when there are shortages of those recycled materials, the prices of those recycled materials go up.
[00:26:00] Rajat Gupta: So to me, the way this will get paid for is going to be through the B2B route and not the B2C route, at least at scale. And this may be just because I'm an industrial guy, not a consumer guy, but this is my view.
[00:26:12] Swapna Gupta: And that's true, right, this is the paying capacity of us as a country that is top 0. 1 percent
[00:26:16] Rajat Gupta: No, I don't think it's only India. I think globally, because there'll always be segments of consumers. There'll be the woke consumers, right? At the top of the pyramid.
[00:26:24] Swapna Gupta: Which we like to call the avocado segment.
[00:26:26] Rajat Gupta: Even in the US and Europe, right? There will be those. So this is not going to be, by the way, the consumers will, the way they will drive this revolution is that they will vote in a certain way, and those regulators will then push the company. That's the way the consumer, in my view, will drive this, where it's going to be a B2B revolution.
[00:26:48] Rajat Gupta: Just in terms of making it economic. And to ensure the prices rise to take into account the additional costs that have to be incurred. And by the way, in this process, we will also have to make sure that if that inflation, and to the extent costs decline great, right, renewables is one example.
[00:27:05] Rajat Gupta: Partly also because, there are some hidden costs to the renewable, which our grid is carrying today, right? So some of these things are not completely transparent either, but it will be that as it may. Costs will decline, but this still, in part, still be inflationary, somewhat inflationary. And so therefore we also have to have mechanisms to take care of the poor.
[00:27:24] Swapna Gupta: And that's a fair point. I think B2B is the way to ensure mass adoption. And like you said, it starts with a regulatory push and then everyone plays ball in some sense. We saw this with EV, right? Today, EV is a function of how the country saw a lot of support in terms of subsidies, et cetera.
[00:27:41] Rajat Gupta: I don't believe it's fame that got EVs going now. After having done my report, it's really the 140 due to 40 dollars, which has gotten it going
[00:27:50] Swapna Gupta: That's the other way to look at it.
[00:27:51] Rajat Gupta: Which is also a regulatory thing, right? So it's something that the government unintentionally has been doing because money had to be raised or financing had to be raised for whatever else the country needs to spend on.
[00:28:04] Swapna Gupta: I think that's the question we have been pondering is we saw solar, we saw EV, a lot of it was a function of many parties and you sit at this great cusp of regulatory and say you see industry bodies and everyone working together.
[00:28:19] Swapna Gupta: What are the other areas where, if we see regulatory intervention, I guess our path to, it's never easy, but our path to 2070 journey will look easy or more doable. What are the other areas where you think regulatory intervention needs to come in?
[00:28:35] Rajat Gupta: I think the regulatory load is very heavy. I think we need regulatory intervention in every area, right? So hydrogen needs blending mandate.
[00:28:44] Swapna Gupta: I would like you to double click because again, the idea is to incept some of this in a startup's mind that this might be coming your way and you need to start thinking ahead.
[00:28:53] Rajat Gupta: So steel needs if you want to do more recycled based steel you need cheaper power. That needs regulation of a different. Hydrogen, as I said, needs blending mandate to come into place, right? So some supply side subsidies, et cetera, have been announced under the mission, but it needs a aggregator of demand who's able to, like in the case of solar that I talked about earlier, it needs to be an aggregator of demand so that it can be blended and the overall cost increase is not huge.
[00:29:19] Rajat Gupta: So there's you can say this is a regulatory action. I think it is a regulatory action. I'm not quite sure if you can do it by itself. So they can try. Likewise, blending mandates on cement on a certain amount of use. And we already have, for example EPR regulations on consumer product companies, for example, with regard to packaging.
[00:29:38] Rajat Gupta: But whether those actually get implemented or not, is that question? The way they get implemented, can people sidestep and pass those by? Today, for example, some of the regulations you can fulfill relatively easily by making sure that while the plastic that you're using is here, you collect somewhere else and take care of it, right?
[00:29:53] Rajat Gupta: So I think regulation has a huge role to play across different areas. There are new products to be created for the grid. Time of day pricing, which will lead to demand management and push demand down when renewable power is less available or new products and power, which will allow for paying huge amounts of power for every kilowatt hour that's generated when the grid is unstable or about to become unstable.
[00:30:20] Rajat Gupta: And we should be willing to pay a hundred rupees a unit at that point in time. But today it's impossible. But for that, there needs to be creation of some sorts of markets, a little bit of regulation changes there so I think this regulatory load is going to be quite heavy.
[00:30:35] Swapna Gupta: And are there few areas which are say, more forward looking versus where still more work needs to be done?
[00:30:43] Swapna Gupta: So if I was a founder, and if I had a choice, first wave I should have done solar, second wave I should have done EV. And if you had to tell me what should I be focusing, maybe what are the two areas I should start building because it's coming our way.
[00:30:56] Rajat Gupta: Yeah, so if you think about power as being the first wave, second being potentially EVs and batteries and the whole chain there, a third wave could be some forms of biofuel or biomass conversion. It could be around circularity. Specifically metals, agri produce, which also links back into biomass. So I think these, this could be a third wave. I can't see the money making thing there as much. There are some companies, can you make money or not? But I suppose startups take that risk of entering early and finding ways of making money on these things. But these are the areas that I see upcoming. Natural climate solutions.
[00:31:33] Swapna Gupta: Yeah, and actually, that's the other area I would love for you to double click and just share more as to what you are hearing, seeing. So again, repeating myself, the idea is to incept some ideas for people to think about, 'hey, go build in this space, maybe this is huge, you haven't thought about it'.
[00:31:50] Swapna Gupta: And you might fail, which is okay, because as a startup, I think the chances are that you're taking that risk and it might give you reward. In nature based climate solutions, what have you seen?
[00:32:01] Rajat Gupta: I think the agri chain very difficult to find. It's not just nature based, but basically let's say for the plays around carbon credits. So projects around agri, projects around community, projects around forestry. I don't know how one would do it because a lot of that is highly regulated also in India. Okay. I think all of those are valid areas because with what happened at COP, with the Article 6, those markets are seeming to get revived. Now, there's been a short term push on those markets but this is also an area where startups have probably an easier role to play, because if you think about the total investment that will go into which, as I said, adds up to trillions, the investment in this area is small. It's more skill intensive. It's more, maybe in some cases, technology intensive. So this is an area where startups perhaps have a more natural role to play than at the get go.
[00:32:55] Swapna Gupta: I think there we are seeing a lot of startups. You're also seeing the flip flop that one day you are able to sell it to the world, one day you're not able to sell it to the world. So I think it's all a journey. But I think again, the question is the quality, the accountability, the traceability of this credits, right? How do you ensure that what you have is like sacrosanct and I think startups are thinking ahead on that, hopefully we'll see some large outcomes.
[00:46:18] Swapna Gupta: Rajat, as always, thanks for the insights and nuggets. And hopefully we'll see two or three good founders come out of this with the ideas you have thrown out and the nuggets you've shared on what really is coming our way, what should we be building for, how do we really get to 2070? I think the answer that all of us are looking for is what can we do better to get to 2070.
[00:46:38] Rajat Gupta: Wonderful. Thank you. And thank you so much for inviting me. Fun talking to you and all the best to all of you founders and make something big happen.