Racold Thermo set to increase revenue from renewable energy business up to 80 percent by 2020

Nitin Sangle, business head - Renewable Energy Business at Racold Thermo

 Racold Thermo, a Pune-based manufacturer of water heating solutions, has been focusing heavily on renewable energy sector. The company has set a goal to raise its revenue from renewable energy business up to 80 percent by 2020, said Nitin Sangle, business head – Renewable Energy Business at Racold Thermo, in an interaction with Greentech Lead.

The growing solar energy market in India has a huge impact on the solar heating system market in India. There is high level of confidence among Indian consumers about solar products as ‘proof of the concept’ for many solar energy powered devices or solutions has been appropriately established, Sangle said.

The solar water heating (SWH) solutions have established its relevance for Indian consumers because of the possibility of usage across the country throughout the large part of the year owing to abundant sunlight available in the country, due to geographical positioning. Coupled with this, SWH has proven to have very favourable pay back periods ranging from 18 – 30 months for various domestic and commercial applications. These factors definitely make a very compelling situation for consumers to adopt SWH solutions in accelerated manner.

In addition to this, increased government support for renewable business, in the form of subsidies, has become a catalyst for the industry. The increased frequency of communication about the positive impact of SWH usage on reduction in CO2 emissions in the environment is also helping to generate a lot of positive word-of-mouth about it.

According to Sangle, the solar water heating industry size is approximately Rs. 500 Cr per annum and it is expected to grow at 10-12 percent CAGR over next 3-5 years period. The growth will be fueled through accelerated penetration of SWH solutions in wider geographies as well as in wider set of applications in domestic and commercial applications.

Commenting on the various government policies on solar products, Sangle said many government programs have proven to be big positive enablers for the growth of SWH usage among Indian consumers. Under the JNNSM program, the Ministry of New & Renewable Energy (MNRE) offers very attractive subsidy to consumers in order to encourage them to opt for solar products. In addition to lowering the initial investments for buyers, the government subsidy program has also helped in building the credibility for SWH solutions among consumers; it is helping the accelerated penetration of SWH among wider set of users in domestic and commercial segments.

Nitin Sangle, business head - Renewable Energy Business at Racold Thermo

The government initially offered loan to encourage solar installation but now the 30 percent subsidy (JNNSM program) offered is very effective. This is accelerating the growth of solar water heater installation.

The pull strategy used by government is:

  1. 30 percent subsidy on selling price
  2. Rebates in electricity bill is given by a few DISCOMs in the country for motivating consumers to use SWH
  3. Awareness generation programs conducted by govt. to promote SWH usage in various commercial segments in addition to the consumer homes segment
  4. Advertisements by the govt. agencies to promote products which run on solar energy

The push strategy used by the government is the mandatory installations of water heaters in buildings. The builders are supposed to install rooftop solar water heaters as a mandate before handing over the new buildings or giving occupancy to home buyers. The usage of SWH in new buildings exponentially grows if the mandatory usage is enforced effectively by the respective government bodies.

In a few states, govt. is using push strategy aggressively, e.g., Karnataka state has made it mandatory for SWH installation for every new building.

Regarding the consumption pattern of solar heating technologies, Sangle said solar water heaters are widely used in residential and commercial segments. In residential segment- individual houses and apartments– it is primarily used for bathing applications.

In various segments of commercial business like hospitals, hospitality, education (hostels) it is used to a great extent for their kitchen and laundry applications, in addition to bathing. In industry – process applications – it is used for process heating in addition to a very common application like hot water for canteens.

The commercial segments are large consumers of hot water and they consume a lot of traditional energy sources like electricity or fuel like diesel or gas which are very expensive as well as environmentally unfriendly resulting in emission of gases like CO2. There is a notable shift among commercial users wherein many of them have started showing preferences to opt for green products like solar water heaters, wherever they can integrate it in their applications.

The accrued savings in fuel bills make a very compelling case of attractive payback periods of 18-30 months for various domestic and commercial applications of SWH.

The cumulative installed SWH park (collector panel area) in India is approximately 5 million sq. meters as against around 160 million sq. meters of that of China. At comparable populations of these countries and abundance of sun energy available, it definitely makes for a possibility of compelling growth story of Indian SWH industry over next 5-10 years horizon. Today, India is among the top-10 SWH markets in the world and our SWH story seems to have just begun and there is a long way to go!

With the benefit of current subsidy offered by the Ministry of New and Renewable Energy (MNRE) under the JNNSM program, a consumer’s investment lowers by 25-30 percent. It further helps in having attractive payback periods of 18-30 months for buyers of SWH, Sangle said. “In order to achieve the critical mass of users for large scale SWH adoption, we need to offer the subsidy for another 3 years period during which subsidy can be reduced in a stepwise manner before withdrawing it completely. The timely disbursement of subsidy by the MNRE to the channel partners (manufacturers) will be essential for successful deployment of JNNSM program.”

In addition to this, government should invest in creating large scale drive for awareness generation initiatives in high visibility media to encourage people to go for SWH solutions wherever they have hot water requirement. The government also needs to play a crucial role as regulator of ensuring the penetration of ‘good / acceptable quality’ SWH solutions in India through effective policy measures which is critical to build consumer confidence on this relatively new technology products, Sangle added.

The key role of government agencies in ensuring the effective enforcement for usage of SWH in new buildings (or heavy electricity / fuel users in commercial segments like factories) will give a strong impetus of growth to SWH industry. It will also help the DISCOMs in bringing the peak load electricity demands down significantly. Possibly, solar penetration could also help improving the electrification penetration in India by allowing DISCOMs to create and use surplus of electricity to untapped areas so far. Thus, accelerated solar penetration could be a way of social improvement and empowerment for the India at large. This needs to be attempted through a joint and shared agenda of industry stakeholders as well as the cross / multi ministry task force of Indian government.

The market size for solar water heaters is approximately Rs. 500 crore and is growing at 10-12 percent CAGR per annum, Sangle said. Major markets for solar water heaters in India are Karnataka, Maharashtra, Tamil Nadu, Kerala, Andhra Pradesh and Gujarat. These six states contribute more than 70 percent to the total SWH market potential in India. In addition to the mandatory enforcements in few of these states, consumers are also willingly opting for SWH as they are aware about its positive benefits on cost saving as well as for sustainability of the planet.

Solar water heaters are widely used in residential and commercial segments. In residential segment- individual houses and apartments, are primary consumers. In commercial segment, hospitals, hospitality and education institutes (hostels) are major users of SWH systems. Manufacturing industry uses the system for process applications.

Racold has been active in Indi for more than 60 years. The company has done key installations of SWH at IIT Mumbai, Mahindra& Mahindra, Army Welfare Housing Organization (AWHO) and L’oreal, to name a few.

Commenting on the growth opportunity of Racold in India, Sangle said, “It’s very much obvious that we are really optimistic about India growth story for solar water heating business as well. We are making considerable investments in building up our capabilities on various fronts of business to lead this growth and strengthen our market position. We are investing in making our industrial set up a truly world class manufacturing facility which can possibly leverage the export potential for solar business in other continents.”

In addition to building up internal capabilities, Racold Thermo is also investing its resources in creating ecosystem of installers or applicators required to implement the SWH solutions through well-structured training programs across India.  The company’s ongoing efforts in R&D are thoroughly focused on strengthening the value propositions of our current range as well as launching innovative solar water heating solutions in India as we move ahead.

Racold offers solar water heaters with a host of innovative features like the Omega flat plate collectors, high absorption VTC tubes, sun max reflectors, Duronox inner container, etc.

In Omega flat plate collectors, the area of contact between the fins and riser is 318 degrees, drastically increasing the contact area and hence maximizing the heat transfer leading to higher efficiency.  The high absorption VTC tubes are designed at1800 mm length, in keeping with international standards, ensuring optimum energy absorption and higher efficiency.

Sun Max uses individualized V-shaped reflectors that ensure 85 per cent reflectivity of sun rays onto the tube, maximizing product efficiency. Duronox Inner Container features specially treated low carbon SS inner container with Magnesium anode ensures durability and longer life.

As part of commitment to increase renewable energy adoption in the country, Racold is continuously working towards popularizing green solutions in water heating domain which are mainly run on renewable energy or are the more energy efficient. Their products are aimed at enhancing lifestyle along with being the most energy efficient so that the appropriate concern and care for the environmental balance is balanced.

The key success factors for the company’s solar business is to improve 3 A’s — awareness, availability and affordability, Sangle said.

Awareness is largely being driven through mix of our marketing initiatives of on-ground activities and high visibility media campaigns. We also conduct continuous awareness generation initiatives for the various user segments across domestic and commercial domains.

Availability is being addressed through our geographical expansion across various tier 1 and tier 2 cities in addition to metros in India. We are looking at rural India as a big opportunity for solar penetration in the country. Our initial expansion across various classes of towns has given us confidence and learning to take it forward quickly.

The affordability of SWH for Indian consumers has significantly improved in recent times because of the technological advancements led cost reduction and the ‘government subsidy program’ which ranges between 25-30 percent based on the products. This has really helped in lowering the initial consumer investments and improving the payback periods for consumers.

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