On 11th September, I attended the USAID-India and BEE’s workshop on Capacity Building for Financing Energy Efficiency Projects in Mumbai.
The workshop did prove to be an eye-opener in terms of on-ground realities in India’s energy efficiency market.
Mr.Gaur, GM [EE], Small Industries Development Bank of India and Mr.Jaisingh Dhumal, Chief General Manager, ICICI Bank spoke on the kind of energy efficiency projects their banks had supported in India. These banks have a focused department and understanding of the energy efficiency concept and have managed to come up with innovative financial solutions to address the needs of the Indian market.
Not surprising because…
According to the World Bank Study, the estimated potential of energy efficiency in India is ~50 billion kWh, with investment potential of INR 140 billion.
Some of the more focused sectors within the Indian economy are:
2. Municipal Pumping
3. Commercial Buildings
4. Street Lightning
This potential has given a boost to the Energy Services Market in India with the rise of:
1. Energy Service Companies [ESCO]
2. Energy Auditors
3. Equipment manufacturers
4. Engineering firms
5. Contract Energy Management Companies
Energy Services Agreement= ESA
Financing Agreement = FA
The Energy Service Business Models are:
1. Shared Savings— ESA between ESCO and host. ESCO finances project and receives share of actual measured cost savings.
FA is between ESCO and financial institution. ESCO finances project with equity and debt from financial institution. ESCO then pays from the % savings shared with host.
2. Guaranteed Savings — ESA is between ESCO and host. ESCO implements project and guarantees cost savings. Host pays ESCO. If savings are lower than guaranteed, ESCO pays the difference; if higher ESCO gets bonus
FA between financial institution and the host; equity from host and debt from financial institution. Host makes repayment plans from the energy savings guaranteed by ESCO.
3. Deemed Energy Savings—ESA between ESCO and host with a fixed price for services provided.
FA is signed between ESCO and financial institution. ESCO repairs loan from payments received from host for the energy management/services rendered.
4. Outsourced Energy Management —-also called Energy Supply Contracting. Agreement between ESCO and host under which ESCO takes over O&M of energy-using equipment in host facility. ESCO sells output to host at an agreed price.
ESCO is expected to invest in all equipment upgrades, repairs, etc to improve energy efficiency.
The ownership of the equipment typically remains with the host facility; however the recent times have seen ESCO assuming ownership.