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BEE Saves 10,259 Million Units Electricity

“During the last two years electricity savings of 10,259 million units and fuel savings equivalent to 5 million tons of oil has been achieved through various programmes. With the new programs more is likely to be achieved in the medium to long term,” says Dr. Ajay Mathur, Director General, Bureau of Energy Efficiency in an interview with Subhajit Roy.
 
The mission of Bureau of Energy Efficiency is to institutionalize energy efficiency services, enable delivery mechanisms in the country and provide leadership to energy efficiency in all sectors of the country.” Can you discuss about the energy efficiency market potential in India?
Energy efficiency assumes significance for the nation in the current environment of shortages and concerns over climate change. It is a win-win situation for all as increased energy efficiency enhances energy security while also leading to a sustainable economic growth. As energy efficiency leads to reduction in the use of energy for facility owners, there is a business model inherent in its implementation. Investments made for energy efficiency usually pay back within a period of less than 5 years while increasing energy productivity.
 
What is the most effective delivery mechanism for energy efficiency implementation?
Implementation of energy efficiency measures in any facility requires technical, financial as well as contractual skills, apart from understanding the business model that secures future cash flows. Energy Service Companies (ESCOs) have been used in several countries to tap this market as they combine all the skills necessary for enabling implementation.
Further, they provide turn-key solutions to the facility owners, who do not need to plan the investments. ESCOs have the necessary capacities to undertake energy audits, prepare bankable Detailed Project Reports (DPRs), guarantee minimum energy savings and propose performance contracts to recover investments.
 
Please highlight the ESCO business model.
ESCOs work on performance contract which is drafted after detailed energy audit of the facility. ESCOs guarantee minimum energy savings from implementation of energy audit and also offer to make investments in the facilities thereto. The ESCOs get paid by sharing the energy savings with the facility owner.
 
What are Government and BEE’s efforts to promote ESCO market?
A survey of international experience worldwide on the development of ESCO based energy efficiency market indicates the need for policy interventions, implementation of demonstration projects, promoting ESCOs, developing and standardizing sustainable contractual and legal documents and putting in place a financing mechanism as key elements. In all the markets where ESCO based energy efficiency investments have taken off, these barriers has being addressed through government interventions. India has initiated several measures to promote energy efficiency in the country. The Energy Conservation Act, 2001 (ECA) provides the legal framework for the same by measures such as creating the pool of energy auditors, mandatory energy audits for high energy using consumers, etc. The BEE, set up as a nodal facilitating body under the ECA has also undertaken following measures to implement demonstration projects in Government buildings: 
 
Implementation of pilot projects for market development consisted of the following essential components:
•      Putting in place a Government supported standard methodology covering the entire project cycle from audit to performance measurement and verification.
•      Design of standard performance contract.
•      Design of financial mechanism for project funding.
•      Project Implementation and post evaluation of impact.
•      Capacity building among ESCOs and project owners.
 
Promotion of ESCOs: As a result of these demonstration projects, some ESCOs initiated their operations and around 12 ESCOs were registered with BEE.  Most of these ESCOs are divisions of large public firms having tie-ups with international ESCOs.  In order to facilitate more players in the market to unlock the market potential, BEE has initiated several measures. They are:
•     Increasing demand for energy services through Government programmes in commercial, municipal, agriculture and Small and Medium Enterprises sectors. The programme seeks to create over 1200 bankable energy efficiency retrofit projects covering the entire country.
•     Enhancing credibility by empanelling 80 ESCOs selected out of a competitive bidding process after taking into account their technical and financial capabilities.
•     Accreditation of ESCOs through rating agencies like CRISIL and ICRA to improve comfort level of financial institutions.
•     Creating a pool of trained manpower- certification programme for energy auditors has been going on and almost 8000 energy auditors and managers have been certified
•     Stimulating the states through their Designated Agencies and Utilities to take up ESCO based projects at the state level.
 
What is Energy Efficiency Financing Platform and how is it positioned to secure lending for ESCOs?
BEE has initiated a platform (EEFP) for promoting financing of EE projects, which is also one of the four new initiatives under the National Mission for Enhanced Energy Efficiency. The EEFP seeks to encourage banks, FIs willing to take up ESCO based projects by enabling the following risk mitigation measures:
•      Capacity building and awareness of the personnel in banks and FIs on performance contracting issues
•      Aggregation of EE projects to reduce transaction costs
•      Preparation of a shelf of bankable DPRs under the oversight of BEE taking into consideration the due diligence requirements of participating banks
•      Experience sharing and dissemination of national and international best practices in the field of EE financing.
 
Has any Bank or Financial Institution joined the EEFP?
At present, PTC India Ltd., HSBC and SIDBI have joined the platform. PTC has taken up about 10 large Government facilities, including the Rashtrapati Bhavan, AIIMS, ESIC Hospital, etc which they are financing. SIDBI has started working with the Executing Agencies developing the DPRs for the SME sector to enable them to prepare projects which could be financed by them.
 
What is PRGF and when is it likely to be operational?
The partial guarantee is a risk-sharing mechanism that will provide commercial banks with partial coverage of risk exposure against loans made for energy efficiency projects. The guarantee will directly support financing of EE projects by:
•     Addressing credit risk and transaction structuring barriers to EE finance,
•     Engaging and building capacities of commercial financial institutions to provide financing for EE projects on a commercially sustainable basis.
 
Recently Bachat Lamp Yojana got registered under UNFCCC. How would the scheme work?
The Bachat Lamp Yojana (BLY), developed by the BEE recently got registered under the Clean Development Mechanism (CDM) of the Kyoto Protocol, part of the United Nations Framework Convention on Climate Change (UNFCCC). Developed to promote energy efficient lighting in India, BLY promotes replacement of inefficient bulbs with CFLs by leveraging the sale of Certified Emission Rights (CERs) under the CDM.
Under the BLY scheme, quality CFLs would be distributed to grid-connected residential households in exchange of an incandescent lamp (ICL) and INR 15. Given the high transaction cost of preparation and registration of CDM projects and for wider reach and faster implementation, BEE has developed a Programme of Activities (PoA) which would serve as an umbrella CDM project. The individual projects, designed to be in conformance with the umbrella project, would be added to the umbrella project as and when they are prepared.
The current penetration of CFL in the household sector remains low at about 5-10 per cent largely due to the high price of the CFLs, which is 8-10 times the cost of incandescent bulbs. The Bachat Lamp Yojana focuses on this first cost barrier to reduce the cost of CFLs to that of incandescent bulbs for consumers. At Rs 15 a piece for CFLs, the BLY is a win-win situation for all. Consumers will not only be able to save on their electricity bills but also help meet the energy efficiency targets of the country.
Domestic appliances and lighting sector accounts for almost 22 per cent of the total electricity demand in India, and contributes almost fully to the peak load as well. It is estimated that there are over 400 million light points in India lighted using Incandescent Lamps. ICLs are extremely energy in-efficient, with just 5 per cent of the electricity input converted to light. The remaining is lost as heat. In recent years the CFL has emerged as an energy efficient alternative, as a CFL uses only one-fifth as much electricity as an ICL to provide the same amount of illumination.
States such as Kerala have already made headway in starting the programme. Many more will join in or start the programme soon.
 
What are BEE’s initiatives in attaining energy efficiency for Industrial sectors?
BEE has identified 714 energy-intensive installations in India across nine sectors — power stations, cement, steel, fertilisers, aluminium, chlor-alkali, paper, textiles and railways.
By April 2011, BEE plans to launch a scheme to assign energy efficiency improvement targets to India’s most energy-intensive industrial units under the Prime Minister’s Council on Climate Change. Called the “Perform, Achieve and Trade (PAT) scheme”, announced under the National Mission for Enhanced Energy Efficiency (NMEE), it is among the steps the country is planning on climate mitigation. It aims to fix specific energy consumption (SEC) targets for large energy-guzzling installations. Energy Saving Certificates, or ESCerts, will be issued to those exceeding their performance goals. The credits could be sold to those who fail to meet the goals. Industry will be allowed to gradually become more energy-efficient from their present levels. Industries will need to improve their energy efficiency by a certain percentage. The scheme is limited to energy efficiency targets, and does not cover other sources of carbon emissions.
BEE is also looking to implement the multi-state Demand Side Management programme that seeks to promote market demand for, and development of, ‘super-efficient’ consumer products such as ceiling fans, refrigerators, etc. Super-efficient products are those that consume about half as much electricity as the products that are currently available in the market.
 
What’s the road ahead for energy Efficiency in India?
BEE’s energy saving measures is having the desired effects. During the last two years electricity savings of 10,259 million units and fuel savings equivalent to 5 million tons of oil has been achieved through various programmes. With the new programs more is likely to be achieved in the medium to long term.   
We need to generate a mass movement in favour of energy conservation to ensure that the need for energy conservation is firmly embedded in our daily lives. It has become a national cause, one that warrants all stakeholders to join hands and contribute towards an energy efficient economy.

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