Energy Conservation in Central Government Buildings & Establishments

1. Energy Conservation in Central Government Buildings & Establishments Presented at the Workshop On “Energy Conservation Act,2001 – Role of State Agencies” New Delhi – 23rd & 24th February, 2005

2. Background • Announcement made by the Honourable Prime Minister on 23 August 2002 • All government organizations to reduce energy consumption by 30% in 5 years • By contracting for guaranteed levels of energy efficiency improvements involving ESCOs • In pursuance of the announcement, BEE initiated the energy auditing of Central Govt. buildings and establishments

3. Energy Audit Route Host entrusts energy audit of facility with energy auditing firm. Energy Auditor, after a detailed study of the facility provides an energy audit report, which essentially provides energy saving measure it’s cost benefit analysis. Host identifies a set of energy saving projects, prepares detailed specifications and procures the equipment paying the vendor upfront at their own risk. Energy Auditor does not guarantee the energy savings. Credibility of energy auditing agencies? BEE is addressing the credibility gap by certification of energy auditing agencies.

4. ENERGY PERFORMANCE CONTRACT • Implementation through performance contract (defining performance indices like lighting levels, comfort conditions, air quality) would result in better savings with more comfort. • Energy Service Companies (ESCO), undertake a Energy Study of a facility to identify: • the areas for energy savings, • its economics and cash flow statements over its lifetime and for 10 years. • establish a baseline for energy consumption • guarantee a minimum energy savings, • agree on a monitoring and verification protocol for quantification of energy savings and • signs performance contract with the facility owners,

5. ESCO on signing the performance contract: • bring in finance, procures equipment and implement the agreed energy saving projects, maintain the energy saving projects, • train the facility personnel on maintenance aspects and transfer the equipment installed to the facility on agreed salvage value. • ESCO recover cost of equipment, professional fees, from energy savings achieved after verifying same through agreed M & V protocol. • any shortfall in guaranteed savings would be made up by ESCO. • Here all risks wrests with the ESCO.

6. Monitoring & Verification of energy savings Single point Electricity Billing for the entire building was adopted for Monitoring & Verification of the energy savings on the following considerations - • Easy to account for savings • Maximum credibility on system performance • Easier to define cash flow and hence project bankability • Difficult to monitor impact of load changes • Higher running cost for ESCOs for monitoring load changes

7. Progress • Consortium of Energy Auditors and ESCOs formed for conducting building energy studies. • These energy studies are more than energy audit and in addition it covers base line determination, energy saving monitoring method • Capacity built in energy audit companies such as TERI, NPC, Energy Audit Services & CPRI to under take energy studies. • Energy studies completed in 9 buildings: • Rashtrapathi Bhawan, • Prime Minister’s Office Rail Bhawan, • Sanchar Bhawan, • Shram Shakti Bhawan • Transport Bhawan, • R&R Hospital, • Delhi Airport, and • AIIMS.

8. Building particulars Annual Energy Consumption ( Lakh kWh) Annual Energy Savings ( Lakh kWh) % Savings (KWh) Annual Energy Savings (Rs. Lakhs) Investment (RS. Lakhs) Payback period (Years) PMO 8.3 2.7 32 16.9 50.5 3 Rashtrapathi Bhawan 34.1 7.8 23 49.9 51.2 1 Sanchar Bhawan 25.6 11.9 46 76 147.1 1.9 Shram Shakti & Transport Bhawan 20.4 8 39 42.9 157.5 3.7 RR Hospital 100 28.8 28 88.3 44.9 0.5 Air Port 713 145 20 586 810 1.5 Rail Bhawan 23.5 6  25 40 163 4.2 AIIMS 369 93.1 29 712 1070 1.5 ENERGY AUDIT RESULTS

9. STRUCTURING PERFORMANCE CONTRACT BEE initially drafted the energy performance contract based on other countries experience adapting to Indian conditions. This contract under the chairmanship of Chief Engineer CPWD and members from host institutions (Railways, Telecommunications, Defence, etc.) was vetted and the contract was improved for implementation. Finally Former Additional Solicitor General whetted the contract. The contract is fully ready for implementation.

10. STRUCTURING FINANCING MECHANISM Payment security mechanism addresses following concerns: Energy saving cash flow does not have a separate revenue head and hence does not provide comfort levels to financial institutions Ensure payment is made for services actually rendered by ESCO. Payment is made to party who is rendering services. Payments to be made are linked to physically verifiable milestones. Create cash flow so that ESCO could make up for any shortfall in guaranteed savings to Facility.

11. Financing Mechanism

12. Mechanism Explanation - (Legal Documents and Parties Involved) ESCO and Lenders to the ESCO will jointly appoint a mutually acceptable Indian bank to act as the trustee on behalf of the Lenders. (The Trustee Bank). Trustee Bank shall establish a Trust and Retention Account into which the facility owner will pay the energy saving payments as required under the Energy Services Contract after the energy savings are verified as per the agreed M & V protocol. Trustee Bank shall allocate all payments in accordance with a Payment Trust and Retention Agreement. Agreement will also envisage the establishment of a separate Debt Service Reserve Account.

13. Operation of the Structure Facility shall pay amount due to ESCO under Energy Performance Contract after energy savings have been verified as per Monitoring and Verification protocol into the Trust and Retention Account (TRA). Payment made to TRA will be acknowledged by ESCO. On each Debt Service Date, Trustee Bank shall apply following order of precedence for allocating funds available in the TRA: a.   Statutory dues of the ESCO viz. taxes, duties etc. b.  Operating expenses as per agreed budget c.   Payment of interest and principal d.  Funding of a Debt Service Reserve Account Debt Service Reserve Account is a liquidity support mechanism to provide comfort to lenders as reserve would have sufficient balance to meet a predetermined number of debt servicing installments. e Balance shall be paid to ESCO

14. Results achieved so far • Energy audit studies completed in 9 buildings • Savings potential between 20 to 46 % identified in the above buildings. • Model documents ( Performance contract, Bid evaluation, Request for proposal & Payment Security mechanism) developed for facilitation of project implementation through ESCO mode.

15. Results achieved so far ( Continued) • Request for Proposal prepared for Rashtrapathi Bhawan, Prime Minister’s Office, Shram Shakti Bhawan & Transport Bhawan, Rail Bhawan, AAI, Sanchar Bhawan and AIIMS have invited tenders. • Core Group Training: All building owners trained. • Rashtrapathi Bhawan, Rail Bhawan, Shram Shakti Bhawan & Transport Bhawan have awarded the contract. Other buildings are expected to award the contract soon.

16. NEXT STEPS • Monitoring & Verification of energy savings • Capacity building of core group, Financial institutions & expansion of ESCO. • Expansion of programme in Central Government establishments & PSU to other Metros and States.