Enhancing Energy Efficiency in Buildings: ESCO Development Perspectives

1. ESCO Development- BEE’s perspective Presented by Sanjay Seth Bureau of Energy Efficiency

2. Sectoral Energy Consumption Domestic and Commercial Sectors account for 30% of Energy Consumption

3. Electricity Use in the Commercial Sector

4. What are Energy Conservation Building Codes? • ECBC was launched by Govt. of India on 27.5.2007 • Mandatory Scope Covers commercial buildings • Applies to New Construction only • Building components included • Building Envelope (Walls, Roofs, Windows) • Lighting (Indoor and Outdoor) • Heating Ventilation and Air Conditioning (HVAC) System • Solar Water Heating and Pumping • Electrical Systems (Power Factor, Transformers) • Potential to save 1.7 billion units annually on mandatory application • Expected reduction in XI plan is 500 MW

5. Energy Efficiency in Existing Buildings/ facilities • There is vast scope for energy efficiency improvement in buildings/ existing facilities. • Energy Audit Studies have revealed a savings potential to the extent of 40% in end use such as lighting, cooling, ventilation, refrigeration etc. • Audits identify the Energy baselines in existing facilities along with Energy Efficiency Measures.

6. Energy Service Companies(ESCOs) • ESCO engages in a performance based contract with a client firm to implement measures which reduce energy consumption and cost in a technically and financially viable manner. • ESCO acts as project developer for a wide range of tasks and assume the technical and performance risk associated with the project. • ESCO offers comprehensive services beginning with energy saving audits and concluding with maintenance of EEMs after implementation. • ESCO achieves specified level of energy savings by monitoring and verification of the EEMs.

7. Energy Efficiency Measures • Energy efficiency measures bring about energy savings due to reduced energy consumptions. • Energy savings are determined by comparing energy baseline with energy consumed after implementation of EE measures. • Energy cost savings resulting from EE measures directly benefit client facilities over the life cycle of the project.

8. Models of Performance Contracting. • PERFORMANCE GUARANTEE ESCO provides energy audit and operation and maintenance of retrofitted equipment with performance guarantee • SHARED SAVING ESCO provides energy audit, finance and implements the measures under the performance contract with shared savings.

9. Energy Efficiency in Govt. Buildings • Under the 1st phase of Energy Efficient Govt. Buildings Programme 9 public buildings were taken up for energy audits • These include:-Rashtripati Bhawan, Prime Minister’s Office, South Block, Rail Bhawan, Sanchar Bhawan, Shram Shakti Bhawan, Transport Bhawan, R& R Hospital, Delhi airport and AllMS.

10. Government Initiatives( 2nd Phase) • Encouraging results in the first phase of Energy Efficiency in Government Buildings Programme 17 more government buildings have been undertaken for 2nd phase through performance contracting under the ESCO route. • These include NirmanBhawan, UdyogBhawan, ShastriBhawan, North Block, South Block, VigyanBhawan, National Archives, YojanaBhawan, Sardar Patel Bhawan, Supreme Court, Safdarjunj Hospital, SSK Hospital, Parliament House & Parliament Annex, PariyavaranBhawan and NIC, CGO Complex.

11. Energy Audit Results- 1st phase

12. Barriers to ESCO development • Energy Conservation & Efficiency measures at nascent stage of development. • Lack of information and awareness about ESCOs. • Lack of motivation and initiative on the part of the developers. • Higher cost of Energy Efficient technologies. • Absence of proper frame work and guidelines for creation of appropriate environment for ESCO market . • Asymmetry in sharing of costs and benefits.

13. Barriers to Promotional Incentives • Lack of support system by the Government. • Lack of information on success stories. • Reinforcement policies on financial support by the Government. • Lack of R&D facilities on EE technologies. • Inadequacy of financial business models to promote ESCOs.

14. Interventions to Barriers • ECAP developed- Close coordination between BEE & SDAs to disseminate information. • BEE is expanding the database of ESCOs which would be shared with the SDAs. • National workshops to promote EEMs through the ESCO route. • Adoption of CDM to service investments made upfront. • Incentives to industry to adopt conservation/ efficiency measures. • Standard Performance Contract document be evolved based on M&V protocol, project financing & timely payments. • Standardize Monitoring and Verification Protocol for assessment of savings. • Savings through Life Cycle cost analysis.

15. Interventions by Government • Involvement of Central/ State Govts. to develop favorable policies and regulations. • Development of Innovative financial instruments for promoting performance contracting to overcome lack of effective delivery mechanism. • Innovative Financial products, like securitization of receivables, energy efficiency bonds to fund the projects • Provide a suitable subsidy linked funding mechanism with due incentives for an appropriate Public Private Partnership (PPP) • Provide sufficient measures to ringfence all the risks associated with such projects

16. Interventions by Industry • Establishment of an ESCO Promotion Council. • Confidence building measure in favor of Energy Efficient Technologies through R&D. • Adoption of best practices prevalent internationally. • Voluntary adoption of energy conservation / efficiency by the industry.

17. Roadmap for ESCO Development

18. ESCO Empanelment • BEE is promoting implementation of energy conservation measures in existing buildings / facilities through the ESCO route. • The BEE had published an EOI seeking the empanelment of ESCOs in all leading National dailies • This data base of short listed ESCOs would be shared by BEE with the State Designated Agencies. • This shortlist would be reviewed at the end of 2 years.

19. Next Steps • BEE has proposed accreditation of the short listed ESCOs by CRISIL, ICRA, FITCH and CARE. • Terms of Reference for these ratings have been finalized. • SDAs need to identify 50 Govt./ semi government buildings in their respective states for energy audits & preparation of DPRs. • BEE would provide financial assistance to SDAs for energy audits • Baseline being developed through a survey of existing buildings

20. Guidelines to support Audits in Government Buildings through SDAs • The guidelines are for financing DPRs through government agencies and require beneficiary government agency to provide the following details to access funding as approved • Preliminary Details/ Identitification of buildings • Ownership of the project by SDA/ Other government agency • Competitive bidding for selection of ESCO • Quantifiable Timelines and Deliverables • Cost of IGA and Financing Options • Contractual Arrangement including Monitoring and Verification, Dispute Resolution Mechanism, etc • Quantifiable deliverable based financing to cover costs upto DPR preparation proposed

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