ENERGY CONSERVATION

• EC Act 2001
• Demand Side Management
• Performance Contracting

Nov. 16, 2010

 Agenda

 Energy Conservation Act 2001

 Demand Side Management

 ESCO – Performance Contracting

01/12/2013

2 Energy Division
 Energy Conservation Act 2001

01/12/2013

3 Energy Division
 Energy Conservation Act - Background
• An Act to provide for efficient use of energy and its conservation and for matters connected therewith or
incidental thereto
• It extends to the whole of India except the state of Jammu and Kashmir
• It was enacted by Parliament in the Fifty-second Year of the Republic of India on October 2001
• The Bureau of Energy Efficiency (BEE) came into force from March 2002 onwards
Powers to the Central Government:
• Specify the norms for processes and energy consumption standards for any equipment, appliances which
consumes, generates, transmits or supplies energy
• Specify equipment or appliance or class of equipments or appliances, as the case may be, for the purposes of
the proposed legislation
• Prohibit manufacture or sale or purchase or import of equipment or appliances unless such equipment or
appliances conforms to energy consumption standards
• Direct display of such particulars on label on equipment or on appliance
• Specify, having regard to the intensity or quantity of energy consumed by any user or class of users of energy
as designated consumer for the purposes of the legislation
• Direct any designated consumer to get energy audit conducted by an accredited energy auditor
• Direct designated consumer to appoint energy manager in charge of activities for conservation of energy
• Prescribe minimum qualifications for appointment of energy managers
01/12/2013

4 Energy Division
 Energy Conservation Act - Background
• Direct any designated consumer to furnish information with regard to energy consumed and action taken on
the recommendation of the accredited energy auditor
• Direct any designated consumer to prepare a scheme for efficient use of energy and its conservation and
implement such schemes as may be prescribed
• Prescribe energy conservation building codes for efficient use of energy and its conservation in the building or
building complex
Powers of BEE:
• Recommend to the Central Government the norms for processes and energy consumption standards for
equipment and appliances
• Recommend to the Central Government for notifying any user or class of users of energy as a designated
consumer having regard to intensity or quantity of energy used by it
• Recommend to the Central Government the particulars required to be displayed on label of equipments or on
appliances and manner of their display
• Take suitable steps to prescribe guidelines for energy conservation building codes
• Develop testing and certification procedure and promote testing facilities for certification and testing for
energy consumption of equipment and appliances
• Promote use of energy efficient processes, equipment, devices and systems
• Specify qualifications for the accredited energy auditors, the manners and interval of time in which the energy
audit shall be conducted by such auditors
• Specify certification procedures for energy managers to be appointed by designated consumers
01/12/2013

5 Energy Division
 Energy Conservation Act - Background
• Prepare educational curriculum on efficient use of energy and its conservation for educational institutions,
boards, universities or autonomous bodies and coordinate with them for inclusion of such curriculum in their
syllabus
Power of State Government:
• Amend the energy conservation building codes to suit the regional and local climatic conditions
• Direct every owner or occupier of a building or building complex being a designated consumer to comply with
the provisions of the energy conservation building codes
• Direct if considered necessary for efficient use of energy and its conservation, any designated consumer to get
energy audit conducted by an accredited energy auditor in such manner and at such intervals of time as may
be specified by regulations
• Designate any agency as designated agency to coordinate, regulate and enforce provisions of EC Act 2001
within the State
• Take all measures necessary to create awareness and disseminate information for efficient use of energy and
its conservation
Expected Outcome:
• Barriers for EE & DSM to be removed.
• The State Regulatory Commissions and Utilities to be encouraged to implement the Conservation initiatives
• Engagement of Stakeholders

01/12/2013

6 Energy Division
 Energy Conservation Act - Background
• Industrial and Commercial users
• Time of use tariff for industrial and commercial users.
• Incentives to industry to adopt conservation/ efficiency measures
• States
• Encourage implementation of DSM programmes in Agriculture/ Municipalities
• Domestic consumers
• Promoting use of low cost CFLs.

01/12/2013

7 Energy Division
 Energy Efficiency- Initiatives
Revenue
Agency & Initiative Comments
Size
Bureau of Energy Efficiency
• Reduce Use Consumption
Standards & Labeling 9.00 Cr
• Check Testing
• Enhance efficiency of buildings
• Promotion of ESCOs
Energy Conservation Building Code 2.80 Cr
• Innovative Financial Products
• Rating of ESCOs
• Promote EE through CFLs
Bachat Lamp Yojana • Country wide coverage 6.00 Cr
• Est. 6.5 Cr CFLs required
• Promotion of PAT
NMEEE 125.00 Cr
• Inclusion of DCs for EE
• Market Development
Misc. 18.94 Cr
• Promotion Activities
Ministry of Power & BEE
• Energy Audits
SME Programme • DPR 6.50 Cr
• Implementation Assistance
• Database on Baseline Data
MuDSM & AgDSM • Bankable DPRs 8.37 Cr
• Implementation Assistance
SDAs • Estd SECF 22.26 Cr
• Knowledge Strengthening
State Level Capacity Building • Policy & Reforms 12.00 Cr
• Energy Conservation Action Teams

8 Energy Division
 Demand Side Management

01/12/2013

9 Energy Division
 Introduction to DSM

Demand Side Management (DSM), entails

actions that influence the quantity or patterns of
use of energy consumed by end users, such as
actions targeting reduction of peak demand
during periods when energy-supply systems are
constrained. Peak demand management does
not necessarily decrease total energy
consumption but could be expected to reduce
the need for investments in networks and/or
power plants.

01/12/2013

10 Energy Division
 Type of DSM Programs
Energy Efficiency
Efficiency equipment upgrades that provide long term energy savings can provide peak
demand reductions

“Peak Shaving” Programs

Load reductions during peak hours or whenever supply/demand margin is tight includes
interruptible / curtailable load which can be called upon when needed or demand
response which relies on voluntary load reductions

Peak-Shaving Program
Hourly Load (MW)

Sun. Mon. Tues. Wed. Thur. Fri. Sat.

01/12/2013

11 Energy Division
 DSM Measures

01/12/2013
12 Energy Division
 Approach to DSM

Regulators can make certain DSM Measures mandatory, arrange for financing through incentivization,
create consumer awareness, develop ESCOs, create templates, DSM plans, DSM design, selection criteria
etc.
01/12/2013

13 Energy Division
 Energy Service Company-
Performance Contracting

01/12/2013

14 Energy Division
 Introduction to ESCOs
In the Indian context, Energy Service Companies (ESCOs) identify and evaluate the
energy savings potential in industrial units, commercial complexes, hospitals,
municipalities and utilities, among others, by using energy audit tools. On completing a
detailed audit they recommend a set of energy conservation measures which on
implementation can pay for the investment through the resultant savings.

Types of ESCOs in India

Consulting based
Vendor based

01/12/2013

15 Energy Division
 ESCO Contract Models
“Performance based contract to implement measures which reduce
energy consumption and costs in a technically and financially viable
manner”

Guaranteed Model
Shared Model
ESCO Responsibility - Project Development,
& Implementation ESCO Responsibility - Project Development,
Financing & Implementation
Financing - Mainly Client
Financing - Mainly ESCO
Share of Savings – Smaller share (≈20%)
Share of Savings -Recover cost from customers,
Risk- Performance risk therefore higher share of the savings (≈70 - 80%)

Payback period – 2-10 years Risk- Both Credit and Performance risk

ESCOs can do more projects without getting Payback period – Shorter 2 - 14 years
more leveraged
Favours large ESCOs

01/12/2013

16 Energy Division
 ESCO – Financial Summary
The 3 most critical financial needs of an
ESCO
Meeting Development Expenditure SHARED SAVINGS MODEL
Financing a part of project Cost
Sponsor support under Risk Sharing

Common RoIs for Guaranteed & Shared Savings

GUARANTEED SAVINGS model:
MODEL • Average savings of 23 to 46 percent on baseline
energy costs
• Majority of ESCO projects have < 3 years payback
period
• Savings classified according to the type of Energy
Conservation Measure Recommended
01/12/2013

17 Energy Division
 ESCO - Process Mapping

18 Energy Division
 ESCO – Planning & Approach

01/12/2013

19 Energy Division
 ESCO – Planning & Approach

01/12/2013

20 Energy Division
 Traditional Approach to EPC
Pre & Post Bid
Baseline Data Assistance
Selection of
Collection&
Implementation Municipalities
Investment Grade
Energy Audit Agency • Preparation of Bid
Documents
• Pre Bid Meeting
• Evaluation of
Proposals S
Preparation of E
Project Design and • Evaluation Report C
Technical Capacity Building T
Recommendations O
(ECMs) R
A Agriculture
L

C
Structuring Options Drafting of Contract O
V
Small & Medium
including risk Agreement
Cost Projections
mitigation and
E Enterprise
R
incentives A
G
E
Lighting

Detailed Project Financial Viability Measurement &

Report and Modeling Verification Industries

01/12/2013

21 Energy Division
 Modern Approach to EPC

22 Energy Division
 Funding Options

01/12/2013

23 Energy Division
 Transaction Model

FINANCIAL
SUPPORT – PROJECT
FINANCING

EPC
CONTRACTING

CONFIRMS SAVINGS AS SHOWN

BY ESCO

24 Energy Division
 Technology & Innovation - Due Diligence

The Importance of Technology Changes to ESCOs

• Sources of EE innovation
• Technology innovation & competitiveness
• Assessing new technology potential in local market
• Gathering international competitive intelligence
• Cost & value analysis of introducing new technology to ESCO project portfolio

Incorporation of new technology

• Technology teams
• Prototype projects using new technologies
• Training staff on new operational procedures

Managing Risk of New Technologies

• New technologies in small components
• Negotiating manufacturers guarantees
• Hidden cost of new technologies (unexpected maintenance cost)

01/12/2013

25 Energy Division
 Key Barriers in ESCO Market Development

• Accurate and latest baseline energy consumption data

• Financing of ESCO projects through

• Debt
• Equity

• Absence of good M&V guidelines for confirmation of savings

• Robust performance contracting guidelines

• Awareness about ESCO performance contracting

• Disconnection of Energy Audit and Implementation Phases in order to avoid

biased recommendation of energy conservation measures

• Energy conservation is a non-core activity for most consumers.

01/12/2013

26 Energy Division
 Thank You

India’s Leading Integrated

Infrastructure Services Company

www.feedbackventures.com

This document does not carry any right of publication or disclosure to any other party. The information in this document has been
compiled by Feedback Ventures Pvt. Ltd. (Feedback) based on various public domain sources, primary surveys and interviews and
Feedback’s proprietary research.
This document is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by
Feedback. Neither this presentation nor any of its contents may be used for any other purpose without the prior written consent of
Feedback

27 Energy Division