Energy Efficiency project

under ESCO Model

Module 2 June 2015 Page 20

 Typical ESCO Project

ESCO capabilities explained; Initial Meeting This meeting is predicated on

expectations outlined; approval with Client good client research

to proceed obtained

Conduct Facility Review Energy Collect energy use

Use Customer and cost (2-3 yrs); analyze
Data Form Walk-Through Usage Data for anomalies

EER provides approximate scope

of savings and cost potential and is
used to screen potential projects Prepare Energy
EER begins process of establishing Efficiency Report (EER)
ESCO credibility
Select New
Present EER Client
to Prospect

Does
energy savings No
justify
project??

Credit analysis is completed Yes

by the bank providing the
long-term financing Is Credit No
check
good??

Module 2 June 2015 Page 21

 Typical ESCO Project

ESCO develops a Letter

of Intent (LOI) and Client No Select New Facility or
presents it to the client signs the
for signature Client
LOI??

Owner agrees to have

ESCO complete a Detailed Yes
Energy Study (DES)
Detailed Energy
Study (DES)
Completed

A DES takes four to eight weeks

to complete; provides opportunity Present DES to
to get to know client staff Customer
DES reinforces ESCO
credibility
Review builds motivation Review Results
to undertake energy services Including Project
project Scope and Plan

If DES results depart significantly DES

from EER, ESCO absorbs part or all Confirms No Select new
of DES costs Preliminary Facility or Client
Energy
Savings

Yes

Module 2 June 2015 Page 22

 Typical ESCO Project

Customer No Client pays for

Accepts 100% of DES
Results

Yes
Final mix of measures selected;
Financial modeling used to help Draft Energy
price the Energy Service Performance Services Agreement
Contract (ESPC) and optimize profit (ESPC) is developed
and cash flow for selected measures

Client
No
and ESCO
Sign
ESPC

Yes

Project
Implementation

Module 2 June 2015 Page 23

 ESCO Business

 ESCO: An ESCO is a company that provides energy-efficiency

related and other value-added services and for which
performance contracting is a core part of its energy efficiency
services business (Source: the Lawrence Berkeley National Laboratory (LBNL) and
the National Association of Energy Service Companies (NAESCO)).

 ESCO is an organization engaged in a performance based contract

with a client firm to implement measures which reduce energy
consumption and costs in a technically viable manner.
 Energy Saving Performance Contracting: Contracting based
on the performance of a company on energy savings achievement
to the project
 Payments to ESCO <= Total cost savings
 Total Cash flow during ESPC is (supposed to be) less than
before ESPC
 Implementation Under ESCO Model of
Performance Contracting

 Working Mechanism
A Performance Contract guarantees that the cost savings from an
EE project will pay for the costs of the improvements at a facility.

savings
user’s
Payment to

End
ESCO
Energy Bill

Energy Bill
After the
Before During the contract
contract Transfer of the equipment
Project Start-up (less than life property
Contract signed span)
End of the contract
Monetary Benefits for Client
 Procedure for ESPC

 Building Data & commitment for implementation of

EE measures from building owner (BO)
 IGEA Audit, presentation to BO about saving
potential, Implementation plan
 Performance Contract, M&V Plan, O&M Plan
 Base line data capturing (Baseline energy use,
static factors, independent variables)
 Implementation of EE measures
 Documentation of energy savings as per M&V plan
 Recoupment of investments
 Barriers in ESCO Business

Barriers
 Regulatory Barriers: absence of Regulatory Mechanism for EE
market & mandatory energy audit
 Institutional Barriers: inability of building managers to assess
and guarantee the energy savings on account of these
interventions, non-availability of an appropriate delivery mechanism
& absence of Institutional framework, Lack of coordination amongst
different initiatives-different Government Ministries/departments
 Technical Barriers: absence of technological solutions,
unavailability of solutions in local market, absence of secure
payment mechanism, penetration of energy efficient product in the
market
 Information Barriers: lack of awareness, Communication Gap
between technical staff and top management, Lack of data on
actual building stock, energy consumption by different sectors,
absence of standard templates for RfP, audit reports, PC, M&V etc.
 Financial Barriers: Low energy rate, Lack of energy subsidies,
Lack of access to financing, Non-payment& electricity theft
 Difficulties in developing countries

 Immature energy efficiency market

 High cost of project development
 Small capital base of ESCO
 Hard to access project financing from commercial financial
institutions (FIs)
 Lack of confidence and creditability with facility
management due to limited experience of successful ESCO
projects
 Limited knowledge and understanding of energy efficiency
projects and the ESPC concept by FIs
 Objectives of Empanelment Process

 Address the Institutional, procedural and process barriers

 Mitigate the risk of inability of building managers to assess
and guarantee the energy savings through ECM
interventions
 Promote energy efficiency delivery mechanisms
 Development of a market for Energy Service Companies
(ESCOs)
 Provide a business model through which the energy-
savings potential in existing buildings can be captured, and
the risks faced by building owners can be addressed
 ESCO Empanelment (Licensing) Process

 Identification of Grading agencies

 Meeting with Grading agencies to freeze the criteria of
Grading
 Advertisement for Expression of Interest (EoI)
 Evaluation of Requests received by Grading agencies
 Grading report
 Submission of grading report to BEE
 Empanelment of ESCO by BEE and uploading of list on
website
 Empanelment will be valid for 2 years & re-empanelment
after 2 years
 ESCO: Grading Process

 Grading process carried out by Security Exchange Board of India

(SEBI) accredited agencies (CRISIL Limited, CARE & ICRA)
Criteria of Grading
 Companies are graded from Grade 1 to 5 Based on a 100 point
scale (Being Grade 1 as Excellent grading)

Grading Parameter Weightage

Track Record and Market 40

Position
Organisational Risk 25

Financial Risk 35
 ESCO: Grading Process

Information for Grading Parameters

 General Information: history of the company and key milestones,
profile of Board of Directors and Key Management Personnel,
Shareholding pattern, major subsidiaries and associates
 Track Record and Market Position: energy management/
energy savings/ESCO (shared savings and guaranteed saving)/
energy audit/consultancy/equipment manufactured/turnkey
projects
 Organizational Risk: Certified energy auditors, ISO certification
and other accreditations, patents for energy management/energy
related products/services, technological tie-ups, key personnel &
manpower strength, audit instruments, energy management/
energy efficiency related projects, organizational structure
 Financial Risk: Annual reports for the last three years, Previous
year’s turnover for ESCO activities, Previous years profits,
 Feedback from at least 4-5 major clients
 Grading Scale

ICRA / CRISIL- Definition of ability Score

BEE Grading

GRADE 1 Excellent 85 and above

GRADE 2 Very good 70-84

GRADE 3 Good 55-69

GRADE 4 Satisfactory 40-54

GRADE 5 Poor 0-39

 ESCO: Grading Rationale

Grading Rational comprising of:

 Grading Assigned
 Key Grading Considerations: Grading strength & weakness
 Information sheet: Track Record and Market Position,
Organizational risk and Financial risk
 ESCO related performance: ESCO business performance,
Energy audit & implementation services, Energy saving achieved
 Financial performance: ESCO business turnover
ESCO: Empanelled list of ESCO on BEE website
 Indian ESCO Growth & Grading Distribution

137
128

More than 70% ESCOs are with in Grade 1-3 114 129

89

56 58
52
45
42
32 35
23 26 3130 29
20 22 24 23 27
17 25 17 17
1415
9 10 9
6 12
5 3
3 5 64
0 1 4

Grade 1 Grade 2 Grade 3 Grade 4 Grade 5 Total

2008 2009 2010 2011 2012 2013 2015

 Super ESCO

 A Super ESCO is an entity that is established by the

Government and functions as an ESCO for the public sector
market
 Supports capacity development and project development
activities of existing private sector ESCOs and helps create
market for ESCOs
 Facilitate access to project financing by developing
relationships with local or international financial institutions
 Act as a leasing or financing company to provide ESCOs
and/or customers EE equipment on lease or on benefit-
sharing terms
 Government capitalizes the Super ESCO with sufficient funds
to undertake public sector ESPC projects and to leverage
commercial financing
 Target the largely untapped energy efficiency market in the
public sector 22
 Super ESCO: EESL

• EESL is a joint venture company promoted by 4 CPSUs of the

Ministry of Power, namely NTPC, PGCIL, PFC and REC and
BEE.
• C’man of EESL is CMD NTPC and other board members are
from PGCIL, PFC, REC and two JS’s from the Ministry of
Power.
• It is registered under the companies Act, 1956 on 10th
December 2009 and obtained the commencement of business
certificate on 11th February 2010.
• It is the first such public sector company exclusively for
implementation of energy efficiency in South Asia and
amongst very few such instances in the world.
• The authorised share capital of EESL is Rs. 190.00 crores with
equal contribution from the 4 promoters. Has a paid up
capital of 100 crores.
23
 Business Plan - EESL

•Implementation
of EE in buildings,
•municipality,
•agriculture,
•SMEs ESCO
•BLY

•S&L •Capacity
Programme building of
Monitoring/ Resourc
•National EESL SDAs/other
Implementing e Centre
Examination BEE’s stakeholders
•NMEEE programs •Training of
•PAT scheme Energy Managers
•PRGF/ •3L Programmes
VCFEE
•CDM
Consultancy
•Consultancy to
Consultancy SDAs/ Govt.s
Organization
•International
Consultancy
Energy Efficiency in Existing Buildings/ facilities

 Energy Audit Studies reveal a saving potential to the extent of

40% in end use energy such as lighting, cooling, ventilation,
refrigeration etc.
 EE implementation Delivery Mechanism
 Utility based Demand-side management (DSM)
 Departmentally by Building/ Facility owner
• Vendor execution contract (Payment not on basis of saving
achieved, but on implementation cost)

 Through ESCO mode on Performance Contract (ESPC )

(Payment on basis of saving achieved)
• Shared Saving option
– Investment by ESCO, Saving achieved shared between
ESCO & Building owner
• Guaranteed Saving option
– Investment by Building/ Facility owner, ESCO paid on basis
of performance of Guaranteed saving
• Mix option
 Performance Contract Process (Energy Audit)

Benchmark Walk Investm Project Project Concessi

Audit Through ent Development Implement on period.
Audit Audit -ation

Audit based on client's

data done for the purpose
of quote
Sustenance Support
Assessment of measurement system Operation & Maintenance
Validation of benchmark audit Project cash flow
Preparatory work for IGA

Signing of baseline & M&V document

Detailed assessment including project
Detailed engineering
configuration, development of baseline & M&V
Financial closure
plan, project costing and financial analysis
Procurement
Installation & commissioning
Measurement & Verification
Letter of intent from client Management Information System
Finalization of implementation mechanism Training
(performance contract), financing
mechanism including savings sharing
mechanism.
Development and signing of performance
contract
Case Study: Yojana Bhawan (NITI Aayog Building)

 Covered Area of 23116 sq. m

 Conditioned area of 15206 sq. m

 Working area of 19007 sq. m

 Supply from NDMC – HT 11 KV high reliability feeder (CD 875 kVA)

 2 Xmers – each 100 kVA

 Annual energy consumption from Grid (kVAh) – 30 Lac Units

 Annual Electricity Bill – Rs. 167 Lacs (Jun’12 – May’ 13)

Description Value Unit

Built up area per floor 23116 m2
Total no of employees 700
Annual energy consumption 2999301 kVAh (As per RFP)
EPI, Energy Performance
129.75 kWh/ Annum/ m2
Index
 Case Study: Yojana Bhawan
BEE Scheme for Existing
Building

Option B: Star rating performance X

enhancement retrofitting

BEE will pa ESCO for Finalisation of

Implementation Plan,
baseline identification &
BEE Invites ESCOs PC & M&V
EA work
through bidding process

PRGF /VCFEE Assistance EE Implementation

through PC
Bid Evaluation

BEE will provide

Third Party (M&V)
ESCO selection for support for verification
baseline identification Measurement & & reporting of savings
and energy assessment achieved

Submission of
Implementation plan BEE will revise the Star
along with M&V and Rating of building
O&M by ESCO

NO
 Existing Vs. Proposed Energy Norms

800000
Existing Annual kWh consumption New Porposed Usage
700000

600000 Overall Savings

potential –
500000
29%
Annual kVAh

400000

300000

200000

100000

0
Water CFL FTLs Fans Packaged Halogens Old Timer
Pumping including Acs and MHL portable control for
T5 AC (20) Acs
Functional Area
 Investment Vs. Energy Savings

3500000 Estimated Investment Potential Monetary Gain 2000000

1800000
3000000

Estimated Monetary Savings

1600000
Estimated Investment

2500000
Estimated
1400000
Investment Rs.
2000000 104 Lacs (incl. 1200000

tax, PFD, etc.) 1000000

1500000
800000

1000000 600000

400000
500000
200000

0 0
Water CFL FTLs Fans Packaged Halogens Old Timer APFC
Pumping including Acs and MHL portable control for
T5 AC (20) Acs
Functional Area
 Baseline Usage

 Baseline for indoor Lights

 Daily Use – 9 hrs
 Annual Use – 240 days per year
 Baseline for outdoor lights
 365 days a year for 11 hrs per day
 Base line for APFC
 Existing Average PF as per DPR for last 12 months 0.97
 Baseline for fans
 Daily Use – 9 hrs
 Annual use – 180 days per year
 Baseline for HVAC
 Window/Split AC – 9 hrs daily for 150 days annually
 Packaged Units – 8 hrs daily for 150 days annually
 Baseline for pumps
 9 hrs per day for 250 days annually
 BEE initiatives to boost ESCO mechanism

 Creation of Venture Capital Fund and Partial Risk Guarantee

Fund under NMEEE
 Development of Standard performance contracting document,
Standard templates for energy audit, standard RFP
 Support to states for mandatory energy audit for all
government buildings (MP, Rajasthan, Kerala, Gujarat &
Maharashtra have initiated)
 Currently 129 ESCO companies are empanelled with BEE
 Conclusion

 Energy Efficiency is the most cost-effective option in the short

to medium term to meet the energy requirements of
increased economic growth and minimizing the impact of
global climate change
 ESCO is an important institutional delivery mechanism for the
energy-efficient investments based on Performance
Contracting
 Super ESCOs can provide stimulus to the implementation of
energy efficiency projects by overcoming some of the major
barriers to implementation in developing countries