Transcript Current Status and Work Plan for PACE

Capacity Building of Banks and Financial Institutions
for Energy Efficiency Project Financing
Module 2
Energy Efficiency Project Characteristics
Partnership to Advance Clean Energy-Deployment (PACE-D)
Technical Assistance Program
September 2014
Capacity Building of Banks/FIs
For EE Project Financing
Page 1
July 2014
Presentation Outline
• Energy Efficiency Projects
• Energy User Motivations
• EE Projects in Different Sectors
• EE Project Characteristics
• Typical Energy Efficiency Project
• Illustrative Project Examples
Capacity Building of Banks/FIs
For EE Project Financing
Page 2
July 2014
Energy Efficiency Projects
• In all major consuming sectors
 Large Industries
 SMEs
 Commercial Buildings (offices, hotels, hospitals, shopping malls,
etc.)
 Government Buildings
 Municipalities (street lighting, water pumping)
 Agriculture
Capacity Building of Banks/FIs
For EE Project Financing
Page 3
July 2014
Energy User Motivations
•
•
•
•
•
•
•
•
•
Achieve efficiency
Capture energy cost savings;
Improve productivity and enterprise competitiveness
Improve product quality
Address necessary system upgrades, equipment replacement, &
deferred maintenance requirements
Improve level of energy services in facilities
Improve living conditions
Improve energy system reliability
Comply with environmental regulations
Capacity Building of Banks/FIs
4For EE Project Financing
Page 4
July 2014
Perform, Achieve and Trade Scheme
• Specific Energy Consumption (SEC) reduction targets for the energyintensive units which are designated consumers under the Energy
Conservation Act

Targets would be % reduction of current SEC

Percentage reduction requirement based on:
 Sectoral targets to achieve the national goal
 Current SEC as a ratio of the best in the sector / groups within a sector
 Unit specific diversities
 Target setting for the power generation and fertilizer sectors through the
existing tariff-setting processes
 SEC measurement and verification by BEE through designated verifiers
Capacity Building of Banks/FIs
For EE Project Financing
Page 5
July 2014
List of sectors for PAT
• Cement
• Textile
• Chlor alkali
• Power Plants
• Aluminum
• Iron & steel
• Pulp & paper
• Fertilizer
Capacity Building of Banks/FIs
For EE Project Financing
Page 6
July 2014
Energy Efficiency Projects in Industry
• Replacement of inefficient industrial technologies with energy saving
technologies and equipment, such as more efficient industrial boilers,
kilns, and heat exchange systems
• Recovery and utilization of by-product gas, waste heat
• Installation of highly efficient mechanical and electrical equipment,
including lighting, motors, Chillers, refrigeration units, pumps, heating
and ventilation equipment, etc.
• Industrial system optimization to reduce energy use
Capacity Building of Banks/FIs
For EE Project Financing
Page 7
July 2014
Examples of EE in Cement Industry
• Improve kiln combustion efficiency by reducing the false air ingress at
•
•
•
•
•
•
the Preheater section and reducing marginally the sintering level of
Clinker
Optimize the air flow to the grate cooler and reduce the vent air losses
Utilize cooler vent air as primary air to the Kiln burner
Improve insulation at preheaters ducts & Kiln internally
Replace the air cooled Turbulators with Refractory lined Turbulators
Generate electricity from the Waste heat of PH exhaust & Cooler Vent
streams
Install variable frequency drive for fans in the production processes
Capacity Building of Banks/FIs
For EE Project Financing
Page 8
July 2014
EE in SMEs
• Key Characteristics of SMEs







Very small in size (majority are MSE units)
Majority of units are proprietorship / family owned concern
Very limited professional management
Obsolete technology/ production process
Low capital investment & labor intensive
High energy consumption in many sectors
Lack of Knowledge about energy efficient production options and
available technologies
Capacity Building of Banks/FIs
For EE Project Financing
Page 9
July 2014
Energy Intensive SME Clusters
• Forging
• Foundry
• Limekilns
• Brick
• Rolling
• Rice
• Pottery
• Paper
• Edible oils
• Brass
• Glass
Page 10
July 2014
SIDBI Activities for EE in SMEs
• Established Energy Efficiency Cell
• Developed guidelines for EE project financing
• JICA credit line for EE equipment – disbursed in 2010
• AfD credit line – initiated in 2010
• KfW credit line – requires carbon savings estimates and monitoring –
initiated in 2010
• Developing tools for
 Project Assessment
 Impact Monitoring
Capacity Building of Banks/FIs
For EE Project Financing
Page 11
July 2014
Energy Efficiency in Buildings
• Energy efficiency in residential, commercial, and government
buildings:
 Lighting
 HVAC (heating, ventilation, and air conditioning)
 Building envelope (insulation for roof, walls, windows, doors)
 Renewable energy in buildings (roof-top solar PV, solar water
heaters, and ground source heat pumps)
Capacity Building of Banks/FIs
For EE Project Financing
Page 12
July 2014
Buildings Rating Systems
• Energy Conservation Building Code (ECBC) launched in May 2007.
The ECBC sets minimum energy standards for new commercial
buildings having a connected load of 100 kW or contract demand of
120 kVA.
• BEE Star Labeling Scheme for
 Day Use Buildings
 BPO buildings
 Shopping malls
Capacity Building of Banks/FIs
For EE Project Financing
Page 13
July 2014
EE in Municipalities
• Water Pumping
 Leak detection
 Efficient pumping systems
 Operational optimization
• Street Lighting
 Efficient lighting
 Controls
 Solar systems
Capacity Building of Banks/FIs
For EE Project Financing
Page 14
July 2014
EE in Railways
• Stations, platforms
 Lighting
 Space cooling
 Water pumping
• Rolling stock performance





Two tier rolling stock
Four berth coaches
Managing fuel cost
Kinetic energy storage systems
Power and energy optimization systems
Capacity Building of Banks/FIs
For EE Project Financing
Page 15
July 2014
Characteristics of EE
Projects
Characteristics of EE projects
• Wide range of technologies, most with substantial experience in
successful implementation, internationally as well as in India
•
•
•
•
Relatively small project size - many projects less than INR 1 crore
Relatively short simple payback periods – generally one to five years
High proportion of project development costs
Range of implementation business models with increasing interest in
performance based approaches
• Manageable risks
Capacity Building of Banks/FIs
For EE Project Financing
Page 17
July 2014
IFC Experience with Project Size
95% of projects were under INR 4.5 crores
Project Size Distribution
No. of Projects = 818
Source: International Finance Corporation
Capacity Building of Banks/FIs
For EE Project Financing
Page 18
July 2014
Typical Energy Efficiency
Project
Typical Energy Efficiency Project
ESCO capabilities explained;
expectations outlined; approval
to proceed obtained
Use Customer
Data Form
Initial Meeting
with Client
Conduct Facility
Walk-Through
EER provides approximate scope
of savings and cost potential and is
used to screen potential projects
ERR begins process of establishing
ESCO credibility
This meeting is predicated on
good client research
Review Energy
Usage Data
Collect energy use
and cost (2-3 yrs); analyze
for anomalies
Prepare Energy
Efficiency Report
Select New
Client
Present EER
to Prospect
Does
energy savings
justify
project??
No
Yes
Credit analysis is completed
by the bank providing the
long-term financing
Capacity Building of Banks/FIs
For EE Project Financing
Is Credit
check
good??
Page 20
No
July 2014
Typical Energy Efficiency Project
ESCO develops a Letter
of Intent (LOI) and
presents it to the client
for signature
Owner agrees to have
ESCO complete a Detailed
Energy Study (DES)
Client
signs the
LOI??
No
Select New Facility or
Client
No
Select new
Facility or Client
Yes
Detailed Energy
Study (DES)
Completed
A DES takes four to eight weeks
to complete; provides opportunity
DES reinforces
to getESCO
to know client staff
credibility
Review builds motivation
to undertake energy services
project
If DES results depart significantly
from EER, ESCO absorbs part or all
of DES costs
Present DES to
Customer
Review Results
Including Project
Scope and Plan
DES
Confirms
Preliminary
Energy
Savings
Yes
Capacity Building of Banks/FIs
For EE Project Financing
Page 21
July 2014
Typical Energy Efficiency Project
Customer
Accepts
Results
No
Client pays for
100% of DES
Yes
Final mix of measures selected;
Financial modeling used to help
price the ESA and optimize profit
and cash flow for selected measures
Draft Energy
Services Agreement
(ESA) is developed
Client
and ESCO
Sign
ESA
No
Yes
Project
Implementation
PACE-D Finance Team Presentation
Page 22
April 29, 2013
Illustrative Project Examples
Industrial Waste Heat Recovery
•
•
•
•
•
•
Major industrial unit manufacturing copper
Copper smelting exothermic process
Hot flue gases with high heat content being wasted
Waste heat recovery system installed
Power generation ~ 10.4 MW
Payback <1 year
 Total generation : 82.8 million units
 Cost of generation : Rs 1.10 per unit
 Cost of Grid Power : Rs 4.30 per unit
 Annual Savings : Rs 265 million
•
Reduction of CO2emission: 47,500 tons/year
Capacity Building of Banks/FIs
For EE Project Financing
Page 24
July 2014
Biomass Cogeneration
• Edible oil refinery in Maharashtra
• Steam required for processes
• Co-generation (top end) using biomass (bagasse)
• Generation of power 550 KW
• Loan amount: Rs 20 million
• Annual savings: Rs 16 million
• Reduction of CO2emission: 4,350 tpa
Capacity Building of Banks/FIs
For EE Project Financing
Page 25
July 2014
EE Project – SME
Capacity Building of Banks/FIs
For EE Project Financing
Page 26
July 2014
EE Project – Major Health Center
•
Project: Reduction in contract demand and savings through upgrades to the
building’s reactive power controllers, lighting, air conditioning, raw water
pumping and switching electric loads in geysers to solar water heating
Annual Energy Bill
INR 182 million
Investment Cost – Equipment
INR 85 million
Project Dev. Cost
INR 32 million
Total Project Cost
INR 117 million
Energy Cost Savings
INR 40 million
Simple Payback
~ 3 years
Capacity Building of Banks/FIs
For EE Project Financing
Page 27
July 2014
Streetlighting Project
•
Installation by ESCO of 486 street light controllers covering 19,000 street lights
of Nasik Municipal corporation
•
Improvement in the existing electrical distribution network for :
 Reduction in cable losses
 Power factor optimization
•
•
•
Savings were shared for five years
•
Payback period ~1.5 years
Annual Energy bill prior to implementation - Rs 50.0 M
Achieved annual savings - Rs 17.0 million on a capital investment of Rs 16.6
million
Capacity Building of Banks/FIs
For EE Project Financing
Page 28
July 2014
Energy Services Market in India
Energy Service Companies (ESCOs)
• Initiated in mid-1990s
•
•
•
•
•
Growth has been slow
Many issues and challenges faced
BEE has empanelment scheme
Over 137 ESCOs have been empanelled
ESCO capacity building program planned
Capacity Building of Banks/FIs
For EE Project Financing
Page 29
July 2014
Key Characteristics of ESCOs
Energy Service Companies:
• Provide or arrange a complete package of services, including energy
analysis, design, installation, financing, and maintenance of the energy
management (and other) technologies
• Offer business and financing models under which customers
effectively pay for the energy services from a portion of actual energy
savings achieved
• Payments to the ESCO are based on demonstrable results (that
satisfy the performance guarantees provided by the ESCO)
• Most of the project risks are assumed by the ESCO.
Capacity Building of Banks/FIs
For EE Project Financing
Page 30
July 2014
Energy Services Market in India
Other energy service providers
• Energy auditors – certified by BEE
• Equipment manufacturers and vendors (Schneider, Siemens, Alstohm,
etc.)
• Engineering firms – extending capabilities to provide performance
contracting services
• Contract energy management companies (Dalkia, A to Z Power, etc.)
Capacity Building of Banks/FIs
For EE Project Financing
Page 31
July 2014
Energy Services Business Models
Energy Services
Business Models
Shared
Savings
Outsourced
Energy
Management
Guaranteed
Savings
Capacity Building of Banks/FIs
For EE Project Financing
Deemed
Energy
Savings
Page 32
July 2014
Example of Customer Benefit – Hotel Guaranteed Savings
Capacity Building of Banks/FIs
For EE Project Financing
Page 33
July 2014
Developing Financial Products for EE Projects
• Based on target market and project characteristics and implementation
business models
 credit characteristics
 typical deal size & project economics (cash flow, ROI, NPV, etc.)
 Ability to assemble acceptable collateral/security package
• Define loan offer(s)
 term, pricing
 required security structure, with guarantee(s)
 economic parameters: e.g., size, % own funds
 documentation requirements
• Prepare business plan, identify/implement initial deals, train branch
staff network
Capacity Building of Banks/FIs
For EE Project Financing
Page 34
July 2014
Thank you
Dilip R. Limaye
Finance Team Leader
USAID PACE-D Technical Assistance Program
[email protected]
www.pace-d.com