Diapositive 1 - Bureau of Energy Efficiency

Report
Development of Energy Efficiency
Projects under Guaranteed
Performance Contract
DSM Workshop conducted by
CEA in cooperation with BEE & CBIP
N Delhi, January 24, 2012
Presentation by
Dr. G C Datta Roy
CEO
Dalkia Energy Services Limited
New Delhi
)
Disclaimer
This presentation captures the views of DESL and need
not necessarily represent the views of the entire ESCO
community.
Presentation Outline
DESL
• Our legacy
Brief introduction-ESCO & EE Performance Contract
Project Experience-Case examples
• Successful
• Unsuccessful
Global development
Key learnings
Conclusion
Dalkia Energy Services Ltd

Set up in February 1999 as DSCL Energy Services Co Ltd as a full service
ESCO

Engaged in performance contract & consulting business in the areas of
“Energy Efficiency” ,“Renewable Energy” and “GHG mitigation” globally

Acquired by Dalkia India, member of the 8 Bn euro global Energy
Service Major-Dalkia of France in Dec, 2009 and rechristened as
Dalkia Energy Services Limited

Only Indian ESCO to provide such services in the Industrial, Municipal &
Commercial segments in India and many countries globally
Only Indian ESCO to have implemented PC projects in the Industrial,
Commercial and Municipal sectors
Recipient of
BEST ENERGY
SERVICES COMPANY
AWARD
For 4 out of 5 Years
Service Offerings
Project Management Portfolio
Consulting Portfolio
Design improvement
Fee Based Engineering
and Project Management
Energy
Efficiency
Engg. & Project Mgmt
under Shared Savings
(EPSS)
Engineering, Procurement
& Construction (EPC)
Service
Offerings
Energy Diagnostic Study
(Audit)
Feasibility Study
Owner/ Lender Engg.
Services
Renewable
Energy
Energy Strategy &
Management
Performance
.
Measurement
& Verification (PMV)
CDM , REC, Escert services
Industry
Breweries and Distilleries
Chemicals
Edible oil
Paper
Power Plants
Rice Mill
Sugar
Textiles
Biomass and cogeneration
Commercial Buildings
Commercial Office Buildings
Government Building
Hospitals
Hotels
Data Centers
Bi/Multi Lateral Projects
Asian Development Bank
USAID
World Bank
UNDP
GTZ
ESCO & Performance Contract
Box 1. What Is an ESCO?
An ESCO is “a company that provides energy efficiencyrelated and other value-added services and for which performance
contracting is a core part of its energy efficiency services business.”1
World Resource Institute
Box 2. Shared savings PC
Savings
Baseline
energy
bill
16/07/2015
Footer
PC
energy
bill
ESCO
share
B
Client
share
Respective share
governed by savings
performance &
financing mechanism
6
ESCO Development – Important Milestones
Year
1992-93
Program
USAID Study
1994-95
EMCAT
1995-96
USAID Support
1999-2000
2000-01
ECO- I Project
EC Act
Activities
Feasibility of ESCOs
Grants to Industrial Development Bank of
India for ESCO Promotion
Formation of a few ESCOs
Some EE/ESCO/ DSM Projects
Model Performance Contract for ESCOs
BEE established; EC Action Plans
formulated and under implementation
Source: 3 Country EE Project
Contd./-
ESCO Development - Timeline
Year
Activities
Programme
2001- ongoing
USAID ECO II & III
2007- Ongoing
BEE Support
Support to BEE
Utility DSM projects in 2 states
DSM Best Practices - Development & Dissemination
ECBC developed for 6 climate zones
Development of State ECAPs
EC Curriculum Development
ESCO Projects in Buildings
ESCO Projects in SMEs with Risk Financing
ESCO Empanelment
Rating by CRISIL/ICRA
Implementation of PC projects in
Government buildings
Launch of super ESCO-Financing of
ESCOs
Contd./-
DESL Performance Contract: Track Record
400.00
345.00
341.00
20.75
20.00
Other Industry Projects
33%
120.0
Paper
Projects
45%
130,284
183.7
2.50
199,439
4.92
5,338
Buildings Projects
22%
Min Monetary Savings (in Lac Rs)
Lac kWH Saved
Max Monetary Savings (in Lac Rs)
Tons of GHG Emissions Saved
PMV Results-Government building
Results of PMV for Three Years
% Energy Savings
100%
75%
50%
% Energy Savings
48%
47%
48%
2003-04
2004-05
2005-06
25%
0%
Year
Technical & Financial
performance better
than guaranteed
Private Hospital: Savings Measured & Verified
PMV Method -Whole Facility
Guaranteed Savings - 16%
Actually Achieved - 21%
Winner of national award
Paper Mills-PMV during PC period
Annual financial savings > Rs 13 Million;
Individual project payback < 6 months.
1500
1434
1400
kg/husk
1351 1352
Per MT Paper
kWh
1402
1362
1300
1257
1200
1160
1090
1100
1000
1
2
3
Y
Pre-PAT days
Winner of National Award
4
Project Experience-Unsuccessful
Ones
)
Large paper mill
Energy
Audit
Baseline & PMV
development
Investment grade audit
By ESCO
•System Analysis
•Baseline establishment
•ECM designing
•Project implementation
•PMV
Draft PC
Negotiation
Failed to move forward with implementation as transaction
Cost would have been higher than the return
From share of savings
List of project approved
At CEO level
UNRESOLVED ISSUES
•Final list of projects
•Complex factors for base line
& adjustment
•Transactions & documentation
•Roles and responsibilities
• Overall savings and share of savings
Recently faced almost
similar situation in a very
prestigious project in the
Government Building
Segment
Central Government Hospital
Energy
Audit
Scoping
&
implementation
Detailed Energy Audit by
consortium under
BEE program
•System Analysis
•Baseline establishment
•ECM designing
•Arranging funds
•Project implementation
•PMV
•Payment through shared savings
•Payment security
Change of engineers
Huge cost of transactions
Project dropped
RFP for
ESCO
Negotiation
LOI & basic contracts signed
In May 2006
UNRESOLVED ISSUES
List of projects
Base line & adjustment
This project reenergized once
again by BEE in 2008; still
struggling with similar issues
Municipal Water System
Tendering by
UDC with support from ILFS
Negotiations
(For over 2 years)
Investment grade audit
2.Baseline establishment
4.Project implementation
5.PMV
6.Shared savings
7.Payment security
Approval of
audit report
By UDC
Preparation of
draft PC document by external
consultant
Basic agreement
reached-still uncertainty
in decision & if yes,
when.
Next hurdle-Changes in baseline
-Project financing
Huge cost of transactions-even if rest of the things go smooth,
would not be able to recover cost
Challenges for ESCO Business
Despite highly successful project experiences-only about 30 projects
implemented in last ten years-none in the last two years
There are over 80 ESCOs empanelled with BEE-not much is known
about how many of them are active and volume of business
Last survey done by WRI, Washington based NGO in 2008
• 28 active ESCOs
• 24 of them have done projects
3 having annual revenue over $ 4 Mn
11-between $ 0.2 to 4 Mn
10-< 0.2 Mn
ESCO business initiated in India in 1994, in
Brazil in 2000 and in China in 2001-but
contrasting growth stories
17
ESCO Development*-China (3 Pilots)
Revenue growth-Mn RMB
*CHINAʼS ESCO INDUSTRY:Saving More Energy Everyday Through the Market, Sun Xiaoliang and Zhu Lin, with
Bob Taylor, May 31, 2011
18
Rapid Growth post 2005-China
Explosive growth of PC
investment ($ 4 Bn
market) driven by both
policy & market
So has been the growth of
number of ESCOs
Average investment/ESCO
> 10 Mn $
As against $ 4 Bn in China and estimated $ 1 Bn in
Brazil, investment in India would be in the order of $30
MN & that too mainly in vendor projects
In USA, SEPC is being executed mainly by service ESCOs.
19
Key learning
Successful projects
• Client end need & Leadership
• Innovative contracting
• Simple M&V
• Development of credibility and relationship
Unsuccessful projects
• Procedures & processes
Contracting process & procedure
Time requirement for freezing technical and commercial issues
Lack of understanding of M&V process
Change of terms post tendering
Change of persons
Cost of transactions
Project financing
• Relationship & trust building
Information asymmetry
Credibility gaps
Key Differences-Brazil, China, India
Brazil
•
•
•
•
DSM cess & mandated DSM projects (> $ 150 Mn/year)
DSM projects to be performed mainly by ESCOs
Loan guarantee fund
Emphasis on M&V
China
•
•
•
•
WB-GEF support & hand holding
PPP Model for ESCO organizations
Loan guarantee fund
Total alignment under mandated program
India
• No mechanism to review follow on action (e.g. no review of PM’s announcement in
2002 of 10% reduction in EI in Government building through PC projects by 2012)
• BEE’s role in this is of a facilitator-cannot mandate as is done in China and Brazil
• Absence of and difficulty in developing financing mechanism for small scale ESCO
projects
Developing the PC Market
& ESCOs in India
)
Developing PC Market
•Steering implementation of sufficiently large number of projects in the
Government segment-cradle to cradle
•Review of the programs launched under EESL
•Taking feed back
•Corrective action
•Re-launch
•Development of PPP model for implementation of PC projects
•Review and redrafting of the standard PC document
•Formation of a high powered steering committee from GOI stakeholders (MUD, CPWD, MOH,
MOD, Railways, PSUs, MOP & BEE)
•Adaptation of a new draft for wider acceptability
•Launch of a national awareness program on baseline & adjustments
•Collaborating with CERC for launch of utility DSM program across the
country as regulatory initiative under PC
•Mandating 3rd party verification for projects implemented directly in the
Government facilities
We also foresee market boost from
implementation of ‘PAT’ scheme
23
Fiscal & Financing Support
Fiscal
• Tax exemption on income from PC projects for at least five years
• Service tax exemption for BEE accredited ESCOs & service income from
PC projects
Development of financial products for ESCOs
• PSM instrument as security
• Development of micro-credit mechanisms for small projects/project
insurance
• Status as priority sector
• Loan guarantee fund
• Standardized project appraisal process-reducing cost of transaction
24
Incubating & Developing ESCOs
Incubation-China/Brazil models
Review and development of an effective accrediting system
• Purpose & impact
• Methodology
• Cost
25
In Conclusion
DESL always happy to share their rich learning from success and failure
stories
Hopefully, such sharing would help taking a few steps forward to develop
the PC market & ESCOs
CERC/CEA/BEE can play very significant roles-best to emulate the China
example-how initially ESCOs were incubated and how even now
Government is playing a very big role in development of ESCO market
(NDRC carried out a Province-wise survey in 2010 based on which more
stringent policy performance evaluation system is being put in place).
Thank You
Dr. G C Datta Roy
Chief Executive Officer
Dalkia Energy Services Limited
(Formerly DSCL Energy Services Co Ltd)
The Great Eastern Centre, Ryder Tower, 1st Floor
70, Nehru Place, N Delhi-110019
Tel-+91 11 4079 1100/4079 1107 (Direct)
Fax-+91 11 4079 1101
Mob-+91 9810212315/95829 40363
[email protected]

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