Energy Conservation

The strategy developed to make power available to all by 2012 includes promotion of energy efficiency and its conservation in the country, which is found to be the least cost option to augment the gap between demand and supply. Nearly 25,000 MW of capacity creation through energy efficiency in the electricity sector alone has been estimated in India. Energy conservation potential for the economy as a whole has been assessed as 23% with maximum potential in industrial and agricultural sectors.

THE ENERGY CONSERVATION ACT

Energy Conservation Act, 2001
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Considering the vast potential of energy savings and benefits of energy efficiency, the Government of India enacted the Energy Conservation Act, 2001 (52 of 2001). The Act provides for the legal framework, institutional arrangement and a regulatory mechanism at the Central and State level to embark upon energy efficiency drive in the country. Five major provisions of EC Act relate to Designated Consumers, Standard and Labeling of Appliances, Energy Conservation Building Codes, Creation of Institutional Set up (BEE) and Establishment of Energy Conservation Fund.

The Energy Conservation Act became effective from 1st March, 2002 and Bureau of Energy Efficiency (BEE) operationalized from 1st March, 2002. Energy efficiency institutional practices and programs in India are now mainly being guided through various voluntary and mandatory provisions of the Energy Conservation Act. The EC Act was amended in 2010 and the main amendments of the Act are given below:

The Energy Conservation (Amendment) Act, 2010- Main Amendments

  • The Central Government may issue the energy savings certificate to the designated consumer whose energy consumption is less than the prescribed norms and standards in accordance with the procedure as may be prescribed.
  • The designated consumer whose energy consumption is more than the prescribed norms and standards shall be entitled to purchase the energy savings certificate to comply with the prescribed norms and standards.
  • The Central Government may, in consultation with the Bureau, prescribe the value of per metric ton of oil equivalent of energy consumed.
  • Commercial buildings which are having a connected load of 100 kW or contract demand of 120 kVA and above come under the purview of ECBC under EC Act.

Energy Efficiency Measures

1. STANDARDS AND LABELLING PROGRAMME

Standards and labelling (S&L) programme has been identified as one of the key activities for energy efficiency improvements. A key objective of this scheme is to provide the consumer an informed choice about the energy saving and thereby the cost saving potential of the relevant marketed product. The scheme was launched by the Hon'ble Minister of Power on 18th May 2006 and is currently invoked for 12 equipments/appliances, i.e. ACs, Tube lights, Frost Free Refrigerators, Distribution Transformers, Induction Motors, Direct Cool Refrigerator, Geysers, Ceiling fans, Colour TVs, Agricultural pump sets, LPG stoves and Washing machine, of which the first 4 have been notified under mandatory labelling from 7th January, 2010. The other appliances are presently under voluntary labelling phase. The energy efficiency labelling programs under BEE are intended to reduce the energy consumption of appliance without diminishing the services it provides to consumers. The scheme aims at providing information on energy performance of appliances based on the standards issued by BEE so that the consumers can make informed decisions while purchasing appliances. The STAR rating ranges from 1 to 5 in the increasing order of energy efficiency. In addition to the objective of informed choices to consumers, this program leads to huge energy savings and thereby the cost savings, reduces capital investment in energy supply infrastructure, enhances the product quality, strengthens the competitive markets, builds position for domestic industries to compete in such markets where norms for energy efficiency are mandatory, removes indirect barriers to trade, reduces carbon emission and helps meet climate change goals.

2. DEMAND SIDE MANAGEMENT

The Demand Side Management and increased electricity end use efficiency can together mitigate power shortages to a certain extent and drastically reduce capital needs for power capacity expansion. The Bureau will be assisting 5 electric utilities to set up DSM Cell and will also assist in capacity building of DSM Cell staff. The preparation of investment grade feasibility reports on agricultural DSM, municipal water pumping and domestic lighting in each of the 5 states will also be undertaken by the Bureau under DSM programme.

  • Agriculture Demand Side Management (Ag DSM)

  • Bureau of energy efficiency (BEE) initiated Agriculture Demand Side Management (Ag DSM) scheme in the XI five year plan period as a key strategy to address the existing inefficiencies in the end use segments of agriculture sector. The objective of the programme was to create appropriate framework for market based interventions in agricultural pumping sector by facilitating conducive policy environment. Pump set efficiency up gradation through PPP mode was one the key aspects of this scheme. The replacement of existing inefficient pump sets with energy efficient (BEE star labelled) pump sets would unlock the market for large scale investments in this area. A recent study estimates a total saving potential of 27.79 billion Kwh in Indian agricultural pumping sector. This accounts for 37% of the overall energy saving potential and about 40% of the overall energy deficit reported during 2007-08.

    BEE has prepared six Detailed Project Reports (DPRs) in 5 states viz. Maharashtra, Gujarat, Punjab, Haryana and Rajasthan. Five more DPRs are in pipeline in the states of Karnataka, Madhya Pradesh and Andhra Pradesh. Implementation of one DPR has begun in Solapur, Maharashtra. Consent has been received from the utilities in Gujarat and Punjab for their willingness to implement the DPR.

  • Municipal demand side management

  • DSM measures have a key role in eliminating power shortage. There is need to address these issues on priority through integrated and comprehensive approach and by adopting latest techniques and technologies with active participation of all stakeholders. Municipal bodies often lack sufficient institutional capacity to develop practical approach for maximizing efficiency, even after recognizing the potential benefits. Urban Local bodies (ULBs) have to develop proper approach & proper model to identify energy efficiency projects & implementation strategy for the efficiency energy management. The goal of energy management must be on provision of services like drinking water & street lights with the least cost and least environmental effect.

    Total population of the ULBs under Municipal Demand Side Management is 1029.47 lakh which cover 12411.18 sq kilometres across 171 cities. Situational analysis survey of current ongoing initiatives on energy efficiency covers 23 states/UTs. It's high time for ULB of remaining cities to provide exclusive focus to energy efficiency initiatives. Trends for special separate provisions for energy conservation/ efficiency projects/ activity is notably not very positive. As low as only 38 cities out of 171 have separate allocation in their budget for any energy efficiency initiative. Municipal DSM programme is first of its kind and carried out across the country for 171 ULBs. This programme was divided into 5 different phases. Phase 1 covers 24 ULBs, phase 2 covers 55 ULBs, Phase 3 covers 33 ULBs, Phase 4 covers 31 ULBs and remaining ULBs will be covered in the 5th phase. The basic objective of the project is to improve the overall energy efficiency of the ULBs, which could lead to substantial savings in the electricity consumption, thereby resulting in cost reduction/savings for the ULBs.

3. Energy Conservation Building Code (ECBC)

The Energy Conservation Building Code (ECBC) was launched by the Government of India on 27th May, 2007. The ECBC sets minimum energy standards for new commercial buildings having a connected load of 100kW or contract demand of 120kVA in terms of Energy Conservation (Amendment) Act, 2010.

Harmonization of ECBC with National Building Code (NBC) is also under progress by including a chapter on "Approach to Sustainability" in NBC-2005. BEE has developed ECO-nirman conformance check tool with an objective of helping architects and design professionals to assess the conformance of their designs with code requirements.

Labelling programme for 3 categories of buildings (day use office buildings/BPOs/Shopping malls) has been developed and put in public domain. Till now 136 buildings have been found eligible for issue of label while ESCO model is being promoted for carrying out energy efficiency measures in existing buildings through performance contracting.

4. Bachat Lamp Yojana (BLY)

Bachat Lamp Yojana (BLY) promotes energy efficient and high quality CFLs as a replacement for incandescent bulbs in households at the rate of an incandescent bulb, i.e. Rs 15. This would remove barrier of high CFL price (which is currently Rs 80 - Rs 100 per CFL) which is constraining its penetration into households. It targets replacement of about 400 million incandescent bulbs in use in the country, leading to a possible reduction of 4000 MW of electricity demand, and a reduction of about 24 million tonnes of CO2 emissions every year. The price differential would be made up by project implementer through carbon credits earned which could be traded in the international market under Clean Development Mechanism (CDM) under the UNFCCC Kyoto protocol. BEE has developed the umbrella framework BLY-Programme of Activities (PoA) which has been registered under UNFCCC-EB on 29th April, 2010. The PoA would define key CDM requirements, including the project baseline, additionality, methodology, monitoring protocols through which CO2 emission reductions would be assessed. The PoA approach reduces time and transaction costs for registering the projects since the key CDM requirements will not need to be addressed by area-specific projects within the PoA. BEE plays a role of a coordinating and managing entity (CME) in the BLY - PoA. Kerala State has distributed the CFLs in the entire state. Karnataka State has also launched the scheme and CFL distribution has started. BLY is at different stages of implementation in many other states like Punjab, Haryana, Andhra Pradesh, Orissa, Chhattisgarh , Madhya Pradesh, Uttar Pradesh, Uttarakhand , Rajasthan, Goa, West Bengal, Tamilnadu and Delhi .These projects can be added to the registered umbrella framework as and when they are developed during the lifetime of the PoA.

5. Strengthening Institutional Capacity of State Designated Agencies (SDAs)

State Designated Agencies (SDAs) are statutory bodies set up by states to implement energy conservation measures at state level. The main emphasis of the scheme is to build capacity of the SDAs to enable them to discharge regulatory, facilitative and enforcement functions under the EC Act 2001. The scheme seeks to develop and implement Energy Conservation Action Plan (ECAP) based on a uniform template evolved for taking measures necessary to build institutional and human capacity, enabling the SDAs to implement energy efficiency programmes and undertake evaluation and monitoring of the Energy conservation activities implemented in the state.

Till date, 32 States/UTs have designated their SDAs to coordinate, regulate and enforce the provisions of Energy Conservation Act, 2001.

Most of these organizations have limited experience in energy efficiency / conservation. This resulted in the need for building capacity, enhancing their understanding and knowledge about energy efficiency, having a common action plan to implement measures to reduce energy intensity of the State etc. The approved scheme of the Ministry of Power therefore enables SDAs to:
a) Prepare a 5 year Energy Conservation Action Plan (ECAP)
b) Implementation of ECAP with yearly deliverables
c) Enhance capacity to undertake regulatory duties that they are required to perform under the Act.

The Ministry of Power had approved the scheme to provide financial support to the SDAs for strengthening their institutional capacity. Under the SDA scheme financial support was provided to the SDAs to carry out the following activities:

  • Creation of IT infrastructure
  • Creation of database for Energy Managers / Energy Auditors and Designated Consumers and other stakeholders.
  • Organizing workshops / training programmes
  • Creating awareness through electronic media / print media
  • Preparation of Detailed Project Reports of Govt. Buildings under IGEA.
  • Implementation of Energy Efficiency Demonstration Projects in the area of energy efficient street lighting, revamping of drinking water pumping system and energy efficiency in SMEs clusters
  • To convert the existing incandescent bulbs (ILBs) in the households and the street lights of one village with LEDs.

6. State Energy Conservation Fund (SECF)

SECF is a statutory requirement under section 16 of the Energy Conservation Act 2001 and is one of the key elements of the ECAP. The scheme is for support of Rs. 70 Crores as contribution by BEE to SECF to invest in Energy Efficiency projects. The effort will be to create a pool of financially sustainable activities for SDAs (like training programmes, fee for services, etc) which can augment the fund. The Ministry of Power has approved the scheme "Contribution to SECF by the Bureau of Energy Efficiency" for which Rs 70 Crores was sanctioned and to be disbursed during the last three financial years of the XI five year plan, i.e. 2009-10, 2010-11 and 2011-12. The funds were disbursed to those states who have constituted their state energy conservation fund and finalized the rules and regulations to operationalize the same.

7. Energy Efficiency in Small and Medium Enterprises (SMEs) and Designated Sonsumers

Energy use and technology gap study has been completed in 20 SMEs cluster and is in progress in other 5 clusters. Cluster specific manual on energy conservation opportunities have been prepared in 20 clusters and information dissemination workshop for various stakeholders have been completed in 34 clusters. Preparation of DPRs on energy efficient technologies in under progress and peer review of the prepared DPRs is being done by SIDBI/ISTSL. Capacity building workshop for Local Service Providers (LSPs) has been organized in 4 clusters. BEE also initiated the small group activities (SGA) and Total Energy Management (TEM) programme to inculcate the energy efficiency practices in SMEs with support of experts from Japan. The pilot activities of SGA/TEM have been implemented in three SMEs clusters (9 units) so far.

8. PROFESSIONAL CERTIFICATION AND ACCREDITATION

As per the Energy Conservation Act, it is mandatory for all the designated energy consumers to get energy audit conducted by an Accredited Energy Auditor and to designate or appoint an Energy Manager . The Government of India has specified the passing of the National level certification examination as the qualification for a Certified Energy Manager & Certified Energy Auditor. BEE has taken up the challenge of creating a cadre of professionally qualified energy managers with expertise in energy management, project management, financing and implementation of energy efficiency projects, and policy analysis.

The Bureau has successfully conducted Ten National Certification Examinations since 2004. After 10th Examination, 8026 persons have been qualified as energy managers out of which 5731 have been qualified as energy auditors.

The Guide Books for the Energy Managers and Energy Auditors have been revised. The 11th Examination for the fresh candidates has been held on 5th & 6th February, 2011 based on the revised syllabus. The capacity building of energy managers and energy auditors through National Certification Examination route will have a long-term impact on the Indian economy by making it less energy intensive.

The Central Government, vide Notification of 12th March, 2007, has notified 9 energy intensive industries s designated consumers. The Bureau of Energy Efficiency (Qualification of Accredited Energy Auditors and Maintenance of their List) Regulations, 2010 has also been notified on 31st March 2010. The above Regulation lays down the procedures for constitution of Accreditation Advisory Committee and qualifications for accredited energy auditor. The accreditation process is proposed to be completed twice in a year by the Accreditation Advisory Committee, constituted by the Bureau.

MANUAL AND CODES

Energy audits have been conducted in past with little or no standard test procedures and inadequate instrumentation. When Manuals of standardized test procedures are available and uniform codes are adopted, there would be increased awareness and clarity among users regarding the output from an energy audit.

Manuals and codes on 7 Technologies (Equipment) Lighting Systems; Dryers; Cogeneration Plants; Electric Motors; Electric Transformers; Fluid piping systems (network), insulation and Air Conditioners/Chillers (HVAC) have been prepared. The manuals and code would help in standardizing the process of energy audit to support energy manager and energy auditors.

BEE Codes & Manuals

9. SCHOOL EDUCATION PROGRAMME

Considering the need to make the next generation more aware regarding efficient use of energy resources, it is necessary to introduce children during their school education. In this regard, promotion of energy efficiency in schools is being promoted through the BEACON project which is now in its third phase. The main methodology being adopted by this project is to train a minimum of 3 teachers as Master Trainers from 30 schools across several towns and cities in 22 states. These master trainers will assume the role of further training other teachers and students to ensure sustainability and continuity of the project.

Through this project recommendations will also be made to the National Council of Education, Research and Training (NCERT) to update the science text books of classes VII to IX to include relevant chapters on Energy Efficiency in the school syllabus.

10. INDO-GERMAN ENERGY EFFICIENCY PROJECT (PHASE-II)

The Phase-I of the Indo-German Energy Efficiency Project has been successfully completed by the Bureau of Energy Efficiency (BEE) in September 2009. Activities in the Phase-II of the Project have already begun and the project would be supporting the thrust areas of the Bureau as mentioned above.

11. ENERGY CONSERVATION AWARDS

The Energy Conservation Awards recognize innovation and achievements in energy conservation by the Industries, buildings, zonal railways, state designated agencies, aviation; manufacturers of BEE star labelled appliances and municipalities and raise awareness that energy conservation plays a big part in India's response to reducing global warming through energy savings.

These examples suggest the potential for large scale replication, and of concrete measures which can help mitigate global warming. The awards scheme has been in operation since 1991. 32 sectors of Industry and other establishments are included in the Awards. In the Awards 2010, a new category for Thermal Power Stations has also been introduced so as to recognize their initiatives and efforts undertaken to conserve energy.

The responses among the industrial and commercial units have become very encouraging as is evident from the increasing participation level (from 123 in 1999 to 592 in 2010)

The participating units of 2010 awards have collectively invested Rs.5457 crores in energy conservation measures, and achieved a monetary savings of Rs. 2138 crores every year, implying a payback period of 31 months only, once again proving the fact that energy conservation is a least cost option. The participating units have also saved electrical energy of 2422 Million kWh of electrical energy, which is equivalent to the energy generated form a 357 MW thermal power station at a PLF of 0.775. In other words, these participating units have avoided the installation of power generating capacity equivalent to 357 MW thermal power stations in 2009-10, which would otherwise have been required to meet the power demand of these units.

In the last 12 years of Award Scheme of the period 1999-2010, the participating units have collectively saved Rs13399 crores and the investment made on energy efficiency projects was recovered back in 20 months. In energy terms, 14535 Million kWh of electrical power, 27 lakhs kilolitre of oil, 91 lakhs metric tonne of coal and 22 billion cubic metre of gas was saved, through the energy conservation measures of the participating units.

Speaking on the occasion, Union Power Minister, Shri Sushil Kumar Shinde said, "Energy conservation across all sectors of the economy is essential for balancing growth in energy demand and economic growth, while ensuring that India's access to energy is managed efficiently. India is one of the first developing countries to have achieved the unique distinction of successfully achieving the decoupling of economic growth from energy use. The National Energy Conservation Awards are a testament to the Government's and the industry's commitment towards efficient energy management and conservation."

In his address, Shri P. Uma Shankar, Secretary (Power), said, "The Energy Conservation Awards have motivated the participating units to undertake serious efforts in saving energy and safeguarding the environment."

Electrical energy savings In termss of equivalent avoided capacity in(MW)

Encouraging response from indian industry in the industry in the national energy convesvation award scheme(1999-2010)

It is hoped that National energy Conservation Award Scheme would help in motivating the other energy consumers in joining and promotion of a nationwide energy conservation movement.

PAINTING COMPETITION ON ENERGY CONSERVATION, 2010

Ministry of Power has undertaken National Campaign on Energy Conservation 2010. Under this campaign, a painting competition on energy conservation at School, State and National level are conducted. The painting competition is first conducted at the School level and two best paintings from the participating school are included in the concerned State/UT level Competition. First two winners from each State and UTs are invited to participate at the national level competition. This year, 47155 Schools and 15.63 lakhs students of 4th, 5th and 6th standards of the 35 States and Union Territories participated in the School Level Painting Competition, which was quite encouraging. This competition is aimed at motivating the children towards energy conservation and offers them a chance to explore their creativity. The expressive paintings of the children reflected their interest in the energy conservation activities and their concern about climate change.

NATIONAL MISSION FOR ENHANCED ENERGY EFFICIENCY (NMEEE)

The National Mission for Enhanced Energy Efficiency is one of the eight missions under the National Action Plan on Climate Change. The scheme has been approved by the cabinet and its implementation will commence in 2010-2011. The objective of the Mission is to achieve growth with ecological sustainability by devising cost effective strategies for end- use demand side management. The Ministry of Power (MoP) and Bureau of Energy Efficiency (BEE) have been entrusted with the task of preparing the implementation plan for the National Mission for Enhanced Energy Efficiency (NMEEE) and to upscale the efforts to create and sustain market for energy efficiency to unlock investment of around Rs. 74,000 Crores. The Mission, by 2014-15, is likely to achieve about 23 million tons oil-equivalent of fuel savings- in coal, gas, and petroleum products, along with an expected avoided capacity addition of over 19,000 MW. The carbon dioxide emission reduction is estimated to be 98.55 million tons annually.

The Cabinet approved the financial outlay of Rs.235.35 crores and a budgetary provision for Rs 108.30 crores has been made for the current financial year. NMEEE will usher in the following four initiatives, in addition to the policies and programmes for energy efficiency being implemented by BEE. These initiatives are as follows:

  • Perform, Achieve and Trade (PAT), which is a market, based mechanism to enhance cost effectiveness of improvements in energy efficiency in energy-intensive large industries and facilities, through certification of energy savings that could be traded.

    Targets for improvements in energy efficiency will be set under Section 14 of the Energy Conservation Act, 2001 in a manner that reflects fuel usage and the economic effort involved. The Government, in March 2007, notified units in nine sectors, namely aluminium, cement, chlor-alkali, fertilizers, iron and steel, pulp and paper, railways, textiles and thermal power plants, as Designated Consumers (DCs).

    Designated Consumers (DCs) in 8 industrial sectors will have mandatory participation in the 1st cycle of PAT scheme which will be implemented during 2011-12 to 2013-14. It is estimated that the total energy consumption by about 462 DCs in 8 energy intensive sector is about 165 million tons of oil equivalent (MTOE) with Power Plant sector having the lion's share (i.e. 64%). Moreover, only 5 sectors like Power plant, Iron & Steel, Cement, Fertilizer and Aluminium do consume 97% of total energy consumed by 8 sectors. About 5.4% reduction which is estimated as 8.97 MTOE are targeted in 3 years from energy intensive industries. Among the 23 MTOE set as target from NMEEE, implementation of PAT scheme do focus on achieving 8.97 MTOE by the end of first PAT cycle.

    In an effort to provide an online platform to operationalize the PAT scheme, development of an internet based system (PATNET) is under process and work-order on PATNET has been awarded to NIIT to develop the e-platform of entire PAT scheme.

  • Market Transformation for Energy Efficiency (MTEE) to accelerate the shift to energy efficient appliances in designated sectors through innovative measures to make the products more affordable with focus on leveraging international financial instruments, including Clean Development Mechanism (CDM) to make energy efficient appliances affordable and increase their levels of penetration.

    Since the public sector holds the key to aggregation of CDM projects so as to reduce transaction costs, barriers to widespread adoption of CDM need to be removed through the following measures.

    • Make it mandatory for all public investment and over time, all public operations to be assessed for their potential to attract carbon finance
    • Promote programmatic CDM to reduce transaction costs and aggregation of small energy-efficiency projects
    • Develop and implement a national CDM strategy for energy efficiency
    • Promote market access of small industries in energy-efficiency projects
    • Promote transparency in pricing
    • Ensure that the legal status of CERs is clear to avoid disputes related to taxation
    • Enhance capacity-building and training

    Under this initiative of NMEEE, BEE has developed the umbrella framework BLY-Programme of Activities (PoA) which has been registered under UNFCCC-EB on 29th April 2010. The PoA would define key CDM requirements, including the project baseline, additionality, methodology, monitoring protocols through which CO2 emission reductions would be assessed. The PoA approach reduces time and transaction costs for registering the projects since the key CDM requirements will not need to be addressed by area-specific projects within the PoA. BEE plays a role of a coordinating and managing entity (CME) in the BLY - PoA. Kerala State has distributed the CFLs in the entire state. Karnataka State has also launched the scheme and CFL distribution has started. BLY is at different stages of implementation in many other states like Punjab, Haryana, Andhra Pradesh, Orissa, Andhra Pradesh, Chhattisgarh , Madhya Pradesh, Uttar Pradesh, Uttarakhand , Rajasthan, Goa, West Bengal, Tamilnadu and Delhi. These projects can be added to the registered umbrella framework as and when they are developed during the lifetime of the PoA.

    Another program under this initiative is the development of Super Efficient Equipment Programme (SEEP). This program is proposed to develop superefficient appliances with an aim to reduce consumption and enable demand side management. The goal is not only to reduce cost of energy efficient equipments to stimulate accelerated market transformation but also to encourage domestic manufacturing to sustain the market.

  • Energy Efficiency Financing Platform (EEFP), to help stimulate necessary funding for Energy Service Company (ESCO) based delivery mechanisms for energy efficiency. The costs will be recovered from the energy savings, which will also reduce the subsidy bill of the state government. The scheme has the potential to be replicated across the country.

    BEE has undertaken the following measures, in addition to those related to implementing demonstration projects in government buildings, in order to stimulate the market.

    • Putting in place a government-supported standard methodology that covers the entire project chain from audit to performance measurement and verification
    • Designing a standard performance contract
    • Designing appropriate financial mechanisms to fund projects
    • Implementing projects and evaluating their impact
    • Building capacity in ESCOs and project owners
  • In an effort to provide EEFP, MoUs with M/s. PTC India Ltd, M/s. SIDBI and HSBC Bank have been signed by BEE. PTC India Ltd. has commenced financing of several building energy efficiency projects in Rashtrapati Bhavan Estate, ESIC Hospitals at Rohini and East Delhi, AIIMS, Safdarjung Hospital. SIDBI has taken up project preparation of energy efficiency projects in 25 SME clusters which will then be offered financing.

    Further, investment grade energy audits have been completed for large public buildings in the country. Based on the recommendations of these audits iconic buildings in the states will be taken up for implementation through ESCO route.

  • Framework for Energy Efficient Economic Development (FEEED), seeks to develop fiscal instruments to promote energy efficiency including innovative fiscal instruments and policy measures like the Partial Risk Guarantee Fund (PRGF) and Venture Capital Fund for Energy Efficiency (VCFEE), Public Procurement of energy efficient goods and services, Utility based Demand Side Management (DSM), etc.

    Efforts of the government to create a market for energy efficiency need to be supplemented with appropriate fiscal instruments, which must be designed to address the following objectives:

    • Reassuring lenders by providing a guarantee for performance contracts
    • Providing a venture capital fund from the Government to provide equity for energy-efficiency projects
    • Promoting leadership in the public sector on energy efficiency
    • Promoting energy efficiency in public procurement based on life cycle cost analysis
    • Promoting regulatory incentives to state utilities through electricity regulatory commissions for DSM projects
    • Offering concessions on taxes and duties to attract investment

    Partial Risk Guarantee Fund (PRGF)

    A PRGF is a risk sharing mechanism lowering the risk to the lender by substituting part of the risk of the borrower by granting guarantees ensuring repayment of part of the loan upon a default event. The guarantee can seek to directly support financing of energy-efficiency projects by:

    • Addressing credit risk and barriers to structuring the transactions involved in financing energy-efficiency projects and
    • Engaging commercial financial institutions and building their capacity to finance energy-efficiency projects on a commercially sustainable basis.

    Venture Capital Fund for Energy Efficiency (VCFEE)

    VCFEE as envisaged by the Government of India under the National Mission for Enhanced Energy Efficiency can go long way in addressing these barriers and kick starting some of the long awaited energy efficiency projects in the country.

    This fund will work with following criteria:

    • It is a Fund providing risk capital support to energy efficiency investments in new technology, goods and services, etc
    • It is a leveraging fund with a view to leverage private venture investments in energy efficiency sector by identifying the possible co-investment opportunities (not in competition with other private funds) with other venture capitalists into Energy Efficiency projects & companies.
    • It allows private venture fund players to capitalize the transaction costs associated with specific EE investments
    • It helps to create the volume in energy efficiency deal flow by the fund manager of VCFEE through advertising & soliciting opportunities in energy efficiency area.
    • In investments, where it co-invests with other venture capitalist on same return expectation as private venture capitalist, this Fund could be last to be paid in case of liquidation of investment in projects
    • In investment, where it co-invests with other venture capitalist on lesser return expectation than private venture capitalist, this Fund then should be the first paid in case of liquidation of investment.
    • Under this initiative, framework development for financial institutions to promote energy efficiency is in process. Document on institutional framework and RfP for hiring fund manager for Partial Risk Guarantee Fund (PRGF) and Venture Capital Fund (VCF) are being finalised.

      Study on fiscal and monetary policy of energy efficiency projects have been awarded to National Institute of Public Finance and Policy (NIPFP).

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