1 Albrecht Kaupp, Manager Indo-German Energy Programme, IGEN Energy Efficiency and Conservation, Demand Side Management and Energy Modesty “Are we still on track”?

2 1. This Act is a Government intervention to mandate firms to make more profit. 2. Voluntary market transformation without a stick and carrot approach is not working as the Japanese, USA and European experience has shown. 3. However industry, utilities and consumers are too smart to mistake yellow painted sticks for juicy carrots Yes, but need to accelerate pace to implement the Energy Conservation Act !

3 1. India’s and Germany’s power sectors are generating about the same output say 650,000 GWh per year. 2. In the future, BEE may earn a meager 10 Crore Rs from labeling fees to implement the Energy Conservation Act. 3. The designated State Agencies also do not have significant budgets to implement the Energy Conservation Act. 4. One Paisa/kWh cess (0.3%) generates 650 Crore Rs per year. 5.This is a very small price to pay for a consumer considering the economic and financial benefits. A Cess on Electricity in support of EE,EC and DSM

4 1. The cess costs are 15,000 Crore Rs passed on to the Consumer 2. The cess applies for the time being for renewable energy, combined heat and power and cogeneration. 3, Accumulated investments trigged by the cess were 50,000 Crore Rs 4. Annual turnover from investment 30,000 Crore Rs 5. About 180,000 Jobs in a population of 82 Million have been created However the German utilities made a profit of 35,000 Crore Rs from power sales while the Indian utilities have about the same level of losses. Cost/benefits of Cess in Germany

5 Most survey as well as the annual MoP/ BEE survey of energy conservation measures implemented in India agree that there is a large cost effective and technically viable potential for EE, EC and DSM measures. The potential is estimated at Rs. 10,000-30,000 Crore depending on which desired payback period or FIRR is assumed. Presently a meager Rs. 1,500 ± (50%) Crore a year of investments in EE, EC and DSM are implemented. Energy efficiency market transformation with the help of ESCOs

6 A.Lack of risk cover for ESCOs and B.Unsuitable business structure of “would be” ESCOs. C.Large well paying and low risk industries do not prefer ESCo contracts Why is this highly profitable EE,EC and DSM investment market so poorly tapped?

7 Various experts estimate the number of ESCOs in India between 0 and 60 1.Appraisal of the energy conservation potential in a client firm-C 2.Preparation of a detailed project report. 3.Detailed project engineering of selected measures by ESCO-C 4.Financial closure through ESCO-O 5.Implementation of selected measures by ESCO-C 6.Joint monitoring and verification of impact-C 7.Repayment of ESCO by client. 8.Hand over of project to client. What is an ESCO anyway ?

8 1.Fund for risk cover (payment security mechanism) for ESCOs. 2.ESCOs as subsidiaries of larger financially strong firms (energy utilities, banks, large industrial houses). 3.Lenders request from their borrowers mandatory appraisal of energy saving potential. 4.The Reserve Bank of India declares the subject an investment priority area. Four possible ways forward with ESCOs

9 Data collection, data analysis, impact monitoring and publication of validated data about the positive and negative effects of EE, EC and DSM at the national, State and company level is insufficient. Public and political image of EE,EC and DSM suffers. Allocation efficient decision making about the future strategies in these subjects is poor without comprehensive and validated data. Provide more and better validated impact data

10 The Planning Commission in cooperation with BEE, PCRA, CMIE and ? presents for the first time in “The annual report of the impact of energy conservation, energy efficiency and demand side management on the Indian Economy” The Energy Conservation Act has all the powers and is the framework to institutionalize in a sustainable manner a structure to work towards this objective. All what it takes is 5 years, Rs. 50 Crore and a dedicated team to completely institutionalize. The way forward: A vision

11 DSM is a most effective tool if we do it right! Split DSM market and duties and responsibilities up between the two group of players where they are best and have influence Power Utilities, and Private sector ESCOs, energy auditors and energy managers

12 Let the (power) utilities do their DSM with non paying or below cost paying customers such as generation, transmission, distribution losses and those sectors of the society which either pay too little for power due to social considerations, or don’t care to pay. The DSM responsibility of power utilities and area of influence

13 Let the ESCOs, energy auditors, energy managers, energy consultancy groups do their DSM with well paying consumers cutting into the revenues of power utilities. This two way recipe has been an overwhelming success worldwide to end up with either healthy utilities or those who are not any longer able to survive on their own. Either way there will be a much needed change. The DSM responsibilites of ESCOs, Energy Auditors, Energy Managers and area of influence

14 I have never learned anything from a man/woman who agreed with me Thank you Let us discuss