Manager

Confidence Building Measures for Energy Efficiency

U V Krishna Mohan Rao 15 Oct ‘04

U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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Presentation Structure • • • • •

Conducive situation for EE in India Energy savings potential EE investment potential CBMs – Need and What ? Experience sharing for EE success

U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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Conducive situation for EE in India • India on right track

U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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Energy Intensity high and increasing –

Is India on right track ? Energy Intensity comparison (Energy/GDP) 29.00 27.00

India

(MJ/1987 US$) 25.00 23.00 21.00 World Average 19.00 17.00

USA

15.00 1980

1985

Source: MIT Energy Lab: World Energy Statistics

U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

1990

1995 UVK

Conducive situation for EE in India • India on right track

U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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EE : India on right track

Source: World Development Indicators, WB 2002 Source: World Development Indicators, WB 2002

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International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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Conducive situation in India • • • • •

Best Leadership Reforms on firm ground, irreversible India now most favored FDI destination Evolution of national EE strategy - supply&demand BEE, EC Act, Elec.Act, National Elec.Policy

(time bound action

plan for EE improvements,voluntary targets,benchmarks; professionals professionals development; Standards, labelling; labelling; Rewards & recognition)

U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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Conducive situation for EE in India • 3 decades,every multilateral institution interacted now into specific result oriented assistance

• Energy suppliers performing world class Refineries, Power

• At industry level, world class performers in Cement, Petrochemicals, Engineering, Automobiles ….

• At product level, world’s best two wheelers, World’s best heat recovery wheels

• At the building level, world’s best models (CII, TERI)

U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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EE Savings and Investment Potential • Rs. 10,000 crore annual saving potential one sector alone (18 months payback) • 20,000 MW cogen potential (36 months payback) • Capturing this EE leads to massive investment opportunities (Rs.15,000 to 45,000 crore) • How about Municipalities - pumping, lighting ?

U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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Situation for EE in India •Most conducive. Period

U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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Such EE potential offers ample opportunities for: • Energy Devt.& Reg. Agencies:

Govt, NGOs, Renewables..

• Financing, Multilateral Agencies, Insurance: Banks & Fin. Instns, IREDA, USAID, ADB…..

• • • • • •

Energy related Edu.Institutions: IITs, Anna University.. Building & Mfg industry Energy Professionals, Architects, ESCOs Industry & Chambers of Commerce Law abiding & enforcement Manufacturers of EE equipment & systems

U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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CBMs – Need and What ? • All concerned agencies doing their bit. Need pace • Commensurate with potential and talent available, it is possible. For awakening tiger, CBMs required at: – National level; Industry segment, specialization level – Individual company level

• CBMs in terms of: – Action, Models – Awareness – Tools, Products & services

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CBMs – Need and What ? • National Level –President, PM, CMs (Japan) • Awareness (Polio, AIDS, Eye/blood donation, EE) –Water –EE U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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CBMs - National Level EE Strategy Development and Execution calls for men, money • Part of it can be self-financing • Partly by creation of a fund say, thru’ a small cess • Men – internal or outsource (Thailand)

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CBMs - National Level EE Awareness, Education • Massive national efforts – Press, TV, Radio, other media – until it becomes part & parcel (Reliance) • State level orgns.like EMC Kerala, GEDA, National level efforts of oil, coal, power suppliers, NPCs, PCRAs, ENFUSEs, CIIs, FICCIs U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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CBMs - National Level • Instead of Mandatory, make it sponsored energy audits • Instead of mandatory norms, encourage voluntary benchmarking • Sponsor training for EE; ESCO business to EE, financing, insurance professionals • Sponsor demonstration; innovative financing

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CBMs – Industry, Specialization Level Dr V Kurien, Infosys Narayanamurthy, HLL Chairman, ITC, Reliance – Awareness (PEPSI, Parker, Credit Card, Santro, Reliance Mobile, EE)

– Sponsor replication of known efficiency (Sunflag Iron) – ICICI Kamath, SBI Chairman, Canara Bank CEO… – Royal Sundaram Chairman, ……. • •

Rs.10,000 crores an sav potl -one sector alone; 20,000 MW cogen potential Capturing this EE calls for massive awarenes

U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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CBMs at Unit Level Typical fears of executives for making financial commitments for EE • Whether the proposed EE scheme will work and envisaged benefits accrue? • Is it possible to measure & monitor the savings ?? • Whether external expertise be useful or such expenses turn futile without returns ? These challenges are equal opportunities for energy experts, financiers and insurance providers. U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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If you are consultant, your contribution to CBMs • Less than dozen EE consultants with annual fee of Rs.1 crore. Prospects exist for Infosys, Wipro & TCS size of consulting for EE ! • Opportunities EE consultancy range from Rs.100 crores for EE identification & project consulting to Rs.1000 crores annually for consultants who help realize Rs.10,000 crores annual saving ! • Accept fee related to real savings. No savings, no fees; creates confidence in customers on consultant credibility U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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CBMs : Consultants role • Sharpen your skills • Organise yourself : equipment, manpower, logistics, computerise • Upgrade & systematise : get ISO 9000 for your outfit • Take up the challenge • Provide top class professional service-not only technical but also assure savings • Take up assignments to implement recommendations/assist client achieve savings U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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If you are an energy management expert and can muster financial muscle

• Collaborate with one who has strong balance sheet • Practice ESCO concept

U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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CBMs : Involve legal experts • Opportunities for legal expertise would necessitate : – especially when large scale EE projects are taken up – external financing is involved and – ESCO concept is pursued

• Legislative, Regulatory framework is now taking firm ground with EC Act, Electricity Act • Legal frame work to safe guard contracts or indemnify a breach in contract is underdeveloped in India • ITC Unit Legal, DHQ legal and Corporate Legal U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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CBM – Establish database before and after implementation • What is not measured is not saved ! • The CBM relates to : – Fixed & Portable meters – Data loggers,PLCs,BMS, EMS • Business opportunities for the above can exceed over Rs. 200 crores ! U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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CBMs - Sponsor EE Monitoring • Any EE measure is worth mentioning only when benefits are measured • Metering, therefore, precedes EE investments and is part and parcel of energy efficiency management • Energy accounting a must; More transparency in operations • Lower sp.energy consumption & en. bills in long run • Don’t dissuade by insisting on stand-alone payback for EE monitoring. It is a prerequisite U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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CBM – Banking sector to also lend for EE Banking sector : – “in general does not have an understanding of EE projects and their payback potential and do not want to depart from conventional asset-based lending, whereas EE project requires an innovative approach” – “while ready to finance, modernisation, upgradation of plant, technology and machinery which may have incidental energy saving, are presently not inclined to finance EE projects in ESCO mode” – “appear to be more comfortable with their existing customers whereas many ESCOs, may be of first generation, with limited financial strength but high technical capabilities” Source:UNEP- World Bank Initiative for Developing Financial Intermediation Mechanisms for EE Investments - 2004

U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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CBM – Banking sector to also rise up and lend for EE

– Housing finance – all players covered – Film finance – all actors covered ! – Vehicle finance - all players covered – Why not EE financing ? It is just a question of time for learning the art, coming out with suitable products U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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If you are financial institution… • Opportunities exists for ICICIs, SBIs, Citibanks, HDFCs, Sundaram Finances, • You can target a piece of Rs.25,000 ~ Rs.35,000 crores as energy efficiency investment financing !

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CBMs – Need and What ? • Develop financing products – – – – – –

for manufacturers of equipment For client facilities Consultants Vendors Manufacturing equipments ESCOs

U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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CBMs by Energy Suppliers/Financial Institutions • Energy Suppliers to involve FIs to quickly lend for EE. Policies / schemes need to be simple and announce simplicity • FI can sponsor energy studies as a pre-cursor to lending for capital equipment • Energy suppliers need to review periodically with consultants also • Energy suppliers can also sponsor computerized progress monitoring U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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CBM - Insurance for EE Investments

•Acts of God are insured •Acts of men for plunging into EE are not insured !!

U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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If you are in insurance business • EE offers phenomenal business prospects. Many a time, EE investments are not made due to fear of failure • Insurance is required for concerned players – – – – –

Consultants who assure results, turnkey consultants ESCOs who invest money, manpower and management Vendors who guarantee performance Lenders of money Manufacturers assuring performance and savings

• If only all the investments required for EE are to be made, the insurance business for this segment alone exceeds Rs. 100 crore per annum ! (just 1% of investment value for all the concerned players put together)

U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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Is EE applicable to “my business”? Experience with over 750 Companies in India and abroad covering: • All types of industries and buildings (hotels, hospitals, colleges, commercial complexes, cement, chemicals & fertiliser, dairy & food products, glass & ceramics, jute, textiles & fibres, metal & metal products, pulp & paper, sugar, tyres)

• All kinds of energy (coal, lignite, wood, oil, gas, electricity, waste) • EC has been a success through out • In all cases identified savings exceeded 10%. Range 15 to 35% • Specific Energy Consumption improvement more than 5% in 3 years • VRs . 20 lacs to Rs . 10 crores saving annually U Krishna Mohan Rao Associates UVK

International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

Fundamentally, “sales pitch” required that EE, an opportunity to make money ! • “Use EE • No subsidies required. No doles required. No free lunch. You can afford and can give back, perennially. • Self financing • Triple digit returns”

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CBMs - share cases to confirm that one can save energy whether plant is: • Old or new • Small or large • With imported or indigenous technology • “As-is” or under expansion • Sick or healthy U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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CBMs - share cases to confirm that one can save energy • With or without Consultants • Regardless of current savings level • Whether mandatory or not ! • Watch out the Award winners presentations at this very seminar !!

U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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CBM - outsourcing EE can be as good • Housekeeping, transport, communications, security, catering are all now familiar outsourced services • Now, there are increasing number of examples of facilities management being outsourced • We are now experiencing companies requisitioning services for maintenance aspects on utilities like compressed air & steam . This will be increasing by the day. • Keep plugging the leaks and take a portion of savings (leaks) !! U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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CBM Case Studies • • • •

Amul GCMMF Group ITC Paper ITC Hotels EID Parry Murugappa

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CBM Case Studies - Amul, ITC, Parry • CBMs at Board Level, CEO Level, Plant Level • CBMs - first give and then take ! – Data base established first – Every investment cleared by user, HODs Production, Engg, Finance plus Unit Head plus CEO and sub-committee of Board – Implemented first, No advance – Savings realization assurance & achievement even during study stage – Savings monitoring and measurement – Transparent discussions, interactions – Mid-course corrections – Awareness, motivation and incentives – Savings certified by user engineer, finance manager and then fee cheque taken ! 18 months after initial entry !! U V Krishna Mohan Rao Associates UVK

International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

CBM Case Studies - Amul, ITC, Parry • Amul Rs.2,500 lacs pa saving; 20 %; 18 months payback • ITC Paper Rs.300 lacs pa saving (over and above Cogen project), 30 %; 12 months payback • ITC Hotel Rs.60 lacs pa saving; 10 %; 12 months payback • EID Parry Murugappa Rs.200 lacs pa saving; 40 %; 3 months payback

U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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Recap and Take home . . . • Situation most conduce for EE in India • Abundant EE Saving and Investment Potential • Initiate CBMs such that “Law or no-law”, EE has to be “on” • National level, industry level, unit level - all players have their role in CBMs • EE is a win-win business for energy suppliers, users, equipment mfrs, FIs, insurance providers, ESCOs and consultants • Successful companies nurture CBMs for EE. Success begets success U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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Acknowledgements: BEE USAID

Thank You U V Krishna Mohan Rao Associates International Specialists - Energy Efficiency Implementation

[email protected] U V Krishna Mohan Rao Associates International International Specialists Specialists -- Energy Energy Efficiency Efficiency IImplementation IImplementation

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