dilip limaye - the emerging model of the public super esco
TRANSCRIPT
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ECO-Asia Clean Developmentand Climate Program
The Emerging Model of the Public Super-ESCO:
Need and Opportunity Dilip R. Limaye
Lead Consultant, Energy Efficiency ECO-Asia Clean Development and Climate Program
Asia Clean Energy ForumManila
23 June 2011
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2ECO-Asia Clean Development
and Climate Program
Implementing Energy Efficiency
EnergyEfficiency
Enhancing energy security
Mitigating climate change impacts
Reducing future generation costs
Balancing supply and demand
Low cost of Implementation
HighPotential
Limited MarketImplementation
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3ECO-Asia Clean Development
and Climate Program
Barriers toEnergy Efficiency
Policy/Regulatory
PublicEnd-users
Equipment/
ServiceProviders
FinancingInstitutions
Barriers to Energy Efficiency
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4ECO-Asia Clean Development
and Climate Program
Public Sector
Largest Single Purchaser of Energy
Large Cost Burden to Governments
Public SectorPublicly-Owned
Institutions
PublicProcurement
Rules andRegulations
Subject to
Energy Use in the Public Sector
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5ECO-Asia Clean Development
and Climate Program
PublicLighting
Federal/MunicipalBuildings
Universities/
SchoolsHospitals/
ClinicsWaterUtilities
PublicTransportation
FireStations
CommunityCenters
Libraries Orphanages
Energy Use in Public Facilities
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6ECO-Asia Clean Development
and Climate Program
Old, Outdated Equipment
Inadequate Maintenance
Lack of Knowledge and Awareness
Limited Budgets
Because of the Use of
Energy Use in thePublic Sector
Public Agency
Managers
Staff
Very Inefficient
Limitedexperience
Inefficient Energy Use
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7ECO-Asia Clean Development
and Climate Program
Examples of Policy Measures to
Overcome Barriers
Policy Measures
Performance Contractingusing ESCOs
Establishing Energy
Efficiency Targets
Energy EfficientProduct Procurement
Building Codes & Standards
Pricing Reforms
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8ECO-Asia Clean Development
and Climate Program
Role of ESCOs and
Performance Contracting Performance guarantees assure the successfulimplementation of the energy efficiency measures.ESCOs will generally provide operation and
maintenance services to assure continued highperformance of equipmentMeasurement, verification and demonstration of theenergy and cost savings is conductedThe ESCO provides breadth and depth of capabilities
as well as training to staff of the customerThe ESCO facilitates access to external capital forproject implementation
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9ECO-Asia Clean Development
and Climate Program
ESCO Services
Engineering
Commissioning
Construction
Design Installation
Measurementand
Verification
ESCOServices
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10ECO-Asia Clean Development
and Climate Program
Additional ESCO Services
OptionalESCO ServicesProviding or
ArrangingFinancing
Operations andMaintenance
Training
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11ECO-Asia Clean Development
and Climate Program
ESCOs in Asia
Initiated in the mid-1990s in India, Thailand, Japanand KoreaWorld Bank introduced ESCOs in ChinaMany other Asian countries have expressed interestin the performance contracting concept andencouraged establishment of ESCOs (Philippines, SriLanka, Hong Kong, Singapore)Many government initiatives to facilitate ESCOsMany types of organizations establishing ESCO
business linesBut, other than in China, the growth anddevelopment of ESCO industry has been limited
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12ECO-Asia Clean Development
and Climate Program
Why Limited Development of ESCOs
in Developing Countries? Small size, limited capacityMostly supported by donorfundsChallenges in working withPublic SectorPoor credibility withprivate sectorSmall equity, weak balancesheetsLimited staff capacity
Challenges in working withbanks and FIsHigh project developmentcosts
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ECO-Asia Clean Developmentand Climate Program
Establishment of a Super ESCO
A Super ESCO is an entity thatIs established by the GovernmentServes as an ESCO for the large untapped public sector(hospitals, schools, municipalities, government buildingsand other public facilities)Supports capacity development and activities of otherESCOsFacilitates access to project financing
It may also act as a leasing or financing company to provideESCOs and/or customers EE equipment on lease or onbenefit-sharing terms.Recent World Bank study of public procurement of energyefficiency services (published as a book) identified the SuperESCO as a potentially viable model for developing countries
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ECO-Asia Clean Developmentand Climate Program
Establishment of a Super ESCO
Super ESCO
Perf.Contracts
with PublicFacilities
ESCOCapacity
Building
FacilitateAccess to
Financing
VendorFinancing/
Leasing
Established by Government
Recent World Bank study of public procurement of energy efficiency services (published asa book) identified the Super ESCO as a potentially viable model for developing countries
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ECO-Asia Clean Developmentand Climate Program
Role of Super ESCO in China
A number of ESCOs have been established in China andmany more are being created. However, these areconcentrated in certain Provinces, while in other Provincesfew ESCOs are operating in the market.The growth of the ESCO industry has been supported byWorld Bank financingThe commercial banking industry is undergoing a transitionin China and needs assistance to fully engage in EE projectfinancingProvince of Hebei has established Super ESCO that isworking with existing and newly-formed ESCOs and
commercial banks to promote increased EE projectfinancing and implementationSuper ESCO is establishing a joint venture to form a Public-Private Partnership (PPP) for project implementation
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ECO-Asia Clean Developmentand Climate Program
Hebei DRC
DSM Center
FaKai CompanySuper ESCO Private Partner
JV forImplementation
DSM Fund
EMCs FinancingPartners
EPP Projects
Structure of the Super ESCO PPP Model
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ECO-Asia Clean Developmentand Climate Program
India Energy Efficiency Services
Limited (EESL) Very large untapped potential and a small number of fledgling ESCOs that are mostly undercapitalizedNew public sector company EESL established bynational government with equity capital of $50millionMajor functions include:
EE planning and implementationAppliances in buildings and industrial sitesAgricultural and municipal DSMNational CFL schemeAssisting the growth and development of the existing ESCOindustry
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ECO-Asia Clean Developmentand Climate Program
How the Super ESCO will help in the
Public Sector BARRIERS TO EE PROJECT
IMPLEMENTATION IN THE PUBLIC SECTORHOW THE SUPER ESCO
CAN ADDRESS THESE BARRIERS
Low awareness and interest on the part of public agencies in energy efficiency (EE)
projects
Super ESCO can conduct "marketing campaign"
to increase awareness and interestZero budgeting policy of many governments
provides little incentive for saving energycosts
Super ESCO can develop incentive mechanismsfor public agencies
Budgeting Issues for public agencies - Capital
Expenditure vs. Operating Expenditure
Agency can avoid issue by having project
financed by a Super ESCO
Lack of procurement regulations that wouldallow ESCOs and Performance Contracting
Contracting with a Super ESCO can overcomethis problem
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ECO-Asia Clean Developmentand Climate Program
Super ESCO in the Public Sector
(continued) BARRIERS TO EE PROJECTIMPLEMENTATION IN THE PUBLIC SECTOR
HOW THE SUPER ESCOCAN ADDRESS THESE BARRIERS
Limited capacity in public agencies forperformance contracting using ESCOs
Super ESCO can develop standard contractscustomized for public agencies
Lack of interest on the part of local financialinstitutions to fund public sector projects
Financing can be provided by Super ESCO
Local financial institutions generally unwillingto provide "project financing" for EE projects
Super ESCO can provide "project f inancing" forpublic agency EE projects
Private ESCOs unwilling to invest in publicsector projects
Super ESCO can invest in public agency EEprojects
Public agencies not used to contracting withprivate sector for energy services
Public agencies may find it easier to contractwith a Super ESCO
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ECO-Asia Clean Developmentand Climate Program
How the Super ESCO will help in the
Private Sector BARRIERS TO EE PROJECT
IMPLEMENTATION IN THE PRIVATE SECTORHOW THE SUPER ESCO
CAN ADDRESS THESE BARRIERS
Small number of ESCOs operating in thedomestic mret in many nations - makes
competition difficult
Super ESCO can facilitate the creation of additional ESCOs
Low aw areness of the ESCO concept on thepart of commercial and industrial energy
users
Super ESCO can conduct "marketingcampaigsn" and provide case studies and
demonstration projectsMost private ESCOs are undercapitalized and
have limited resources for projectdevelopment
Super ESCO can assist ESCOs in projectdevelopment
Most ESCOs have limited resources for projectfinancing of EE projects
Super ESCO can provide capital and/or leveragefunds from commercial financial institutions
Few successful ESCO projects that can serveas "demonstration projects" for ESCO concept
Super ESCO can develop and disseminate casestudies of successful ESCO projects
Project hosts unwilling to invest internalcapital in energy efficiency projects
Super ESCO can provide capital and/or leveragefunds for EE projects from commercial FIs
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ECO-Asia Clean Developmentand Climate Program
Super ESCO in the Private Sector
(continued) BARRIERS TO EE PROJECT
IMPLEMENTATION IN THE PRIVATE SECTORHOW THE SUPER ESCO
CAN ADDRESS THESE BARRIERS
Local FIs' lack of familiarity with lending forEE projects
Super ESCO can provide TA to local FIs on EEprojects and help develop new financial
products
Local FIs' unwillingness to finance ESCOs dueto their limited assets Super ESCO can provide credit enhancementproducts for ESCOs
Local FIs' perception that EE projects arehighly risky
Super ESCO can provide risk managementproducts for FIs
Local FIs' lack of capacity to conducttechnical due diligence of EE projects
Super ESCO can provide assistance in technicaldue diligence
High project development costs for ESCOprojects due to limited experience in
performance contracts
Super ESCO can develop standardizedtemplates for ESCO contracts and agreements
Commercial and industrial users are notconvinced of energy and cost savings benefits
of EE projects
Super ESCO can develop standardized andformal measurement and verification protocols
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ECO-Asia Clean Development
and Climate Program
Thank you
Dilip R. Limaye ECO-Asia CDCP