energy conservation ec act 2001 demand side management performance contracting

ENERGY CONSERVATION

• EC Act 2001• Demand Side Management• Performance Contracting

Nov. 16, 2010

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Agenda

Energy Conservation Act 2001

Demand Side Management

ESCO – Performance Contracting

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Energy Conservation Act 2001

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Energy Conservation Act - Background

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• An Act to provide for efficient use of energy and its conservation and for matters connected

therewith or incidental thereto

• It extends to the whole of India except the state of Jammu and Kashmir

• It was enacted by Parliament in the Fifty-second Year of the Republic of India on October 2001

• The Bureau of Energy Efficiency (BEE) came into force from March 2002 onwards

Powers to the Central Government:

• Specify the norms for processes and energy consumption standards for any equipment, appliances which consumes, generates, transmits or supplies energy

• Specify equipment or appliance or class of equipments or appliances, as the case may be, for the purposes of the proposed legislation

• Prohibit manufacture or sale or purchase or import of equipment or appliances unless such equipment or appliances conforms to energy consumption standards

• Direct display of such particulars on label on equipment or on appliance

• Specify, having regard to the intensity or quantity of energy consumed by any user or class of users of energy as designated consumer for the purposes of the legislation

• Direct any designated consumer to get energy audit conducted by an accredited energy auditor

• Direct designated consumer to appoint energy manager in charge of activities for conservation of energy

• Prescribe minimum qualifications for appointment of energy managers

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• Direct any designated consumer to furnish information with regard to energy consumed and action taken on the recommendation of the accredited energy auditor

• Direct any designated consumer to prepare a scheme for efficient use of energy and its conservation and implement such schemes as may be prescribed

• Prescribe energy conservation building codes for efficient use of energy and its conservation in the building or building complex

Powers of BEE:

• Recommend to the Central Government the norms for processes and energy consumption standards for equipment and appliances

• Recommend to the Central Government for notifying any user or class of users of energy as a designated consumer having regard to intensity or quantity of energy used by it

• Recommend to the Central Government the particulars required to be displayed on label of equipments or on appliances and manner of their display

• Take suitable steps to prescribe guidelines for energy conservation building codes

• Develop testing and certification procedure and promote testing facilities for certification and testing for energy consumption of equipment and appliances

• Promote use of energy efficient processes, equipment, devices and systems

• Specify qualifications for the accredited energy auditors, the manners and interval of time in which the energy audit shall be conducted by such auditors

• Specify certification procedures for energy managers to be appointed by designated consumers

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• Prepare educational curriculum on efficient use of energy and its conservation for educational institutions, boards, universities or autonomous bodies and coordinate with them for inclusion of such curriculum in their syllabus

Power of State Government:

• Amend the energy conservation building codes to suit the regional and local climatic conditions

• Direct every owner or occupier of a building or building complex being a designated consumer to comply with the provisions of the energy conservation building codes

• Direct if considered necessary for efficient use of energy and its conservation, any designated consumer to get energy audit conducted by an accredited energy auditor in such manner and at such intervals of time as may be specified by regulations

• Designate any agency as designated agency to coordinate, regulate and enforce provisions of EC Act 2001 within the State

• Take all measures necessary to create awareness and disseminate information for efficient use of energy and its conservation

Expected Outcome:

• Barriers for EE & DSM to be removed.

• The State Regulatory Commissions and Utilities to be encouraged to implement the

Conservation initiatives

• Engagement of Stakeholders


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• Industrial and Commercial users

• Time of use tariff for industrial and commercial users.

• Incentives to industry to adopt conservation/ efficiency measures

• States

• Encourage implementation of DSM programmes in Agriculture/ Municipalities

• Domestic consumers

• Promoting use of low cost CFLs.

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Energy Efficiency- InitiativesAgency & Initiative Comments

Revenue Size

Bureau of Energy Efficiency

Standards & Labeling• Reduce Use Consumption• Check Testing

9.00 Cr

Energy Conservation Building Code

• Enhance efficiency of buildings• Promotion of ESCOs• Innovative Financial Products• Rating of ESCOs

2.80 Cr

Bachat Lamp Yojana• Promote EE through CFLs• Country wide coverage• Est. 6.5 Cr CFLs required

6.00 Cr

NMEEE• Promotion of PAT• Inclusion of DCs for EE

125.00 Cr

Misc.• Market Development• Promotion Activities

18.94 Cr

Ministry of Power & BEE

SME Programme• Energy Audits• DPR • Implementation Assistance

6.50 Cr

MuDSM & AgDSM• Database on Baseline Data• Bankable DPRs• Implementation Assistance

8.37 Cr

SDAs • Estd SECF 22.26 Cr

State Level Capacity Building• Knowledge Strengthening • Policy & Reforms• Energy Conservation Action Teams

12.00 Cr

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Demand Side Management

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Introduction to DSM

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Demand Side Management (DSM), entails actions that influence the quantity or patterns of use of energy consumed by end users, such as actions targeting reduction of peak demand during periods when energy-supply systems are constrained. Peak demand management does not necessarily decrease total energy consumption but could be expected to reduce the need for investments in networks and/or power plants.

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Type of DSM ProgramsEnergy EfficiencyEfficiency equipment upgrades that provide long term energy savings can

provide peak demand reductions

“Peak Shaving” ProgramsLoad reductions during peak hours or whenever supply/demand margin is tight

includes interruptible / curtailable load which can be called upon when needed or demand response which relies on voluntary load reductions

Peak-Shaving Program

Ho

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Lo

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(M

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Sun. Mon. Tues. Wed. Thur. Fri. Sat.

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DSM Measures

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Approach to DSM

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Regulators can make certain DSM Measures mandatory, arrange for financing through incentivization, create consumer awareness, develop ESCOs, create templates, DSM plans,

DSM design, selection criteria etc.

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Energy Service Company-Performance Contracting

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Introduction to ESCOs

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In the Indian context, Energy Service Companies (ESCOs) identify and evaluate the energy savings potential in industrial units, commercial complexes, hospitals, municipalities and utilities, among others, by using energy audit tools. On completing a detailed audit they recommend a set of energy conservation measures which on implementation can pay for the investment through the resultant savings.

Types of ESCOs in India Consulting based Vendor based

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ESCO Contract Models

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“Performance based contract to implement measures which reduce energy consumption and costs in a technically and

financially viable manner”

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ESCO – Financial Summary

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The 3 most critical financial needs of an ESCOMeeting Development ExpenditureFinancing a part of project CostSponsor support under Risk Sharing

GUARANTEED SAVINGS MODEL

SHARED SAVINGS MODEL

Common RoIs for Guaranteed & Shared Savings model:•Average savings of 23 to 46 percent on baseline energy costs•Majority of ESCO projects have < 3 years payback period•Savings classified according to the type of Energy Conservation Measure Recommended

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ESCO - Process Mapping

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ESCO – Planning & Approach

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ESCO – Planning & Approach

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Baseline Data Collection&

Investment Grade Energy Audit

Preparation of Project Design and Technical

Recommendations (ECMs)

Cost Projections

Detailed Project Report

Financial Viability and Modeling

Structuring Options including

risk mitigation and incentives

Capacity Building

Selection of Implementation

Agency

Pre & Post Bid Assistance

• Preparation of Bid Documents

• Pre Bid Meeting• Evaluation of

Proposals• Evaluation

Report

Drafting of Contract

Agreement

Measurement & Verification

SECTORAL

COVERAGE

SECTORAL

COVERAGE

Traditional Approach to EPC

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Modern Approach to EPC

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Funding Options

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Transaction Model

FINANCIAL SUPPORT – PROJECT

FINANCING

DIRECT PAYMENT OF INTEREST & PRINCIPAL TO F.I.

PAYMENT OF SAVINGS TO

ESCO AS PER CONTRACT

CONFIRMS SAVINGS AS SHOWN BY ESCO

RISK COVERAGE TO F.I. THROUGH PRGF

EPC CONTRACTING

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Technology & Innovation - Due Diligence

The Importance of Technology Changes to ESCOs• Sources of EE innovation• Technology innovation & competitiveness• Assessing new technology potential in local market• Gathering international competitive intelligence• Cost & value analysis of introducing new technology to ESCO project portfolio

Incorporation of new technology• Technology teams• Prototype projects using new technologies• Training staff on new operational procedures

Managing Risk of New Technologies• New technologies in small components• Negotiating manufacturers guarantees• Hidden cost of new technologies (unexpected maintenance cost)

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Key Barriers in ESCO Market Development

• Accurate and latest baseline energy consumption data

• Financing of ESCO projects through• Debt• Equity

• Absence of good M&V guidelines for confirmation of savings

• Robust performance contracting guidelines

• Awareness about ESCO performance contracting • Disconnection of Energy Audit and Implementation Phases in order to avoid biased recommendation of energy conservation measures

• Energy conservation is a non-core activity for most consumers.

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Thank You

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