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The funding challenge for energy efficiency

To escalate the energy efficiency movement, sector experts believe there is need for a separate funding mechanism in the country. This could possibly be in the form of a specialised bank or platform.

There was discussion during a recent CII meet on...


The funding challenge for energy efficiency

To escalate the energy efficiency movement, sector experts believe there is need for a separate funding mechanism in the country. This could possibly be in the form of a specialised bank or platform.

There was discussion during a recent CII meet on how the Energy Service Company (ESCO) model could make a big difference provided large companies get involved in the process. KS Venkatagiri, Executive Director CII-IGBC, pointed to Energy Efficiency Services Limited as a shining example. He felt larger companies like BHEL could play a crucial role using ESCO.

The energy efficiency market is estimated to be ₹1.28 lakh crore. But in India there are barely 150 odd companies that provide ESCO services and of them about 30-40 are active. Growth of the model is hampered as there is limited access to institutional finance.

Pradeep Perera, energy specialist at the Asian Development Bank, felt that Indian industry can replicate some of the success stories and best practices of China. He said China took up over 10,000 large energy conservation projects. A series of technologies were promoted and power intensive units like steel and cement were addressed. This yielded excellent results.

Ravichandran Purushothaman, President, Danfoss, believed priority sector lending status for energy efficiency could do the trick. This would require appropriate policy interventions, suitable financing mechanisms and a robust banking process.

ACC Limited’s KN Rao expressed the need to promote ESCO models as though the country’s industry had islands of excellence, the rest functioned below capacity.

Purushothaman believed the current focus is more on energy efficiency through efficient lighting systems. “This has to be broad based. There is a huge untapped market crying for attention when it comes to energy efficiency,” He said. “There are no formal channels of funds.

Like NABARD serves as a specialised bank for the agri sector, we could consider a bank for energy efficiency.” He added that the ESCO model in China has already grown to be a $5 billion market last year alone as against about $ 150 million in India.

However, there was a consensus that though the Indian market is quite small, the potential is huge. Venkatagiri emphasised that the ESCO model backed by financing could create the necessary trigger. He felt the GST regime would also impact the energy efficiency momentum as it is applicable at the higher slab of 28 per cent. “What we need is zero GST till the market blossoms.” And for the real leap forward, a specialised bank. ADB, it is learned, is working on one such project to promote sovereign or direct lending for energy efficiency.

(This article was published on September 12, 2017)

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