Koshy cherail aeee

21 Apr’10 © 2010 Copyright Alliance for an Energy Efficient Economy

Energy Efficiency – Choices and Barriers for SMEs

Panel Discussion on Energy Efficiency and Technology for SMEs

The Need; and How to Become more Energy Efficient & Reduce Costs

21 Apr ‘10 © 2010 Copyright Alliance for an Energy Efficient Economy2

Alliance for an Energy Efficient Economy (AEEE) is a member-driven industry association providing a common platform for energy efficiency stakeholders to collaborate and align with the Bureau of Energy Efficiency for implementing the Energy Conservation Act.

AEEE addresses barriers to EE implementation through policy research; facilitating market transformation; fostering technology innovations; capacity building of energy professionals and stimulating financial investments.

AEEE – Mission StatementAEEE – Mission Statement

21 Apr ‘10 © 2010 Copyright Alliance for an Energy Efficient Economy3

An Energy Efficient India

VisionVision

21 Apr ‘10 © 2010 Copyright Alliance for an Energy Efficient Economy

SMEs in IndiaSMEs in India India has nearly 3 million small & medium enterprises

(SMEs) – units whose plant & machinery > 100 million SMEs constitute 80 % of total no: of industrial

enterprises in India One of the biggest employment-providing sectors

(over 30 million jobs) SMEs limited access to technology and to maintain

competitiveness, and cope with environmental laws First to be impacted by economic slowdown – likely to

wipe out many businesses


Why Energy Efficiency?Why Energy Efficiency? India's Energy Deficiency:

Peak Power Deficit: 11.6% & Energy Deficit: 8% Loss of GDP from lack of access and availability of

electricity “Govt of India’s ambitious target of electrifying the

entire country by 2012, is likely to be delayed because only half the proposed new capacity has been added during the three consecutive 5-Yr Plans between 1992 and 2007”

Energy Conservation Act 2001: “Efficient Use of Energy and its Conservation”

One Unit of Energy Conserved/Saved at the Consumer End avoids 2.5 to 3 times of Capacity Addition


Energy Scenario in SMEsEnergy Scenario in SMEsHuge potential for EE and wide variation in present

efficiencies – highly diverse and dispersedSMEs are facing high and rising energy costsSMEs are vulnerable to global competition,

fluctuation in price and input costs SMEs lag behind larger Indian industry benchmarks

in terms of productivity, technology upgrading, and energy efficiency

NMEEE emphasizes the need for Energy Conservation in the manufacturing sector


Energy Efficiency in SMEs Energy Efficiency in SMEs Energy intensity can be reduced with the

widespread adoption of Energy Efficient technologies

For SMEs energy costs are a large portion of total production costs

Direct economic benefits from improving energy efficiency and reduction of energy losses

Possible to find strong linkage between EE and environmental compliance


General Barriers for EE in SMEsGeneral Barriers for EE in SMEs Low priority for EE due to lack of awareness &

capacity (skills) to adopt EE methods & technologies Lack of scientific approach, measured data on the

energy performance status – non-formal operations Low credibility of the service providers such as

energy auditors/ESCOs, and dearth of champions and strategic partners

Limited access to affordable finance and lack of incentives for SMEs to monitor & take up EE measures

Lack of coordination among the Government and private sector agencies involved in energy efficiency related activities


Institutional Interventions for Institutional Interventions for EE in SMEs in IndiaEE in SMEs in India

National Programmes: National Productivity Council (NPC),The Ministry of Micro, Small, and Medium Enterprises (MSME), BEE/ MOP, PCRA and SIDBI – over 20 years of efforts

State Bank (SBI), SIDBI, IREDA, and ICICI Bank, among others, have been funding and supporting energy efficiency projects in SME units

International: United Nations Industrial Development Organization (UNIDO), Swedish Development Cooperation Agency (SIDA), Indo-German Energy Program, and USAID

TERI, PCRA, NSIC, DCSSI, NISST (Steel) have been working in specific sectors

UNF/UNEP-World BankTechnical Assistance Project 2002–2006 Developing Financial Intermediation Mechanism for EE Projects - the 3CEE Project – 5 banks roll out schemes


3CEE Project Experience3CEE Project Experience Inadequate information on appropriate equipment and technology Slow implementation despite substantiate effort since past 20

years Communication Gap between Energy Auditors and Banks

(Technical Proposal Vs Loan Proposal) Lack of available capital, especially for smaller enterprises Under-emphasis on EE investment financing by domestic financial

institutions (eg., Lack of ESCO financing for SMEs ) Lack of interest from the industry in implementing capital

intensive measures (eg, replacement of inefficient re-rolling mill furnaces)

Lack of foresight and prevailing attitudes regarding EE solutions Frequent changes in the programme implementing agencies

adversely affect the outcome


Key Learning 1: Key Learning 1: Financing EE Financing EE projectsprojects

Wide range of investment scale in EE projects in SMEs Low & medium investment projects, having payback of less than 1

year are normally implemented from internal accruals Medium to large investment projects are normally implemented as

part of modernization or expansion programme for which debt financing is sought

There are several existing sector-specific credit lines – Information on such schemes is known at cluster level since they are operated through a network of Nationalized Banks

Asymmetry associated with reporting production and hence energy usage

Preference and comfort in relationship with existing banks (working capital lenders)

Decision for obtaining debt financing is based on the scale of investment and importance to main production operations.

Loan review and servicing process are not consistent and scalable


Key Learning 2 : Cluster Key Learning 2 : Cluster OperationsOperations Role of Industry Associations: Homogenous and

Heterogeneous clusters coexist (Individual units tend to associate – regional or domain centric)

Asymmetric information access on cleaner production practices, energy efficient technologies (Only to a few the developments such as CDM are well known and leveraged)

Unmet demand for service on industry intelligence Need for a medium such as the BEE or or local center

of excellence or testing centre etc, through which updated case studies and cost information can be made available


RecommendationsRecommendationsTechnical, Managerial, resource and financial constraints to be

addressed Focus on BEE’s National Agenda for Energy Efficiency in SMEs aims

to accelerate adoption of energy efficient technology and practices Need for high level of awareness on possible areas and potential for

energy cost reduction Develop broad levels skills required for conceptualizing and

implementing such projects – training & capacity building Need to address the constraints posed by competition Financial Products & EE Solutions to be customized to the client and

industry; products to be built around existing ones used for SMEs Need to dovetail EE financing with existing financing schemes,

which have a better reach to the clusters


How AEEE seeks to bridge the How AEEE seeks to bridge the gapgap

● To integrate the highly fragmented EE business in India ● To work closely with BEE, State Designated Agencies and

Regulatory Commissions for effective implemen -tation of EC Act 2001, the Electricity Act 2003 and now the National Action Plan on Climate Change- National Mission on Enhanced Energy Efficiency

● To address cross-sectoral projects and issues and assess the energy-impact of policies

● Support Member-SEETech – Regional EE Centre for SMEs- focus on fuel switching & EE solutions for industrial furnaces in SMEs

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AEEE bridging the gapAEEE bridging the gap● Strengthen ESCO business model through M&V (IPMVP &

IEEFP) & raise the level of SME dialogue with Banks / Fis● Facilitate larger EE companies to work with SMEs, through

cluster approach & cross-cutting technologies ● To provide a platform for efficient large & medium

industries to share knowledge and skills with SMEs● For partnership and co-ordination with Multi-lateral &

Bilateral agencies for effective EE & CC programmes ● Platform to share and learn about global best practices,

enable industry benchmarking and create opportunities for energy efficiency market

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AEEE - Contact InformationAEEE - Contact InformationKoshy Cherail, PresidentAlliance for an Energy Efficient Economy101, Sagar Galaxy Commercial ComplexMayur Vihar-II, New Delhi-110091, INDIATel: +91-11-43027344, Fax: +91-11-22786200E-mail: [email protected], [email protected]

Web: www.aeee.in 16

Thank youThank you

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