Manager

Confidence Building Measures
for
Energy Efficiency
U V Krishna Mohan Rao
15 Oct ‘04
U V Krishna Mohan Rao Associates UVK

International
International Specialists
Specialists -- Energy
Energy Efficiency
Efficiency IImplementation
IImplementation
Presentation Structure
• Conducive situation for EE in India
• Energy savings potential
• EE investment potential
• CBMs – Need and What ?
• Experience sharing for EE success

International
Energy Efficiency
IImplementation
Conducive situation for EE in India
• India on right track

International
Energy Efficiency
IImplementation
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 1990 1995
Source: MIT Energy Lab: World Energy Statistics
International
Energy Efficiency
IImplementation
• India on right track

International
Energy Efficiency
IImplementation
EE : India on right track
Source: World Development Indicators, WB 2002

Source: World Development Indicators, WB 2002
International
Energy Efficiency
IImplementation
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)

International
Energy Efficiency
IImplementation
• 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)

International
Energy Efficiency
IImplementation
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 ?

International
Energy Efficiency
IImplementation
Situation for EE in India
•Most conducive. Period

International
Energy Efficiency
IImplementation
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

International
Energy Efficiency
IImplementation
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

International
Energy Efficiency
IImplementation
• National Level
–President, PM, CMs (Japan)
• Awareness (Polio, AIDS, Eye/blood donation, EE)
–Water
–EE

International
Energy Efficiency
IImplementation
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 (Thailand)
• Men – internal or outsource

International
Energy Efficiency
IImplementation
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

International
Energy Efficiency
IImplementation
• 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

International
Energy Efficiency
IImplementation
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

International
Energy Efficiency
IImplementation
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.

International
Energy Efficiency
IImplementation
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
International
Energy Efficiency
IImplementation
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

International
Energy Efficiency
IImplementation
If you are an energy management expert
and can muster financial muscle
• Collaborate with one who has
strong balance sheet
• Practice ESCO concept

International
Energy Efficiency
IImplementation
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

International
Energy Efficiency
IImplementation
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 !

International
Energy Efficiency
IImplementation
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
International
Energy Efficiency
IImplementation
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

International
Energy Efficiency
IImplementation
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

International
Energy Efficiency
IImplementation
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 !

International
Energy Efficiency
IImplementation
• Develop financing products
– for manufacturers of equipment
– For client facilities
– Consultants
– Vendors
– Manufacturing equipments
– ESCOs

International
Energy Efficiency
IImplementation
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
International
Energy Efficiency
IImplementation
CBM - Insurance for EE Investments
•Acts of God are insured

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

International
Energy Efficiency
IImplementation
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)

International
Energy Efficiency
IImplementation
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
U
• VRs
Krishna Mohan
. 20 lacs Rao
to Rs Associates
. 10 crores saving annually
UVK
International
Energy Efficiency
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”

International
Energy Efficiency
IImplementation
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

International
Energy Efficiency
IImplementation
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 !!

International
Energy Efficiency
IImplementation
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) !!
International
Energy Efficiency
IImplementation
CBM Case Studies
• Amul GCMMF Group
• ITC Paper
• ITC Hotels
• EID Parry Murugappa

International
Energy Efficiency
IImplementation
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 !!
International
Energy Efficiency
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

International
Energy Efficiency
IImplementation
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
International
Energy Efficiency
IImplementation
Acknowledgements:
BEE
USAID
Thank You
U V Krishna Mohan Rao Associates
International Specialists - Energy Efficiency Implementation
uvkrao@vsnl.net

International
Energy Efficiency
IImplementation

Manager

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Confidence Building Measures

U V Krishna Mohan Rao

U V Krishna Mohan Rao Associates UVK

U V Krishna Mohan Rao Associates UVK

U V Krishna Mohan Rao Associates UVK

• India on right track

U V Krishna Mohan Rao Associates UVK

Source: World Development Indicators, WB 2002

U V Krishna Mohan Rao Associates UVK

U V Krishna Mohan Rao Associates UVK

U V Krishna Mohan Rao Associates UVK

U V Krishna Mohan Rao Associates UVK

• Energy Devt.& Reg. Agencies: Govt, NGOs, Renewables..

U V Krishna Mohan Rao Associates UVK

U V Krishna Mohan Rao Associates UVK

U V Krishna Mohan Rao Associates UVK

• Men – internal or outsource

U V Krishna Mohan Rao Associates UVK

U V Krishna Mohan Rao Associates UVK

U V Krishna Mohan Rao Associates UVK

U V Krishna Mohan Rao Associates UVK

U V Krishna Mohan Rao Associates UVK

U V Krishna Mohan Rao Associates UVK

U V Krishna Mohan Rao Associates UVK

• The CBM relates to :

• Business opportunities for the above can

U V Krishna Mohan Rao Associates UVK

U V Krishna Mohan Rao Associates UVK

– Housing finance – all players covered

U V Krishna Mohan Rao Associates UVK

U V Krishna Mohan Rao Associates UVK

U V Krishna Mohan Rao Associates UVK

•Acts of God are insured

U V Krishna Mohan Rao Associates UVK

• If only all the investments required for EE are to be

U V Krishna Mohan Rao Associates UVK

U V Krishna Mohan Rao Associates UVK

• With imported or indigenous technology

• “As-is” or under expansion

U V Krishna Mohan Rao Associates UVK

• Whether mandatory or not !

• Watch out the Award winners presentations at this very

U V Krishna Mohan Rao Associates UVK

U V Krishna Mohan Rao Associates UVK

U V Krishna Mohan Rao Associates UVK

• Abundant EE Saving and Investment Potential

U V Krishna Mohan Rao Associates UVK

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