dilip limaye - the emerging model of the public super esco

8/6/2019 Dilip Limaye - The Emerging Model of the Public Super ESCO

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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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and Climate Program

Barriers toEnergy Efficiency

Policy/Regulatory

PublicEnd-users

Equipment/

ServiceProviders

FinancingInstitutions

Barriers to Energy Efficiency


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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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and Climate Program

PublicLighting

Federal/MunicipalBuildings

Universities/

SchoolsHospitals/

ClinicsWaterUtilities

PublicTransportation

FireStations

CommunityCenters

Libraries Orphanages

Energy Use in Public Facilities


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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Old, Outdated Equipment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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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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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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and Climate Program

ESCO Services

Engineering

Commissioning

Construction

Design Installation

Measurementand

Verification

ESCOServices


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and Climate Program

Additional ESCO Services

OptionalESCO ServicesProviding or

ArrangingFinancing

Operations andMaintenance

Training


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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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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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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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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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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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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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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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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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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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How the Super ESCO will help in the

Private Sector BARRIERS TO EE PROJECT

IMPLEMENTATION IN THE PRIVATE SECTORHOW THE SUPER ESCO


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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Super ESCO in the Private Sector

(continued) BARRIERS TO EE PROJECT

IMPLEMENTATION IN THE PRIVATE SECTORHOW THE SUPER ESCO


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

[email protected]

dilip limaye - the emerging model of the public super esco

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