Toronto, Canada [RenewableEnergyWorld.com] With an investment of US $10 billion dollars in energy efficiency improvements, India’s economy would benefit from its potentially vast annual energy savings of 183.5 billion kilowatt hours, according to a new report from the World Resources Institute (WRI).
“India’s energy demand is expected to more than double by 2030. There is a dramatic need for domestic and international energy efficiency technology providers, service providers, and equipment manufacturers to develop innovative ways to conserve energy,” said Robin Murphy, WRI vice president of external relations.
A key element in realizing this potential is the energy service company (or ESCO) sub-sector. ESCOs operate on the basis of energy-performance contracts, wherein revenue is earned based on the amount of energy cost savings produced. In India, the ESCO industry had an annual growth rate of 96 percent from 2002 to 2007 and is estimated to have grown by an additional 62 percent in 2008, according to financial information provided by these companies to WRI.
WRI’s report, Powering Up: The Investment Potential of Energy Service Companies in India is being released as part of the New Ventures India Investor Meet, a gathering of leading investors and other stakeholders interested in the intersection of environment and enterprise.
The majority of ESCO efficiency projects have payback periods of less than two years, and ESCOs save clients an average of 20 to 25 percent of baseline energy costs. For example, the large and energy-intensive Lilavati Hospital in Mumbai hired Sudnya Industrial Services, an ESCO, to undertake an analysis. The results showed that the air-conditioning system comprised 60 percent of the hospital’s energy usage and that an upgrade was necessary. The entire investment of the hospital to do this upgrade was US$12,000, the annual savings are US$17,000, and the payback time was nine months.
Though the Indian ESCO industry has grown rapidly over the past five years, compared to similar industries in the U.S., Brazil, and China, it is relatively small. One of the factors holding back the Indian ESCO industry has been a lack of access to financing.
To reach their conclusions, the authors conducted an extensive survey of more than 90 percent of the ESCOs in India, as well as interviews of various investors, government officials, and clients of ESCOs. Using the findings from this study, WRI is currently working with various banks in India to develop a financial product that will help build investments in energy-efficiency projects performed by ESCOs.