US$12bn/year market face implementation barriers
The Indian Government and the World Bank have signed a US$220 million Loan Agreement and a US$80 million Guarantee Agreement for the India Energy Efficiency Scale-Up Program, a market of US$12 billion a year.
The Program, to be implemented by the Energy Efficiency Services Limited (EESL), will help scale-up the deployment of energy saving measures in residential and public sectors, strengthen EESL’s institutional capacity, and enhance its access to commercial financing.
The Agreement for a total of US$300 million was signed in New Delhi on 28 Aug 2018 by Sameer Kumar Khare, Joint Secretary, Department of Economic Affairs, and Hisham Abdo, Acting Country Director, World Bank India.
The investments under the Program are expected to avoid lifetime greenhouse gas emissions of 170 million tons of CO2, and contribute to avoiding an estimated 10 GW of additional generation capacity.
This would be over 50% of the National Mission for Enhanced Energy Efficiency target of 19.6 GW indicated in India’s Nationally Determined Contributions (NDCs) under the Paris Accord.
Speaking on the occasion, Khare said the Program will help tackle the financing, awareness, technical and capacity barriers faced by new energy efficiency programs and support the UJALA program of the Indian Government.
He said that this is one of the several steps being taken by the Government to meet its climate change commitments to reduce carbon intensity by 33-35% by 2030.
The Key Components of the Operation include: Creating sustainable markets for LED lights and energy efficient ceiling fans; facilitating well-structured and scalable investments in public street lighting; developing sustainable business models for emerging market segments such as super-efficient air conditioning and agricultural water pumping systems; and strengthening the institutional capacity of EESL.
Moreover, the Program will help to increase private sector participation in energy efficiency, including through private sector energy service companies.
Under the Program, EESL will deploy 219 million LED bulbs and tube lights, 5.8 million ceiling fans, and 7.2 million street lights, which will be supplied by private sector manufacturers and suppliers.
As an integral part of the operation, the first-ever IBRD guarantee in India will help EESL access new markets for commercial financing in line with the Bank’s approach of maximizing finance for development.
The guarantee is expected to leverage some US$200 million in additional financing, to help EESL with its growing portfolio and future investment needs.
Abdo added that the additional guarantee from the World Bank will support EESL to access new sources of commercial funding, diversify its investor base, and establish a track record for future access to financial markets.
Demand for energy end-use appliances and equipment like lighting, ceiling fans, air conditioners, refrigerators, agricultural pumps, and industrial motors is projected to grow significantly in India.
“India’s energy efficiency market, estimated to be over US$12 billion per year, continues to face implementation barriers, particularly in the residential and public sectors, which have some of the largest untapped potential for energy efficiency improvements.
Building upon its experience of UJALA and SLNP, EESL is now expanding its initiatives to other energy efficiency measures,” said Ashok Sarkar, Senior Energy Specialist and World Bank’s Task Team Leader for the Program.
“The financing under the India Energy Efficiency Scale-Up Program will not only help EESL to continue achieving the results under its existing initiatives but also strengthen its institutional capacity and ability to meet its future expanding needs by leveraging private ESCO industry and increased access to a wider range of external commercial financing sources,” he elaborated.
The loan, from the International Bank for Reconstruction and Development (IBRD) to EESL, has a 5-year grace period, and a maturity of 19 years.
The US$80 million IBRD guarantee will partially cover re-payment risks to commercial lenders or investors, to enable EESL to raise funds for its program. fiinews.com
