Post on 15-Mar-2020
transcript
Energy Efficient Technology Adoption in MSMEs: Lessons learned from India on Financing Industrial Energy Efficiency
Conference on ‘Stimulating Industrial Competitiveness through
Energy Efficiency and Innovation in the SADC Region’
By
Debajit Das
(National Project Coordinator)
d.das@unido.org
2
MSME ENERGY
OUTLOOK
There are 19.6 Million in Manufacturing Manufacturing MSMEs in India (Annual Report MSME 2017-2018)
Estimated MSME energy consumption would be somewhere around 90 MToE
Energy Share of Production Cost ranges from 12-50% and Saving potential stands 15 to 25%. Profitability bottom-line impacted from 7.5 to 30%
India’s MSME energy efficiency market has an investment potential of USD 1722 Million. (International Association of Engineering and Management Education (IAEME))
Past intervention reaches only to mere 0.1 million industries. UNIDO’s three prong approach
3
Strengths:
• Creates large scale employment:
• Wider market place due to exposure to digital platforms
• Encourages Inclusive Growth:
• Affordable Labor and minimum overhead:
• Spread across the county
Weakness
• 400 major MSME clusters are characterized as energy intensive
• Many units uses outdated technology
• Lack of knowledge and skilled manpower
• Lack of access to new technologies
• Challenge to access affordable finance
• No appreciation of energy efficiency
Opportunities:
• Significant potential for becoming energy efficient and cost competitive
• Potential for technology upgradation
• Simple Management Structure for Enterprises
• Plays an important role in making “Make in India” possible
Threats:
• Lack of energy management standards
• Units using older technology lacks to competency
• Lack of support from Banks and Financial Institutes
• Scarcity of skilled manpower to run new technologies
SWOT Analysis
Source: Adopted from BEE MSME Summit presentation, 2017
4
2 Crore MSMEs Consuming 90 MToE
Past and present intervention has tried to touch around 55,000
MSMEs
Potential of Energy saving is at least 9 MToE
• Long term hand-holding
• Financial and technical risk mitigation
• Robust and sustainable support mechanism
MSME Energy Efficiency Status
What is Required?
150 million LED Bulbs distributed within 18 months
INDIA’s Biggest EE Success Story : LED Programme
LED Programme (UJALA) : India Success Story
No of LED lights to
be replaced by March
2019: 770 million
Expected annual
energy savings: 105
billion kWh
Expected reduction
of installed load:
20,000 MW
Estimated capital
investment
(excluding O&M):
1.23 billion USD
Annual estimated
GHG emission
reductions: 79 million
tonnes of CO2
Demand Aggregation
Large Scale Procurement
Consumer Outreach Program
Distribution
Warranty
2 to10 (9 W) LEDs given at price $
1.2 to 1.3 reduced to $ 0.8
Payment upfront or through easy
instalment for 8-10 months
Distribution points near to
consumers
Awareness about the benefits
Free replacements for 3 years
against defects
Success Factors
Major Attributes in Indian LED Model
Market Transformation Approach for MSMEs
MSME Units
ESCO
Upscaling
Media
News articles
Workshops
Training programs
Bulk procurement
Economic of Scale
Implementation and
vendor
management
Pay as you save
Payment security BG or others (mutually decided)
Energy Audit of Cluster represented units
Survey of MSME units in the cluster
Unit selected for DEMO
Sharing of
DEMO results
Technology identification
Brain storming with Experts
Technology Selection
Spec finalization
Innovative Industrial Energy Financing Model
Project Cost
Goods & Services
Max 80% Support (Rs. 12 lakh)
Project Admin Charge (0.9 Lakhs)
9% interest 0.027 lakhs
MSME Contribution
(20% = 3 lakhs)
Project Period = 2 Years
Quarterly Instalments1.61 Lakhs x
8 = 12.9 Lakhs
AB
Additional Monetary saving
(0.772 Lakhs per
instalment)
• PAYMENT SECURITY
• ESCROW ACCOUNT
• BG
Energy Saving(Rs. 11 Lakhs per
year)
Repayment
Investment
MSME Contribution
(0.378 Lakhs per
instalment)
Rs 16.17 Lakhs
Less capital cost1
Tax/GST benefit2
AMC for 2 to3 yrs3
Less paper work4
Online monitoring your project5
Innovative financial
model
9
ESCO is a long-term contract, that’s why it is highly affected by “Enforcement of Contracts and Ease of Doing Business ”.
Congenial Policy Environment
Strong ESCO Association
A shift from Shared savings to Guaranteed Savings Contracts
Holistic Approach taking care of complete ESCO business cycle (not only empanelment & financing)
Effective ESCO Models
10
Lessons Learnt
Providing Access to ESCOs to serve MSME clusters to improve ticket
size (business):
Financing to MSME units instead of ESCOs
A shift from EE Technologies to Aggregation to Basket of specific EE
Technologies for Specific Clusters (first demand generation and then
aggregation)
MSME works on “Seeing is believing” and replicates very fast if its
really working for them
Holistic Approach is required to care of complete supply chain
ESCOs to position themselves as technology up-gradation agency to
specific clusters than merely addressing energy cost
Integrated approach with resource efficiency makes more sense to
industries
11
Thank You
Debajit DasNational Project CoordinatorUnited Nations Industrial Development OrganisationPromoting Market Transformation for Energy Efficiency in MSMEs------------------------------------------------------------------------------------55 Lodhi Estate, New Delhi 110003