Background: AEEE had been funded by Shakti Sutainable Energy Foundation (SSEF) for the development of a model ESCO Energy Performance Contract (EPC) for Industrial Energy Efficiency projects in 2014. This model has subsequently been adopted by Small Industry Development Bank of India (SIDBI) as the basis for its own Energy Saving Performance Contract (ESPC) under the Partial Risk Sharing Facility (PRSF) scheme supported by World Bank. As a follow up to this, with support from SSEF, AEEE conducted five regional workshops in partnership with SIDBI, to promote the model ESCO EPC and associated Measurment & Verification (M&V) template among ESCOs, Micro, Medium & Small Enterprises (MSME), Financial Institutions (FIs) and other key stakeholders. Three roundtables and a National Conference (on 21 March 2016), were held to consolidate the policy recommendations from the project. AEEE also launched a dedicated portal for ESCOs, “AESCONet”, in March 2016. A significant learning emerging from these workshops and the National Conference, is that while ESCOs have started utilising EPC and building confidence and credibility with their customers, they still face obstacles in getting financing for EE projects. Several FIs stated that while they do finance EE projects some of the issues FIs face are as follows: ESCOs are technically very competent, however, they need to be more articulate in presenting the financial RoI of projects, especially with respect to reducing or mitigating the performance risk and indicating how energy savings will in fact pay for the project The financial value of most ESCO projects is quite small in comparison to most business or industry projects, making the transaction costs for processing ESCO loans comparatively higher; a portfoliobased approach to financing ESCO EE projects would allow for more streamlined loan processing, and help to spread the financial risk across a larger number of projects Identification of proven technologies with energy savings potential and structured financing packages to reduce transaction cost can greatly help drive Financing of ESCOs EE services As an example, the Investor Confidence Project (ICP) in Europe is aimed at improving the financing of EE projects. To achieve this ICP has developed standard “protocols” for certain types of EE projects, primarily for EE projects in buildings, to help underwrite the performance risk and increase the bankability of EE projects. Reference http://europe.eeperformance.org/protocols.html. A similar effort in India to define 5-10 Energy Conservation Measures (ECM) across several sectors, processes and technologies and develop a preliminary financing framework for these EE projects would enable ESCOs to articulate the financial RoI of EE projects, as well as pave the way for developing more detailed financial models that could be used by Fis, Banks and other investors to finance EE projects.
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