Municipal Energy Efficiency Program in Tamil Nadu, India


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A Replicable Approach to Project Financing Through ESCOs

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  • The Alliance coined the term "Watergy" to describe the strong link between water and energy in municipal water supply and wastewater treatment systems.  The Watergy approach helps cities realize significant energy, water, and monetary savings by carrying out technical and managerial changes in water and wastewater systems, providing consumers with quality water while using a minimum of water and energy.  WHY IMPORTANT • It is important to pay attention to energy efficiency in the municipal water sector because water is heavy and it is distributed over large distances: Every liter of water that passes through a water supply system has a significant energy cost, compounded by the money invested to produce it. • In addition to direct savings in energy and water, efficiency improvements in municipal water utilities generate impressive reductions in operating costs and often improve services, or access to water by underserved populations. Saving money in the municipal sector leaves more funding for public services that are often underfunded. • In developing countries, often one-third to one-half of the volume of water produced is lost to leaks and system inefficiencies. COST EFFECTIVE • Watergy measures pay for themselves extremely quickly – most in the range of a few months to 3 years. • Huge savings are the norm, at least 20% and often more. • Another important cost consideration is that cities need to get the most of the infrastructure they have. Watergy makes this possible and can defer the need for new infrastructure. Over more than a decade, the Alliance to Save Energy’s Watergy Program has helped more than 100 cities around the world realize annual savings of more than 20 million kWh of electricity and more than $5 million in operating costs.
  • This slide shows the types of measures that help save energy in water systems. Municipalities need to: - Map the layout of the water system - Conduct an energy audit of the system and identify opportunities for EE improvements. REGARDING PUMPS: Optimizing the system includes improvements such as matching the pump to the pumping requirements, eliminating unnecessary valves, controlling pump speed where appropriate, and introducing improved operations and maintenance practices.  LEAKS: Identifying and minimizing leaks in the pipes and fixtures IN ADDITION, AUTOMATION in a water supply or wastewater treatment system monitors—and sometimes also controls— the system components to make the whole system as efficient as possible. Using sensors to measure such things as pressure, water level, and flow rates; and devices such as control valves, motors, pumps, and fans to automatically maintain these components at a desired range of values, a municipality can: - Regulate the use of pumps based on the water level in storage tanks. Control pumps according to changes in demand Control daytime and nighttime pressure in the network, saving energy when demand is lower. - Use variable speed drives and automated pressure controls to stabilize water pressure in the system and reduce downtime. METERING: In water systems around the world, only about 50% of water supply is metered, making it difficult to improve system performance. Since “you can't manage what you don’t measure,” water and energy efficiency projects need to start with the establishment of a system to regularly monitor the various components within the water or wastewater system.
  • To facilitate the implementation of industrial and municipal projects around the world, and to ensure their replicability, the Alliance helps build local capacity in the energy services company (ESCO) sector. The Alliance implemented a project to improve the energy efficiency of water supply and street lighting systems in the Indian state of Tamil Nadu, and to increase confidence among stakeholders in the use of energy performance contracts (EPCs) by creating a replicable financing model and toolkit for the successful implementation of municipal EE projects using EPCs and ESCOs The concept of EPCs is not new in India, but there is low confidence in its practice, especially in the public sector. This project was designed to address this barrier, by developing and implementing a major EPC program to demonstrate the market potential to interested ESCOs and at the same time convince customers that ESCOs offer value-added solutions. With funding from REEEP, The Alliance partnered with the Tamil Nadu Urban Development Fund to provide technical advisory services to the Tamil Nadu Urban Infrastructure Financial Services Limited (TNUIFSL) and to municipal officials throughout the state.
  • This unique group of partners included a combination of program management, infrastructure development, and energy efficiency technical experts. The team designed a two-phase project, grouping the cities into geographic zones, and focusing first on energy efficiency projects i n 29 cities (Phase I). The 29 cities participating in Phase I are using EPCs to improve the efficiency of their bulk water supply and street lighting systems. These municipal energy efficiency projects have been ”bundled” together for the purpose of negotiating and implementing efficiency improvements through a streamlined EPC process – representing the first statewide bundled municipal EE initiative for water pumping and street lighting in India.
  • From a field of 13 interested ESCOs, six ESCOs submitted proposals and two were ultimately selected to carry out the project. As a first step, the ESCOs performed investment grade energy audits for the towns’ water supply and street lighting systems. For the second step, which is now being negotiated: Once agreement is reached on the audits and recommended energy efficiency improvements, the ESCOs will sign energy performance contracts with individual municipalities for implementing energy efficiency measures. A third-party measurement and verification agency will be hired to measure energy and cost savings. The Alliance developed an M&V plan and provided training for the ESCOs and the municipal engineers on the International Performance Measurement and Verification Protocol (IPMVP).
  • The selected ESCOs agreed to share the resulting savings with the municipalities.The term of each contract is 5 years. In order to ensure that the ESCOs have options for financing, the project team arranged with TNUIFSL to offer a financing package: The ESCOs can choose to borrow from TNUIFSL if they find the terms of lending to be more favorable than those from other financial institutions. To increase confidence in the receipt and disbursement of savings from the energy efficiency measures, the municipalities and TNUDF agreed to set up a Trust and Retention Account (TRA) as a repayment mechanism. The TRA serves as an escrow account, into which each municipality will deposit their baseline electricity bill amount during the project period. FI = Financial institutions EEM = energy efficiency measure
  • As a result of this project, the Government of Tamil Nadu issued a Government Order (GO) on April 20, 2010, highlighting a policy announcement in the Assembly that “a new concept of energy saving through ESCOs would be proposed for implementation,” and giving approval for the Directorate of Municipal Administration to implement the project, and for the 29 urban local bodies to sign the energy performance contract. This is a first-of-its-kind GO in India, empowering ULBs to proceed with project implementation through performance-based contracts under an ESCO mechanism.
  • This project concept and methodology were replicated in Gujarat under the US Agency for International Development (USAID)’s Energy Conservation and Commercialization III (ECOIII) program. The Alliance to Save Energy provided technical advisory services to the Gujarat Urban Development Company (GUDC) to implement municipal water and energy efficiency projects throughout the state, ensuring that the Gujarat program benefits from the lessons learned during the development of the pilot program in Tamil Nadu. In addition…. (Other bullets self explanatory)
  • Municipal Energy Efficiency Program in Tamil Nadu, India

    1. 1. Municipal Energy Efficiency Program Tamil Nadu, India: A Replicable Approach to Project Financing Through ESCOs (Energy Service Companies) Kateri Callahan, President Alliance to Save Energy 1850 M Street, NW Washington, D.C. 20036 [email_address] A
    2. 2. What is the Alliance to Save Energy? <ul><li>Mission: </li></ul><ul><li>To promote energy efficiency worldwide to achieve a healthier economy, a cleaner environment, and greater energy security. </li></ul><ul><li>Organization: </li></ul><ul><li>Staffed by 90+ professionals </li></ul><ul><li>34 years of experience </li></ul><ul><li>$16 million annual budget </li></ul><ul><li>Premier energy efficiency organization in the world </li></ul><ul><li>Offices in South Africa, India, Mexico and Eastern Europe </li></ul>
    3. 3. What is the Face of the Alliance? <ul><li>Business ▪ Government ▪ Public Interest </li></ul><ul><li>Coalition membership of more than 175 diverse organizations </li></ul><ul><li>Involvement by businesses in all economic sectors </li></ul><ul><li>Participants active in policy research, standards, education & communication </li></ul>
    4. 4. Efficiency of Water Systems WATERGY makes the best use of two valuable, limited resources: water & energy WHY IS THIS IMPORTANT?  Every liter of water that passes through a system has a significant energy cost .  Water sector efficiency leaves more funds for crucial and often underfunded public services .  In most developing countries, 1/3 to 1/2 of water produced is lost. AND IT’S COST EFFECTIVE …  Rapid Payback : generally from a few months to 3 years  Huge Savings : at least 20% in energy costs; much higher possible  Makes the most of existing infrastructure ; reduces the need for new
    5. 5. Cost-Effective Interventions  Pumps  Leak Management  Automated Controls  Metering & Monitoring
    6. 6. Energy Efficiency in Indian Municipalities – Context <ul><li>Indian municipalities spend an estimated 40-60% of their annual </li></ul><ul><li>budget on energy costs </li></ul><ul><li>Numerous barriers to saving energy: </li></ul><ul><ul><li>Lack of technical, managerial, financial capacity for improving energy efficiency </li></ul></ul><ul><ul><li>Lack of adequate metering (e.g., in buildings, water supply, street lighting systems) </li></ul></ul><ul><ul><li>High rates of unaccounted for water; unreliable water services </li></ul></ul><ul><ul><li>Lack of Government policy on reducing energy consumption </li></ul></ul><ul><ul><li>Low confidence in public-private partnerships </li></ul></ul>
    7. 7. Tamil Nadu Project - An Overview <ul><li>Purpose: </li></ul><ul><li>Improve energy efficiency of water supply and street lighting systems in Tamil Nadu </li></ul><ul><li>Create replicable financing model and toolkit to ensure that municipal EE projects are successfully implemented using performance contracting/ESCOs </li></ul><ul><li>Partners: </li></ul><ul><li>Alliance to Save Energy, REEEP </li></ul><ul><li>Tamil Nadu Urban Infrastructure Financial Services Limited (TNUIFSL) </li></ul><ul><li>Tamil Nadu Urban Development Fund (TNUDF) </li></ul><ul><li>Municipal Administrations, Urban Local Bodies </li></ul>
    8. 8. Project Overview <ul><li>Unique Team: TNUDF + The Alliance + Municipal Administrations </li></ul><ul><ul><li>Program management experts </li></ul></ul><ul><ul><li>Infrastructure development experts </li></ul></ul><ul><ul><li>Energy Efficiency technical experts </li></ul></ul><ul><li>Phased Approach: </li></ul><ul><ul><li>Phase I – 29 cities </li></ul></ul><ul><ul><li>Phase II – 16 cities </li></ul></ul><ul><li>First statewide bundled municipal EE initiative for water pumping and street lighting in India </li></ul>
    9. 9. Project Highlights <ul><li>*Two ESCOs selected to carry out the Phase I project* </li></ul><ul><li>Step 1 -- Investment Grade Audits </li></ul><ul><ul><li>Baseline parameters </li></ul></ul><ul><ul><li>Energy saving projects/proposals </li></ul></ul><ul><ul><li>Comprehensive reengineering design </li></ul></ul><ul><ul><li>Project cost & economics </li></ul></ul><ul><ul><li>Project duration </li></ul></ul><ul><ul><li>Risk assessment and mitigation </li></ul></ul><ul><li>Step 2 -- Implementation of Improvements, Monitoring & Verification of Results </li></ul><ul><ul><li>Project financing </li></ul></ul><ul><ul><li>Complete installation and commissioning </li></ul></ul><ul><ul><li>Savings measurement and verification – “ IPMVP” </li></ul></ul><ul><ul><li>Equipment maintenance </li></ul></ul>
    10. 10. Project- Financing Model
    11. 11. Project Output <ul><li>Developed financial tool kit for municipal EE project </li></ul><ul><ul><li>Model EOI, RFP, EPC document along with evaluation criterion </li></ul></ul><ul><ul><li>M&V Plan and reporting formats </li></ul></ul><ul><ul><li>Investment grade energy audit guidelines </li></ul></ul><ul><ul><li>Project repayment mechanism </li></ul></ul><ul><li>Watergy M&V protocol developed and tested for its suitability in Indian context </li></ul><ul><li>Strategy document to scale up program in other municipalities in Tamil Nadu, based on the lessons learned </li></ul>
    12. 12. Policy Outcome <ul><li>The Government of Tamil Nadu issued a Government Order (GO), a first-of-its-kind GO in India, empowering municipalities to proceed with project implementation through performance based contracts through ESCO mechanism. </li></ul><ul><li> </li></ul>
    13. 13. Project Impact <ul><li>Tamil Nadu project concept and methodology replicated in USAID-supported Gujarat state-wide municipal EE program (159 cities) </li></ul><ul><li>BEE’s municipal demand side management program is based on Tamil Nadu project methodology </li></ul><ul><li>Other urban local bodies in India are using Tamil Nadu project concept and documentation to develop municipal EE projects </li></ul><ul><li>TN Government Order is helping other states initiate similar programs </li></ul><ul><li>Banks and FIs have started to show interest in lending for large municipal EE projects </li></ul><ul><li>New opportunities for private service providers & energy professionals to partner with ESCOs in municipal EE projects </li></ul>
    14. 14. <ul><li>Thank you!! </li></ul><ul><li>Kateri Callahan </li></ul><ul><li>President, Alliance to Save Energy </li></ul><ul><li>[email_address] </li></ul>