This document discusses two models for public-private partnerships (PPPs) for energy efficient street lighting and rooftop solar power generation projects - the shared savings model and the notional savings/annuity model. The shared savings model involves a private energy service company (ESCO) undertaking capital expenditures and operations & maintenance of the project. Savings are shared between the ESCO and municipal corporation based on actual energy savings achieved monthly as measured by utility meters. The notional savings/annuity model has the private operator undertake capital expenditures and O&M for a set annuity payment from the municipal corporation. Energy savings are estimated upfront rather than measured, and are not part of the operator's performance.

1. PPPs for Energy Efficient Street Lighting and
PPPs for Rooftop Solar Power Generation
June 15, 2016

2. 2
Street Lighting PPPs: Need & Rationale
Reduction in Energy
Consumption
Improvement in
Service Level
Mobilization of Private
Sector
Introducing energy efficient street lighting system in Project area
•Reduction in energy
consumption by
implementation of
Energy Conservation
Measures (ECM)
•Maintain environment
friendly street lighting
system
•Improvement of
illumination level
•Reduction in number of
non glowing lamps
•Systematic recording of
inventory, billing and
maintenance data
•Improvement in
operation and
maintenance practice –
single point
accountability
•Utilization of private
sector expertise
•Deployment of latest
technological knowhow –
would enable training of
municipal employees as
well.
Implement a technologically and financially sustainable project which may be
replicated in other cities

3. IFC Experience in India
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Description Jaipur Bhubaneswar
Street Lights in city 170,000 28,916
Single Drop points 42,000 9,043
Street lights covered under contract 70,000 19,873
Street lights with functional meters 27,000 Approx. 4,000 (ie 20%)
Annual O&M expenses (staff and R&M) USD 1 million USD 200,000
Electricity charges USD 4 million USD 1.5 million
Expected electricity charges post project
implementation
USD 1 million USD 300,000
Estimated Project Cost USD 8.5 million USD 3.5 million
Winning bidder SMC Infrastructure
(LOA issued)
Shah Investments
Energy savings guaranteed (bids received) 77% 80%

4. Trust &
Retention A/c
Agreement
Transaction Structure – Shared Savings Model
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Energy Service
Company (ESCO)
Distribution Utility
Municipal Corporation
(MC)/ Urban Local Body
(ULB)
Street Lighting
Network
Financing
(Equity,
Debt)
Sharing of % of savings +
O&M Payment
Energy
Savings
Metering
Supply, Billing & Payments
Supply
Agreement
Energy
Performance
ContractO&M
• The Shared Savings Model
(BOOT Model) envisages the
capital expenditure and O&M of
the project to be undertaken by
the ESCO.
• The ULB shares the savings
realized from the project with the
ESCO as per the provisions of
the contract.
• The actual sharing of benefits is
as per the actual savings
achieved by the ESCO on month
to month/ billing period basis.
• The metering and billing by the
utility decides the amount of
actual energy saved in the
project after implementation of
the identified energy efficient
measures by the ESCO.

5. Trust &
Retention A/c
Agreement
Alternative Model: Notional Savings / Annuity Model
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Lighting manufacturer/
Operator
Distribution Utility
Municipal Corporation
(MC)/ Urban Local Body
(ULB) / State Authority
Street Lighting
Network
Financing
(Equity,
Debt)
Annuity
Energy
Savings
Metering
Supply, Billing & Payments
Supply
Agreement
Supply &
Services
ContractO&M
• The model envisages the capital
expenditure and O&M of the
project to be undertaken by the
operator.
• The ULB pays an annuity to the
operator which is the lowest bid.
• The technological intervention is
determined by authority and
therefore savings are estimated
prior to the bid.
• The operator is only required to
meet 1) equipment performance
and 2) customer service
obligations. Energy savings are
not part of the operators
performance parameters

6. Roof-top Solar Power
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• Every building whether home, industry, institution, commercial establishment can
generate some solar power by installing PV panels on the rooftop or on unutilized
premises
• PV roof-top installations at the tail-end of the grid increase grid-stability and
reduce losses
• Savings in land requirement and costs
• Savings in development of new transmission infrastructure
• Creation of value from under-utilized /unutilized rooftops
The Concept
Rationale

7. Gujarat Roof-top Solar Case Study
7
• Govt. of Gujarat (GOG) envisaged to implement a pilot 5 MW grid connected
distributed rooftop solar project in Gandhinagar on a PPP model
• Demonstrate technical, commercial and regulatory viability and sustainability of
rooftop solar concept
• Potential to reduce ~ 6000 tons of CO2 equivalent annually
• Private sector investment mobilization ~ US$ 10 million
• Potential for large scale replication
The Drivers
Envisaged Impact

8. Gross Metering – Self Owned
8
Rooftop Solar
PV System
SM
Utility (Grid
Owner)
Rooftop
Owner
Flow of Funds
Flow of Energy
Utility Payments to solar developer based
on pre-determined formula
Key mechanisms:
1. Feed in Tariffs
2. Generation Based Incentives
Solar meter
(Generator
Meter)
PPA – Utility & Solar
System Owner

9. THANK YOU
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10. Roof-top Solar Business Models
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Parameter Gross Metering Net-metering
Objective • Electricity sale to utility • Self-consumption of electricity
Tariff
Arrangement
• PPA with the utility – utility to pay
as per PPA price (FIT)
• No payment by utility for electricity
injected into the grid, beyond a limit
Financial
burden
• Cost borne by utility & then passed
through to the consumer
• Usually Govt. bears burden for any
incentive/subsidy to bridge viability gap
Energy
Accounting
• Metering arrangement to measure
generation only
• Metering arrangement to measure
generation as well as respective
consumption
Beneficiary
• Assist utility in meeting Solar RPO
compliance
• Assist consumer directly to reduce its
electricity billing
Project
Selection
• Tariff based competitive bidding
• First-come-first serve basis (to start
with)
Utility’s
Concern
• Not keen on signing PPA with small
rooftop projects – higher FIT &
administrative burden.
• Loss of revenue for utility – reduced
grid consumption by consumers
Developer’s
Concern
• Grid unavailability to impact
revenue
• Low level of incentives may impact
viability of project for certain consumer
segments

11. Key Features of Shared Savings Model
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Baseline Needs complete functional data on number of lights, performance quality,
glowing / non glowing hours, voltage fluctuations, etc
Working meters and robust underlying infrastructure required to ensure
proper base lining
If not available, authority needs to incur upfront expenditure to ensure
proper baseline either prior to technical due diligence or post bid
Engagement with utility to ensure working meters are available at all points
Technology
Neutral
Bidding is usually done on the basis of energy savings so choice of technology
is left to operator as long as highest savings are achieved
While energy share offered to authority, if base line increases after
correction of deficiencies and operational improvement then it results in a
net cash outflow
Operational & Maintenance expenditure currently being incurred by the
authority also transferred to operator to make project viable

12. Challenges
• Need for robust Baseline and Monitoring and Verification (M&V) :
 Performance and the payment to the ESCO depend on improvements made over
the baseline
• Difficulties in establishing baseline:
 In the absence of meters, difficult to arrive at the energy cost of the ULB based
on actual energy consumed.
 Not possible to establish baseline consumption for points not connected to the
street-lighting feeder (single drop points)
 Baseline needs to assume that all lamps in the city are glowing
 Need for adequate system infrastructure: poles, cables, and feeder pillars
• Places significant demand on the ULB to undertake robust M&V and make
performance based payments.
• Single drop points are not covered – need for a separate contract
• Investors not very keen on ESCO model given the payback depends upon quality of
the infrastructure and accuracy of metering/ billing systems
• Difficult to raise project finance under ESCO model owing to above
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13. Key Features of Annuity Model
Project
design
determined
upfront
Authority can decide technology, systems required based on objectives,
city needs and payment capacity.
Bid will incorporate specific design and input requirements
If underlying infrastructure is poor, then the project scope can be
expanded to include upgradation of entire network
No reduction
in energy
bills – net
cash outflow
Technical demonstrations will determine energy savings at the due
diligence stage (prior to bid).
Engagement with the utility will be up to the municipal authority – in
the interest of the ULB to push for installation of meters
Authorities will need to get budget approvals upfront based on bid
amount
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14. Challenges
• The notional savings/ annuity model assumes that the 1) data available with respect
to number and types of lamps and 2) energy consumption of the street lighting
network is up to date and robust and does not require fresh surveys
• The Notional Savings / Annuity model ignores underlying issues that may exist in the
network which can only be determined through a survey/detailed assessment
• The operator is not required to demonstrate energy savings so in the absence of
adequate data monitoring, the city authority may not realize cost savings under
such projects
• The city authority finalizes the technology prior to the bid and they may not
necessarily be aware of the latest options in the market
• If sample surveys undertaken prior to the bid are not robust or the estimated
number of points is lower than estimated then the authority may end up paying a lot
more under such projects
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15. Key Differences in Models
Point of difference Shared Savings Notional savings
Technology / Interventions Selected by bidder Prescribed by ULB
Energy savings Based on bid (minimum
threshold provided by ULB)
Prescribed by ULB by way of design
(but not measured)
Bid variable Guaranteed energy savings Annuity payable by ULB
Savings share with government Can be structured in project
design
Not applicable as actual savings accrue
to the ULB
Energy Baseline Robust baseline required Not required (sample surveys to
demonstrate savings)
M&V Detailed M&V protocol
prescribed in bid documents
Minimal M&V required provided
technology interventions are as
prescribed
Metering Required to establish
baseline and for M&V
Not required, though is in the interest
of the ULB and preferable for long
term sector development
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16. THANK YOU
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