3. ENERGY EFFICIENCY (EE) FOR SMES – WORKSHOP
OBJECTIVES & STAKEHOLDERS
3/16/2011
Objective of Workshop
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• Raising Engagement Platform for B2B stakeholders of
ESCO model – SME, ESCO, EAs & EMs, Vendors,
Bankers (SIDBI etc.), Agencies (BEE, SEAM etc.),
Industrial Associations (VIA, BMA, MIA etc.) to:
1. Create awareness for true Value Proposition of EE
interventions to SME Business Performance & ROI
2. Design a good ESCO delivery model and financing
loan product for EE in SMEs by attending to all
stakeholders risks & rewards
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4. EE FOR SMES – WORKSHOP CONTENT AND SPEAKERS
Activities/Topic Speakers
Topic 0: Supply Chain Gaps in EE for pManifold Rahul Bagdia Co-founder
Industries (Co-chair)
3/16/2011
Topic 1: Energy Audit results from SME MSME Sanjeev Kumar Business Head
Clusters Foundation
Topic 2: EE savings impact on Balance SEE-Tech Milind Chittawar Founder
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Sheet (Co-chair)
Topic 3: Financing Energy loans for SMEs – DRA Dinesh Rathi Founder
Risk mitigations
Topic 4: Best practices in EE - Heating SEE-Tech Milind Chittawar Founder
Processes
Topic 5: Best practices in EE – Ventilation Air Technics Shankar Ghime Founder
and Air Conditioning
Topic 6: LED Lighting Solutions Ecozen Sumeet Gattewar Co-Founder
Topic 7: EE Equipment selection and Libra Udayan Shrouti Founder
Sourcing Agencies
Topic 8: Banks willingness on EE project SIDBI Bhanu Prakash DGM, Nagpur
Financing Verma
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5. EE FOR SMES – GAP ANALYSIS
4 key gaps for scale-up of EE in SMEs – Missing value proposition, No turn-key performance
backed delivery & after services, Easy EE escrowed loan, Low contractual enforcement
Elements Dimensions of framework Rationale
EE Value • Absence of clear Business • Why SMEs when could invest in their Business, could not invest
1 Value proposition of EE additional Capex in EE equipments to drive better Returns
Proposition
• Missing Awareness Missing customized Design and Services from ESCO players
EE Delivery & • Low confidence on • Why ESCOs hesitate to offer monetary tied Performance Guarantees
2 Performance of EE products to Industries Challenges in Monitoring savings with SMEs
Performance
• Vendors hesitation to take
Performance Guarantees
• Absence of easy accessible • Why banks does not give focused Energy loans to SMEs (same as
Finance EE loan product from bank established Appliance loan for AC) Looking for transferring
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Linkage performance risks to the equipment suppliers and ESCO agency
• Is finance a real constraint for SME to invest in EE SMEs looking
to transfer EE performance risk to the lender by separating it from
the “normal” credit lines
• Dynamic Business risks keep • Why ESCO efforts not focusing on SME scattered & small ticket
Risks from Energy Optimization low size, financing risk & perceived low contractual enforcement,
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SMEs priority involved operations & marketing
• Low Contractual
enforcement
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Excerpts from Rahul Bagdia’s @ pManifold presentation @ IIES 2011
6. IMPACT OF EE SAVINGS ON BALANCE SHEET
Value Proposition and impact of EE on Bottom New way of marketing
line value proposition from
EE
3/16/2011
Assuming optimistic 10% EE • Project EE impact on overall
savings w/ payback of 2 years business KPIs
• Change the pitchline from
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climate/mandate to
Sr
% Energy Cost ROI of ROI of Energy
ROI of New business and profit
Company buisness
in 2010 Buisness Conservation
Scenario • Check interfaces to see if EE
1 One of biggest
24.74% 9% 50% 11% delivery risks the normal
Cement Industry
2 One of biggest business performance and
Sanitaryware 5.13% 14% 50% 14% address those in the pitch
company
3 Steel Major • Good value proposition
14.45% 4% 50% 6%
could be not cost
4 One of largest Corn
9.87% 18% 50% 19%
optimization, but a new line
Processor
5 Ceramics Industry
of business investment
13.38% 4% 50% 5%
6 Polyester Group
7.35% 21% 50% 22%
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Excerpts from Milind Chittawar’s @ SEE-Tech (mchittawar@yahoo.com) presentation @ IIES 2011
7. CLUSTER APPROACH TO SME EE REALIZATION
Huge Opportunity and missing Service
Providers Learning Forward with
Clusters
3/16/2011
• Turn key EE Service Package – Energy Audit, EPC,
Financial Linkage and Performance Guarantee
•Broader Cluster Development approach could
• SME Stats: 26.1 million SME units in India; 45% of Total work better in tapping EE potential at SMEs
Industrial output of India; 40% of Export of India; 60 •Operational intensive to demo & sustain value
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proposition. Association with a supporting local
Million jobs; 17% of GDP as on 2009 which was Industrial agency as facilitator will work better
estimated to be 22% by 2012 •Proper Incentives alignment from EE of all
stakeholders internal to a company – Owner,
Management, Labor. Special care with
engagement of contractual labor.
•Outside dynamics like illegal coal trading, low
price black mkt procurement of fuels, power theft
etc. could dissuade projections. Include such
dynamics and make a clear pitch to Owner
Sample Opportunities •Create good leadership and ownership of the EE
project internal to the company
• Divided Blast Cupola (DBC) retrofitting costs Rs. 35K with
annual savings of Rs. 3.5 lacs. Less than 100 in use in
foundaries in India, when potential is of 4500+
• Min. of MSME, GOI has a grant of Rs. 25lacs to support
cluster (min 25 companies) based EE audit and low
interest rate project financing
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Excerpts from Sanjeev Kumar’s @ MSME Foundation (sanjeev.kumar@msmefoundation.org) presentation
8. PARALLEL DELIVERY MODELS: HOW TO STRENGTHEN EE
DELIVERY & CREATE TRUST?
Missing Trust for EE amongst Industries
Growing ESCO
3/16/2011
• Missing Trust on Service Providers and Investments
Industry • Professional services missing for SMEs
• Access, flexibility & ease similar to Consumer Finance missing in
• Around 80 ESCOs EE
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registered with BEE • SME volatile Business dynamics challenge attention to EE - SMEs
are either making lot of profits and hence not interested in cost
• PFC, EESL, etc. growing optimization from EE; the other segment making lot of losses and
support system for hence EE is not their priority
ESCOs in India • Existing isolated EA and no performance based guarantees while
implementation will not scale up with SMEs
• Ratification of ESCO
companies by Crisil, Learning from other Sectors – Institutionalizing
ICRA and CARE cash flows
• Toll collections and Road O&M – how certain cash flows
from collection is becoming attractive for banks to finance
• Micro Finance – Securitization of cash inflows of the
aggregators and bringing investments from structured capital
markets
• Water Franchisee for Muncipalities – Escrowed account and
Service Provider being paid from savings from baseline
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Excerpts from Dinesh Rathi’s @ DRA (dinesh.nagpur@gmail.com) presentation @ IIES 2011
9. INSTITUTIONALIZING EE DELIVERY ESCO MODEL
3/16/2011
ESCO Delivery Model
•ESCO model will drive start of
Measurements and Benchmarking
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practices
•ESCO will provide turn key services and
give guaranteed savings on baseline
•ESCO is paid for performance -
proportion of the savings realised
•Bank do the credit rating of the SMEs
and give loan for EE. SME is liable to pay
regular installments to banks. Bank in
turn pay the ESCO.
•This bank interfacing will derisk ESCO
from non-payment from SME for its
value services
•ESCO will give bank guarantee for
performance of EE and hence regular
cash inflows from SME to bank
•Payment from SME equivalent to Energy
savings from baseline will be escrowed
by bank for its interest payment and also
ESCO services
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Excerpts from Rahul Bagdia’s @ pManifold presentation @ IIES 2011
10. BEST PRACTICES - HEATING PROCESSES
Melting Furnaces Saving Potential – Atleast 20%
•Ferrous: Energy Audit and
•Induction Furnace: 650 to 700 KWh/MT to 500 to 575 KWh/MT; PF = 0.999 Measurements
3/16/2011
(1): 7% Saving in Energy Charges, LF = 0.85+: 6 to 10% Saving in Energy
Charges (15% max with LF of 92.5%)
•Cupola (Normal to Divided blast) : 15 to 18% savings in coke consumption • Available good real-time data
•Non Ferrous loggers for Energy consumption
& effectiveness
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•Aluminum Melting: 90 to 125 Lit/MT to 75 to 85 Lit/MT
•Brass Melting: FO 135 Liters/MT to 110 to 115 Liters/MT • Need cost effective & mass
•Use of Gasifier: Coal/Biomass gasification (50% Saving in Energy Cost as deployable type Measurement
compared to FO, Payback period = 6 months to 1.5 years)
Equipments & Data Loggers for
easy Energy Monitoring
Heat Furnaces Saving Potential – Atleast 20%
•Rolling Mill Furnace:
•FO Fired: 55 – 65 Lit/MT to 45 to 55 Lit/MT (F/c length, Recuperator, F/c
Insulation, continuity of usage)
•Coal Fired: 125 Kg/MT to 135 Kg/MT to 115 to 120 Kg/MT and even lesser
(Recuperator, Pulverized coal, continuity of usage)
•Gasifier for full or partial (>80%) substitution of FO: 40 to 45% saving in
energy cost
•Heat Treatment Furnace:
•FO Fired: 55 – 65 Lit/MT to 45 to 55 Lit/MT (Recuperator, F/c Insulation,
continuity of usage)
•Gasifier for substitution of FO: 40 to 45% saving in energy cost
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Excerpts from Milind Chittawar’s @ SEE-Tech (mchittawar@yahoo.com) presentation @ IIES 2011
11. BEST PRACTICES – AIR CONDITIONING & VENTILATION
EE Opportunities in Air
Optimize Process & Heat Conditioning & Ventilation – 50%
Indicative TR Load
3/16/2011
Profile
Exchange in AC load in AC in commercial buildings
•Optimize process heat exchange • Small office cabins: 0.1
•Maintain heat exchanger surfaces TR/m2
•Multi-staging systems • Medium size office (10 –
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•Matching capacity to system load 30 people occupancy)
with central A/C: 0.06
•Capacity control of compressors
TR/m2
•Multi-level refrigeration for plant needs
• Large multistoried office
•Chilled water storage
complexes with central
•System design features A/C: 0.04 TR/m2
New Concepts in EE in AC & Ventilation
• District Cooling Concept - Load Diversity, Optimised Operations,
Advanced Technologies, Better Staff Economies, Customer Risk
Impact of Poor Maintenance of Management, Capital Cost & Annual Cost
ACs • Radiant Control Coatings – Reflect, Refract & Dissipate; can lower
roof temp by 10degC
• Occupancy sensors - built in relays which can switch the light or
air conditioner on directly.
• Adapting comfort levels - Some countries have started to define
room set temperature for the sake of Energy saving. Like Japan
has set the temperature of 27 deg C & Thailand as 26 deg C
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Excerpts from Shankar Ghime’s @ AirTechnics (sgghime@gmail.com) presentation @ IIES 2011
13. EE EQUIPMENT SELECTION & DECISION MAKING – LOOK
INTO LIFE CYCLE COST (LCC)
Lessons for EE Compressor selection – System thinking is MUST
3/16/2011
Equipment Selection • Problem Specifications: Size air compressor, optimize capital cost
as well as operational costs - Main plant supplier specification
sheet mentions compressor capacity as 600 cfm at 7 bar.
•Heat value at point of use at the lowest
cost. Cost of heating/Kg of product. • System Solution: Split total air demand to reduce the no load
power consumption which is power waste without generating
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•Zero gap in required size and procured
size. (DO NOT EXCESSIVELY OVERSIZE) compressed air. 25% is no load power consumption. 90 KW X 2
•Proper configuration of equipment. Nos. Instead 45 KW X 3 Nos. offered.
•Superimposition of process sequence
alteration in optimal sizing of equipment.
•Add on benefits of equipment pollutants 3 x 45KW
for process improvements to be 2 x 90KW
considered. ( Example : CHP (Combined 1 Working 2 Working
heating and power system, water / air 1 Standing 1 Standing
heating from air compressor,)
•Educating customer ensures good and
consistent business
Water Treatment Plant reduces Furnace Oil Consumption & other
Maintenance Issues
•Problem Specifications: Water scare region. Maintenance issues with boiler and Chiller
namely of perpetual break downs and high maintenance costs. Desire to eliminate / reduce
water related problems with improvement in equipment availability
•System Solution: RO plant water quality reduces blow down loss of boiler avoids scale
formation. Achieved energy conservation and environment conservation associated with fuel
savings. RO water reduces boiler water consumption.
•RO water usage in chiller reduces make up water requirement of chiller. Reduction in
electrical energy consumption of chiller is achieved as it operates scale free.
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Excerpts from Udayan Shrouti’s @ Libra Agencies (udayan.shrouti@gmail.com) presentation @ IIES 2011
14. BANK WILLINGNESS ON EE PROJECT FINANCING
Bundling of EE with other financing needs for SIDBI Support for EE
MSMEs @ SIDBI
3/16/2011
• Provides all Banking services to MSME units
• Concessional loans @ 9.5%
• Equity support to growth oriented SME units
• Collateral free assistance upto Rs.100 lakh under CGTMSE Schemes • Credit Linked Capital Subsidy
• Flexible and innovative credit products – direct credit scheme for Scheme (CLCSS) with 15%
setting-up new projects and for technology up gradation, capital good subsidy until Rs.
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diversification, expansion etc. of existing SMEs
1cr. for approved
• Working capital assistance to existing as well as new Small &
Medium Scale Enterprises [SMEs] and Service Sector units for technologies
meeting their working capital requirements under SIDBI-IDBI WC • Combined cost of loan with
arrangement
concessional interest rate
• Energy saving schemes could be well bundled with other business
financing needs of SMEs and capital subsidy amounts
• CGTMSE extends guarantee cover upto 75% of collateral free credits, ~5% for 5-6 years loan
subject to maximum credit of Rs.100 lakh per borrower - helping period making EE adoption
Micro & Small enterprises in accessing institutional credit, both term simpler and better viable
loan and WC facility, without collateral security / or third party
guarantee • SIDBI internal leveraging of
credit line from International
Challenges with ESCO Model for SMEs as seen by bankers financial organizations like
• Cash flows not certain with SMEs because of inherent business KfW, World Bank, Japan’s JFC
volatility & risks to support EE loan
• Measurements prone to tampering to set baseline
• Turnkey realisation of savings and overall positive business
improvement with strong performance monitoring & after-service from
ESCOs will help banks open up more to ESCO led financing
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Excerpts from Bhanu Prakash Verma’s @ SIDBI (bhanup@sidbi.in) presentation @ IIES 2011
15. PMANIFOLD – GROWTH SOLUTIONS FOR EMERGING BUSINESSES
RESEARCH, ONLINE/OFFLINE STAKEHOLDER ENGAGEMENT & CONSULTING
pManifold Energy
3/16/2011
Practice Team
• Smart Distribution
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• Energy Conservation
• Green Generation
Thank You
• Rahul.Bagdia@pManifold.com (+91 95610-94490)
• Vinit.Taori@pManifold.com (+91 99234-46100)
www.pManifold.com 15
