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India, World Bank sign loan agreement to scale-up India’s energy efficiency programme

Aug 29, 2018 10:14 IST
    India, World Bank sign loan agreement to scale-up India’s energy efficiency programme
    India, World Bank sign loan agreement to scale-up India’s energy efficiency programme

    The Union Government and World Bank on August 28, 2018 signed a $220 million loan agreement and an $80 million guarantee agreement for the India Energy Efficiency Scale-Up programme.

    The programme, which will be implemented by the Energy Efficiency Services Limited (EESL), will help scale-up the deployment of energy saving measures in residential and public sectors, strengthen EESL’s institutional capacity and enhance its access to commercial financing.

    The agreement was signed by Sameer Kumar Khare, Joint Secretary in the Department of Economic Affairs, Ministry of Finance and Hisham Abdo, Acting Country Director of World Bank India.

    Key Highlights

    The programme will largely tackle the financing, awareness, technical and capacity barriers faced by new energy efficiency programmes and support the Union Government’s UJALA programme.

    It will help increase private sector participation in energy efficiency, including through private sector energy service companies.

    Under the Program, the EESL will deploy 219 million LED bulbs and tube lights, 5.8 million ceiling fans, and 7.2 million street lights, which will be supplied by private sector manufacturers and suppliers.

    The investments under the programme are expected to help avoid lifetime greenhouse gas emissions of 170 million tons of CO2 and contribute to avoiding an estimated 10 GW of additional generation capacity.

    This would be over 50 percent of the National Mission for Enhanced Energy Efficiency target of 19.6 GW indicated in India’s Nationally Determined Contributions (NDCs) under the Paris Accord.

    Loan Agreement

    The World Bank’s $220 million loan agreement with EESL will have a 5-year grace period and a maturity of 19 years.

    The $80 million guarantee agreement will partially cover re-payment risks to commercial lenders or investors to enable EESL to raise funds for its programme.

    The guarantee will help EESL access new markets for commercial financing in line with the World Bank’s approach of maximising finance for development.

    It is also expected to leverage some $200 million in additional financing, to help EESL with its growing portfolio and future investment needs.

     

    Significance

    The energy efficiency programme is one of the several steps taken by the Union Government to meet its climate change commitments to reduce carbon intensity by 33-35 per cent by 2030.

    It will help India meet its NDC commitments and move further towards a more resource-efficient growth path.

    Key Components of the Operation

    • Creating sustainable markets for LED lights and energy efficient ceiling fans.

    • Facilitating well-structured and scalable investments in public street lighting.

    • Developing sustainable business models for emerging market segments such as super-efficient air conditioning and agricultural water pumping systems.

    • Strengthening the institutional capacity of EESL.

    Other Details

    The demand for energy efficient appliances and equipment such as lighting, ceiling fans, air conditioners, refrigerators, agricultural pumps and industrial motors is projected to grow significantly in India.

    So far, the EESL has already deployed more than 295 million LED bulbs through the ‘Unnat Jyoti by Affordable LEDs for All’ (UJALA) program, avoiding over 7,500 MW of new electricity generation capacity and bringing a significant drop in retail prices of high quality LED bulbs.

    The India Energy Efficiency Scale-Up programme will help EESL expand UJALA’s deployment of efficient ceiling fans, LED street lights and LED tube lights, along with its already-successful LED bulbs procurement and distribution.

    Under the Street Lighting National Program (SLNP) of EESL which has installed over 5.8 million LED street lights in three years across more than 500 municipalities, the EESL has entered into long-term annuity agreements with municipalities to modify existing streetlights with LED lamps and fixtures and maintain them for up to seven years.

    The entire investment is made by EESL and recovered from the energy savings of municipalities/cities.

    Further, in order to realise the street lighting programme’s full market potential and its growing programme, EESL will leverage the capacity and resources of the private energy service companies (ESCOs) to a wider range of commercial financing sources.

    Background

    India’s energy efficiency market, which is estimated to be over $12 billion per year, continues to face implementation barriers, especially in residential and public sectors, which have some of the largest untapped potential for energy efficiency improvements.

    Building upon its experience of UJALA and SLNP, EESL is now expanding its initiatives to other energy efficiency measures.

    The financing under the India Energy Efficiency Scale-Up Program will not only help EESL to continue achieving the results under its existing initiatives but also strengthen its institutional capacity and ability to meet its future expanding needs by leveraging private ESCO industry and increased access to a wider range of external commercial financing sources.

     

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