What is ESCOs
Bureau of Energy efficiency (BEE) is promoting energy efficiency measures in the country under the Energy Conservation Act, 2001. There is a vast scope for energy efficiency improvements in buildings. Energy efficiency measures bring about energy savings due to reduced energy consumptions. Energy savings are determined by comparing energy baseline with energy consumed after implementation of EE measures. Energy audit studies have revealed a saving potential to the extent of 40% in each end use such as lighting, cooling , ventilation, refrigeration etc. Energy cost savings resulting from EE measures directly benefit building owners and occupants over life cycle of the building.
Performance contracting through energy serving companies is an innovative delivery mechanism for overcoming the barriers faced by energy users. These companies specialize in energy audit and implement energy efficiency practices in a particular organization.
- Shared saving model: In this model, ESCO provides or arranges for most or all of the financing needs for the implementation of the project. The energy savings performance contract specifies the sharing of the cost savings between the energy saving provider and the host facility over the period of time. The sharing of the payments is structured such that the energy savings provider will recover its cost of implementation and obtain the desired return on investment within that period.
- Guaranteed saving model: In this model, the customer generally takes loan on its own balance sheet. The ESCO guarantees certain performance parameters (such as efficiency, energy savings, cost savings, and/or other performance parameters) in the Energy Savings Performance Contract, which specifies the methods for M&V and payments are made once the project performance parameters have been confirmed.
Ministry of Power has setup Energy Efficiency Services Limited (EESL), Joint Venture of NTPC Limited, PFC, REC & Power grid to facilitate implementation of energy efficiency projects. EESL undertakes projects in the following areas through the ESCO route:
- Agriculture (AGDSM)
- Municipal Function ( MuDSM)
- Distribution energy efficiency projects
- PAT DCs
Benefits of ESCO services:
A customer derives a number of benefits through engaging an ESCO. Benefits of using ESCO includes
- The Customer does not need to commit its own human and financial resources into non-core activities like energy efficient improvement.
- High probability of reduction in energy costs because the ESCO’s remuneration is contingent upon savings being achieved and measured.
- The ESCO service fee is paid from the savings achieved, so there is no burden on existing cash flows, in fact there is usually a net positive cash flow throughout the relationship with the ESCOs
- The Customer benefits from the latest energy efficiency expertise and technology.
- The ESCOs can arrange financing for the Projects.
- Involvement in bringing Energy security of the country and making green initiatives for the nation.
Existing ESCOs in CG
- Energy Efficiency Services Limited (EESL), A joint venture of PSUs of Ministry of Power, Govt of India