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ENERGY EFFICIENCY (EE) FOR SMES – WORKSHOP OBJECTIVES & STAKEHOLDERS 3/16/2011Objective of Workshop Copyright (c) pManifold• 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 3
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 Copyright (c) pManifold 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 4
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 enforcementElements 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 3 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, 4 SMEs priority involved operations & marketing • Low Contractual enforcement 5 Excerpts from Rahul Bagdia’s @ pManifold presentation @ IIES 2011
IMPACT OF EE SAVINGS ON BALANCE SHEETValue Proposition and impact of EE on Bottom New way of marketingline 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 Copyright (c) pManifold climate/mandate toSr % 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% 6 Excerpts from Milind Chittawar’s @ SEE-Tech (firstname.lastname@example.org) presentation @ IIES 2011
CLUSTER APPROACH TO SME EE REALIZATIONHuge Opportunity and missing ServiceProviders 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 Copyright (c) pManifold 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 OwnerSample 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 7 Excerpts from Sanjeev Kumar’s @ MSME Foundation (email@example.com) presentation
PARALLEL DELIVERY MODELS: HOW TO STRENGTHEN EEDELIVERY & CREATE TRUST? Missing Trust for EE amongst IndustriesGrowing ESCO 3/16/2011 • Missing Trust on Service Providers and InvestmentsIndustry • Professional services missing for SMEs • Access, flexibility & ease similar to Consumer Finance missing in• Around 80 ESCOs EE Copyright (c) pManifold 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 8 Excerpts from Dinesh Rathi’s @ DRA (firstname.lastname@example.org) presentation @ IIES 2011
INSTITUTIONALIZING EE DELIVERY ESCO MODEL 3/16/2011ESCO Delivery Model•ESCO model will drive start of Measurements and Benchmarking Copyright (c) pManifold 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 9 Excerpts from Rahul Bagdia’s @ pManifold presentation @ IIES 2011
BEST PRACTICES - HEATING PROCESSESMelting 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 Copyright (c) pManifold •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 MonitoringHeat 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 10 Excerpts from Milind Chittawar’s @ SEE-Tech (email@example.com) presentation @ IIES 2011
BEST PRACTICES – AIR CONDITIONING & VENTILATION EE Opportunities in AirOptimize Process & Heat Conditioning & Ventilation – 50% Indicative TR Load 3/16/2011 ProfileExchange 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 – Copyright (c) pManifold •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 RiskImpact of Poor Maintenance of Management, Capital Cost & Annual CostACs • 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 11 Excerpts from Shankar Ghime’s @ AirTechnics (firstname.lastname@example.org) presentation @ IIES 2011
EE EQUIPMENT SELECTION & DECISION MAKING – LOOKINTO LIFE CYCLE COST (LCC)Lessons for EE Compressor selection – System thinking is MUST 3/16/2011Equipment 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 Copyright (c) pManifold•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. 13 Excerpts from Udayan Shrouti’s @ Libra Agencies (email@example.com) presentation @ IIES 2011
BANK WILLINGNESS ON EE PROJECT FINANCINGBundling of EE with other financing needs for SIDBI Support for EEMSMEs @ 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. Copyright (c) pManifold 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 14 Excerpts from Bhanu Prakash Verma’s @ SIDBI (firstname.lastname@example.org) presentation @ IIES 2011
PMANIFOLD – GROWTH SOLUTIONS FOR EMERGING BUSINESSESRESEARCH, ONLINE/OFFLINE STAKEHOLDER ENGAGEMENT & CONSULTING pManifold Energy 3/16/2011 Practice Team • Smart Distribution Copyright (c) pManifold • Energy Conservation • Green Generation Thank You • Rahul.Bagdia@pManifold.com (+91 95610-94490) • Vinit.Taori@pManifold.com (+91 99234-46100) www.pManifold.com 15