LEVARAGING CDM FOR ESCO PROJECTS

FUTURE CDM WORKSHOP3rd December 2005

DSCL Energy Services Co. Ltd,New Delhi.

Acknowledgement

We are thankful to METI, JapanCRIEPIMRILBNL

For taking this initiative on FUTURE CDM WORKSHOP

Presentation Structure

ESCO Experiences in IndiaMajor InitiativesESCO Projects in Private SectorESCO Projects in Government Sector

ESCO Approach for Municipal Sector Case study of Tamil Nadu Municipalities

o Introduction to Tamil Nadu MunicipalitiesLighting systemWater pumping systemESCO perspectives

o ESCO approach

Role of CDM

ESCO Experiences in India

Major Initiatives

Gujarat-Jamnagar-USAID ECO supportedMaharastra – MEDA – USAID ECO-II supportedKarnataka – USAEP supportedAP-DIFID SupportedKolkata – WB supportedDelhi Water Board – USAEP & WB supportedTamil Nadu – Most recent initiative

ESCO Experiences in Private sector - ABC Paper

Carried in two phases: Energy auditPerformance contract

Energy Audit:Total Load – 6 MWSavings Potential identified in water pumping, electrical distribution, boiler and cogeneration

Performance Contract:Project designed by ABC and DSCL Energy Services, Financed by ABCBaseline Methodology

o Equipment efficiencyBoilers

» Auxiliary» Thermal Efficiency

Pumps

o Systemic efficiency

ESCO Experiences in Private sector - ABC Paper

o Systemic efficiencyHydraulics Electric distributionCogeneration

PMV Methodologyo Whole facility

BoilerDistribution of electrical and steam power

o Retrofit isolationPumpsFansLighting

Shared savings methodologyo Absolute savingso ROI related

ABC Paper

213,00,000140,50,0009,024,00018,425,000Total

60,00,000125,00,000Existing Steam Turbine Revamp

Co-generation System

13,60,00030,00,000Boiler Efficiency Improvements

3,50,0005,00,000DM Water System

Boiler

6,00,0001,50,000Raw Water Pumping System

Process Improvement

7,14,00022,75,000Motor & Transformer Rationalization & Metering for Load Centres

213,00,000/-140,50,000

Electrical System Improvement

Saving (Rs)

Investment (Rs)

Saving (Rs)

Investment (Rs)

ActualProposedProject

ESCO Projects in Government Sector

New Delhi Municipal Corporation – Palika Kendra Bldg.

Carried in three phases: Preliminary studyPilot projectPerformance contract

Preliminary Study:Total Load – 2 MWAnnual energy million KWh – 1.2Annual load growth – 5.3%Lighting – 45%, Saving potential – 40%Cooling consumption – 40%, Saving potential – 15-20%

Pilot Project at 3rd Floor:Project designed by NDMC and DSCL Energy Services, Financed by NDMCWhat was done

o Installed electronic meters for energy measuremento Measured illuminationo Changed inefficient tubes to energy efficient tubes and electronic ballasts, some re-

designing of the system

Results Before AfterIllumination 30-140 110-400Power factor 0.75 0.95Load (kW) 28 15Consumption (kWh) 104 58

Imp Cost Lakh RsSavings (Rs)Rate of Return (%)Payback period (years)

III Floor

1.61.5899%

1

Pilot Project Results

New Delhi Municipal Corporation – Palika Kendra Bldg.

Performance contract: DSCL ES awarded the contract on competitive bid

o Conformance to the engineering specificationso 4 years contract tenure including maintenance & savings warrantyo Guarantee on savingso Sharing of savingso Bidders qualificationo Cost evaluation

Project completed in 6 monthsProject financed by DSCL ESOverall estimate including for engineering, financing, baseline and PMV and 4 years O&M at Rs37 lacsAnnual savings at Rs 21 Lacs

Other BenefitsFuture load growth can be met without investment in augmentation measuresPF improved from 0.8 to 0.95Illumination levels improved from 40 to 70 lux to 100 to 140 luxDistribution losses reduced-estimated at 15 kWReduced load on Air-conditioning plant-estimated at 40 to 50 TRLower maintenance of electrical equipments & systemsAnnual GHG Emissions reduced by 400 T

Particulars Pre-Ret Post-RetThou kWh Thou kWh Thou kWh %

As per study 490 309 171 35Performance contract

574 296 278 48

Baseline 646 - - -Post M&V - 334 312 48Load-kW 264 138 126 48

Savings

New Delhi Municipal Corporation – Palika Kendra Bldg.

Baseline methodologyEquipment efficiency

o Lighting

Systemic efficiencyo Distribution system

PMVWhole facility

o Lighting

Shared saving methodologyAbsolute savingsROI relatedO & M related ( O & M by DSCL ES)

Gujarat Municipality – Jamnagar

Project Description - JamnagarProject summary

Project structureESCO model-1st of its kind in IndiaShared savingsIndependent verification

2000250075001000053.67.514T CO2/YrMWH/YrMWH/YrMWH/yr%Rs MNRs MN

GHG savings

Energy savings

Proposed cons.

Present cons.

Simple ROI

SavingsInvestment

Project Status

ESCO MOU signedFinancial structuring & security mechanism developed jointly with support from USAIDImplementation got stalled due to several barriers

Reluctance of MC to provide cash flow security through escrow mechanismInadequate capacity of the ESCO for balance sheet financingM&V protocolAdministrative like bid methodology and bid evaluation criteria

Delhi Jal Board

Project Description – Delhi Jal BoardAvailable Data

ESCO Approach proposedEnergy Audit

o Stage 1: Energy System Analysis: Efficient System Design o Stage 2: Baseline Establishment

Performance Contracto Stage 3: Installation /Implementation of EEMso Stage 4: Performance Measurement & Verification of Post implementation

Systemo Stage 5: Maintenance of the equipment modified /retrofitted in EEM Projects

1,0279851,3201,669934kW per MG1,9261,5196601,1131,167Running Load, kW2,3261,8999051,4251,482Connected Load, kW

4537121630Plant Capacity, MGD

Other Projects

Successful implementation of some street lighting projects mainly by vendor ESCOs. ( DNA declined the approval)Other projects particularly bigger water supply projects are yet to test success-multiple barriersTamil Nadu projects aims at large number of project implementation by removal of some of the barriers through:

Innovative financial mechanism with participation by TNUDFCDevelopment of competitive bidding methodologyImplementation by ESCOsCDM

ESCO Approach for Municipal Sector

Introduction to Tamil Nadu Municipalities

Total of 102 municipalitiesEE projects initiated in 44 municipalities

6000.94Area (Sq. Kms)

Diversities

106.34.08Energy bill (RsLakh kWh per annum)*

5,421,9852,842Population Nos

MaximumMinimumParameter

*presently data available for 7 municipalities . Audit study in progress for 44 Municipalities

Municipal street lighting system

Type Unit ment SVL MVL HML MHMC1 % in Nos 81.09 15.84 3.07

% in kW 45.23 45.88 8.88% Replaced 197.63 66.47 65.67

MC2 % in Nos 81.72 17.92 0.1% in kW 57 41.17 0.37% Replaced

MC3 % in Nos 75.7 13.43 11.39% in kW 38.19 32.64 29.17% Replaced

MC4 % in Nos 85.68 14.32% in kW 68.96 31.04% Replaced 60.06 29.94

MC5 % in Nos 85.36 11.62 2.94 0.09% in kW 58.47 30.61 10.44 0.48% Replaced 69.79 45.79 31.88 0

MC6 % in Nos 77.15 22.73% in kW 44.64 52.44 0.12 0.98% Replaced 144.07 57.6

MC7 % in Nos 69.06 30.78 0.06 0.02 0.08% in kW 37.95 60.79 0.18 0.85 0.23% Replaced 85.52 49.62

Avg. % in Nos 79.39 18.09 2.51 0.02 0.01% in kW 50.06 42.08 7.02 0.33 0.03% Replaced 79.58 35.63 13.94 0.00 0.00

High replacementCan be brought down to 25% to

30% level

Lamps - Share by wattage

SVL42%

MVL7%

Others1%

FTL-T1250%

Lamps - Share by quantity

Others0%

FTL-T1279%

MVL3%

SVL18%

Street lighting – Developing Some co-relations

Parameter MC1 MC2 MC3 MC4 MC5 MC6 MC7No. of T12 lamps 1771 3165 1327 999 2006 1273 4315Operation hours 12 11 11 12 11 12 12Calculated energy '000kwh 950 1249 803 298 630 650 2212Actual energy '000kwh 583 1250 738 201 629 286 1853Varaition % 38.6 -0.1 8.1 32.6 0.2 56.0 16.2

% lamps replaced in year 197.6 0 0 60.06 69.79 144.1 85.52kWh/person/yr 12.35 15.6 11.5 5.95 11.4 6.3 12.9Lamps/km 91 31 18.4 24 36.4 34.9

Wide range – more data required to estimate statistical co-relations

ESCO Perspective

Reasons for high replacement (NDMC replacement level is 25%)o Quality of power like voltage fluctuations, power factor etco Lighting distribution system needs redesigning?o Quality of lighting (L1 criteria ?)

Performance contractingBaseline

o Most of the lighting is metered. Installation of a few meters to have 100% metering.

o Sample circuits to be studied 100% to verify the desired reasons

Implementationo Redesigning EE system and implementationo ESCO should also take over O & M

Performance measurement and varificationo PMV as per international standards.o Financing models discussed later.

Municipal Water Pumping System (Typical)

Water treatment plant

Intermediate pumping station

WTP

Bore wells/wells in river

Collection well

Head pumping station

Booster pumping station

OHT

Consumer

Overhead tank

Leaks & Theft

Tanker distribution

WTP to Booster stationE

Collection well to WTPD

Collection well to booster station

C

Booster station to supplyCollection well to SupplyLocal pumpsB

Booster station to OHTCollection well to OHTBore wells/river wells to collection well

A

System IIISystem IISystem IType

Municipal water pumping system

ApplnRange Average S.D. Range Average S.D.

I A NA

II A 45 - 55 51.4 4.2 58-73 68 6II B 51 - 72 61.5 15 47.5 - 65.6 56.5 12.8II C 40 - 85 66 14 47.3 - 81.3 64.5 12II D 18 - 26 20.8 2.5 37 - 81 55 19.5II E NAII F 28 28 0 38.6 - 57 45.6 10.1

III A 19 - 70 41.7 21.7 43.7 - 57.9 53 5.5III B NA

Total 18 - 85 44.4 21.3 37.1 - 81.3 57.5 13.9

Head (M of water) Pump Efficiency (%)

* Data from 7 municipalities

Head distribution for application - II C

0

1

2

3

4

5

40 - 50 50 - 60 60 - 70 70 - 80 80 - 90

Head (M)

No. o

f pum

ps

Correlations difficult to establish

ESCO Perspective

HighMedium - LowHighExpenses ESCO

New design for optimal output and performance considering growth in demand etc. In Jamnagar project, new scheme was envisaged.

A sample of the pumps may be studied in detail – including hydraulic analysis – to identify EE options. Common EE measures identified may be implemented in the entire population assuming average efficiency of homogenous pumps as the baseline

Each pumping station may be individually studied to identify specific EE measures.

Activities

HighLowHigh/ mediumScope for EE

Issues

ESCO project identification method

Particular

Capacity addition plans may also be incorporatedMay not be practical for all municipalities

Gestation period lowHuge, tedious scope of workHigher man hours required

Re-design the entire pumping scheme

Study of in-efficient pumps/systems identified in preliminary study

100 % in-depth audit of each system

Option IIIOption IIOption I

ESCO Approach – Summary - Municipalities

The objective of this task is to map the existing facilities (Water pumping stations , water distribution system, electrical distribution system, lighting systems, etc in the municipality.

Mapping of systems & processes

Audit preparatory work Data format sheets would be designed for inventory collection and historical data on energy consumption by various categories, installation wise from log books (if available). The data would be analyzed which would help in identifying systems for detailed measurement and monitoring.

Detailed Energy Audit Comprehensive energy study would be conducted on the a) street lighting systems b) water pumping systems c) sewerage pumping systems d) electrical distribution systems. Detailed measurements of the systems would be carried out and projects would be identified.

Development of Projects This will include loss identification, concept design and basic engineering, technical constraint analysis, preliminary cost benefit analysis, base line , PMV option and MV plan proposal for each of the identified projects.

ESCO Approach – Summary - Municipalities

Based on the Detailed Cost Estimates received from equipment suppliers financial analysis would be done to obtain exact project financials. This would help formulating action plan for ABC analysis for project selection.

Cost benefit and financial analysis & prioritization

Installation/Implementation of ECM’s

Performance Measurement and Verification would be carried out on the implemented measures. This would help in identifying the actual savings accrued.

Performance Measurement & Verification - Post commissioning

Preparation of standard documents

Preparation of project reports as required for performance contract and project appraisal by banks/financial institutions. Standard documents would be developed for installation and O&M of pumps, motors, transformers, safety and emergency procedures, formats for maintaining records, formats for periodic inspection and contract formats.

This would involve training of the municipal personnel, competency mapping and capacity building. Review of budgeting methodology, providing recommendations for tariff setting, cost review methodology and development of a matrix for different power costs would also be a part of the training program.

Capacity building & training

Role of CDM – How can it help it happen

Given that EE is not happening in MunicipalitiesCan all ESCO Projects by default be Additional

BundlingThe CER are low per municipality. It should be straight forward to add all the municipalities under one ESCO or more ESCO and shares of CER be allowed to distributed.Rules should be flexible to allow DNA approval

CDM as guarantee moneyMost of Initiatives in Municipal have fallen because of lack of financial mechanism, so Let CDM be a source of guarantee to ESCO or To different guarantors/ investors to project and flows directly to their account and banks should recognize this as source of funding or cashflow

Thanks

Paramdeep SinghSenior Consultant

DSCL Energy Services Co. Ltd.,2nd Floor Kanchenjunga Building,

New Delhi -110001India

Shared Saving ESCO ModelIndependent Verification

Verifier

FI, TNUDF ClientESCO EE SCHEMELoan

Share ofSavings

Designated Revenue Stream

FirstCharge

ESCROWAccount

Proposed Model for Delhi Jal Board

ESCO

TRA

Funding of Energy (Power and Fuel) Savings due to ESCO

Assignment of

a) Rights under Equipment supply contract to liquidated damage s

b) ESCO’s energy efficiency assets (insurance policy)

Cash flows

Host

Excess flows to ESCO

Debt Service

Statutory Dues

Operating Expenses

Shortfall in Debt service

DSRA

ESCO

TRA

Funding of Energy (Power and Fuel) Savings due to ESCO

Assignment of

a) Rights under Equipment supply contract to liquidated damage s

b) ESCO’s energy efficiency assets (insurance policy)

Cash flows

Host

Excess flows to ESCO

Debt Service

Statutory Dues

Operating Expenses

Shortfall in Debt service

TRA : Trust and retention account DSRA : Debt service reserve account

Proposed Model

Risk Sharing Follow on Loan

Letter of Comfort

fees

Loan

DONOR GOI

Repayment

EE Projects (Large)ESCO

EA/Banks/FI

PSM

RepaymentGuarantee Mechanism

(fully funded)

Risk Sharing Gtee AgreementFees

PSM

Repayment

Lender 1Lender 2Lender n

Loan E E Projects(Small)Borrower 1Borrower n