Energy Services Gain Ground

During 2006-11, the average growth rate of Indias gross domestic product (GDP) was about 8%, which reflects that India has made rapid strides towards economic self-reliance. Overall, energy is an important input required for economic and social development. And here, India is ranked as the worlds 3rd largest energy consumer accounting for about 5% of the worlds total annual energy consumption in 2010.

Even after 185.5 GW power generation capacities (as on November 30, 2011) and an appreciable growth in electricity generation, India has been facing electricity shortages; per capita consumption of electricity in India is very low at 779 kWh (2010-11) as compared to world consumption. According to the 17th Electric Power Survey report, electrical energy demand would likely reach 1,915 TWh by 2021-22 and the peak electric demand will touch 298 GW, thereby doubling from the current level of demand.

Creating an Energy-efficient Economy

Creating a sustainable energy system begins with the wise use of resources; energy efficiency is the mantra that leads to sustainable energy management. The India government and industry leaders are highly focused on creating a more sustainable and energy-efficient economy, and these goals have intensified their attention on the industry, agriculture, and buildings sector, which are the primary sources of energy consumption. Driven by these macro trends, energy efficiency solutions have become an increasingly larger priority for the enterprises. The energy efficiency solutions largely based on technology help reduce carbon footprint for several companies.

ESCO: Business Potential

 

"Energy Service Company (ESCO) is a consultancy group engaged in a performance based contract with a client firm to implement measures which reduce energy consumption and costs in a technically and financially viable manner" - Bureau of Energy Efficiency, India.

According to a National Mission for Enhanced Energy Efficiency (NMEEE) document brought out in 2008, a '74,603 crore investment opportunity lies through Demand Side Management (DSM) scheme and Perform-Achieve-Trade (PAT) mechanism - '44,000 crore for DSM and '30,603 crore for PAT.

PAT mechanism is slowly progressing towards the implementation stage. According to the 2011 year-end review released by the Ministry of Power, baseline energy audits of 343 designated consumers have been completed. The scheme would cover industrial units across 8 sectors. The total national target of energy saving to the tune of 6.6 mn tons of oil equivalent has been kept in the 1st PAT cycle which will be 3 years from the date of notification period.

In the first phase, the scheme covered 714 Designated Customers (DCs) from 8 sectors - power, textiles, cement, chlor-alkali, iron & steel, fertilizers, paper & pulp, and aluminum. In February 2011, the number of DCs was subsequently reduced to 563. The number of DCs has now been further reduced to 477.

The above findings are part of a CyberMedia Research study brought out to analyze the current India ESCO status and future prospects, potential customers, technology segments, growth opportunities and barriers, and present an industry overview. Market forecasts have been provided through FY14. This CMR report has been designed to serve as a credible source of information that can:

• Enable better business planning and decision-making among Indian businesses
• Help in understanding the roles of various stakeholders and policymakers in the evolution of the ESCO ecosystem Provide cues for developing an effective Go-To-Market program
• Approach and Methodology Adopted by CMR

 

CMR industry analysts utilized a variety of research sources in preparing this report. The key components of CMR analysis included an in-depth primary research gained from telephonic and face-to-face interviews with industry stakeholders through a structured questionnaire - ESCOs registered with BEE, financial institutions, government bodies, and customers. This research included only those ESCOs that have in hand at least one client contract through the performance contracting/ESCO route and meet the BEE ESCO definition.

India ESCO Market Updates, FY11

In the early 1990s, there were only 3 ESCOs in India, now this number is increasing and there are 114 ESCOs accredited with BEE. Twenty-five new companies were accredited with BEE during 2010-11, including major players such as Philips, Moser Baer, Carrier, Tata Projects, and HCL Infosystems.

• More and more ESCOs are entering into the business mainly due to the significant business potential
• Key players (who have earned revenues through performance contracting) - Honeywell, Johnson Controls, Blue Star, Asian Electronics, STEAG Energy, Schneider Electric, SGS Control, Yantra Harvest, Salzer Electronics, 1st ESCO
• In FY11, industry revenues reached '98.8 crore
• The India ESCO industry is dominated by vendor-driven ESCOs which account for a 63% market share
• The India ESCO industry mainly operates on the guaranteed savings model, which accounts for 72% of total industry revenues
• ESCO revenues mainly came from the industrial, commercial (buildings), and government (buildings and municipal facilities) customer segments

Lighting solutions dominated the technology segments and accounted for 35% of total revenues

India ESCO Market Forecast, FY14

The CMR study reveals that the India ESCO is likely to grow at a 27% CAGR by FY14 and is likely to double from 2010-11 levels. Also,

Energy efficiency projects in industries, commercial buildings, and agriculture sector would lead the industry business growth
Demand for building retrofits will increase and Intelligent Building Management Systems (IBMS) solutions will gain more traction.