At the forefront of India’s energy efficiency improvements has been Energy Efficiency Services Limited (EESL). After having successfully transformed the LED lighting segment, it is paving the way for rolling out smart meters and electric cars in a huge way to help India work towards its climate goals. Saurabh Kumar, managing director, EESL, in a recent interview, shared his perspective on the company’s performance, plans and outlook for the sector…
What is your perspective on the current state of the power sector?
The power sector in India is undergoing a transformation as the government aims to provide 24×7 power for all by December 2018. Renewable energy installation is seeing a fast growth and is likely to reach 175 GW in the next few years. The cost of renewable power has become low and affordable. The power sector reform process has picked up momentum in the past couple of years with major interventions by the Ministry of Power (MoP) like the Ujwal Discom Assurance Yojana, the Integrated Power Development Scheme (IPDS) and the Deendayal Upadhyaya Gram Jyoti Yojana. Further, the tariff policy that has been announced will also bring in far-reaching reforms in the sector.
The financial health of discoms continues to be a cause for concern. The main reason is their high aggregate technical and commercial (AT&C) losses. While the IPDS and other reform measures require all discoms to bring down their AT&C losses to 15 per cent (from the present average of 24 per cent to 26 per cent), the progress in some discoms needs to be improved.
One of the key challenges before the sector is related to billing efficiency. The average billing efficiency is about 82 per cent, which means that almost 200 billion kWh of electricity is not billed at all. At a conservative cost of Rs 4 per kWh, there is a gap of Rs 800 billion every year. The MoP has issued a ministerial guidance to all states that the entire metering of over 3.8 million consumers needs to be shifted to smart meters on a prepaid mode. This will transform the financials of the sector. Another challenge is agricultural subsidies.The total subsidy that states provide for agriculture is about Rs 680 billion every year. There is a need to solarise agriculture pumping to reduce the subsidies. The Government of India is finalising the Kisan Urja Suraksha Evam Utthaan Mahaabhiyan, which will incentivise the installation of solar agricultural pumps in a manner that it is scalable and has incentives for discoms, farmers and investors. These interventions, along with the set of reforms indicated above, will ensure the turnaround of the sector.
What have been the outcomes and impact of EESL’s programmes for LED lighting?
When we started our domestic LED distribution drive in 2014-15, the LED sector was not even witnessing 1 per cent of the lighting industry’s total sales. Today, the sector’s sales stand at about 70 per cent, and we have been the enablers of this market transformation. Moving forward, over the next five years, public lighting will remain a big focus area for us. We have already replaced about 6.5 million streetlights in the country with LED variants, becoming the world’s largest street light asset holding company. We are the only company in the world to have implemented a programme of such a scale. We have changed lighting at 1,000 urban local bodies, and seven states, enabling 100 per cent street light saturation. Uttar Pradesh, which is at almost 70 per cent, is witnessing ongoing LED retrofits.
Our model to drive this scale and reach is quite simple: we make the entire upfront investment, change the conventional street lights with LEDs, and make them “smart” via inbuilt remote operations and fault detection capability, thereby guaranteeing a minimum savings of 50 per cent in energy and maintenance costs. As a result of our initiatives, India has achieved energy savings of around 8,000 MW over the past three years. Of this, 7,500 MW is from Unnat Jyoti by Affordable LEDs for All alone. In value terms, the cost savings work out to be approximately Rs 7 million per MW as compared to the average generation cost of Rs 60 million per MW.
What are the next steps proposed for the roll-out of electric vehicles (EVs) and charging infrastructure? What are some of the key barriers that need to be overcome?
To enable the government’s e-mobility vision, EESL aims to replace all 500,000 cars in government service with electric variants, and ensure adequate supporting charging infrastructure for them.
The first tender for 10,000 EVs was closed in January 2018, keeping in mind that creating a robust supporting infrastructure is crucial to promote e-mobility. To propel this, we are working to develop the charging infrastructure and ancillary markets. Currently, in Delhi, about 370 charging points have been set up to cater to 153 vehicles that are already running. Additionally, nearly 400 additional vehicles are at various stages of registration. Also, the demand to boost infrastructure is growing from states like Andhra Pradesh, Gujarat, Maharashtra and Jharkhand, reflecting the effectiveness of the tender. So far, we have received demand for 19,000 electric cars, of which we expect to deliver 10,000 by March 31, 2019, as a part of the first tender. We are also facilitating the installation of 2,500 chargers to cater to 10,000 EVs that are being procured for the government.
Through the EV programme, EESL is trying to create an ecosystem for manufacturers and suppliers to invest in EV in India, aggregate demand through bulk procurement, guarantee payment to suppliers and conduct awareness activities for consumers. In doing so, EESL is addressing and resolving challenges that have inhibited the growth of the industry such as low product demand, high financial risks and costs for industries, and lack of consumer awareness.
However, there are some regulatory gaps that exist in the electric mobility sector. The first hurdle is the creation of public charging infrastructure, for which standards and commercially viable tariffs are needed to encourage people to create charging stations. There is also a need for clear regulatory mechanisms, both in terms of fiscal and non-fiscal incentives, rebates, etc. Since it is a new technology, there is a need to assess areas like grid stability and emerging prices, leverage the right technologies, and cater to the charging specifications, among others. Clearly, the process is expected to be a prolonged one. However, EESL is providing an impetus to it by specifically focusing on government vehicles to support infrastructure for e-mobility in India.
So far, the capital cost of EVs is slightly higher, necessitating most nations across the globe to provide capital subsidy to promote the sector’s growth. However, we believe that incentives such as waiving the road tax and registration charges or doling out an interest subsidy instead of a capital subsidy may play a bigger role in bringing down the costs.
Furthermore, we understand that the FAME II (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) policy, which is at an advanced stage of discussions, emphasises substantially on creating an efficient and effective public charging infrastructure. In fact, it has been recommended that in every city with a population of over 1 million, one public charging station must be available every 3 to 5 km. The government, through the MoP, will help in setting up these public charging stations, and FAME II will provide up to 50 per cent capital subsidy. In this scenario, public and private sector entities must come forward to lay down the infrastructure to boost the adoption of EVs.
What has been the experience so far under the smart meter procurement drive? What are the plans for procurement going forward?
Through our Smart Meter National Programme, we aim to replace 250 million conventional meters in India with smarter versions. So far, we have received an encouraging response from the states. We have also signed agreements to supply 1 million meters to the state discom of Haryana, 4 million meters to Uttar Pradesh, 75,000 meters in the New Delhi Municipal Council (NDMC) area, 1.8 million meters to Bihar, and 1.7 million meters to Andhra Pradesh. Additionally, several states like Tamil Nadu, Telangana, Gujarat, Jharkhand, Odisha, Assam, Madhya Pradesh and Himachal Pradesh have shown interest to follow suit. EESL has begun the implementation in Varanasi and will soon follow this up with similar initiatives in Lucknow, Kanpur and the NDMC area. In Bihar, EESL is identifying five cities to start with wherein around 2 million smart meters will be installed by the end of this financial year.
EESL has already procured 5 million smart meters so far, and the required system integrator. We are also in the process of finalising another tender for 5 million meters to meet the growing demand in Jharkhand, Karnataka, Gujarat, Andhra Pradesh and Tamil Nadu.
To roll out the smart meter initiative, EESL is implementing its proven model of bulk procurement, aggregation of demand, and monetisation of savings. It would be done on a build-own-operate-transfer basis. EESL will, therefore, receive a nominal internal rate of return, which will be reflected in a mutually agreed, automated payback structure.
EESL envisages the aggregation of demand from various states, a trend that has already resulted in reducing the prices by 20 per cent in the second phase of smart meter distribution. Furthermore, the programme will holistically promote the Indian manufacturing industry while creating more direct and indirect jobs.
What were some of the major highlights for EESL in the past year?
In less than a decade, EESL has emerged as a pioneer for implementing and propelling energy efficiency in markets in India and abroad. The energy efficiency measures of the government that were implemented by EESL alone have led to energy savings of over 41 billion kWh and have reduced India’s greenhouse gas emissions by 32 million tonnes.
In 2017-18, EESL has distributed over 79.5 million LED bulbs, 4.256 million LED tube lights, and 1.064 million energy efficient fans. EESL installed 3.5 million LED street lights, with installation per week ramped up to over 100,000 in 2017-18 from 50,000 per week in 2016-17. The Agricultural Demand Side Management project, that replaced old pumps with BEE 5-star-rated pumps, started from Andhra Pradesh. In the last financial year, EESL installed over 17,000 pumps. The National E-Mobility Programme was launched on March 7, 2018, by the minister of power, new and renewable energy. In the previous financial year, EESL completed the procurement of 10,000 electric cars. On February 24, 2018, it also signed an MoU to supply 10,000 electric cars and 4,000 chargers to the Andhra Pradesh government. In 2017-18, EESL signed agreements for 414 e-cars and delivered 104, and installed 102 AC and 25 DC chargers.
EESL started the procurement process for 5 million smart meters in November 2017, for installation in Uttar Pradesh and Haryana. EESL signed an MoU on February 24, 2018, to provide 1.7 million smart meters to Andhra Pradesh’s two power distribution companies – APEPDCL and APSPDCL. Under the Solar Study Lamps scheme of the Ministry of New and Renewable Energy, EESL has distributed over 0.96 million solar study lamps in Uttar Pradesh, Bihar, Jharkhand and Assam in the previous financial year. EESL concluded the acquisition of UK-based Edina Power Services Limited on March 14, 2018. Edina is a supplier, installer and maintenance provider for combined heat and power, gas and diesel power generation solutions in the UK.
What are EESL’s growth plans for the future? What are some of the new areas that the company is looking to enter?
In the current scenario, EVs are one of the most promising pathways to address not only India’s growing concerns for pollution, but also to cut carbon emissions and improve air quality in the country. The Indian government has recognised their relevance to the mobility needs in the near future, as these vehicles are at least 3-3.5 times more energy efficient than traditional internal combustion engine (ICE) vehicles. The government’s initiatives such as the National Electric Mobility Mission Plan and FAME India are facilitating concerted and coordinated efforts towards building an EV ecosystem in the country. To enable the government’s e-mobility vision, EESL has planned to replace the government’s fleet of 0.5 million conventional ICE cars with electric variants. It also aims to establish a charging infrastructure across all the states where EVs are being deployed. Considering that India will need to build 700-900 million square metres of commercial and residential space till 2030, and that energy demand is expected to rise by at least four times by 2032, it is time to identify large-scale energy solutions.
Their energy needs can primarily be linked to their heating, cooling and electricity needs. The personal and macro cost of these needs can be met efficiently through trigeneration. The process of trigeneration uses gas as input to produce electricity, heating and cooling, with an overall efficiency that is twice that of conventional systems. EESL’s latest acquisition of Edina through Energy Pro Assets Limitedd is a part of its efforts to expand its portfolio. Edina brings on board a successful turnkey trigeneration product and service offering, while being able to access financing in a wider international market for its bespoke containerised solutions.
Smart meters is another area that holds tremendous potential for India’s energy goals. Smart meters can not only act as a pathway to resolve discom woes with new found efficiencies but also create an entire domestic industry, which does not exist at the moment.
EESL is constantly looking to unlock and sustain markets for energy efficiency, the market for which has been estimated at $12 billion, with a potential to reduce energy consumption by up to 20 per cent. We will continue to stimulate markets for relevant solutions that would help society, and recalibrate the ecosystem to boost their adoption, while driving a large-scale social impact.
What is your outlook for the power sector in the next few years?
India’s energy efficiency programmes have so far saved nearly 13 GW of annual generation capacity, translating into savings of over $10 billion in the form of avoided capacity generation and reduced energy bills. This achievement is testimony to over four decades of dedicated and concerted effort, a supportive policy framework, and extensive collaborations between domestic and international stakeholders in the public and private sectors. India will need to amplify and accelerate this momentum of multi-stakeholder cooperation as it balances the achievement of its development ambition and embarks on an ambitious programme to reduce the intensity of its carbon emissions by 33-35 per cent by 2030, relative to the 2005 levels.
Additionally, with at least 178 nations around the world geared up to control the temperature rise at 20C this century, the need for exchanging economic and effective solutions is immediate. With its proven success in scaling up energy efficiency and implementing the world’s largest energy efficiency portfolio, India should harness its ability to assume a more prominent role as a multinational convener of knowledge and best practices in mainstreaming the principle of energy conservation, thereby facilitating the global progress towards a climate-resilient future.