Courtesy of Environmental Finance, a report on an interesting Indian initiative to develop & deploy an energy efficiency trading system via which companies – if they beat certain targets – would be awarded energy savings certificates (ESCerts), which they could either sell or bank for future use. It would be interesting to see if a similar model could be deployed on an individual model to help “energize” consumer involvement with the smart grid. As the article notes:
“…India’s prime minister this week unveiled an energy efficiency trading system designed to save 5% of the country’s energy consumption, and 100 million tonnes of carbon dioxide (CO2) annually, by 2015. The initiative – which is expected to cover around 700 installations – is to be underpinned by a market in tradable energy efficiency certificates.
In announcing the plan, Manmohan Singh said: “Our success in reducing the energy intensity of our growth will also reduce the carbon intensity of our growth …The implementation of this mission will also be a powerful signal to the international community that we are willing to contribute in a significant manner to meeting the global challenge of climate change.”
The Bureau of Energy Efficiency (BEE) will implement the system, and is to assign energy efficiency improvement targets to the country’s most energy-intensive industrial plants in the following sectors: thermal power plants, fertiliser production, cement, iron and steel, chlor-akali production, aluminium, railways and textiles.
If they beat these targets, they would be awarded energy savings certificates, or ESCerts, which they could either sell to companies struggling to meet their targets, or presumably bank for later periods.
According to an earlier scoping document seen by Environmental Finance, the first targets will be set for a three-year phase running from 2009-12. However, BEE was unable to clarify if that timetable is still in place.
The prime minister said the scheme is intended to enable $15 billion worth of energy efficiency transactions, but it is unclear whether this figure refers to investments or trading.
The system is also intended to promote the development of energy service companies (ESCOs), which contract to meet customers’ energy needs for a fixed cost – usually less than the customer is currently paying. The ESCO then makes energy efficiency improvements designed to ensure the ESCO itself is able to meet the client’s energy needs at an even lower cost.
Two funds are to be created to support the programme. A “partial risk guarantee facility” will provide back-to-back guarantees to banks for loans to energy-efficiency projects, and a venture capital fund is to support investment in energy-efficient product manufacturing and provision of energy-efficiency services. These – and the running of the programme – are to be funded to the tune of $60 million.
Bishal Thapa, the New Delhi-based managing director of consultancy ICF International, welcomed the initiative. “The companies affected by it will need to start responding to energy efficiency as something central to their business – and begin to centralise energy efficiency. That’s something that hasn’t been done before.
“It also potentially gets the financial markets involved. And we’ll see a lot more ESCOs emerging, potentially,” he added.
“However, it all depends on where the targets are set … it is going to be a challenge to set targets. Every experience I’ve had, it’s proved very difficult to set benchmarks. There’s no simple way to do it. This will be no different.”
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