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Govt proposes fund to make public buildings energy-efficient
By siliconindia
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Wednesday, 18 June 2008, 19:30 IST
New Delhi: In order to offset the effect of climate change and rising energy cost, a government agency has proposed the creation of a fund that will boost energy efficiency in public buildings.
The fund is targeted at so-called energy servicing companies, or Escos, which provide solutions for improved energy efficiency in buildings, utilities and offices and whose profits are directly tied to the savings achieved.
Although the overall energy-efficiency investment market size under the model of performance contracts is estimated at a sizeable Rs14,000 crore, Escos find it difficult to source financing for such projects as banks are wary of advancing the mostly unsecured loans. The fund proposed by BEE will provide partial coverage of the risk for loans advanced by financial institutions to fund energy-efficiency projects.
The planned fund will initially target government buildings as they have the highest payback.
As a beginning, the agency has proposed the fund only for government buildings, which have the highest payback. "The lighting in the Rashtrapati Bhavan was changed with the investment of Rs50 lakh and 95 percent was recouped in just the first year. The same with the Prime Minister's Office, which paid for itself in 12-15 months," said Saurabh Kumar, secretary for Bureau of Energy Efficiency (BEE). The estimated investment requirement in government offices is around Rs340 crore, with potential energy savings of 760kWh annually. Kumar said the fund will initially cover 50 percent of the buildings, since the number of Escos is limited.
The proposal says the fund, whose capital level is yet to be fixed, will cover 50% of the lending risk, with Escos bringing in at least 20 percent of the investment in equity or normal collateral. The fund will be created by the Power Finance and Rural Electrification.