UN Division for Sustainable Development

Case Study Detail Record

Organization type:	Intergovernmental Organization

Name of Organization:	The Renewable Energy and Energy Efficiency Partnership (REEEP)

Name of Focal Point:	Binu Parthan

Initiative Title:	Financing Energy-Efficient Street Lighting in India

Internet links:	http://www.reeep.org/index.cfm?articleid=1387

Scope:	National: - Brazil

Status:	Completed

Timeframe:	Start: 2005 End: 2006

Lead Institution:	Econoler International

Stakeholders/Partners:	REEEP, Asian Electronics Ltd., Central DISCOM, municipal corporations

Relevent issues:	- Energy efficiency and demand-side management

Objectives/Challenges:

Objective:
Support the implementation of an innovative financing mechanism, in order to reduce by 30-40% the consumption of the street lighting network in the cities of Madhya Pradesh.
Challenges:
• Persuading the MPSEB and the Municipal Corporations to reach an agreement for the arrears and ongoing payments of the electricity bills
• Persuading the Municipal Corporations and the ESCO to reach an agreement on the guarantee of reimbursement of the agreed savings
• Achieving the project within the timeframe

Lessons Learned:

Capacity building at the city level is important to realising more city level energy initiatives;
Regional and city level sustianable energy initiatives provide a good starting point to have maximum impact;
Revenues from carbon finance has the potential to improve the business prospects of ESCOs.

Policy Options:

A public-private partnership model for implementing energy efficiency projects in public utility services.

Summary:

Street lighting represents a significant proportion of energy consumption in India, and the burden of providing the service falls on the electricity boards of each state. In several municipalities, the electricity consumed is not metered, and this provides no incentive for municipalities to improve efficiency. Furthermore, utilities have to offer street lighting electricity at a cheap rate, resulting in financial losses which in turn prevent them from making investment in more sustainable lighting systems.
The REEEP has provided an implementation grant to Econoler International to support municipal corporations, and the energy service company, Central Discom, supported the development of a sustainable financing mechanism for the implementation of energy efficient street lighting projects in the state of Madhya Pradesh.
REEEP anticipated that a 30-40% reduction in energy consumption for street lighting in Madhya Pradesh was a realistic target figure. To achieve this reduction, the project promoted the engagement of national and local investors, financial institutions and capital markets in improving energy conservation, and thus cost savings in street lighting within the state.
Similar projects in Indore and Ujjain have already reaped considerable benefits, and the strategy employed to obtain investment was to bundle projects together, providing more attractive investment portfolios with profits shared among investors.
In Indore and Ujjain, a private energy service company (ESCO) took over provision and the cost of street lighting with considerable efficiency gains. The utility which provided the power and gained from the savings then reimbursed the ESCO for the costs of the project over a period of 27 months.
The contract used between the municipalities, the ESCO and the Madhya Pradesh State Electricity Board (MPSEB) in this case was based on a shared savings model.
The REEEP funded project will implement street lighting projects across Madhya Pradesh. It is hoped that the MPSEB and its Discoms will develop sufficient capacity from such projects to launch additional energy-saving projects in the future. REEEP expects that the capacity built on the development of financial methods for reducing power consumption for street lighting projects will spread from Madhya Pradesh to other states across India, and across REEEP partner countries.