15 - pradeep nair
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Financing Lighting Market TransformationJanuary, 2011
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Structure
WHAT
HOW
WHEN
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Current Market Scenario
India and other South Asia are amongst the fastestgrowing regions in the world
Fast growing population, urbanization andindustrialization require additional installation of powergeneration facilities
Their increased demand will put a further strain on these
power generation facilities. urrent y g t ng consumes o tota power
generated in the country.
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Current Market Scenario (contd.)
Majority of the market is dominated by ICL andfluorescent lamps. The market share by lampsmanufactured is given below - Incandescent Lamp 63%
Fluorescent Lamp 14%
CFL 21%
Other Lamps (LEDs) 2%
Technologies that are slated to replace conventionallighting are CFLs and LEDs.
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CFL lighting in India
The CFL lighting story is often seen as a success story by theGOI, where policy interventions led to increase in CFL productionfrom 20 million lam s in 2003-04 to 255 million in 2009-10.
The GOI was also successful in reducing the cost by almost 50%
It led to the establishment of major CFL manufacturing
companies and other support infrastructure in India. Some of the
Osram, Phillips, Havells.
ue o a s rong manu ac ur ng ase n n a, manu ac ur ngwould enjoy significant economies of scale, and increasingmanufacturing capacity would further bring down the price of CFLlamps.
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CFL lighting in India (contd.)
Therefore, CFL lighting is amongst the fore-runners to replaceICLs in India.
sa van ages - owever, one o e ma or sa van ages o
CFLs is the generation of toxic waste in their disposal as theycontain mercury. The average mercury content in CFLs is 4mg.
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LED lighting in India
Currently all the demand for LED lighting is imported intothe countr .
be replaced with LED lights*.
A few pilot projects have been setup to explore thefeasibility of LED street lighting, however very few visible
e or s ave een one n e n oor g ng mar e .
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*Lighting industry Report
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LED - Challenges
Technology The technology to manufacture the LED chip is possessed by
,
bases in South Asia to protect their intellectual property rights.
This exclusivity of the technology along with existing import taxesleads to the high cost.
Standards Absence of national technical standards for testing and
,from constraining its penetration, lends itself to import of sub-standard LED devices.
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LED - Opportunities
Safety LEDs do not generate toxic waste with their disposal
LEDs have a higher luminous efficacy as compared to CFLs;hence they consume less electricity, reducing costs and GHGemissions. (An estimate from LED street lighting projects inother countries uts the estimated reduction in electricit at50%)
Life
LEDs typically have operating lives of 50,000-60,000 hours as
cycle costs.
Strength LEDs are sturdier and can withstand mechanical shock and
.quite suited to conditions of rural India and South Asia wheredamage and losses can occur typically due to rough handling
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LED Action Items
Implement a standard for quality testing and verification of LEDproducts in India; presently due to a lack of such standards somemanufacturers state unrealistic s ecifications of their roducts.
Given the potential of the Indian market, for LEDs to become cost
scale. Significant investments will be needed in R&D and inreducing packaging and manufacturing costs.
The Government of India imposes overall duties close to 30% forLEDs imported into India. Reforms will be needed in the taxstructure to ensure a favourable pricing mechanism for LED
amps.
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LED Government Stimuli
Due to lack of standard monitoring and verification of LEDstandards, the GOI suggests initially focussing on high use andbulk commercial a lications like ublic li htin like streets andstadiums.
Large coordinated retrofit projects are more economical thansmall-scale projects.
To integrate LED lamps in households, the government hassuggested integrating LED lighting under the second phase of
the Rural Electrification programmes, where 5 million BPL,
one CFL lamp. This will require additional funding of Rs 300crore.
lighting market in India will take place in the commercial lightingsector, as the savings made will be larger owing to the highertariff as compared to the domestic lighting tariffs.
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Why do we need energy efficient lighting
Reducing power consumption/energy efficiency
Reducing green house gas emissions
Employment
The GOI has earmarked numerous schemes that have setambitious tar ets to re lace ICL in India. These ro ects canprovide substantial employment and opportunities fordevelopment for Indian industries.
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Predicted savings in electricity by employing energyefficient lighting
Current Scenario GWh/yr 73676 91092 107890 125601
Scenario byemploying energy
efficient lightingGWh/yr 48874 53656 60618 70073
Savings in electricity GWh/yr 24,801 37,437 47,272 55,528
Ref:ResidentialconsumptionofelectricityinIndia:Documentationofdataand
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*Assumingthat
sale
of
ICL
and
magnetic
ballasts
is
prohibited
from
2015
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Street Lighting Technology Landscape
Technology Mercury
Vapor
High
Pressure
Sodium
Induction Cosmopolis LED
Commercializedin 1940s 1970s 1980s 2000s 2000s
Description Older,verycommonwhite
Mostprevalent
HIDlightsource
Whitelight
electrodeless
Whitelight
metalhalide
Whitelight,
directional,
technology
light
lightsource
source
ColorRendering High Low High High High
Initial Cost Low Low High High High
LampLife 24,000hours 24,000hours 100,000hours >24,000hours >50,000hours
LampEfficacy
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Why is financing of energy efficient lighting important
Growth - Ambitious government projects and steady demand byprivate sector These are driven b both need for reduction in GHG emissions and
energy efficiency targets.
To integrate LED lamps in households, the government has suggestedintegrating LED lighting under the second phase of the RuralElectrification programmes, where 5 million BPL households will be
.of Rs 300 crore.
Focus on local manufacturing This calls for major increase in local manufacturing capacity. Example,
a governmen sc eme a ms o rep ace m on ncan escen ampswith CFL lamps (the current domestic production is at 255 millionlamps)
Social focused projects
Government Subsidy An important feature of government schemes is to provide
lamps at a significantly lower price, the subsidy provided willhave to be financed by bank loans or other government
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nanc ng sc emes.
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Areas for Financing
Project Financing Many Planned Street Lighting Projects will require financing from
either the Central or state overnments or external financers.
R&D
standardisation facilities.
Companies will also require funding to setup production facilitiesin India.
CDM Banks and financial institutions will also have a major role to play
in carbon tradin if indoor LED distribution ro ects are modelled
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along the lines of the Bachat Lamp Yojana.
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A government lighting scheme
Under this scheme the GOI aims to replace 400 million incandescent
The Bachat Lamp Yojana(BLY)
amps w s.
This is expected to save 6000 MW of electricity (potential costsavings of INR 24000 crore/annum), and an estimated CO2reduction of 20 million tonnes.
Households will procure CFLs which cost Rs 100 for Rs 15 (thenormal cost of an ICL . The balance cost is covered b investorswho invest in this project. They are provided with CER certificatesunder the CDM which can be sold to developed countries who fail tomeet their emission targets.
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Opportunities for financial institutionsunder the BLY
Provide financial support to manufacturers to increase theirproduction capacity
The current market price of a CFL is Rs 100 while consumers willbe rocurin them for Rs 15, the balance amounts to more thanUSD 750 million which will be paid for by investors in the BachatLamp Yojana. These investors will be looking to financial
institutions for support.
Facilitate in the trading of CER certificates under CDM.
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How can these projects be financed
Source Description Remarks
Central and State government
funds
Stimulus funds, state/provincial
programs, municipal programs.
There are government financing
programs for both indoor and
Assistance could include
partnership in governmentprograms like the Bachat Lamp
Yojana, subsidies to
outdoor lighting. This includes
schemes to make CFLs availableat affordable rates to partnership
in street lighting programs
manufacturers, reduction in
excise and other indirect financial
assistance
External Financing through
agencies and banks
Structured loans from institutional
investors and private equity firms
can provide for the capital
In addition to infrastructure
projects, these sources can
provide for funding where the
investment required for majorinfrastructure projects.
cost of the government subsidiesare borne by lighting equipment
distributors.
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Source Description Remarks
Carbon Finance The resulting GHG emission
reductions are used to obtain
Carbon finance can be a steady
source of income to rovide forCER certificates under the CDM,
they can then be sold to Annex
1 countries that fail to meet their
emission tar ets.
the cost of projects. It is already
being implemented in a few
government schemes and can
be a lied to both indoor and
outdoor lighting projects.
Banks would have a major role
to play in facilitating the trade of
Microfinance/microcredit Microfinance loans can be
provided to rural entrepreneurs
to sustain their business. E. -
Numerous Microfinance
institutions operate in India and
the South Asian Re ion.
Women entrepreneurs who rent
out solar lanterns on a daily
basis.
,
provided to people for whom
lighting equipment is essential to
their business, e.g. Night
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, ,
carpenters, etc.
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Source Description Remarks
Utility Company Utility-based rebates, incentives, and on-bill
Debt Equipment leases, including:
Capital leases
Operating leases
Tax-exempt lease purchases
Medium-term structured loans from commercialbanks or other third party financiers
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x : 140,000 citystreetlightfixturesreplaced
withLEDfixtures,andinstallationofremoteCCIRole
monitoringsystem
$57 millionprojectcost $10 millionenergyandmaintenancesavings
Angeles
in: Developingand
peryr
40,500 t/CO2/yrinannualCO2 savings
7 yearpayback
commun ca ng e us ness
casefortheproject
Soliciting
informal
financial
tenderinsmall,discreteincrements
Projectultimatelyfundedwithcombinationof7 ear 40million loanat5.25%
sheetsolution;proposals
demonstratedstrongproject
economics which eventuall
providedby
LADWP;
$3.5 million
from
StreetLightingMaintenanceAssessment
Fundand$0.24/kWh incentive
ledLA
to
self
fund
project
Conveningstakeholders Bringingattentiontothe
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Project currently ongoing, with savingsgreater than anticipated and project costs
lower than anticipated
project
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A Mechanism where energy savings paysfor the cost of the equipment
A financier enters into an agreement with an ESCO/projectimplementer to provide energy efficient equipment to a customer
.
The financier covers all equipment and project maintenancecosts.
The customer repayment is based on the energy savings andreduced operating expense
After the ex iration of the a reement. The customer has theoption to purchase the equipment.
The 3rd party covers
and installs theequipment
.
The customer repayshim on the basis of
energy savings
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3rd Party
Financer
ESCOThe 3rd party and the ESCO enter
into a contract to pay for all
installation and maintenance costs
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