Promoting energy efficiency in SMEs, and waste heat recovery measures in India 6 th Annual Energy Management Action Network (EMAK) workshop Place: Hotel Taj Palace, New Delhi Date: 25 th February 2015 Organizers: TERI, IEEJ TERI and the Institute of Energy Economics, Japan (IEEJ) organized the 6 th Annual Energy Management Network (EMAK) workshop on the theme Promoting energy efficiency in SMEs, and waste heat recovery measures in India. The event was attended by around 80 participants comprising entrepreneurs, SME industry associations, local service providers, technical experts, energy consultants, representatives from BEE, MNRE, PCRA, SIDBI, MSME-DIs, Ministry of Steel, public sector banks and private banks, Japanese research organizations such as IEEJ, ECCJ and Japanese companies like Kawasaki, Hitachi, Nippon Steel etc. The workshop was moderated by Dr Patrick Crittenden, Director, Sustainable Business Pty Ltd, Australia. The main points made during the presentations and discussions are summarized below. INAUGURAL SESSION Dr Patrick Crittenden, Director, Sustainable Business Pty Ltd, Australia set out the aims of the workshop, namely, to: Learn about and share experiences on designing and implementing energy efficiency policies and programmes for SMEs Identify innovative ways of financing energy efficiency projects Better understand the technical opportunities to reuse waste heat in industrial organizations Initiate and develop networks within and across SMEs, the finance sector, industry associations and government policy-makers at both national and international levels Contribute towards domestic and international dialogue and capacity-building on energy efficiency measures. Mr Girish Sethi, Director, IEED, TERI acknowledged the support provided by Ministry of Economy, Trade and Industry (METI) in Japan, and BEE in India for a range of initiatives to promote energy efficiency in Indian industry. He noted that the present Indian government s thrust to promote clean, efficient production technologies in industry (captured in the slogan zero defect, zero effect ), provides a very conducive environment for more such initiatives to be undertaken.
Ms Junko Ogawa, Senior Researcher, IEEJ, underlined the central importance of energy conservation for Japan, which depends heavily on imported sources of energy (including oil from the Middle East), and was hence hit hard by the oil crisis of the 1970s. In 1979, Japan established the Energy Conservation Law (ECL). Initially, the ECL focused on Japan s industrial sector, which accounts for a major portion of the total energy consumed in the country. Later, the ECL was extended to cover the commercial and transport sectors too. The energy conservation measures have been implemented through a combination of regulations, taxes and incentives. The effectiveness of these measures is evidenced by the fact that the high economic growth achieved in the past few decades has been matched by lower energy costs for instance, heavy industries like cement, chemicals, pulp & paper, and steel have shown marked improvements in energy intensity. A survey conducted on Japanese industries in 2011 revealed that the main barriers to the promotion/adoption of energy conservation measures are in the areas of finance, skills and information. Among these, information barriers are particularly significant for SMEs. Japan has sought to address these barriers through a host of information sharing initiatives (training, capacity building etc.) and support policies and mechanisms involving government organizations like Ministry of Economy, Trade and Industry, Japan (METI); institutions like ECCJ, IEEJ, NEDO etc.; and industry associations. Other nations could draw valuable lessons and models for improving energy conservation from Japan s experience, and through sharing information and experiences with one another. As part of this strategy, EMAK was established in 2009 to promote the improvement of industrial energy efficiency and energy savings in industry and the commercial sector. EMAK supports the sharing of information and experiences through workshops, internet based seminars and its portal: http://www.iea.org/topics/energyefficiency/industry/emak/. Mr Bhaskar Jyoti Sarma, Secretary, BEE, stressed the importance of energy conservation in the Indian context. He noted that in the past decade, the Indian economy has grown by around 8% overall, while specific energy consumption has dropped by about 25%. Large industries like cement and fertilizer plants have improved their energy performances to global standards. However, it is still a challenge to promote energy conservation in the SME sector, which is largely unorganized and hence difficult to influence through regulatory measures. SESSION 1: ENERGY EFFICIENCY IN SMEs This session saw presentations made on different aspects of promoting energy efficiency among SMEs, covering relevant issues at the policy, institutional, technological and financial levels. The salient points and ideas are summarized below.
Accelerating energy efficiency in SMEs a global perspective [Dr Patrick Crittenden, Director, Sustainable Business Pty Ltd, Australia] Globally, an estimated 26 EJ of energy per year could be saved in industry by the year 2030. SMEs account for around 30% of total industrial energy consumption, and are also key drivers of innovation, employment and economic growth. This underlines the importance of promoting energy conservation in the SME sector. The major barriers to improving energy efficiency in SMEs are in the realms of finance, information and skills. These barriers can be addressed through well-structured programs undertaken by government institutions in partnership with industry and other stakeholders, to provide SMEs with access to energy efficient technologies, finance, and training and capacity building support. Examples of such institutionalized initiatives by government are BEE in India; actsmart in Australia [http://www.actsmart.act.gov.au/] and TurSEFF in Turkey [http://www.turseff.org/]. The six key strategies for successfully introducing energy conservation among SMEs are to: (1) understand the barriers and needs; (2) focus on multiple benefits (not just on energy savings); (3) build stakeholder partnerships; (4) make it easy for SMEs to access assistance; (5) leverage existing policies and programs; and (6) combine (package) measures. Understanding the SME sector in Asia, with a focus on India, and challenges in terms of improving energy efficiency [Mr Prosanto Pal, Senior Fellow, TERI] The importance of SMEs is evidenced by the fact that they are major providers of employment and account for 40 70% of GDP in most Asian countries, e.g., Bangladesh and Nepal The Indian SME sector is characterized by a high proportion of micro and small scale units and their geographical clustering; energy intensity (i.e. where energy cost makes up a major portion of operating cost); limited support institutions and local service providers; low awareness levels among entrepreneurs and workers; and the uniqueness of technologies and practices deployed, which are often decades old, low in energy efficiency and high on pollution. R&D efforts, backed by extensive training and capacity building of unit-level personnel and LSPs, are hence required to evolve, introduce and help sustain energy efficient technological solutions that are adapted to local conditions and needs. TERI s experience in working with small-scale foundries has shown the effectiveness of the RDD&D (research, development, demonstration and dissemination) approach in promoting clean, energy efficient technology in the SME sector.
How to calculate energy efficiency potentials and other benefits in SME subsectors the case of foundry and steel rolling SMEs in India [Mr Gaurav Sharma, Institute for Industrial Productivity (IIP), India Office] The cluster-based approach works well in promoting energy efficiency in the Indian SME sector. However, a major challenge is to address the diverse kinds of entrepreneurs often encountered within the same cluster, in terms of their education, awareness levels and willingness to consider/adopt new ideas. IIP s experience in two Indian SME sectors foundry and steel re-rolling has shown that the demonstration of co-benefits brought by energy efficient technology (i.e. benefits in addition to energy savings) can help in motivating entrepreneurs to adopt the improved technology. For instance, in steel re-rolling, improved technology not only brings direct savings in energy costs (reducing coal consumption by about 30 kg/t product), but also reduces metal losses on account of scaling/oxidation, thereby improving productivity. Enabling Finance for Scaling up Energy Efficiency in MSMEs [Mr Upinder S Dhingra, Associate Fellow, TERI] Financing energy efficient technologies (EETs) poses special challenges, as the low awareness and capacity levels among MSMEs is compounded by the lack of capacity among financiers in understanding and assessing EE projects. It is important to recognize that an EET can be in one of three stages of maturity, and that different models of finance are required for the EET in each of these stages. o Pre-commercial. The EET is not available off-the-shelf; R&D is necessary (e.g. melting furnaces for iron, brass, aluminium; waste heat recovery systems) o Semi-commercial. The EET is relatively new; it has been demonstrated successfully in a few units but its replication has to be spurred by awareness generation efforts and more pilot projects (e.g. divided blast cupola, biomass gasifier systems) o Commercial. The EET is available off-the-shelf (although the market is not saturated); concessional loans are needed to push these (e.g. IE3/IE4 electric motors, EE pumps, inverter air compressors, recuperative burners) It is important to distinguish between an investment made for modernization or expansion, and an investment based on energy efficiency criteria. Typically, the former is marked by high capital cost and long payback period (e.g. a CNC machine) while the latter is marked by a relatively low capital cost but short payback period (e.g. an air compressor). It is imperative to consider payback period based purely on energy savings
for analyzing energy efficiency projects. International credit lines for providing grants and low interest loans for energy efficiency typically consider the following criteria, based on energy savings alone: o Internal rate of return (IRR): around 10% o Payback period: 7 8 years Financing of EETs at different stages of commercialization could be modeled as follows: o Pre-commercial. Funds are needed for the entire RDD&D cycle. The funds could take the form of grants or venture capital, and come from government financing schemes and/or low-cost funds from multilateral/bilateral agencies. o Semi-commercial. Here, upfront costs are high, as are the perceived risks. Funds could take the form of capital subsidies and concessional interest rates for new technologies (making them more attractive for MSMEs compared to the existing low efficiency technologies). o Commercial. Funds could be routed through ESCOs and concessional lines of credit. Financiers should be provided with guidelines to assess EETs. In particular, IRR and payback period should be evaluated based on energy savings alone. Discussion The session was followed by a brief round of discussion in which the participants actively provided their inputs. Some of the important points that emerged are as follows: Government should consider providing tax rebate schemes to SMEs to encourage them to adopt EETs. A Value-Added Tax (VAT) holiday could be provided during the duration of the payback period. EE technological solutions are not readily available for the scale of operation in Indian MSMEs, and/or they require customization to suit specific needs Loans required for many EE measures are usually small, and carry almost the same transaction costs as large loans; hence, bankers find them unattractive Put in place a special agency to bridge the gap between MSMEs, technology providers and banks. The Energy Service Company (ESCO) mechanism, with specific focus on the MSME sector, should be promoted particularly for the energy efficiency products. BEE should validate and provide accreditation to various EE technologies and their respective vendors. The SAMEEEKSHA platform can be used to spread awareness on these accredited EE technologies and vendors. The entrepreneurs demanded that the subsidy on EETs should be released at the time of investment itself. Follow an energy intensive cluster based approach in formulating and implementing supportive policies.
SESSION 2: WASTE HEAT RECOVERY This session focused on the opportunities for waste heat recovery (WHR) in industry, the experiences in implementing WHR systems, and case studies from India and Japan. The following presentations were made: Waste heat recovery: opportunities in Indian industry sector [Mr Srikant Kasturi, Development Environergy Services Limited (DESL)] Waste heat recovery: case study of the glass industry sector [Mr Sachin Kumar, Fellow, TERI] Waste heat recovery: power generation for cement plants in India [Mr K V Perumal, Manager, Kawasaki Heavy Industries Ltd, Delhi] Waste heat recovery: policy and practices in Japan [Mr Niro Kitagawa, Energy Conservation Centre, Japan] Waste to energy: heat recovery from waste [Mr Makoto Takano, Deputy Head of BU India, Hitachi Zosen India Pvt Ltd] A few of the salient points made are listed below. WHR systems can save energy costs by using the waste heat for a variety of process applications such as preheating combustion air; heating batch materials; generating hot water/steam in a boiler; generating electricity by means of a turbine; etc. Plant owners and operators are much more receptive to adopting WHR systems if they are provided with an understanding of how these systems work, and how simple modifications in equipment design (e.g. providing open furnaces with doors) and good operating practices (e.g. reducing air leakages, insulating the furnace and pipes, optimizing air supply) reduce heat losses and further increase energy efficiency. Japan promotes WHR under its Energy Conservation Law, by setting benchmarks ( standards and targets ) for waste gas temperatures for boilers, waste heat recovery rates for industrial furnaces, and temperatures of furnace walls. Enterprises are also required to develop and follow energy management manuals. Waste-to-energy (WTE) plants are typically very low in efficiency (5 20%) because of the low calorific value of municipal solid wastes (MSW). However, in addition to generating electricity, they also improve the local environment and reduce health hazards. In 2012, Japan generated over 1750 MW of electricity through WTE plants. SESSION 3: PANEL DISCUSSION AND WRAP-UP A panel discussion took place during this session, following which the closing remarks were made by Mr Tomoyoshi Hisamori, Deputy Director, International Affairs Office, Energy Conservation and Renewable Energy Department, METI. The panelists comprised: 1. Mr Rajiv Kumar, DGM, Energy Efficiency Centre, SIDBI
2. Mr M A Patil, Director, Resource Conservation and Management, FICCI 3. Shri R N Pandya., Sr. Project Executive, Energy Conservation, GEDA 4. Mr. Girish Sethi, Director, TERI 5. Mr A Pari, Chairman, The Institute of Indian Foundrymen (IIF), Chennai Chapter The points that were made and emerged during subsequent discussion included the following: By their very nature, EETs require specialized financial packages and long-term handholding support from technology providers and other agencies. India SME Technology Services Ltd a joint venture of SIDBI, SBI, OBC, IOB and Indian Bank has launched an innovative program named 4E (End to End Energy Efficiency) to help MSMEs adopt EETs by providing financial and technical advisory support for the entire process: from assessment of energy savings potential through energy audits, and identification of vendors, to installation and commissioning of the technology. SIDBI and The World Bank are launching a Partial Risk Sharing Facility, which will encourage energy efficiency projects through the ESCO model by guaranteeing up to 50% of private sector investments in ESCOs. FICCI s experience in Gujarat, where a large number of cleaner production projects have been implemented successfully, indicates that there is often an overlap between EETs and systems/processes that improve productivity and/or product quality (e.g. cupola vs. induction furnace). Therefore, the focus could be on promoting technologies that help improve energy efficiency as well as productivity. Demonstrate model EE pilot projects at the cluster level through the Research, Development, Demonstration and Dissemination (RDD&D) approach Technology is fundamental to the promotion of energy efficiency. Issues related to information, finance, capacity building etc. will have meaning only when technological solutions customized to local needs have been developed. Unlike small, mass-producible products like LEDs, the 3-stage EETs have to be developed through RDD&D, which requires long-term support. Build the capacities of bankers to enhance their understanding to evaluate EE technologies Formulate special schemes for cluster-specific EE financing. There is a need to recognize the critical role LSPs play in supporting EETs at clusterlevel, and to establish suitable policies and schemes to support LSPs. Also, we must create and strengthen linkages between educational institutions (engineering colleges, R&D institutes) and industry; such linkages are vital in fostering a culture of technological innovation, as is seen in countries like Norway.