India

IN-6:Partial Risk Guarantee Fund for Energy Efficiency

Policy Description

The PRGF is a risk-sharing mechanism that provides commercial banks with partial coverage of risk exposure against loans issued for energy efficiency projects.

Description

In June 2008 the Government of India announced its National Action Plan on Climate Change (NAPCC), which include a Mission on Enhanced Energy Efficiency (NMEEE) [7]. The Implementation Plan for NMEEE was approved by the Government in June 2010.

One of the key elements of the NMEEE aimed at industry is the establishment of a Framework for Energy Efficient Economic Development (FEEED), which mainly focuses on developing fiscal and investment guarantee instruments to promote energy efficiency [1]. FEEED includes a Partial Risk Guarantee Fund (PRGF) and a Venture Capital Fund for Energy Efficiency (VCFEE) [2] [3]. The PRGF is a risk-sharing mechanism that provides commercial banks with partial coverage of risk exposure against loans issued for energy efficiency projects. [4] [5] [6].

The Energy Efficiency Services Limited (EESL) will administer these funds. EESL is a Joint Venture of NTPC (largest coal power company), PFC (Power Finance Cooperation), REC (Rural Electrification India) and POWERGRID with a mission to facilitate market implementation of energy efficiency projects. EESL will also function as resource and expert centre and may take the role of Energy Service Company (ESCO). The initial equity of EESL will be Rs. 190 crores with equal contribution from the 4 sponsors. [4] [5]. 

 

The PGRF is a risk-sharing mechanism which lowers the risk to the lender by substituting a portion of the risk of the borrower by providing guarantees. Guarantees provided are a maximum of 50% of the loan amount or INR 300 lakhs, whoever is less [8], In the case there is a default, PGRF will

  • Cover the first loss up to 10% of the total guaranteed amount
  • Cover the remaining default amount on pari-passu basis upto the maximum guaranteed amount
  • PFI shall take guarantee from the PRGFEE before disbursement of loan to the borrower.

Projects that are eligible include those that will achieve a demonstrable energy savings and mitigation in emissions of greenhouse gases; have a method for monitoring and verification of emissions and savings; be a new project; uses viable technology developed with competent energy audit/feasibility studies; implemented by BEE empanelled ESCO on performance contracting mode and; complies with environmental, health and safety standards. 

 

Policy Information Expand this section for information on the key features of the policy, such as its date of introduction, categorization, main objective(s) and linkages with other policies.

Policy Categorisation

Policy Instrument Type: Economic

Position in the Pyramid

About Us

Participation: Voluntary

Policy Linkages

Supports Mandatory energy efficiency standards (pilot phase) Effort Defining
Supports Perform Achieve Trade Scheme (PAT Scheme) Effort Defining

Agencies Responsible

Ministry of New and Renewable Energy (MNRE)
Bureau of Energy Efficiency (BEE)

Primary Objective: Energy

Objective

To increase the availability and reduce the costs of investment capital for energy efficiency investments.

Target Group

All industrial companies.

Driver of energy consumption or emissions affected by policy: Energy efficiency

Implementation Information Expand this section for information on targets, monitoring, verification and enforcement regimes, and implementation requirements and tools.

Coverage

All industrial companies.

Quantitative Target? no

Progress Monitored? yes

Verification Required? no

Enforced? no

Requirements on the Target Group

To be established.

Support by Government

Funds under the Guarantee partially come from public companies (the founders of EESL).

Implementation Toolbox

Unknown.

Complexity of Implementation

Government

Administration of fund has yet to be established.

Target Group

Lengthy loan/guarantee application procedures to go through.

Impacts, Costs & Benefits Expand this section to find information on policy effectiveness and efficiency.

Impact Quantitative Estimate Qualitative Estimate
Estimated effect on energy consumption or emissions Not available. Not available.
Estimated costs/benefits for industry Not available. Not available.
Estimated cost for government Not available. Not available.
Other Benefits
General Benefits Reduced GHG emissions as well as of other energy-related pollutants, reduced reliance on imported fossil fuels.
Specific Benefits • Increased availability and reduced cost of capital for energy efficiency investments • Incentive to improve conditions of commercial energy efficiency financing • Increased cost-effectiveness of energy efficiency technologies.

References & Footnotes

References

[1] Government of India (2008). National Action Plan on Climate Change.

[2] BEE (2008). National Mission for Enhanced Energy Efficiency. Draft Mission Document. Implementation Framework. December 2008. http://www.indiaenvironmentportal.org.in/files/National%20Mission%20for%20Enhanced%20Energy.pdf

[3] Sushilkumar Shinde. Make Energy Conservation a Mass Movement: National Missions on Enhanced Energy Efficiency to be implmented from 1 April 2010: http://www.energymanagertraining.com/NAPCC/main.htm

[4] Saurabh Kumar, BEE (2010). Promoting Innovative Energy Efficiency Financing Mechanisms, Jan 2010: http://www.asiaesco.org/pdf/presentation/6-2.pdf

[5] Energy Efficiency Services Limited (EESL) (2010). PRGF / VCFEE, 2010: http://www.eesl.co.in/website/PRGF.aspx

[6] Sanjay Dube, BEE (2010). National Mission for Enhanced Energy Efficiency, Partial Risk Guarantee & Venture, 2010: http://www.emergent-ventures.com/UploadedFiles/Catalogue/PRGF--VCF-Under-NMEEE-Sanjay-Dube-%5BRead-Only%5D.pdf

[7] Indian Climate Portal, India and International Climate Negotiations: http://www.indiaclimateportal.org/national-climate-change-action

[8] BEE. Partial Risk Guarantee Fund for Energy Efficiency. Available at http://www.superefficient.org/en/Activities/Procurement/~/media/Files/Chennai%20SL%20Workshop%20Presentations/Overview%20of%20PRGF%20for%20financing%20EE%20projects%20in%20Street%20Lighting%20System_%20by%20Saurabh%20Diddi.pdf