ADB to help MP set up energy efficiency fund

Manila: The Asian Development Bank will help set up a fund—Energy Conservation Fund (ECF)—to mobilise financing for energy efficiency projects in the central Indian state Madhya Pradesh.

The fund will complement an ongoing ADB investment programme in Madhya Pradesh's power sector which is focused on reducing the gap between power supply and demand, and improving efficiency in transmission and distribution.

"The ECF will facilitate the financing of revenue-generating energy efficiency projects implemented by public and private sector entities and it will develop a modality that could be replicated in other states of India," ADB's South Asia Department Principal Energy Specialist Neside Tas-Anvaripour said.

ADB will provide a US $1.7 million technical assistance through the Second Danish Cooperation Fund for renewable energy and energy efficiency in rural areas of the state, while the state government will contribute an equivalent of US $400,000.

The technical assistance will support the ECF by financing the initial operational expenditures.

The ECF will be used to implement programmes through technical and financial assistance, benefiting all stakeholders including the state government, power sector companies and consumers.

The technical assistance will also include outreach and awareness programmes to create an environment conducive to the ECF and establish credence among the diverse group of stakeholders whose involvement in energy efficiency is crucial to the success of the ECF.

These stakeholders include commercial building owners, utilities, industries, policy makers, energy auditors, energy service companies, energy efficient equipment manufacturers and banks and financial institutions in the state.

Under its power sector investment programme with the Madhya Pradesh, ADB has been asked to provide a loan of US $5 million as initial seed capital for ECF, while the state government will complement this with funds collected from a special electricity sales levy.

ADB's technical assistance will support ECF to ensure it has adequate operational resources for its first five years in operation, after which it is expected to become financially independent.

The sustained support for the ECF in its start-up years will encourage interest from commercial banks and other private financial institutions which are typically reluctant to finance energy efficiency projects mainly because of the requirement of collateral security for loans.

"With proper policies, awareness and training, energy conservation and efficiency could ensure better supply of energy to needy customers and reduce the burden on power sector companies during peak supply hours," Anvaripour said.