World Resources Institute WRI

Powering up: The investment potential of energy service companies in India

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Against a backdrop of national concern about climate change and rising oil imports, interest in implementing energy efficiency initiatives has been increasing in India’s government, business, and investment sectors. Both government policies and efforts by multilateral and bilateral organizations to conserve energy across a wide range of sectors have contributed to new domestic and international energy efficiency companies to serve this market. This expansion over the last half decade has in turn led to investors’ interest in funding the energy efficiency sector. The potential for energy savings is enormous: an estimated 183.5 billion kWh per year, based on reports prepared by the Asian Development Bank and the Indian Bureau of Energy Efficiency (BEE).

One subsector within the energy efficiency industry that can help deliver both energy savings and financial returns in India is the specialized energy service company (ESCO) industry (see box 1).

In other emerging countries, ESCOs have made significant contributions to energy efficiency programs and local economies. In Brazil, such companies produce annual industry revenues of USD 344 million (2008), and in China, USD 121 million (2006). In both countries, the
industry is growing at double-digit rates. The purpose of this study is to provide a better understanding of the potential of India’s ESCO industry in order for financial investors to make better-informed investment decisions. We describe lessons from the ESCO industries in Brazil, China, and the United States and analyze factors that could either contribute to or hinder the growth of the Indian ESCO industry. We also assess the industry’s growth potential and look at three case study examples.

Last, we summarize the key issues and opportunities and make recommendations to increase the industry’s attractiveness to investors.
Our ultimate aim in driving greater investment in the ESCO industry is to reduce greenhouse gas emissions and contribute to a more sustainable development in India and across the world.

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