1 a market-backed model for agdsm a market-backed model for an agriculture demand side management...

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A Market-backed Model for AGDSM

A Market-backed Model for an Agriculture Demand Side Management

Presented By –Apurva Chaturvedi USAIDRakesh K Goyal Tetra TechAshish Meshram Tetra Tech

December 14, 2011

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Why Agriculture Demand Side Management (AgDSM) in India?

Agriculture consumes 23% of power & 38% of water (90% groundwater)

55 – 60% population dependent on groundwater

Financial health of

power sector

Availability of water both for

irrigation & drinking

Livelihood of Farmers

Food & Water

security of 1.2 Billion population

Subsidy of 8 billion US $ per annum

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Pilots Conducted before the development of innovation Project Duration Location Funding

agencyNature of work/Key learning

Energy efficiency through replacing pump sets

1993-1996 Warangal District, Andhra Pradesh

JBIC (earlier, OECF) Replacement of conventional pumps with efficient pumps; savings were measured

Replacement of pipes and foot valves

1987-1990 Chittor District, Andhra Pradesh

DFID Replacement of pipes and foot valves; 5-15% savings were achieved.

APEEP single-phase high-voltage distribution system for 16 villages

1998-2000 Nalgonda District, Andhra Pradesh

DFID AP Transco- supplied pumps converted to single phase. Pump can work on single phase.

Implementation of power factor correction devices in the agriculture sector

1992 Madhya Pradesh -- End users reportedly refused to maintain the installed equipment. Results could not be measured.

DSM for Climate Change Project

2002-2005 Madhya Pradesh CIDA Pump replacement achieved 25-40% savings.

Agricultural Pump Set Efficiency Improvement Programme with NPCL

2001-2002 Noida, Uttar Pradesh

USAID 75 conventional belt-driven above-ground 5 hp pumps replaced by 3.5 hp Kirloskar energy-efficient mono-block pumps; metered supply. 30-45% saving achieved.

State government scheme to improve the efficiency of agricultural pump sets

2003-2004

2004-2005

Three transformer areas in Tamil Nadu

State Government Results not known

Reach to Power Programme of MSEDCL-Dindori

2005-2006 8,000 villages in Nasik District, Maharashtra

Not Known MERC permitted MSEDCL to charge expenses to the Load Management Charge Fund.

Agricultural pump Replacement

2006-2007 Doddaballapur USAID Savings of 30-70% were achieved.

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What Pilots Established –Saving Potential

S.N. Measures Potential for Energy Savings

1 Efficient Pumpsets 15-25%

2 Suction Pipe & Foot Valve 5-15%

3 Efficient Irrigation Methods 15-25%

4 Total Saving Potential 35-65%

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Pilots Could not be Scaled Up

Water & Electricity nearly free to farmers

Absence of market based approach

Ownership

ESCO's in a nascent stage

Reluctance to work in rural areas

Tough geography and vast area

Low literacy level of farmers

Livelihood of farmers depends on irrigation.

Reliability of DISCOMs getting subsidy has increased

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Rules of public procurement followed

Active engagement of all stakeholders

Extensive groundwork – studies, information – reduce perceived project risks

A market-backed model developed for an Agriculture Demand Side Management

Mark

et b

ase

d

appro

ach

Process adopted

Win

-win

sit

uat

ion

Innovation

Farmers - get new efficient pump, after-sales services, good quality power & required amount of water

DISCOM – energy savings with greater opportunity cost

ESCO – profit from saving energy, payback is less than 5 years

Project based on commercial principles

Long term horizon – no ‘snap back’ effect

Project risks shared among stakeholders and ESCO

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Innovation – Key stakeholders Roles and Responsibility

DISCOM

• Up gradation and maintenance of Electrical Network suitable for efficient pumps and Metering

• Support to ESCO in building relationship with farmers

•Timely payment to ESCO for energy saving

• All Approvals from Regulator & State Govt.

•Feedback from farmers

ESCO

• Financing, Planning, procurement, replacement and maintenance, of pumps.

• Water side interventions

•Capacity Building of farmers

•Obtaining farmers acceptance

Farmers A free new branded energy efficient

pump sets and better O&M

Public Private Partnership

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Innovation-Tested at Site

Site Profile

Location : Doddaballapur (BESCOM)

70 KM from Bangalore, India

Geographical area : 11,000 Acres

No. of villages/population : 34/17,000

% net sown area : 75%

% irrigated area : 16%

Major crops : Mulberry & Grapes

Depth of ground water : 400-750 ft.

No. of feeders/pump-sets : 4/604

Typical pump sets capacity : 10-15 HP

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Innovation- Test Implementation Overview

Electrical Network

Data Bid Process & Selection of

ESCO

Baseline Project

Execution

• Pump replacement

• Monitoring & evaluation protocols

• Governing structure

• Keeping stakeholders informed

• Consumption before pump replacement

• Ag & Non-Ag Load

• Supply hours

• Pump running hours

• Single phasing

• Acceptance by stakeholders

• Draft RFP and marketing• Pre NIT• Pre- bid meeting• Site visit • Bid evaluation • Negotiation and award

• Data collection• Mining• Presentation• Preparing business model

• HVDS• Capacitor Banks Electronic meters

•Separate agriculture feeders

Sa

ving

s

Capacity Building of Farmers

Project Monitoring

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Innovation-Salient Features of the Contract (ESCO and DISCOM)

Sr.No

Particulars Remarks

1 Contract Term 10 years from 1st April 2011. Contract was signed in July 2009

2 Area is ring faced Number of pumps are ring fenced.

3 Ownership of Pump Co-ownership between farmer and ESCO through a written agreement.

3 Energy Saving Payment Mechanism

Within 15 days of invoice. ESCROW account

4 Base Line True up Mechanism Number of hours of 3 phase supply availability. Number of hours to be determined from downloaded data.

5 O&M of pumps during the 10 years period.

O&M office and call centre in the area. Price list to be decided bythe committee involving farmers. Within 72 hours otherwise penalty.

6 Grievance Handling Procedure (Pump and electrical)

A procedure with three tier mechanism for satisfactory resolution of the grievance.

7 Governing Structure A three tier governing structure to steer, monitor and resolveof operational issues.

8 CDM registration Mandatory. Hot country approval obtained

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Innovation-Metering and Verification Protocol

Findings Contracted Load of Pumps as per BESCOM Record = 2.6 MW Actual Connected Load of Pumps = 5.9 MW Average Capacity of a Pump as per BESCOM record = 4.3 KW Actual Average Capacity of a Pump = 9.7 KW

About 16% pumps in each month have zero consumption. Supply hours are more than pump running hours Farmers run pump as per their convenience and use capacitors to convert

single phase supply into three phase supply.

New Tools Developed Determination of IP set and non IP set Consumption separately One meter can help in determination of up to 4 different capacity pumps

consumption. Estimation of consumption for the period when meter is not working.

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Innovation-Pilot-Water-Side Interventions

Farmer awareness - Cropping Pattern & Cultivation Practices

Promotion of Drip Irrigation Construction of Field Bunds

Construction of Check Dam

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Project Parameters Option -1 Replace all (28,97,157)

Option -2 Replace Pumps > 10 HP ( 94,264 )

Option -3 Replace Pumps in Ag Dominated area Baramati, Nasik & Amravati (13,13,630)

Capital Cost (Rs Crores) 8279 416 4071

Debt Service (Rs Crores) 10022 503 4929

Energy Savings (Rs Crores) 26737 2565 14435

Project NPV (Rs Crores) 8437 1647 5334

Project IRR (%) 18 56 20

Additional savings in Generation capacity (Rs Crores)

3052 285 1635

Additional savings in Network capacity (Rs Crores)

2775 259 1486

CER Savings (Rs Crores) 2174 211 1165

Subsidy & Cross-Subsidy Avoided (Rs Crores)

30314 1287 15395

Scaling Innovation -Business Case Study Results with Maharashtra as Sample State (worst Case 100% debt with 15% Interest)

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Innovation- Pilot Status

Pumps replaced by energy efficient pumps

Pumps maintenance Call Centre and office established

Feedback from farmers is encouraging

Host country approval for CDM obtained

First energy saving invoice generated and paid by DISCOM to ESCO- 25% saving

A dedicated website for farmers developed (www.agripowerindia.com) and kiosk

installed for use of farmers

Holistic water side intervention plan is ready implementation to start soon.

Capacity building is continuous process. .

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Sensitizing Stakeholders About Innovation

Multi-stakeholder Meeting

Interactive session with DISCOM officials

Involving Farmers

Workshop with Pump Manufacturers

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Scaling Innovation at India Level will -

Save Electricity (19 Billion Units)

Save Network Capacity (83,557 ckt. Kms and 13,126 MVA)

Can help to bridge existing demand supply gap of electricity (by 60%)

Can improve the financial health of the power sector

Saves Subsidy annually (8000 Cr INR )

Cross-Subsidy – Boost Industrialization, Reduce cost

Reduce Carbon Emissions (14.8 Tera Tonnes per annum)

Save Water

Rural development

Arrest shift from rural to urban

Data from CEA Annual Report 2008

A conservative saving of only 20% has been assumed.

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A MARKET -BACKED MODEL for AgDSM

CAPACITYBUILDING

POLICYSITE ACTIVITIES

DOCUMENTATION

Scaling up of Innovation at India Level - Requires

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Coordinated Approach

Urban Development

Food Security

Finance

Energy

Agriculture

Rural Development

Surface Water

Ground Water

AGDSM

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Key Issues

Sr. No.

Issues Addressed Un-addressed For Large Program

1 Market based commercial approach

Public Private Partnership model in AGDSM projects is possible

more risks to be shared by DISCOM/Govt

2 Financing Financing from financial institutions like NABARD is possible

Guarantee for the loan ?

3 Baseline Data Methodology and tools established. Measurement and availability of data

4 Availability of NHEP Only 35 -40% pumps manufacturered today are NHEP (progressive pump manufacturer’s)

Increasing it to 100% will be a challenge. Market for BEE star rated pump is developing. BEE star rated NHEP > 15 HP still not available.

5 Power supply improvement

HVDS and capacitor banks Segregation of Ag feeder is very helpful.

6 Capacity Building Course material developed On going process

7 Pump Manufacturer Interested to sell energy efficient pumps Not interested to share the risk of saving.

8 Water-side Interventions

Pilot successfully executed M&V protocol to be established.

9 Calculation of energy savings

Truing-up mechanism for calculating energy savings.

Risk associated due to change in cropping pattern, availability of power supply etc.

10 Documentation Electrical Case Studies, RFP, Policy work, Documentary and Guide for Ag DSM under preparation

On going Process.

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Project Partners

Innovation won 2nd India Power Awards -2009

1 a market-backed model for agdsm a market-backed model for an agriculture demand side management...

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