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POSITIVE CHANGE: Street lights fixed with LED bulbs, which have turned affordable under EESL’s watch | Photo Credit: SRIRAM MA
The greenest energy is that which is not produced. Using less energy for the same work — the underlying principle of energy efficiency — has perhaps received less attention than it deserves, in the world’s arm-wrestling with global warming.
In India, energy efficiency is commercially driven by the public sector company Energy Efficiency Services Ltd (EESL), a joint venture of several government-owned energy companies. EESL’s remit is to function as an energy services company, or ESCO — namely it would first install energy-efficient devices at the user’s premises at its cost, and then recover the cost plus profit from the user’s savings in energy bills.
Another way of nudging consumers towards energy-efficient appliances is by aggregating demand, procuring in bulk and achieving cost reduction through scale. But an ESCO company typically follows the first model.
EESL, now in its 10th year, has tried both models. Its ‘Unnat Jyoti by Affordable LEDs for All’ (UJALA) scheme followed the demand aggregation-price crash model, which is so successful that it is being studied by several countries. In the last 10 years, EESL has replaced 370 million light bulbs with energy-saving LEDs, saving energy worth ₹20,000 crore. Due to bulk purchase by EESL, the prices of LED bulbs crashed from ₹450 in 2014 to around ₹70 now. EESL adopted the same model for other household appliances, such as electric fans and (lately) induction cookstoves.
For the Street Light National Programme (SLNP), EESL followed the other model — invest first and collect later. The programme was a success but it left EESL with a pile of receivables — about ₹3,000 crore. Apparently, collecting dues from municipalities is not easy.
Likewise, under its Building Energy Efficiency Programme (BEEP), the company adopted the ESCO model, spruced up over 10,400 (mostly government) buildings but ended up with unpaid dues.
As on March 31, 2024, EESL had outstanding gross receivables of ₹4,325 crore, up from ₹4,037 crore a year ago and ₹3,593 crore two years earlier. Two-thirds of the receivables were due for a year or more.
Rising dues seem to have made EESL wary of the ESCO model — its primary mandate. The company is leaning more towards the ‘bulk procurement’ model. An EESL insider told businessline that the board is not ready to invest upfront due to the perceived risk of defaults or delayed payments.
Among the biggest consumers of electricity are motors.
There are tens of millions of motors in India; over 90 per cent of them are the energy-inefficient IE-0 or IE-1 type. EESL, under its National Motor Replacement Programme, wants these motors to make way for the more energy-efficient IE-3 and IE-4 type.
EESL wants to use the bulk procurement model and has tendered out for a few thousand units. Vishal Kapoor, CEO, EESL, says bulk procurement leads to 10 per cent cost savings per customer on average.
EESL is, therefore, asking consumers to replace existing motors with energy-efficient models, with a 10 per cent price discount when buying from EESL and an estimated 15 per cent savings in annual electricity costs.
The point is moot as to how many customers will actually make the switch. Not many, going by EESL’s experience with its Super-Efficient Air-Conditioners (SEAC) programme. The company’s media release in August 2019 said, “Once this pilot programme (of 50,000 SEAC) is successfully completed, we aim to deploy about 2,00,000 SEACs.”
Today, its website says, “As on date, EESL has deployed 3,146 super-efficient air conditioners.” The two sentences capture the challenges encountered with the bulk procurement model — consumers are reluctant to invest upfront for promised future savings.
This is EESL’s predicament. If it invests upfront, it ends up with unpaid dues and suffers losses. (The company is loss-making, but Kapoor says, “We are EBIDTA positive.”) If it doesn’t invest upfront and relies on the demand aggregation-price crash model, the success is, at best, moderate.
There are many in the company who believe that EESL can make a difference only if it adopts the ESCO model as, otherwise, it may become just another Amazon or Flipkart.
Anil Kumar Choudhary, Chief General Manager and Head–Operations, backs the invest-first model. “The ESCO model, if structured properly, can never fail,” Choudhary says. This essentially entails taking a bank guarantee from customers.
Kapoor says collections are improving, thanks to the “interventions” of the Ministry of Power, and that EESL “may go back to the ESCO model” later. Even while admitting that “cash flows are a problem”, Kapoor insists that there is nothing wrong with the demand aggregation, direct sales model. “The idea is to drive down the prices,” he says.
Published on March 2, 2025
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