Background

There are more than 380 clusters of small and medium-sized enterprises (SMEs) in India, and industry accounts for more than a third of the country's electricity consumption. There is a recognized need to increase the energy efficiency (EE) of SMEs, but success has been limited due to technical and financial barriers.

A comprehensive analysis of the feasibility of using carbon financing as a part of financing EE measures in SME clusters has not been done in the Indian context before.

Purpose

To work with one SME cluster as a pilot, involving its local trade association or Chamber of Commerce and the Indian Renewable Energy Development Agency (IREDA) to explore options for financing energy efficiency equipment by pooling the cluster's demand and using a carbon financing mechanism, and then to disseminate this model to other nearby clusters.

Main Activities

• Select an energy intensive SME cluster with an interested focal organisation, and select 3-5 industries for pilot energy audits.
• Make an inventory of equipment used in the SME and assess opportunities for EE improvements through pilot energy audits.
• Work with focal organization to design mechanisms to bulk-purchase EE equipment at discounted prices, facilitate discussion between focal organization, members, IREDA, and equipment suppliers, act as liaison with a carbon trading mechanism to trade collective CO2 emissions and implement pilot procurement of EE equipment for the cluster
• Develop handbook covering the technical opportunities for EE, the financing options, and carbon credits.
• Hold a workshop to disseminate model to nearby SME clusters and distribute feasibility study to SME cluster

Expected Impact

•  Access of SMEs to carbon funds and enhanced EE improvements
• Increased stakeholder confidence in using financing mechanisms to increase  EE and productivity in SMEs.
• Catalyzing of similar EE initiatives across the country
• Expansion of energy efficiency services to a sector where they are currently seldom used.
• Increase in the number and proportion of EE projects in the CDM portfolio