1. 1 A Market-backed Model for AGDSM A Market-backed Model for an Agriculture Demand Side Management Presented By – Apurva Chaturvedi USAID Rakesh K Goyal Tetra Tech Ashish Meshram Tetra Tech December 14, 2011

2. 2 A Market-backed Model for AGDSM 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

3. 3 A Market-backed Model for AGDSM Pilots Conducted before the development of innovation ProjectDurationLocationFunding agency Nature of work/Key learning Energy efficiency through replacing pump sets 1993-1996Warangal District, Andhra Pradesh JBIC (earlier, OECF)Replacement of conventional pumps with efficient pumps; savings were measured Replacement of pipes and foot valves 1987-1990Chittor District, Andhra Pradesh DFIDReplacement of pipes and foot valves; 5-15% savings were achieved. APEEP single-phase high- voltage distribution system for 16 villages 1998-2000Nalgonda District, Andhra Pradesh DFIDAP Transco- supplied pumps converted to single phase. Pump can work on single phase. Implementation of power factor correction devices in the agriculture sector 1992Madhya Pradesh--End users reportedly refused to maintain the installed equipment. Results could not be measured. DSM for Climate Change Project 2002-2005Madhya PradeshCIDAPump replacement achieved 25- 40% savings. Agricultural Pump Set Efficiency Improvement Programme with NPCL 2001-2002Noida, Uttar Pradesh USAID75 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 GovernmentResults not known Reach to Power Programme of MSEDCL- Dindori 2005-20068,000 villages in Nasik District, Maharashtra Not KnownMERC permitted MSEDCL to charge expenses to the Load Management Charge Fund. Agricultural pump Replacement 2006-2007DoddaballapurUSAIDSavings of 30-70% were achieved.

4. 4 A Market-backed Model for AGDSM What Pilots Established –Saving Potential S.N.MeasuresPotential for Energy Savings 1Efficient Pumpsets15-25% 2Suction Pipe & Foot Valve5-15% 3Efficient Irrigation Methods15-25% 4Total Saving Potential35-65%

5. 5 A Market-backed Model for AGDSM 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

6. 6 A Market-backed Model for AGDSM 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 Market based approach Process adopted Win-win situation 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

7. 7 A Market-backed Model for AGDSM 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

8. 8 A Market-backed Model for AGDSM 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

9. 9 A Market-backed Model for AGDSM 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 Savings Capacity Building of Farmers Project Monitoring

10. 10 A Market-backed Model for AGDSM Innovation-Salient Features of the Contract (ESCO and DISCOM) Sr. No ParticularsRemarks 1Contract Term10 years from 1 st April 2011. Contract was signed in July 2009 2Area is ring facedNumber of pumps are ring fenced. 3Ownership of PumpCo-ownership between farmer and ESCO through a written agreement. 3Energy Saving Payment Mechanism Within 15 days of invoice. ESCROW account 4Base Line True up MechanismNumber of hours of 3 phase supply availability. Number of hours to be determined from downloaded data. 5O&M of pumps during the 10 years period. O&M office and call centre in the area. Price list to be decided by the committee involving farmers. Within 72 hours otherwise penalty. 6Grievance Handling Procedure (Pump and electrical) A procedure with three tier mechanism for satisfactory resolution of the grievance. 7Governing StructureA three tier governing structure to steer, monitor and resolve of operational issues. 8CDM registrationMandatory. Hot country approval obtained

11. 11 A Market-backed Model for AGDSM 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.

12. 12 A Market-backed Model for AGDSM Innovation-Pilot-Water-Side Interventions Farmer awareness - Cropping Pattern & Cultivation Practices Promotion of Drip Irrigation Construction of Field Bunds Construction of Check Dam

13. 13 A Market-backed Model for AGDSM Project ParametersOption -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) 82794164071 Debt Service (Rs Crores) 100225034929 Energy Savings (Rs Crores) 26737256514435 Project NPV (Rs Crores) 843716475334 Project IRR (%) 185620 Additional savings in Generation capacity (Rs Crores) 30522851635 Additional savings in Network capacity (Rs Crores) 27752591486 CER Savings (Rs Crores) 21742111165 Subsidy & Cross-Subsidy Avoided (Rs Crores) 30314128715395 Scaling Innovation -Business Case Study Results with Maharashtra as Sample State ( worst Case 100% debt with 15% Interest)

14. 14 A Market-backed Model for AGDSM 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 farmerswww.agripowerindia.com  Holistic water side intervention plan is ready implementation to start soon.  Capacity building is continuous process..

15. 15 A Market-backed Model for AGDSM Sensitizing Stakeholders About Innovation Multi-stakeholder Meeting Interactive session with DISCOM officials Involving Farmers Workshop with Pump Manufacturers

16. 16 A Market-backed Model for AGDSM 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.

17. 17 A Market-backed Model for AGDSM A MARKET -BACKED MODEL for AgDSM CAPACITY BUILDING POLICY SITE ACTIVITIES DOCUMENTATION Scaling up of Innovation at India Level - Requires

18. 18 A Market-backed Model for AGDSM Coordinated Approach Urban Development Food Security Finance Energy Agriculture Rural Development Surface Water Ground Water AGDSM

19. 19 A Market-backed Model for AGDSM Key Issues Sr. No. Issues AddressedUn-addressed For Large Program 1Market based commercial approach Public Private Partnership model in AGDSM projects is possible more risks to be shared by DISCOM/Govt 2FinancingFinancing from financial institutions like NABARD is possible Guarantee for the loan ? 3Baseline DataMethodology and tools established.Measurement and availability of data 4Availability of NHEPOnly 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. 5Power supply improvement HVDS and capacitor banksSegregation of Ag feeder is very helpful. 6Capacity BuildingCourse material developedOn going process 7Pump ManufacturerInterested to sell energy efficient pumpsNot interested to share the risk of saving. 8Water-side Interventions Pilot successfully executedM&V protocol to be established. 9Calculation of energy savings Truing-up mechanism for calculating energy savings. Risk associated due to change in cropping pattern, availability of power supply etc. 10DocumentationElectrical Case Studies, RFP, Policy work, Documentary and Guide for Ag DSM under preparation On going Process.

20. 20 A Market-backed Model for AGDSM Project Partners Innovation won 2 nd India Power Awards -2009