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The Investment Potential of Energy Service Companies in India

The purpose of this study is to provide a better understanding of the potential of India’s Energy Service Company (ESCO) industry in order for financial investors to make better-informed investment decisions.

Key Findings

Executive Summary

An ESCO is “a company that provides energy-efficiency-related and other value-added services and for which performance contracting is a core part of its energy-efficiency services business” (definition from Lawrence Berkeley National Laboratory and the National Association of Energy Service Companies).

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.

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.

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.

Data and Information Sources

The information and data used for this publication were derived from three sources: (1) a survey that WRI conducted among ESCOs in India; (2) interviews of selected ESCOs, financial institutions, ESCO clients, prospective ESCO clients, and government entities; and (3) secondary sources. WRI’s survey included only those ESCOs that have had at least one client contract in hand and met the aforementioned ESCO definition. Based on these criteria, we identified twenty-six ESCOs, twenty-four of which responded to the survey.

The ESCOs which responded to our survey are as follows:

  1. Asian Electronics Ltd.
  2. Blue Star Ltd.
  3. Dalkia
  4. DSCL Energy Services Company Ltd.
  5. EL PRO Energy Dimensions
  6. Encon Energy Management Services P Ltd.
  7. Energetic Consulting Pvt. Ltd.
  8. Energy Economy and Environment Consultants
  9. Epic Energy Ltd.
  10. Dynaspede
  11. Five-M Energy Pvt. Ltd.
  12. Honeywell Automation India Ltd.
  13. Intesco Asia Ltd.
  14. M.K. Raju Consultants P Ltd.
  15. Optimumair Solutions Pvt. Ltd.
  16. MITCON Consultancy Services Ltd.
  17. Pranat Engineers Pvt. Ltd.
  18. Rayon Applied Engineers
  19. Win-Win
  20. Salzer Electronics Ltd.
  21. SEE-Tech Solutions Pvt. Ltd.
  22. Sudnya
  23. U V Krishna Mohan Rao Associates (UVKA)
  24. Transparent Energy Systems

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