Tap ESCO model for improving energy efficiency, Kerala’s Energy Management Centre tells institutions, industries

While the energy crisis in Kerala during the monsoon season has reiterated the importance of efficient energy use, the State government agency Energy Management Center – Kerala (EMC) has urged corporates and industrial and commercial establishments to leverage the Energy Service Company (ESCO) model to implement energy efficiency projects.

What makes the ESCO model attractive is that organizations can implement energy efficiency improvement projects without upfront capital investment. ESCO undertakes the investment and implementation of selected energy efficiency measures and the project cost is covered from the verified energy cost savings generated.

According to EMC, which is also the State Designated Agency (SDA) for Bureau of Energy Efficiency (BEE) programs in Kerala, “This approach allows utilities to modernize their energy systems, reduce operating costs and reduce emissions, while minimizing the financial burden of the initial investment.”

Project cost

EMC – Kerala Director R. Harikumar said ESCO recovers the project cost through a percentage of the energy cost savings the organization makes by implementing such projects. Projects are approved based on their feasibility and the agreed contractual arrangement.

For the current program, EMC is prioritizing large commercial buildings, hotels, hospitals and industries focused on chemicals, pharmaceuticals, textiles, food and beverage processing, metals and engineering. Minimum indicative requirements include monthly energy expenditure of ₹25 lakh or more; heating, ventilation, and air conditioning (HVAC) system capacity 500 TR (Tons of Cooling) or greater; and significant demand for hot water with potential for heat pump applications.

Kerala, which produces only 30% of its electricity needs, is currently grappling with massive demand shortage due to limited-scale power outages. The increase in electricity demand, low water storage in reservoirs for hydropower generation due to low southwest monsoon rainfall, and the increase in electricity demand across the country due to hot weather due to El Niño were cited as the reasons for this.