Financing Energy Efficient Street Lighting in India

REEEP set the goal of a 30-40% reduction in energy consumption for street lighting in Madhya Pradesh as a realistic target figure. To achieve this reduction, we aimed to promote the engagement of national and local investors, financial institutions and capital markets in improving energy conservation, and thus cost savings in street lighting within the state.

Similar projects in Indore and Ujjain reaped considerable benefits, and REEEP believed that the most effective way of obtaining investment to achieve these goals was to bundle projects together, providing more attractive investment portfolios with profits shared among investors.

The model used in Indore and Ujjain saw a private energy service company (ESCO) take over the provision and cost of street lighting with considerable efficiency gains. The utility that provided the power and gained from the savings then reimbursed the ESCO for the costs of the project over a period of 27 months. In this case, the contract used between the municipalities, the ESCO and the Madhya Pradesh State Electricity Board (MPSEB) (and now in the DISCOMS) was based on a shared savings model.

REEEP’s financing helped Econoler International, a consulting firm based in Canada, to provide support to MPSEB. The project worked with Sehore and Dewas Municipal Corporations as well as central DISCOM to implement, and a tendering process to identify an ESCO was also launched. Econoler International was able to scale up to five cities with an innovative approach for tendering and implementing energy-efficient street lighting projects in cities developed from a previous technical assistance project financed by the Canadian government involving two cities in Madhya Pradesh. The implementation of three projects in the municipalities and the capacity building of the utilities was completed by October 2006.

The project implemented street lighting projects in cities across Madyha Pradesh, with an evaluated cost of € 1,5000,000, and improved energy efficiency of 13.93 GWh per year; in the cities of Bhopal with 5.25 GWh, Jabalpur with 5.27 GWh, Sehore with 1.26 GWh and Dewas with 2.15 GWh.

“Existing lighting systems were often lacking maintenance and several lamps were burned [out], reducing the safety of drivers and pedestrians. New and efficient lighting systems ensured better lighting coverage not only for cars but also for pedestrians, especially women, in their use of the roads roads at night by improving the security and safety in the streets”, says Myriam LeBlanc, Development Director at Econoler.

The project catalysed long-lasting impact which is still lighting up these regions today. It continues to contribute to creating new jobs and opportunities in the energy sector, as more projects will be developed and implemented based on this model and the lessons learned.