Reshaping Efficiency: Discussing innovative financing models to drive energy efficiency in India

This report discusses the current situation of the energy efficiency sector in India, delves into some of the causes hindering the development of this market and explains why the lack of commercial bank financing is one of the main barriers for attaining higher energy savings.

The discussion then moves to proposing two innovative business models to overcome this funding barrier. The first model is a bespoke financing protocol that would serve as a blueprint for banks to reduce perceived risks, learn how to appraise energy savings as cash flows to back loans, and launch energy efficiency as a new credit line. The second proposal is a business model for energy efficiency deal aggregation as a viable strategy for banks to deleverage their balance sheet while creating a broader investor base for energy efficiency projects.

If implemented, these business models may not only prove to be valuable tools for driving energy efficiency in India, but could also bring additional benefits to the country, represented in the development of local capital markets and the appearance of more sophisticated investment products. The document concludes that although the knowledge for implementing these ideas is already there, not many public statements have signaled a government commitment to tackle energy security concerns from the supply side. India seems to be ready to enter into an age of attractive economic development, but doing this through an energy efficiency path requires redefining current public priorities.