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Factors Influencing the Uptake of Energy Efficiency Initiatives by Indian MSMEs

Tirtha Biswas, Sachin Sharma, Karthik Ganesan
August 2018 | Industrial Sustainability & Competitiveness

Citation: Tirtha Biswas, Sachin Sharma, and Karthik Ganesan (2018) 'Factors Influencing the Uptake of Energy Efficiency Initiatives by Indian MSMEs' August

Overview

Several programmes and policy interventions have targeted energy efficiency improvements in the micro, small and medium enterprises (MSME) sector since 1995, but large-scale adoption of energy conservation measures has not penetrated in the sector yet. This first-of-its-kind study, based on a primary survey of 429 enterprises across 11 clusters in eight states, identifies barriers to the adoption of energy efficiency by enterprises and implementation gaps in the government’s existing efforts. The study also includes a roadmap to improve the overall state of energy efficiency in the sector.

Key Findings

  • Higher levels of capacity utilisation facilitate larger investments in technology upgradation and energy efficiency technologies.
  • Enterprises competing with larger industries are more likely to invest in energy efficiency technologies, energy audits, and incorporate various energy management practices in their business activities.
  • Majority of the enterprises have limited knowledge regarding energy efficiency. Most did not participate in energy efficiency workshops.
  • Half of the enterprises participating in energy efficiency workshops (only 83 out of 429 enterprises participated) were not satisfied with the practical training imparted.
  • Absence of data on the performance of energy efficiency technologies is a significant barrier. Peers play a crucial role in the enterprise owner’s choice of energy efficiency technologies. However, insufficient or partial knowledge leads to incorrect purchase decisions.
  • Existing financing instruments do not support the implementation of energy efficiency measures. Merely being in the formal financing system is not sufficient for the adoption of energy efficient technologies.

Key Recommendations

  • Focus on greater participation of state government agencies to improve implementation of existing schemes related to energy efficiency.
  • Energy benchmarking for MSMEs: Enterprise-level energy consumption data recorded by the enterprise should be collected by the Ministry of micro, small and medium enterprises. A comprehensive database must be created to contribute to establishing of sector- and process-specific benchmarks.
  • Conduct technology demonstrations and pilot projects across a large number of clusters.
  • Make energy audit programmes mandatory. In its initial stages, the programme could target energy intensive medium and small enterprises with an annual turnover above INR 25 crore and gradually extend to cover all medium and small enterprises.
  • Introduce market mechanisms to drive efficiency in the sector by setting minimum performance standards for equipment, exploring the role of corporates in improving the energy efficiency of their MSME vendors, and focusing on innovative financing instruments.
  • Create awareness and introduce training programmes on energy efficiency and energy monitoring: This would have a positive impact on investments in energy efficiency technologies.
  • Address the risks associated with energy efficiency by establishing clear energy saving benchmarks and by creating a reliable baseline for energy consumption in firms.

Based on the analysis, CEEW has developed an implementation roadmap that highlights key actions for the Ministry of Micro, Small and Medium Enterprises to scale-up adoption of energy efficiency in the sector.

Dedicated platform for pilots and
tech demonstration
Linking tech developers, FIs, research agencies to enterprises
Generation and dissemination of information on on-ground performance of EETs
Benchmarking energy consumption Strengthening ministry’s capacity to conduct surveys and research
Voluntary disclosures of energy consumption by enterprises
Targeted energy audit programs to assist creation of SECs
Market mechanisms to
drive down SECs
Minimum energy performance standards
Greening the supply chain
Innovative financing instruments
Institutional reform and
program implementation
Strengthening the implementation linkages
Setting of targets/KRAs/KPIs for bodies conducting EE trainings and workshops

Source: CEEW analysis, 2018

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