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The `Green Conscious` India creates a vibrant market for performance contracting, finds Frost & Sullivan


Source: Frost & Sullivan

Government initiatives to promote green efficiency attracts investors

Mumbai, India -- The emerging performance contracting (PC) market in India is expected to grow significantly over the next five years on the back of higher investments in infrastructure, focus on energy efficiency in the existing infrastructure, and active participation of apex regulatory bodies in promoting energy efficiency.

New analysis from Frost & Sullivan (, Analysis of Performance Contracting in India, finds that the market earned revenues of INR 1612.8 million in 2011 and estimates this to reach INR 3011.5 million in 2015, at a compound annual growth rate of 16.2 percent.

The PC market will be influenced by end-user concerns about climate change, the need for energy conservation due to acute power shortage, and austerity measures employed by Indian businesses. With the Ministry of Environment taking concrete steps to reduce CO2 emission and the Bureau of Energy Efficiency (BEE) stressing on energy efficiency, the PC market in India is expected to attract numerous investors.

Further, with electricity consumption increasing faster than electricity generation, there are substantial opportunities for PC companies to strategize and capture market share. Participants will also gain from industrial and commercial segments' corporate social responsibility (CSR), which prompts them to focus on energy efficiency and productivity.

Among the many industries contributing to the green movement in India, the lighting industry stands out for leveraging the energy-saving potential of PC, integrated lighting management systems (ILMS), and light emitting diode (LED) technologies for both indoor and outdoor lighting.

However, despite the acknowledgement that energy efficiency is the need of the hour, the provision of subsidized electricity to agriculture segment offsets the industrial and commercial segments' efforts to achieve higher energy efficiency.

Similarly, energy saving companies (ESCOs) that offer PC are hindered by the conflicting and varying interests of entities to a project and the absence of robust judicial systems to penalize financial defaulters. The entities involved in a PC project ingress at making higher and faster return on investment (RoI) and digress in assuming financial risk in an energy-saving performance contract.

'To increase the market share in the PC market, ESCOs can build on their brand image and offer a holistic solution centered on energy efficiency,' said Frost & Sullivan Analyst. 'They can offer PC in the triplet industrial cluster states of Gujarat–Madhya Pradesh–Maharashtra and Tamil Nadu–Karnataka–Andhra Pradesh, which are the major consumers of electricity due to the presence of energy-guzzling end-user segments.'

The increasing load shedding in Indian states have intensified the government's efforts to reduce emission intensity of the gross domestic product (GDP) by 20-25 percent by 2020, from the levels witnessed in 2005. This, along with the ratification of the Energy Conservation Act in 2001, can be translated into business opportunities for investment firms and commercial banks. Recognizing the potential of the market, building automation/ management system (BAS/BMS) companies have been proactively bundling PC services with energy-efficient equipment supplies.

'Savvy participants can consolidate their position in the market by arriving at a common business interest with the entities in an ESPC project and having a strong understanding of the technology, contract terms, and inherent risks,' noted the Analyst.

Analysis of Performance Contracting in India is part of the Building Management Technologies Growth Partnership Services program, which also includes research in the following markets: Analysis of Performance Contracting in Middle East (GCC), Indian Facility Management Services Market, Middle East Facility Management Services Market, Middle East Mechanical, Electrical and Plumbing Services Market, Indian Lighting Controls and Systems Market, and Middle East District Cooling Market. All research services included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants.

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