Using the Tamil Nadu Municipal EE Programme to create a replicable financing model.


Indian municipal water works face continuous pressure from accelerating population growth, electricity shortages, rising energy costs and water scarcity. At the same time, they incur enormous losses from inefficiencies in electricity and water supply systems. Previous water and energy efficiency projects have been successful in reducing wastage and costs. This project aimed to increase confidence in energy performance contracting (EPC) as practiced by energy service companies (ESCOs), a concept not previously unknown in India but also not widely adopted. The project addressed this by developing and implementing a major performance contracting programme to demonstrate the market potential to both municipalities and the ESCOs themselves.


The project was a success: the REEEP grant support and partnership with the Alliance to Save Energy has had a broad and long-lasting impact on the sector. One key outcome was the unprecedented issuance by the State Government of Tamil Nadu of the statutory government order Energy saving through Energy Service Companies (ESCOs) in Urban Local Bodies, which amounted to official recognition of the potential value of ESCOs in achieving efficiency improvements and encouraged municipalities to work with them.

The Alliance to Save Energy developed a replicable financing model and toolkit for carrying out performance-linked energy efficiency projects, which was used in 29 municipalities in Tamil Nadu. On average, these pilot projects resulted in a 20% reduction in energy consumption and EUR 3,500 savings per year, per million litres of water supplied.

The implementing partner also worked with various stakeholders on building capacity and creating enabling macro conditions. The increased confidence levels (due to the successful demonstration projects) and the enhanced capacity (due to the standard toolkit and government order) encouraged state agencies to scale up the implementation of energy efficiency projects in the street lighting and water supply sectors. The programme has also been expanded to 159 cities in the state of Gujarat and talks have started about implementing it in the state of Karnataka. At the national level, the model and project methodology were adopted by the Bureau of Energy Efficiency for their municipal energy efficiency programme.

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Programme sector: 

Energy Efficiency (EE) (Business&Finance)

Stage of project: 



2007 - 2011


€ 201,504 including co-funding from USAID, IFC

Implementing agency: 

Alliance to Save Energy

REEEP grant funded by:

United Kingdom