Energy Transition – Scope for MSME Sector
Published on : Saturday 10-02-2024
The green transition will offer Indian MSMEs a unique opportunity to be integrated into the global supply chain, says Darshana Thakkar.
India has committed to reducing the emission intensity by 2030 by 45% from 2005 and reaching net zero by 2070. The industrial sector consumes approximately 56% of the energy demand in India. The micro, small, and medium enterprises (MSME) sector is the backbone of the industry, with about 6.5 crore MSMEs collectively employing about 11 crore people. The MSME sector consumes about 25% of the total industrial demands and, as a result, generates about 110 million tonnes of CO2 annually. The projected energy consumption of the MSME sector is estimated to increase by 50% by 2030. These sectors contribute significantly to economic and social development by generating tremendous employment opportunities at a comparatively lower cost. Hence, the MSME sector is critical to align India's growth on the net zero and inclusive trajectory.
The transition to green energy in India's MSMEs is crucial for sustainable economic development, environmental conservation, and energy security. MSMEs play a significant role in the Indian economy, and their adoption of green energy practices can contribute to reducing carbon emissions, lowering energy costs, and enhancing overall competitiveness.
The MSME sector lacks easy access to knowledge, technology, resources, and capital. Further, the MSME sector faces challenges transitioning to resource-efficient technologies and sustainable daily operations. Lack of awareness of formal financing instruments, resources, and expertise is another roadblock.
The Indian government has undertaken several policies, strategies, and programs to promote resource efficiency and sustainability in the MSME.
Sector at the national level: The Government of India undertook diverse initiatives and schemes in collaboration with the Bureau of Energy Efficiency (BEE).
BEE operates under the Ministry of Power and the Ministry of MSME. It plays a pivotal role in fostering the adoption of energy-efficient practices, enhancing sustainability, optimising resource utilisation, and minimising waste generation within the MSME sector.
The BEE in India has established comprehensive policies to promote energy efficiency (EE) across various sectors. Among these sectors, the industrial segment has become a key focus for BEE, as enhancing energy efficiency within industries plays a pivotal role in addressing the escalating issues of energy consumption and associated carbon emissions. To address these concerns and promote sustainable development, the Government of India introduced the National Action Plan on Climate Change (NAPCC) in 2008, outlining a path toward low-carbon and highly resilient development.
The drive for energy efficiency in the industrial sector has gained significant traction recently, with specific policy initiatives such as the Perform, Achieve, and Trade (PAT) scheme. PAT is one of the flagship programs of the BEE, launched as an SME program to expedite the adoption of energy efficiency in the MSME sector.
International organisations and agencies such as the World Bank, UNIDO, UNDP, JICA, and GIZ prioritise energy efficiency in the MSME sector.
BEE – SME Programme
The scheme enhances energy efficiency by accelerating the adoption of energy efficiency measures and technologies to conserve energy in MSME sectors. It aims to empower MSMEs through supportive services, including knowledge sharing, capacity building, demonstrations of efficient technologies, and the provision of suitable financial mechanisms.
Some of the initiatives undertaken to encourage efficient energy consumption in Indian MSMEs are:
a. Energy Use and Technology Analysis
b. Capacity building and Outreach Awareness
c. Development of innovation financing information, and
d. Implementation of energy efficiency measures.
Promoting energy efficiency and renewable energy in selected MSME clusters
The United Nations Industrial Development Organisation (UNIDO), in collaboration with BEE, a statutory body under the Ministry of Power, Government of India, is executing a Global Environment Facility (GEF) funded national project titled 'Promoting energy efficiency and renewable energy in selected MSME clusters in India'. The Ministry of MSME and the Ministry of New and Renewable Energy (MNRE) support the project. The components covered under this project are as follows:
1. Increased capacity of owners, suppliers, service providers, and finance providers of RE and EE sectors.
2. Increasing the level of end-use demand and implementing RE and EE technologies in MSMEs
3. Scaling of the project to the national level, and
4. Strengthening policy, institutional, and decision-making framework.
The following projects were started in 12 MSME clusters across India in five sectors in the first phase:
1. Brass (Jamnagar)
2. Ceramics (Khurja, Thangadh and Morbi)
3. Dairy (Gujarat, Sikkim and Kerala)
4. Foundry (Belgaum, Coimbatore and Indore), and
5. Hand Tools (Jalandhar and Nagaur).
These projects have scaled up and expanded their activities to additional 14 new clusters to reach out to MSMEs at the national level in the second phase.
Facility for low carbon technology deployment
The facility for Low Carbon Technology Deployment (FLCTD) project commenced in 2016 to facilitate innovation in low-carbon technology solutions, addressing prevalent technology gaps.The project, executed in collaboration with the BEE and funded by the Global Environment Facility (GEF), is overseen by the United Nations Industrial Development Organization (UNIDO).
The project aims to get 120 innovative technology validation ideas and 40 commercialised innovations. The project provides the winners with financial assistance of up to US$50,000 to validate their innovation and demonstrate its efficacy (performance) in actual field conditions.
The project is divided into the following two parts:
1. The innovation ecosystem for selecting, awarding, and policy interventions, and
2. Focus on technical assistance for implementing technology transfer support facilities.
Three winners of the FLCTD innovation challenge received the Energy Efficiency Innovation Awards on 14 December 2022.
• M/s ENCON Thermal Engineers,
• M/s CEEP, and
• M/s AFECO Heating Systems.
The 5th innovation challenge was launched on 1st April 2022 in the following sections:
1. Waste heat recovery & thermal efficiency
2. Space conditioning
3. Pumps, pumping systems, and motors
4. Industrial resource efficiency & circular economy
5. Industrial IoT, and
6. Electrical energy storage.
18 innovations were identified for conducting field demonstrations. Under the FLCTD Accelerator program, training for 23 early-stage startups was provided. The certificate was provided to the 20 startups after completion of the rigorous training for four months.
It is essential to create a conducive ecosystem to facilitate the smooth transition towards greener MSMEs. This green transition will also offer Indian MSMEs a unique opportunity to be integrated into the global supply chain and trade system and subsequently attract international investment. As per BEE's UNNATEE (Unlocking National Energy Efficiency Potential) report, the industrial sector, including MSMEs, will contribute an estimated 60% of the energy savings. Energy consumption of the Indian MSME sector is estimated to increase to 500% in the next decade (by the year 2031), and to realise the energy saving potential at MSMEs, an investment of ~12.3 bn USD is required in the next 14 years as per UNNATEE report.
Darshana Thakkar is an MSME Transformation specialist and Founder of Transformation-The Strategy HUB. She is a pioneer in transforming MSME companies with an Electrical engineering and MBA in operations background and 28 years of hardcore industrial experience. She helps MSMEs define growth paths, derive marketing strategies, improve business operations, adopt digital Transformation, and increase profitability. She is a winner of several regional and national awards and recognition as an MSME activist and women's business leader. The Transformation was listed among the most trusted consulting companies in 2022 and the Top 50 consulting companies for MSMEs in 2023. She holds a few honorary positions among the Industry Associations.
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