By Anupama Airy
Having already set some unbeatable benchmarks, Energy Efficiency Services Ltd (EESL) under the Union Ministry of Power is on its way to offer yet another unbeatable product. After the success of LED Bulbs, Energy efficient fans and tube lights, the company is now gearing to present to the Indian market a super-efficient Air Conditioner or what is called as an Invertor AC.
The Managing Director of EESL Saurabh Kumar is himself a super-efficient and energetic leader. In an exclusive interview to Anupama Airy, the Founder&Editor of EnergyInfraPost.com, he shared his plans and strategies to make this new product offering (Invertor AC) a grand success, as has been in the case of LED bulbs— where distribution has already touched a remarkable 21 crore.
A modest Saurabh Kumar says this successful journey would not have been possible without the guidance and hand holding of union power minister Piyush Goyal (also minister of RE, coal and mines), whose thought process has given Energy Efficiency an altogether new dimension in the country.
Excerpts of his Interview
Q: What are you planning after the grand success of LED Bulbs distribution that has crossed 21 crore mark? So what next?
Ans. After LED bulbs, energy efficient fans and tube lights, the next big thing in appliances will be the super-efficient Air Conditioners for the Indian market, we have now finalized a project to bring in an air conditioner which is not there in the Indian market in terms of efficiency. Right now the BEE has 1 to 5 star category of ACs. While a 5-star AC has an energy efficiency of ratio about 3.5 to 3.7, we at EESL are looking at invertor air conditioners with the minimum efficiency of 5.2. We have already initiated the process and Request for Proposal (RfP) for a very large procurement of 100,000 super-efficient ACs has been published
Q: Could you elaborate…Why is it called an invertor AC?
Ans. There is separate class of air conditioners which are called invertor air-conditioners. A normal air conditioners that we have in our houses is something that runs continuously without automatically adjusting the temperature. Although if you fix it at a temperature, there will be a cut off of the compressor etc. But here in case of an Invertor AC, there is a variable frequency drive. Based on the ambient temperature, it will automatically switch on and off.
Que- But isn’t there a feature similar to this in the existing ACs also?
Ans- The present ACs with a fixed speed drive are not as efficient as the variable (or Invertor ACs). We are looking at an air conditioner which is atleast 5.2 and 40% more efficient then the best in class available in the market and if you are able to aggregate sufficient demand, we will be able to bring down the price points to the levels of that of an 5-star AC.
Que- So are you saying that initially the price of an Invertor AC will be higher?
Ans- We don’t want it to be higher that’s why are looking at a very large procurement of at least a 100,000 pieces.
Que- So these new ACs will be split or window?
Ans- These will be fully split because now the market is almost 90% for split ACs. Also we are not looking into the retail market to begin with. We are looking at B2B (business to business). Interestingly, we have found one thing with demonetization and were able to take note of the fact that there are 200,000 ATMs in the country.
Now what does an ATM has—two split ACs and a few lights. An ATM is usually there in the most commercially high end area, where the commercial tariff are Rs 9 – 10 a unit. When we look at further details, there are about four banks that own almost 70-80% of ATMs. So we have talked to all the four banks and have told them that they don’t need to do anything. We will invest and we will replace the ACs on our own cost.
Que- And it is the savings with which you will recover the cost of the old ACs with that of the new more efficient ones?
Ans- So I get my aggregated demand. I push my super-efficient ACs in that market and sustain the demand.
Que- And what if a retail guy wants to buy that AC?
Ans- That we will see as we progress. But with the first procurement of 100,000 super-efficient ACs, we would like to push these new ACs into institutions and organisations.
So we are aggregating demand in government buildings. I have written to all the PSUs under the power ministry saying that we will replace the old ACs with these efficient ACs. They just need to tell us the aggregated demand.
Que- What you will do with the older ones?
Ans- See these old ACs are the properties of the respective organization. So as in the case of street lights, it depends upon what they want us to do, if they want we can put buy back clause and let the AC manufacturer take it back. We are telling these companies that you please replace all your 2-3 year old ACs which will result into at least 40% savings in your bill. And they don’t have to invest anything upfront.
Last year data of sales show that about 5 million of ACs were sold in the Indian market. And 70% of them were at 3-star level, which is 3.1 Energy Efficiency Ratings (EER). Only 10-15% were 5-star. So we are looking at moving the market from 3.1 to 5.5 which is an enormous jump.
So to begin with, these ACs will go to institutions and then into homes. So we would like to see do a couple of procurement and see whether price points are? And our indications are the price points will be very drastically down.
The procurement of 100,000 ACs is a very large procurement and I don’t think anybody at least in India has done a procurement like this. We have already initiated the procurement and RfP for 100,000 super-efficient ACs is published
Que- How are you going about the procurement…who will you buy it from?
Ans- It’s an open procurement, just like we did it for the LED bulbs. If you see the AC market worldwide, there about 12 players which account for about 80-85% of global market. It is the same LG or Samsung which even sells 6 star ACs in certain markets and so it is not that the technology is not available in the market. Unfortunately we are not demanding higher rating Air-conditioners from the regulatory side.
So super-efficient ACs have a variable frequency drive (as against a fixed frequency drive), better quality of insulation within the ACs, better Airflow, use of better material. And mind you…all this is available with the same Daikin who in Japanese market cannot sell an AC less than 6-star.
Another very interesting part is and we did a lot of research before entering into this, it is a misnomer that when you increase efficiencies, the cost will go up. In Japan between 1990 and 2013, the efficiency have gone up by 150% and the real price has gone down by 30%. In India also the efficiency between 2007 and 2014 have gone up by about 40-50%, and the real cost has declined.
Que- Will you give a rating also, like we have 5-star rating?
Ans- See I cannot do a rating and the Bureau of Energy Efficiency (BEE) has to do it. As of it will be a 5-star rating super-efficient AC and hopefully in the next couple of months, we should be able to come out with it.
Que- So how then would you sum up the EESL’s proposal if any institution today wants to replace its old ACs with your super-efficient ACs.?
Ans. So if you are a big organisation like Banks, PSUs having lots of ACs, then we will simply replace your old ACs without charging anything from you. The savings will be say a ballpark figure of Rs 8,000 per year per AC. So our offer to you is that gives us Rs 7000 per AC per year and keep the balance Rs 1000 with yourself per AC. So you pay approximately Rs 35,000 for five years and I will change your AC and also maintain it over 5 year period. So it is like save while you earn (Rs 1000×5=Rs 5000/ in 5 years) and with a super-efficient AC coming to you almost free of cost.
So actually sir there are three angles to this entire model- First is the B2B angle where institutions and organisations do not pay anything and we replace there ACs without any capital cost and maintain it for 5 years. Then there is the procurement angle to this, which gives huge business opportunities to the developers of such ACs and third is the benefits to the end users as I specified above. That’s not all. Like in case of LED Bulbs, there would come a point, when prices due to large procurements will also come down. So the consumer will be the ultimate beneficiary and the country will save on energy through this super energy efficient appliance.
Currently, Writing a Book for Penguin India Titled Greased Pole:How Politics and Lobbying Stifled India’s Energy Dreams. The author can be reached on firstname.lastname@example.org (9810661825)
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