Key Details
Insurance-backed risk sharing, standardised contracts, independent verification and blended finance can unlock greater investment in industrial energy efficiency by reducing the financial and performance risks that discourage enterprises from adopting energy-efficient technologies.
Framework Component | Roadmap Recommendation | Why It Matters |
|---|---|---|
Core challenge | Investment risk - not technology availability - is the principal barrier to industrial energy efficiency | Reframes energy efficiency as a financing challenge rather than a technology challenge |
Energy Savings Insurance (ESI) | Introduce insurance that compensates firms if guaranteed energy savings are not achieved | Reduces performance risk and improves lender confidence |
Market architecture | Combine insurance, standardised contracts, independent Measurement & Verification (M&V), and blended finance | Creates an integrated ecosystem for scaling private investment |
Initial implementation | Launch pilot projects in energy-intensive MSME clusters before national expansion | Enables standardisation and lowers transaction costs |
Institutional ecosystem | Coordinate BEE, insurers, SIDBI, IREDA, ESCOs and development partners | Builds a scalable market for energy-efficiency finance |
India’s Energy Efficiency Challenge Is Becoming a Finance Challenge
The OECD’s Energy Savings Insurance Implementation Roadmap of India argues that India’s next phase of energy efficiency depends less on developing new technologies than on reducing the financial and performance risks that discourage investment. Although programmes such as PAT, UJALA and ADEETIE have significantly improved energy efficiency, commercially proven technologies remain underutilised - particularly among MSMEs - because high upfront costs, uncertain returns and limited access to affordable finance continue to constrain adoption.
Energy Savings Insurance Is Part of a Wider Market Architecture
Rather than proposing a standalone insurance product, the roadmap recommends building an integrated financing ecosystem centred on Energy Savings Insurance (ESI).
The proposed framework combines four mutually reinforcing elements:
Energy Savings Insurance, which compensates enterprises if guaranteed energy savings are not achieved.
Standardised Energy Performance Contracts, defining clear responsibilities and performance guarantees.
Independent Measurement and Verification (M&V), providing objective technical validation and dispute resolution.
Blended finance, using concessional finance and premium support to improve affordability during the market’s early stages.
Together, these mechanisms reduce investment risk, improve project bankability and encourage commercial lenders to finance energy-efficiency projects with greater confidence.
MSMEs Become the Starting Point for Scale-Up
The roadmap recommends beginning with energy-intensive MSME clusters - including forging, steel re-rolling, food processing and paper - where proven technologies can deliver predictable energy savings and standardised project models.
It also proposes strengthening insurance underwriting, technical validation and pilot implementation before expanding the model across other industrial sectors and eventually commercial buildings.
The report estimates an energy-efficiency investment opportunity exceeding ₹10 lakh crore by 2031, while noting that only around 130 empanelled ESCOs currently serve a market already valued at approximately ₹1.5 lakh crore, underscoring the scale of the financing gap.
Building a National Green Finance Ecosystem
The roadmap is designed as an implementation guide for the Bureau of Energy Efficiency (BEE) and emphasises coordinated action among public institutions, insurers, banks, ESCOs and development partners.
Rather than relying primarily on subsidies, it proposes creating a self-sustaining financing ecosystem where insurance, technical verification, commercial lending and public policy work together to mobilise private investment in industrial decarbonisation, improve productivity and strengthen India’s long-term energy security.
What is Energy Savings Insurance (ESI)?
Energy Savings Insurance (ESI) is a risk-sharing financial instrument that compensates project owners if an energy-efficiency project fails to deliver the contractually guaranteed energy savings. By reducing performance risk, ESI improves project bankability, increases lender confidence and encourages greater private investment in energy-efficiency projects. It is typically implemented alongside Energy Performance Contracts (EPCs), independent Measurement and Verification (M&V), and commercial financing, rather than as a standalone insurance product.
Policy Relevance
The roadmap shifts the policy focus from promoting energy-efficient technologies to reducing the financial and performance risks that constrain their adoption.
Energy Savings Insurance (ESI), supported by Energy Performance Contracts, Measurement and Verification (M&V) and blended finance, offers a market-based mechanism for improving project bankability and expanding commercial finance for energy-efficiency investments.
A cluster-based implementation strategy targeting energy-intensive MSMEs can lower transaction costs, standardise project evaluation and accelerate technology adoption at scale.
Building domestic capabilities in insurance underwriting, technical validation and independent verification will be critical to establishing a sustainable energy-efficiency finance market.
The proposed ecosystem illustrates how insurance, commercial finance, technical standards and public policycan work together to mobilise private investment, accelerate industrial decarbonisation, improve industrial productivity and strengthen long-term energy security.
Follow the Full Report Here: Energy savings insurance implementation roadmap of India