Initiating Energy Efficiency in India: Need of the hour

Initiating Energy Efficiency in India: Need of the hour

By: Staff Reporter
Importance of energy efficiency has emerged from various supply scenarios and is further underlined by rise of prices in energy sector and subsequent areas
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The importance of energy efficiency has emerged from the various supply scenarios and is further underlined by rising energy prices. Efficiency can be increased in energy extraction, conversion, transportation and in consumption. Further, the same level of service can be provided by alternate means that require less energy.

The major areas where efficiency in energy use can make a substantial impact are mining, electricity generation, transmission and distribution, pumping water, industrial production and processes, transport equipment, building design, construction, heating ventilation and air conditioning, lighting and household appliances. It may be noted that a unit of energy saved by a user is greater than a unit produced as it saves on production, transmission and distribution losses.

Tracking energy efficiency

In the 1990s, several studies have estimated the potential and cost effectiveness of energy efficiency. Despite these potential studies, actual implementation has been sluggish. The 8th Five Year Plan made a provision of INR 1,000 crores for energy efficiency to provide targeted energy savings of 5,000 MW and 6 Mt in the electricity and petroleum sectors, respectively. There is no clear quantification of the actual costs and savings achieved.

The 9th Five Year Plan proposed the passing of the Energy Conservation Act and the setting up of the Bureau of Energy Efficiency (BEE). The 10th Five Year Plan proposes benchmarking of the hydrocarbon sector against the rest in the world. The target for energy savings in the 10th Plan was 95,000 million units which was about 13 per cent of the estimated demand of 7,19,000 million units in the terminal year of the 10th Plan. Various initiatives have resulted in an avoided capacity generation of 10836 MW during the 11th plan period.

The target for energy savings in the 12th Plan was 1,50,000 million units.

A study by Asian Development Bank (ADB, 2003) estimated an immediate market potential for energy saving of 54,500 million units and peak saving of 9,240 MW. Though there is some uncertainty in any aggregate estimates, it is clear that cost effective saving potential is at least 15 per cent of total generation. Additional savings are possible on the supply side through reduction in auxiliary consumption at generating plants and lowering technical losses in transmission and distribution.

At present an estimate of the total volume of the energy efficiency consulting business (audit, performance contracting, engineering, technical assistance and consultancy) is less than 1 per cent of its potential.

The primary energy demand in India has grown from about 450 million tonnes of oil equivalent (toe) in 2000 to about 770 million toe in 2012. This is expected to increase to about 1250 (estimated by International Energy Agency) to 1500 (estimated in the Integrated Energy Policy Report) million toe in 2030. This increase is driven by a number of factors, the most important of which are increasing incomes and economic growth which lead to greater demand for energy services such as lighting, cooking, space cooling, mobility, industrial production, office automation, etc.

This growth is also reflective of the current very low level of energy supply in India: the average annual energy supply in India in 2011 was only 0.6 toe per capita; whereas the global average was 1.88 toe per capita. It may also be noted that no country in the world has been able to achieve a Human Development Index of 0.9 or more without an annual energy supply of at least 4 toe per capita. Consequently, there is a large latent demand for energy services that needs to be fulfilled in order for people to have reasonable incomes and a decent quality of life.

Since energy efficiency schemes are often cost effective, it seems superfluous to create policy interventions to actually realise this saving potential.  But it may be noted that in actual practice there are several barriers that constrain the adoption of energy efficiency schemes including high transaction costs, lack of incentives to utilities who perceive energy efficiency schemes as a loss of market base, inadequate awareness, lack of access to capital, perceived uncertainty concerning savings, high private discount rate, limited testing infrastructure with which to ascertain savings and an absence of a reliable measurement and verification regime. Policy interventions are thus imperative to address these barriers. To promote energy efficiency and conservation we need to create an appropriate set of incentives through pricing and other policy measures. Public policy can set the pace for such development by offering attractive rewards and imposing biting penalties.

Institutional framework

Government of India has undertaken a two pronged approach to cater to the energy demand of its citizens while ensuring minimum growth in CO2 emissions, so that the global emissions do not lead to an irreversible damage to the earth system. On one hand, in the generation side, the Government is promoting greater use of renewable in the energy mix mainly through solar and wind and at the same time shifting towards supercritical technologies for coal based power plants.

On the other side, efforts are being made to efficiently use the energy in the demand side through various innovative policy measures under the overall ambit of Energy Conservation Act 2001.

The Energy Conservation Act (EC Act) was enacted in 2001 with the goal of reducing energy intensity of Indian economy. Bureau of Energy Efficiency (BEE) was set up as the statutory body on 1st March 2002 at the central level to facilitate the implementation of the EC Act. The Act provides regulatory mandate for: standards & labeling of equipment and appliances; energy conservation building codes for commercial buildings; and energy consumption norms for energy intensive industries.

In addition, the Act enjoins the Central Govt. and the Bureau to take steps to facilitate and promote energy efficiency in all sectors of the economy. The Act also directs states to designate agencies for the implementation of the Act and promotion of energy efficiency in the state. The EC Act was amended in 2010 and the main amendments of the Act are given below

  • The Central Government may issue the energy savings certificate to the designated consumer whose energy consumption is less than the prescribed norms and standards in accordance with the procedure as may be prescribed
  • The designated consumer whose energy consumption is more than the prescribed norms and standards shall be entitled to purchase the energy savings certificate to comply with the prescribed norms and standards
  • The Central Government may, in consultation with the Bureau, prescribe the value of per metric ton of oil equivalent of energy consumed
  • Commercial buildings which are having a connected load of 100 kW or contract demand of 120 kVA and above come under the purview of ECBC under EC Act.

Ministry of Power, through Bureau of Energy Efficiency (BEE), has initiated a number of energy efficiency initiatives in the areas of household lighting, commercial buildings, standards and labeling of appliances, demand side management in agriculture/municipalities, SME’s and large industries including the initiation of the process for development of energy consumption norms for industrial sub sectors, capacity building of SDA’s etc. Thus an enabling institutional framework is essential to achieve an energy efficient future. Following are few recommendations.

  • BEE should be an autonomous statutory body under the Energy Conservation Act and be independent of all the energy ministries. It should be funded by the Central Government. BEE staffing should be substantially strengthened
  • Existing national energy efficiency organisations like the PCRA should be merged with BEE. This will ensure that BEE is responsible for energy efficiency for all sectors and end uses
  • Based on the recommendations of the merged autonomous body the government could directly provide funding support to financial institutions for promoting energy efficiency programmes
  • Energy efficiency and conservation programmes and standards should be established and enforced. BEE should develop such standards for all energy intensive industries and appliances as well as develop modalities for a system of incentives/penalties for compliance/non compliance. These standards should be at levels equal to or near current international norms
  • Mechanisms for independent monitoring and verification of achieved energy savings must be established. Evaluation reports should be publicly available. The feedback from the monitoring exercises should help in modifying programme designs
  • Truthful labelling must be enforced with major financial repercussions if equipment fails to deliver stated efficiencies. In extreme cases, one can resort to black listing errant suppliers at consumer information web sites and on government procurement rosters
  • Verification and labelling requires testing laboratories. A programme for setting up such laboratories in public, private and the NGO sectors is needed
  • National Building Codes should be revised to facilitate and encourage energy efficient buildings
  • Large scope exists to make buildings energy efficient. Construction materials are energy intensive and the use of appropriate materials and design can save energy also during use by occupants. Innovative and energy efficient building technologies should be widely publicised through an annual prize. Reducing energy needs for heating and cooling by orientation, insulation and using temperature differences in earth or water could also be significant
  • Improvement in energy efficiency requires actions by a large number of persons and institutions. To mobilise them, the first task is to create awareness about the extent of gains
  • Promote and facilitate energy service companies (ESCOs) that can identify energy saving options and provide technical support needed for execution to industries and commercial establishments.

Policy initiatives

Well designed initiatives at the policy level can yield quick returns from a small effort. Such short term – quick return initiatives have been briefly outlined:

  • Regulatory commissions can allow utilities to factor energy efficiency expenditure into the tariff. Each energy supply company/utility can set up an energy efficiency cell. A large number of pilot programmes that target barriers involved need to be designed and tested. Innovative programme designs can then be rewarded
  • Implementing Time-of-Day (TOD) tariffs can also yield beneficial results. Introduction of TOD tariffs for large industrial and commercial consumers can flatten the load curve. Load research undertaken can understand the nature of sectoral load profiles and the price elasticities between different time periods and correctly assess the impact of differential tariffs during the day
  • Facilitating grid interconnection for cogenerators and enforcing mandatory purchase of electricity at fixed prices from cogenerators can encourage the building of additional generation capacity
  • Improving the efficiency of industrial, municipal and agricultural water pumping along with the adoption of shifting pumping load to off-peak hours can amply serve to save energy. The public sector should be mandated to do so, and the private sector encouraged through TOD pricing. This will help reduce peak demand as well as total energy demand
  • Instituting an efficient motors programme is an initiative that focusses on manufacturers/rewinding shops and target market transformation, by providing incentives to supply energy efficient motors
  • Instituting an efficient boiler programme also focusses on industry and provides incentives for replacement of old inefficient boilers
  • Promoting solar hot water systems is a programme that is aimed at both industrial and household needs of hot water
  • Promoting variable speed drives in all large industries for their major pumping and fan loads
  • Undertaking efficient lighting initiative where utilities should launch pilot efficient lighting initiatives in towns/cities (similar to the Bangalore Electricity Supply Company programme). Features should include warranties by manufacturers and deferred payment through utility bill savings
  • Improving cooking efficiency of cooking stoves should be promoted by targeting manufacturers and requiring them to label stoves so that consumers know the cost of fuel used. Energy efficient utensils and efficient cooking practices should be promoted as they offer a very large scope for reducing fuel consumption
  • Energy audits should be made mandatory and done periodically for public buildings, large establishments (connected load >1 MW or equivalent) and energy intensive industries
  • Reaping daylight savings by introducing two time zones in the country can save a lot of energy

Medium to long term initiatives include

  • Adoption of a least cost planning and policy approach that ensures that energy efficiency has a level playing field with supply options. Thus, if a state requires an additional peak demand of 1,000 MW over the next five years, the utility can ask for bids from independent power producers as well as ESCOs. For example, an efficient lighting programme may offer to save 150 MW at a cost of Rs.5,000/peak kW saved. This would then become part of the least cost plan before putting in new power plants that may cost Rs.40,000 to 50,000/peak kW generated. Similar exercises should be adopted for the oil sector
  • Initiate benchmarking exercises for different industrial sectors, hotels, hospitals, buildings, etc. In each segment, the benchmark would provide the theoretical minimum energy consumption, the best practice and specific steps required to reduce energy consumption. A road map (5 to 10 years) should be created for energy efficiency improvements in each industry segment. BEE can catalyse the benchmarking process by bringing together energy auditors, researchers, end users and providing the required funding
  • The Government (Central/State), Railways, Defence and public sector units constitute a large market segment for energy intensive products. The basis for selecting a vendor is usually only the lowest initial cost. It is recommended that the procurement process be modified based on the minimum annualised life cycle cost. A manual should be prepared establishing the methodology for annualised life cycle costing with a simple spreadsheet package to enable easy implementation
  • Though life cycle costing seems particularly relevant for appliance purchase since appliances are often bought without consideration of operating costs, it should be used for all decision making and alternatives should be compared in terms of expected present discounted values of life cycle cost
  • Increasing efficiency of coal based power plants require NTPC and SEBs to acquire technology to enhance the fuel conversion efficiency of the existing thermal power stations from an average of 30 to 35 per cent. No new thermal power plant should be allowed without a certified fuel conversion efficiency of at least 38 to 40 per cent
  • Shifting freight traffic to railways from trucks that consume five times as much diesel per net ton kilometer of freight carried. Construction of dedicated freight corridors and dismantling of the Container Corporation (CONCOR) monopoly are critical measures for this. Already, the railways are permitting private operators. Carrying 3000 billion ton kilometres (Bt-km) of freight (half of projected freight traffic in 2031) by rail instead of trucks can save approximately 50 Mt of diesel per year. To attract freight traffic, railways must ensure timely and secure delivery. This can be accomplished by operating scheduled container trains and by charging freight on the container, rather than the content, so that the customers can lock and seal it
  • Promote waterways as water transport is energy efficient. Make investment to provide the needed infrastructure to facilitate water transport
  • Promote urban mass transport by providing quality services which may be partially financed by imposing congestion, pollution and parking charges on those who use personalised motor transport. Plan for future mass transport corridors in smaller cities. As the city grows, the permissible built up area may be gradually increased. However the additional right to build should remain with the local government, which it can auction to finance mass transport and other urban infrastructure
  • Fuel efficient vehicles should be promoted in India, which are internationally already available commercially. Also promote the already commercial flexi fuel vehicles that can burn varying proportions of ethanol blended fuels.

At an 8 per cent growth rate, India will nearly double its capital stock in about nine years. Energy using equipment and appliances will also expand rapidly. The  manufacturers of equipment and appliances should be targeted to force the pace of improvement in energy efficiency. The following steps may be ensured:

  • Mandate time bound targets of energy efficiency for industrial equipment, boilers and appliances such as motor vehicles, pump sets, refrigerators, water heaters, boilers, etc
  • Create competition among manufacturers to be the first to achieve the target through a ‘golden carrot’ – a large monetary reward to the first one to commercialise products which may provide a minimum saving of 20 percent over the best existing design within a given time frame. The Super Energy Efficient Refrigerator Project in the USA is a successful example of such a policy initiatives
  • Mandate clear and informative labelling in well designed standardised forms for equipments and appliances. Combine this with consumer awareness programmes that illustrate the savings and possible associated gains
  • Strengthen appropriate labelling by creating regional facilities for testing and certification.

End note

India faces an enormous challenge if it is to meet the energy requirement over the coming 25 years. This challenge can be met with a coherent approach which develops all available energy resources. The path to sustainable energy security needs a broad policy framework and development of thrust areas to create a roadmap for implementations. An aggressive campaign by roping in a dozen public heroes must be undertaken to drive the message home that there is no alternative to being energy efficient.


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