Energy Efficiency Initiatives in India Sanjay Seth Energy Economist Bureau of Energy Efficiency Ministry of Power Government of India

Energy Efficiency – the Indian experience Energy efficiency makes economic sense – and is happening Yet, there are unexploited opportunities – due to market failures Public policy aims to address these market failures through: Information on energy performance Standards Promoting demand side management and performance contracting Market-based mechanisms International cooperation can accelerate the introduction and early adoption of energy-efficient technologies Public policy nudges have led to real and verified savings

Energy Intensity continues to decline 3

Largely because energy is costly Scope for further increases in energy prices are negligible

Future Energy Use in India Energy demand is increasing due to rising incomes, accelerated industrialization, urbanization and population growth 2003-04 : 572 Mtoe 2016-17 : 842-916 Mtoe 2026-27 : 1406-1561 Mtoe 5

Regulatory Framework for energy efficiency in India Energy Conservation Act, 2001 Created Bureau of Energy Efficiency Appliance standards and labeling Energy consumption norms, and energy-use reporting requirements for energy-intensive industrial units Energy Conservation Building Code for commercial buildings Certified Energy Managers and auditors National Action Plan for Climate Change, 2008 National Mission on Enhanced Energy Efficiency provides mandate for market-based mechanisms to promote energy efficiency National Mission on Sustainable Habitat seeks to incorporate energy-efficiency requirements in building byelaws 6

Technological change is the key Installation of energy-efficient infrastructure, equipment and appliances is essential for Meeting energy demand Managing energy security, and Meeting climate goals Technological transitions – both deployment and development - are important in Power generation Buildings, especially commercial buildings Equipment and appliances Industry Mobility Generally speaking, since choice of energy efficient technologies and products leads to lower energy bills, these are win-win situation, and so should occur on their own. However, there are many instances of market failures due to which these opportunities are not exploited. One of the most important reasons is that users do not know of the comparative energy use data of different products This is particularly true of the household sector - most of us in India do not know how much electricity our refrigerator or air conditioner uses. Consequently purchase decisions are based on brand, colour etc., without accounting for energy use - which in the case of an AC, could cost 10 – 15 times more than the initial purchase cost, over the life of the AC. So, we need to ensure that users have comparative energy use information. In the industrial and commercial sectors, the key problem relates to the fact that very few users have actually adopted more efficient technologies or practices, As a result, potential users are unaware of its actual performance, and thus hesitate to invest in the energy efficient technology. This implies risk mitigation measures are required. Almost without exception more energy efficiency technologies have higher first cost than less efficient technologies. This becomes a barrier to the accelerated adoption of the new technologies, especially in the household sector where discount rates are high. Consequently it is important to facilitate a rapid decline in the prices of energy efficient technologies and products. Finally a glaring market failure occurs in the building sector where the higher costs are borne by the builder, but the lower energy bills are enjoyed by the building tenant. The sharing of costs and benefits is difficult in this sector, and therefore market signals are inadequate to facilitate market transformation. Mandatory design codes therefore become necessary. To sum up, there are often instances when regulatory intervention is necessary to promote energy efficiency 7 7

Information helps consumer decisions STAR RATING FOR BUILDINGS Energy Performance Index: Category of Building : Type : Climatic Zone : Connected Load : Build up Area : Name of the Building : kWh/ sq m/ year

Labels built up as a “brand” Voluntary labels for refrigerators and airconditioners introduced in December 2006 Aggressive advertising and outreach promoted labels as a brand of superior products – manufacturers piggybacked on label advertising In 2008-09, 75% of refrigerators, and 50% of air conditioners sold in the market were labeled – showing consumer preference and market transformation Labeling became mandatory for four products (where market transformation is well under way) from 7th January, 2010 Voluntary labels in place for eight other appliances

In industry, new plant is amongst most energy efficient in the world – but there is large bandwidth of energy efficiency A wide bandwidth of energy efficiencies occurs in almost all industry sectors This creates a differentiated potential for energy savings Trading of savings allows maximum cost-effective savings as plants with “low-cost savings” exceed their “mandated “ savings for trading them with other plants which are unable to meet their targets “Perform, Achieve & Trade” mechanism introduced for 580 industrial units which have to meet SEC reduction targets

Perform, Achieve and Trade (PAT) The units covered by the programme consume about 200 million toe annually, of the total of 400 million toe of commercial fuels consumed annually in India The goal is that the gate-to-gate specific energy consumption of these units, collectively, is about 5% less in 2013-14 than it was in 2008-09 Each sector is subdivided into a number of clusters based on input and output differences, and on the basis of statistically significant differences in their SECs The allocation of SEC reduction targets within a cluster is based on the relative SECs of units – less efficient units have larger SEC %-reduction targets – so that the collective SEC reduction in a cluster is 5% ESCerts (and penalties) would be based on the achieved SEC and the target SEC, and will be computed on the basis of the baseline-year production

Certification of Energy Managers and Energy Auditors National exam to certify energy managers and energy auditors Candidates who qualify in three base papers are certified as energy managers Energy Auditors have to qualify in an additional paper Exam conducted by National Productivity Council Ten national exams have been conducted Over 15,000 candidates have appeared About 7,000 have qualified as energy managers; about 5,000 are also energy auditors EC Act mandates roles Each designated consumer has to employ an energy manager Periodic energy audits of DCs have to be carried out by energy auditors

Energy Conservation Building Code ECBC covering the following components prepared: Building Envelope (Walls, Roofs, Windows) Lighting (Indoor and Outdoor) Heating Ventilation and Air Conditioning (HVAC) System Solar Hot Water Heating Electrical Systems Voluntary introduction of ECBC in May 2007; mandatory after capacity building and implementation experience Easy to use guides, tip sheets launched Panel of architects prepared to help dissemination of ECBC Curriculum enhancement in architectural institutions Government agencies taking the lead in ECBC implementation 13 13

Enhancing Energy Efficiency of Existing Buildings Program for energy audit and retrofit in central government and state government buildings 8 building retrofits completed; 6 buildings used ESCOs to carry out retrofits through performance contracting Experience used to develop model agreements for ESCOs Over 500 buildings now being targeted for upgrades through ESCOs ESCOs promoted through model contracts, accreditation, ratings, and financing Identification, accreditation and rating of ESCOs Project-based financing of accredited and rated ESCOs Also being promoted for: Municipal lighting and water pumping Agricultural pumpsets Supporting initiatives by electricity distribution companies 14 14

Bachat Lamp Yojna (Lamp Savings Project) Of the approximately 1 billion light points in India, about 600 million use CFLs CFL penetration in commercial sector is almost complete – but low in household sector “Bachat Lamp Yojana” facilitates firms in providing CFLs to households at the price of incandescent bulbs The difference in cost would be recovered through the carbon credits that accrue because of their lower energy use CDM Programme of Activities has been registered to enable quick registration of many small projects About 300 to 400 million lamp replacements are targeted Approximately 20 million have already been replaced since October 2010

Verified energy efficiency gains – 11th Plan Fuel Avoided Savings Generation Capacity million toe MW 2007-08 2.86 623 2008-09 4.98 1504 2009-10 3.96 2868 2010-11 4.44 2882 2011-12 4.207 2959 (upto Dec 2012 ) Total 59.21* 10,836 * Compounded cumulative fuel savings Strategies to address these market failures suggest 3 kind of regulatory interventions. The first enables the provision and sharing of information. Examples of these include energy labeling of appliances, as well as of the sharing of energy use information by units within an industrial sector so as to provide least efficient units with a benchmark to improve their performance. The second kind of intervention reduces the perceived risk of adoption of energy efficient technologies, and can be achieved through a range of interventions such as bulk procurement of energy efficient products – such as CFLs - to drive down prices, or through utility driven DSM to ensure large scale adoption of energy efficient products, spurred by discounts on electricity bills or by utility-backed performance guarantees. In addition, performance guarantees by Energy Service companies, with payments based on the achieved savings, is another means to reduce risks. Finally in cases where market transformation is not achievable by “market-supportive regulations”, mandatory standards become essential. Energy building codes become necessary because of the asymmetry of costs and benefits sharing, as discussed earlier, leads to weak market signals. Similarly in some industrial sectors, energy consumption benchmarks are essential to ensure that the least efficient units upgrade their performance. 16

Both supply “push” and demand “pull” are necessary Coal-based generation Minimum efficiency requirements for new plant Tariff-based bidding to sell electricity Commercial buildings Energy conservation building code Retrofits by ESCO-driven performance contracting Energy performance labeling Industry Energy consumption norms in industry Market mechanisms to promote energy efficiency in industry Equipment and appliances Minimum energy performance standards

International Cooperation can accelerate introduction of energy-efficient technologies Rapid development and adoption of much-more energy efficient technologies is often constrained by: Costs that are higher than those which a large number of consumers are able and willing to pay High risk perception regarding performance of new technologies Lack of large markets that incentivize manufacturers to bring super-efficient products early into the market Global cooperation – especially on appliances/devices amenable to global standards – can help in aggregating demand and finalizing specs SEAD (Super-efficient Appliance Deployment) initiative is a good first step in this direction LED standards have been finalized TV standards are in the process of being finalized

International Cooperation has been central to our efforts Programme design has been influenced by, and has drawn on: Energy Conservation Law of Japan, and the Japanese energy manager and top-runner approaches Building energy efficiency programme of the US Appliance standards and labeling programmes of the EU and US DSM programmes in EU and France Institutional outreach for energy efficiency technology dissemination in Germany Several national experts (from Germany, France and Japan) have been located in BEE to support programme design International study tours build capacity of public sector officials and private-sector experts

Public policy nudges are important to enhance the rapid adoption of cost-effective technologies Energy efficiency makes sense – in most instances, people and firms make energy-efficient choices; yet instances of non energy-efficient investments – which are of economic disbenefit - continue to abound Lack of information, risk aversion, and high discount rates seem to be drivers of these (irrational) decisions Public policy nudges help create and strengthen markets for energy savings which are sustainable Voluntary programmes a good way to find out if people will respond; this also helps fine-tune them “Branding” has turned out to be a very effective tool Market “creation” incentivizes early introduction of energy-efficient technologies In retrospect, perseverance, consultation, impact assessment and course-correction have been of most importance

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