of Integrated Energy Policy for DSM
following recommendations have been made in the integrated Energy
Policy Report of the Planning Commission Government of India
1. The importance of energy efficiency and DSM has clearly emerged
from the various supply scenarios and is underlined by the rising
oil prices. Efficiency can be increased in energy extraction,
energy conversion, energy transportation, as well as in energy
consumption. Further, the same level of service can be provided
by alternate means requiring less energy. The major areas where
efficiency in energy use can make a substantial impact are mining,
electricity generation, electricity transmission, electricity
distribution, pumping water, industrial production, transport
equipment, mass transport, building design, construction, heating
ventilation & air conditioning, lighting and household appliances.
Thus a “Negawatt” (a negative Megawatt), produced
by reducing energy need saves more than a Megawatt generated.
2. The 10th
Five Year Plan proposed benchmarking of the hydrocarbon sector
against the rest in the world. It also suggested demand side
management specifically in the transport sector. The target
for energy savings in the 10th Plan 95,000 Million Units (Planning
Commission of India) (13% of the estimated demand) in the projected
terminal year of 7,19,000 Million Units.
3. A study for the Asian Development Bank (ADB, 2003) estimated
an immediate market potential of energy savings of 54,500 Million
Units and peak saving of 9240 MW. This has an investment potential
of Rs.14,000 crores. Though there is some uncertainty in any
aggregate estimates, it is clear that the cost-effective saving
potential is at least 10% of the total generation through Demand
Side Management. Additional savings are possible by auxiliary
reduction in generation plants. At present an estimate of the
total volume of the energy efficiency consulting business (Audit,
performance contract, engineering and technical assistance consultancy)
is less than 1% of this potential (DSCL,2004).
4. Since most Energy Efficiency/DSM schemes are often cost effective
is it necessary to have policy interventions? In actual practice
there are several barriers that constrain the adoption of EE/DSM.
These relate to high transaction cost, lack of incentives to
utilities who perceive DSM as loss of market, inadequate awareness,
lack of access to capital, perceived uncertainty concerning
savings, high private discount rate and limited testing infrastructure
for ascertaining savings. Policy interventions are required
to address these barriers.
5. BEE (Bureau of Energy Efficiency) should be made autonomous
and independent of the Ministry of Power. It should be funded
by contribution from all energy Ministries or a cess on fuels
and electricity adjusted for cess on fuels used for generating
electricity. BEE staffing should be substantially strengthened.
6. Increasing Efficiency of Coal-Based Power Plants:- Require
NTPC and SEBs to acquire technology to enhance the fuel conversion
efficiency of the existing population of thermal power stations
from an average of 30% to 35%. No new thermal power plant to
be allowed without a certified fuel conversion efficiency of
at least 38%.
7. Implementing Time of Day (TOD) Tariffs: All utilities should
introduce TOD tariffs for arge industrial and commercial consumers
to flatten the load curve. Utilities should support load research
to understand the nature of different sectoral load profiles
and the price elasticities of these loads between different
time periods to correctly assess the impact of differential
tariffs during the day. The utility should have focus group
meetings of industrial or large commercial consumers, document
a few potential case studies illustrating the potential for
shifting loads and provide information and analytical support
along with implementation of the TOD tariff.
8. Facilitating grid interconnection for Cogenerators: Enforce
mandatory purchase of electricity at fixed prices from cogenerators
(at declared avoided costs of the utility) by the grid to encourage
cogeneration. The buying/selling price should be time-differentiated
and declared by the state regulatory commissions at the time
of each tariff notification.
9. Improving efficiency of Municipal Water pumping:- Institute
measures that encourage adoption of efficient pumping systems
and shifting of pumping load to off-peak hours. The public sector
should be mandated to do so. Private sector could be encouraged
to do so through time of day pricing. This will help reduce
peak demand and energy demand.
10. Promoting Variable Speed Drives:- All large industries should
be required to assess suitability of variable speed drives for
their major pumping and fan loads.
11. Undertaking efficient Lighting Initiative:- Utilities should
launch pilot efficient lighting initiatives in towns/cities
(similar to the BESCOM programme in Bangalore). Features should
include warranties by manufacturers, deferred payment through
utility bill savings. (International examples are available
12. Making Energy Audits Compulsory For all Loads Above 1 MW:-
Energy audit should be done periodically and be made mandatory
for public buildings, large establishments (connected load>
1 MW or equivalent energy use > 1MVA) and energy intensive
13. Reaping Daylight Savings:- Finally saving daylight by introducing
two time zones in the country can save a lot of energy.
14. Adoption of a least cost planning and policy approach that
ensures that energy efficiency and Demand Side Management (DSM)
have a level playing field with supply options. The regulatory
commissions should invite bids for DSM while approving new capacity
additions. Thus, if a state requires an additional peak demand
of 1000 MW in the next five years, the utility can ask for bids
from Independent Power Producers (IPPs) as well as Energy Service
Companies (ESCOs). For example, an efficient lighting programme
may offer to save 150 MW at a cost of Rs.5000/peak kW saved.
This would then become part of the cost of Rs.5000/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 - 50,000/peak kW
generated. Similar exercise should be adopted for the oil sector.
15. Regulatory commissions can allow utilities to factor EE/DSM
expenditure into the tariff.
16. Each energy supply company/utility should set-up a DSM/energy
efficiency cell. BEE can facilitate this process by providing
guidelines and necessary training inputs. A large number of
pilot programmes that target the barriers involved and have
low transaction costs need to be designed need to be tried with
different institutions, incentives, and implementation strategies.
Innovative programme designs can be rewarded.
17. Create competition among manufacturers to e the first to
achieve the target through a “golden carrot” which
is a large monetary reward to the first one to commercialise
products which provide, say a minimum saving of 20% over the
best existing design within a given time frame.
18. Mandate clear and informative labelling in well-designed
standardised form for equipment and appliances. Combine this
with consumer awareness programmes that illustrate the savings
& gains that can be made.
19. To strengthen the labelling initiatives create regional
testing facilities for testing and certification. The labelling/standards
initiative should be supported by analytical studies to establish
equipment consumption benchmarks (minimum achievable energy
20. Industries may need technical support to identify and execute
energy saving options. Energy Service Companies (ESCOs) can
provide such support. We need to promote and facilitate ESCOs.
Some possibilities include-
support for ESCOs could be in the form of payment security mechanism
(this may be required for projects in municipalities, government
buildings), partial credit guarantee, venture capital.
Encouraging different business models-
ESCOs to be successful in India a variety of alternative business
models need to be attempted to determine the appropriate ones
in the Indian context. BEE could facilitate 15-20 demonstration
ESCO projects in different sectors. These should be well documented,
independently monitored and made available to the public. This
will encourage more entrepreneurs to invest in ESCOs.
ESCOs as producers of “Negawatts” may be given the
same tax breaks that are available for renewable energy programmes
or other energy investments.
Providing an institutional framework for independent monitoring
& evaluation of projects delivered by ESCOs.