According to the National Mission for Enhanced Energy Efficiency (NMEEE), “Various studies have established that substantial energy savings can be achieved in the residential and commercial sectors. Implementing carbon mitigation options in buildings is associated with a wide range of co-benefits, including improved energy security and system reliability. Other co-benefits of energy efficiency investments include the creation of jobs and business opportunities, while the energy savings may lead to greater access to energy for the poor.”
NMEEE also mentions that in order to enhance energy efficiency, some of the initiatives would include “a market based mechanism to enhance cost-effectiveness of improvements in energy efficiency in
energy-intensive large industries and facilities, through certification of energy savings that could be traded, accelerating the shift to energy efficient appliances in designated sectors through innovative measures to make the products more affordable, creation of mechanisms that would help finance demand side management programmes in all sectors by capturing future energy savings and developing fiscal instruments to promote energy efficiency.”
The market for energy efficiency in India is estimated to be around Rs 74,000 crore ($11.57 billion). Also, the National Mission for Enhanced Energy Efficiency aims to avoid creation of 19,000 MW of fresh power capacity by promoting energy efficiency.
Everyone agrees that these are good ideas. Ramdas Shenoy, Director of Marketing, GIBSS – which aims to make zero-net-energy buildings – says, “The effective implementation of unconventional energy, afforestation with energy efficiency at the core, will definitely help in reducing the emission levels of the country.”
The movement predates the National Action Plan on Climate Change (NAPCC), and not everyone is happy with the progress of NMEEE. Karthik Ganesan, a researcher at the Council on Energy, Environment and Water (CEEW), recalls that energy efficiency has been a national priority since the Energy Conservation Act of 2001. “It has been around for a lot longer than the NAPCC. So, it is tough to say that the NAPCC is the reason that energy efficiency has been achieved. Even though the NAPCC lays out various missions and sub-missions to help mandate, promote and finance energy efficiency, but the reality is that these haven’t really taken off.”
Shenoy also cautions that though the goal looks specific, it seems to be overstretched and working in silos. “It would be better to have smaller and focused missions. Also whether India Inc. is aligned with these goals needs to be understood. Else many of the missions will remain mere marketing campaigns without reaping true benefits. It also has to be made commercially viable, by not only involving technology experts but also the people from the MEP domain, who are going to execute them.”
The approach, he believes, should be to see some benefits in the short term so that the industry can view the benefit at large and get more committed to these goals.
Why energy efficiency?
Increasingly stringent environmental regulations targeted at plants using, alarming trends in global warming and the build-up of greenhouse gases have put energy production under sharp scrutiny. The recent mid-year update of the UN World Economic Situation and Prospects (WESP) mentioned that India’s economy is projected to grow by 7.6% this year and 7.7% in 2016, overtaking China, thus putting more pressure on natural resources.
Stressing on the significance of energy efficiency in an economy, Koshy Cherail, president, Alliance for an Energy Efficient Economy (AEEE), explains, “Energy efficiency is the ‘lowest hanging fruit’ to achieve sustainability. It opens up myriads of opportunities for resource conservation and efficiency, through plugging wastage in energy distribution, storage and use. Increased volatility of global energy prices has reiterated the need for resource efficiency as the first step toward energy security.”
Cherail believes that energy efficiency provides a triple dividend in terms of environmental benefits, by way of reduction in emissions, economic benefits as a result of the profitability of energy-efficiency investments and social dividends through opportunities for redistribution policies and investments for social goals.
“When we speak of green buildings, measures such as installing a solar water heater, solar rooftop, ensuring there is enough daylight, saving energy, will not only help cater to the power demand, but go a long way in ensuring that our cities become smarter,” reasons S P Gon Chaudhuri, a renewable energy consultant. He adds that in India, it is possible to generate 10,000 MW of power by adopting energy efficient measures.
Gon Chaudhuri believes that presently, in India, we are wasting a lot of energy and still using outdated technology on the demand side. “Since they are cheap, we opt for it, instead of energy efficient options. For urban areas, the regulations are strict. However, this is not the case with rural areas. They are heavily subsidized and will go for the cheapest options, which may not be efficient. Moreover, in cities, the lighting, elevators and pumps in use are very old and need to be replaced.”
Apart from households, service sectors such as banking too are lagging behind when it comes to energy efficiency. Cherail feels that India’s banking systems “are yet to actively participate in the energy efficiency markets, when compared to the potential. In as much as manufacturers focus on quality, there should be a sustained interest in reducing the cost of energy consumed per unit of output.”
Energy efficiency is related with tariff and how it is being imposed, say for instance in rural areas. In terms of how measures by the government can help, Gon Chaudhuri explains, “Presently, the actual tariff is not there and the urbanites end up paying for their rural counterparts. On the other hand, those in rural areas are taking subsidies and paying less. They don’t really bother about energy efficiency. This is a challenge we face in the country now.”
He goes on to warn that if the actual pricing of energy is not imposed, energy efficiency plans may not materialize. Though there are enough incentives in sectors such as solar, this is not the case with energy efficiency.
Recognising the relevance of energy efficiency, the Indian government has initiated various policy measures. Some of the main ones are:
Perform, Achieve and Trade (PAT) is a market based mechanism to enhance cost-effectiveness of improvements in energy efficiency in energy intensive large industries and facilities, through certification on energy savings that could be traded. It is a market assisted compliance mechanism, through certification of energy savings that can be traded. The move has helped and Karthik believes that the PAT scheme “has seen some level of uptake from the industries.”
The first phase is nearing completion. “The roll-out of the second cycle of PAT will widen its scope and include aviation, railways, power transmission and distribution companies encouraging uptake of PAT,” says Cherail.
Energy Conservation Building Code
The Bureau of Energy Efficiency (BEE) – which is in charge of NMEEE – developed the Energy Conservation Building Code (ECBC) in 2007 to establish minimum energy efficiency requirements for the design and construction of new commercial buildings and for major retrofits. ECBC has been developed as a voluntary code for all new commercial buildings with a connected load of 100 KW and above. It is likely to be made mandatory.
A report by the Natural Resources Defence Council and the Administrative Staff College of India says, “With the Indian real estate development rapidly expanding, the country could save enough electricity to power 358 million homes annually through 2030 if states adopt building codes and incentives for developers aimed at boosting energy efficiency in new construction and major retrofits. If states across India adopted stronger building efficiency codes and developers participated in strong programmes for rating commercial buildings, an estimated 3,453 terawatt hours of cumulative electricity could be saved by 2030.”
The ECO-III project, part of an agreement signed between India and the US with the objective of improving the performance of India’s energy sector, has significantly improved ECBC, by providing support to the BEE towards developing the code and increasing awareness about it.
Bachat Lamp Yojana
This is a scheme to promote energy efficient lighting in India, a country without any mandatory requirement to use energy efficient lighting at the household level. According to BEE, the objective of the Bachat Lamp Yojana (BLY) is to “provide energy efficient Compact Fluorescent Lamps (CFLs) at the same cost i.e. Rs 15, as of incandescent bulbs.” The cost differential would be made up by the project implementer through carbon credits earned which could be traded in the International market under the Clean Development Mechanism (CDM) of Kyoto Protocol. About 29 million CFLs were distributed have been distributed during the eleventh five year plan period (2007-2012).
Venture Capital Fund
Ajay Mathur, Director-General, BEE, recently said a Venture Capital Fund for Energy Efficiency (VCFEE) would start soon with a corpus of Rs 70 crore. “The BEE has also started a ‘partial risk-guarantee fund’ that would stand guarantee for debts raised for energy efficiency projects,” he added. “If the borrower defaults, the fund will pay the lender 50% of the outstanding loan. This would address the debt part of funding the projects, while the VCFEE would chip in with equity.”
While the energy efficiency market is large, most projects lag behind due to unfamiliar risk profiles. It is this problem that VCFEE aims to address. By creating volumes in energy efficiency deal flow, it will act as a leveraging fund for private venture capital investments, by identifying co-investment opportunities.
S Raghupathy, an energy efficiency expert at the Confederation of Indian Industry (CII), said the fund would be a big help, particularly to the country’s fledgling energy saving companies (ESCO). “The energy saving companies implement energy saving measures in the client organisations and get paid out of the savings. ESCOs are unable to secure bank funding, though their business models can give attractive yields.”
The way ahead
So, what are the steps which will steer the sector in the right direction? Cherail is of the opinion that securing a sustainable supply of Energy Saving certificates (ESCerts) will be crucial. “When supported by a reliable baseline and appropriate Measurement and Verification (M&V), it will be possible to track and achieve higher energy efficiency targets.”
Shenoy too feels that demand side technologies like geothermal cooling systems which have now been recognized by the Ministry of New and Renewable Energy, plus lighting systems, will help to reduce the gap or the quantum of energy required for any building and help build ‘Smart India’.
However, he cautions that the implementation aspect will have its own set of challenges that opposition to a coal or nuclear plant will have. “The political discussion needs to acknowledge that we will have to accept some higher prices for renewable energy, though price parity has much more rationalised then what it was earlier.”
Some project failures in the renewable space are partly due to the misguided theory that new energy sources can be provided immediately at costs that compare with traditional power. The targets for wind and solar energy that has been set are very stiff (solar targets of 100,000 MW by 2022 and 60,000 MW in wind) which will challenge the feasibility of the systems. To make it viable, the focus has to move to energy efficiency. The Prime Minister’s LED Lamp project is a move in the right direction. With energy efficient systems getting noticed, it will be difficult to ignore this space, Shenoy concludes.