The bygone financial year has left behind a trail of milestones — 10 GW of solar installations, 30 GW of wind and 50 GW of all renewable energy (which includes small hydro and biomass). These milestones have been duly recognised and celebrated. However, there is one more, which has gone unnoticed.
Towards the end of 2016-17, India had saved enough through its energy efficiency measures to free up 10 GW of capacity during peak hours — there is 10 GW less load on the grid during peak hours. That is rich. A new 10 GW thermal power project today comes with a price tag of ₹70,000 crore.
These savings have mainly come from two of the many programmes of the National Mission on Enhanced Energy Efficiency — the ‘Ujala scheme’, which strives to achieve energy savings by replacing incandescent bulbs with LED, and the ‘Perform, Achieve, Trade (PAT) scheme’, which eggs on named industries to introduce energy saving measures.
Official data puts avoided generation under Ujala at 5,905 MW and under the PAT at 5,635 MW. By the looks of it, it is just the beginning.
The vanguards
The 10-plus GW of energy saving achieved is the early part of the learning curve, which involved a lot of mine-clearing. In a way, 2017-18 marks the beginning of ‘Energy Efficiency 2.0’, as both the schemes turn to new chapters.
Two institutions have been in the vanguard in the energy efficiency movement. The Bureau of Energy Efficiency, a unit of the Ministry of Power, which oversees the PAT scheme, has just taken the scheme into the second cycle. The Energy Efficiency Services, a for-profit entity owned by four power public sector companies, which implements the Ujala scheme, has just taken the scheme beyond LED lights to ceiling fans and water pumps, and has plans to bring several other appliances, like air-conditioners, under its fold. How these two schemes have worked is the heart of India’s energy efficiency achievement story.
The PAT scheme works by first naming ‘designated consumers’ (DCs) that it covers, typically factories that consume large amounts of energy, and then consumption benchmarks for them. In the first cycle, it named 478 DCs, from eight industrial sectors (cement, steel, aluminum, thermal power plants, fertiliser, paper, textiles and chlor-alkali). These DCs were set benchmarks for energy consumption relative to their production. Those who consumed less than the benchmark during a three-year period, get incentives in the form of trade-able ‘Energy Saving Certificates’, or ESCerts. Those who consumed more are required to buy the ESCerts.
Thirty eight lakh certificates were recently issued to the 478 DCs. These certificates are meant to sweeten the choice of making investments in energy efficiency. How sweet they turn out to be will be known after the value they fetch in the closed market of 478 companies. However, regardless of that, ₹24,517 crore was invested by the DCs, which resulted in saving of 5,635 MW. At ₹4.35 crore a MW, this is the cheapest energy investment.
In the second cycle, 621 DCs from eleven industries, will roll up their sleeves and strive to save energy and will, no doubt, learn from the first 478.
The consumer saves
The Ujala scheme, as Business Line goes to print, has saved 30 billion kWhr of electricity, worth ₹12,000 crore in the hands of consumers, by replacing 22 crore incandescent bulbs with LED, since January 2015. EESL has just begun a similar scheme for tube lights, and for replacing old ceiling fans with 5-star rated, energy efficient ones, and these two lines have contributed to savings of another ₹25 crore worth of energy.
EESL is an ESCO, or an energy service company. It invests in energy efficiency measures at its clients’ premises and recovers the investments and its profits from out of the saving in energy bills. For instance, it gives the LED bulbs to households for practically free, and lets the consumer pay through the electricity bills.
Now EESL intends to add more lines — municipal and agricultural water pumps, air-conditioners to start with. The World Bank, from which EESL has sought a loan of $300 million, says that the company intends to invest ₹37,600 crore in 2017-22.
EESL and Bureau of Energy Efficiency (BEE) have kind-of kick-started the energy efficiency movement in India. Their achievement so far is, as a government official observed, “beginning of the beginning”. There is a lot more to come, and here is why.
The BEE website lists 137 licensed ESCOs. These include big names such as Power Grid Corporation of India, Carrier Aircon, Philips Electronics, PwC, Tata Projects, Forbes Marshall, Voltas, Siemens, Johnson Controls and Schneider Electric. If all these companies get into the act, the country is in for a big saving in energy.
Fine tuning needed
However, in reality very few of these 137 companies are active. The public sector EESL, which has a role of hand-holding them, has recently asked the Association of Enhanced Energy Efficiency (AEEE) to do a reality check of its members and see who is really doing what, with a view to fine tuning any assistance that EESL may provide them. The process, says EESL’s Managing Director Saurabh Kumar, might take a month.
ESCOs have faced challenges in terms of finding the money to make upfront investments and in measurement and verification of energy savings, which has been a fertile area for disputes to crop up between the ESCO and the client.
EESL is now in a position to play mom to other ESCOs. The World Bank, which describes EESL as a “Super ESCO” notes that the company “has been able to overcome the challenges resulting from the lack of commercial financing in these segments, demonstrate the viability of EE and trigger market transformation (emphasis added).” More specifically, World Bank observes that EESL “has demonstrated the viability of the deemed savings approach as the basis for contracts, paving the way for use of this, and other performance-based contracted models by private ESCOs.”
Further, EESL brings down cost of equipment by aggregating demand and making bulk purchases — for which it has the financial strength, given its pedigree. It can – and is willing to – be the low-cost bulk-procurer for other ESCOs too.
And, the icing on the cake could be the opening up of carbon markets, which will enable energy savers to earn trade-able instruments (such as ESCerts or Certified Emission Reductions). Globally, governments are trying to ginger up today’s moribund carbon markets, by fixing floor prices for carbon and mandating purchase. On its part, the World Bank will soon start the ‘Transformative Carbon Asset Facility’, which will essentially pay for emission cuts.
The 10 GW of saving achieved in 2016-17 is but just a pinch. A whole new industry is opening up.
(The article first appeared in The Hindu BusinessLine.)