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Perform, Achieve and Trade Initiative to tackle Power Shortage, Shri R V Shahi, Former Secretary, Ministry of Power

The phenomenon of power shortage was always there, continues to be so, and it seems, it would remain for quite some time. In the recent years, in view of wider private sector participation, and also larger public sector outlays, capacity addition programmes have entered a different phase in which we can expect 60,000 to 70,000 MW of capacity, may be even more, every five year. In spite of this, the demand for power will continue to grow, and it should, if we have to accelerate the economic growth to the level target and also enhance the quality of life of our people, particularly of those in rural India. Continuing shortages do lead to lack of reliability in power supply. This obviously affects smooth process of manufacturing as also activities in other sectors of economy. Secondly, the issues concerning climate change require that we should be able to manage to optimize demand and minimize consumption as much as possible. While on the one hand it is a national imperative that per capita consumption of energy, and of electricity, should rise, and rise rapidly, it is equally essential that wasteful consumption is minimized. Reduced consumption, therefore, does not necessarily mean that there would be reduction in per capita consumption. All that it means is that for the same usage, the consumption must reduce through technological and process changes and through consumption habits. But the extent of usage itself needs to expand which would mean enhanced per capita consumption.

Some years back, a survey of consumption of electricity revealed that wasteful consumption is as high as 23%. Over last few years, several initiatives have been taken, more particularly after the Bureau of Energy Efficiency was established in 2002. These initiatives indeed have led to creation of awareness about efficient energy consumption. Yet, the extent of saving potential may be still in the range of around 20%. This indicates that a lot more is required to be done to reduce the inefficiencies in consumption and bring about savings in different forms of energy. Initiatives such as National Awards for Energy Conservation in Industry, National Painting Competition on Energy Conservation (meant for children), Star Rating of electricity consuming gadgets, general awareness programmes have led to not only better understanding of the need for efficient electricity consumption, elimination of wasteful usage but also bringing about considerable savings. The need for such Demand Side Management, in Indian context, is even more pronounced, because of the Indian power sector profile being highly fossil fuel centric. If we save, obviously we are reducing the need for that extra power which invariably would come from coal based generation. Therefore, if we are saving, we are reducing the CO2 emissions thereby contributing, in a significant way, towards mitigating climate change concerns.

Apart from the above initiatives launched by the Bureau of Energy Efficiency (BEE), an Organization under Ministry of Power, recent initiative of the BEE viz., Perform, Achieve and Trade (PAT) is worth commenting upon for larger understanding and appreciation of the subject. Recently India Energy Forum organised, under Urja Vichar Manch, a discussion on the subject in which a detailed presentation was made by the Director General of BEE. I had the opportunity to initiate the discussion with a few opening remarks. But before I highlight the salient features of PAT Scheme and the discussions, I propose to also discuss about a recent initiative in the United Kingdom.

During the month of May, 2011 I had an occasion to be in London and had the opportunity to listen to the debate in the U.K. Parliament (House of Commons) on T.V. The debate was on "Energy Bill". Mr. Kris Huhney, Secretary (Energy and Climate Change), U.K., initiated the discussions and responded to comments from a large number of Members of the House. This Bill, characterised as "Green Deal" aims at encouraging households to install energy efficient systems with no upfront cost to them. The Secretary (Energy) highlighted that the U.K. was committed to 80% emission cut by the year 2050. The legislation was being introduced to implement Green Deal due to start in 2012. The Government has recognized that U.K. has some of the oldest buildings which are least energy efficient. Emission performance standards must be established and all efforts should be made to meet these standards. As much as 24% of all emissions are from homes. The most important of the Scheme, which covers households as well as business premises, is that the upfront cost of installing energy efficient system will be borne by the energy companies which will be paid back over a period of twenty five years, from the savings generated out of these systems. It may be seen that a highly developed nation like U.K., which does have installed capacity with required spinning reserves, is also conscious of saving through efficient energy consumption. For India it is much more relevant.

In this context, the PAT is an important step. I briefly outline its important features and also some of the suggestions which could make the Scheme more effective.

  1. The Scheme is targeted at 462 designated consumers in eight industry sectors, which are considered high energy consuming industries. The sectors covered include Thermal Power Plants, Iron and Steel Factories, Cement Factories, Fertilizer Plants, Aluminium Plants, Pulp and Paper Factories, Textile, and Chlor-Alkali Factories. In each of these sectors designated consumers have been identified.
  2. The energy consumption in these factories has also been established as baseline data. The total energy consumption in the 462 designated consumers, as the baseline data is of the order of 164 million tonne oil equivalent (mtoe). 145 Thermal Power Plants constitute more than 63% of the energy consumption, followed by 17% in Iron and Steel Group, 7.23% in Cement, 4.79% in Fertiliser, and 4.71% in the Aluminum Group.
  3. Based on the baseline data, Specific Energy Consumption (SEC) has been established for each of the designated consumers. Keeping in view the scope for energy savings, the target of reduction in Specific Energy Consumption, which has to be achieved by 2013 - 2014, has also been established. The Scheme of appreciation for doing better than the targets and penalties for non-compliance have also been provided.
  4. Aggregating the saving potentials based on the targeted reductions on Specific Energy Consumption by various designated consumers, the overall saving target is of the order of about 9 mtoe over the present energy consumption of 164 mtoe.
  5. During the exercise, it has been discovered that the energy consumption pattern not only varies widely across the sector, but also there are wide variations among various factories in a particular sector. These variations are on account of size (installed capacity), Raw Material, Process, Technology, Vintage, Operation and maintenance Practices, Product Mix etc. Obviously the power plants installed during sixties would have different heat rates as compared to modern power plants set up during the current century. Again Super Critical Technology leads to much more efficient consumption of fuel. Similar situations would be relevant to the factories in other industry sectors. Therefore, baseline data for different designated consumers would differ just as the targets of performance.
  6. While fixing the target with reference to the current specific energy consumption, utmost care would need to be exercised on the basis of potentials for reduction in specific energy consumption. Those designated consumers who have deployed or retrofitted modern technologies and also are performing at the benchmark levels of operating parameters should not be disadvantaged. In their cases, the target reduction will have to be fixed realistically because the potential for reduction would be rather low. Those designated consumers who continue with the old technologies, and are also not careful in respect of operation and maintenance practices, would have the current baseline data which would be very poor. In these cases the scope for improvement would be much larger. Therefore, the target for reduction will have to be much higher. The exercise, therefore, will have to be carried out on the basis of not only analysis of historical data, but also on the basis of a clear and deeper understanding of the state of affairs and possibilities for improvement.
  7. The Scheme provides for issue of Energy Savings Certificates to those who do better than the target. Those who do not meet the target may buy these Certificates to make up for the shortfall in performance. However, even for non performers, the scope for making up their shortfalls through purchase of Energy Saving Certificates is defined. It is not that for any amount of non performance they would be allowed to make up only through these Certificates. Beyond a point they shall have to pay penalty which will be equal to the cost of additional energy consumption.
  8. Energy Saving Certificates should obviously be allowed to be traded through the Energy Exchanges (two of such Exchanges are already operational). The Scheme needs to be disseminated across the sector. It is a good idea that inefficient consumption is not fully substituted by purchase of Energy Saving Certificates. The skill will, however, lie in determining the levels of SEC upto which such non-performing factories could be allowed to buy the Certificates to make up the shortfalls and beyond which they would be liable for penalty. Obviously the performers have to have a market to trade their certificates which would mean certain amount of non-performance has to be tolerated. This is quite in consonance with the fact that all factories may not find it possible to convert to latest technologies, though a good amount of retrofitting should be encouraged. Fixation of baseline SEC, and targeted reductions should be so structured that non-performers, and also those who deliberately do not undertake conversion on retrofitting exercises, do not get away by resorting to purchase of Energy Saving Certificates. At the same time, as mentioned above, performers need to be rewarded through sale of these Certificates to non-performers. This is obviously a very delicate exercise of fine balancing the various parameters.

On the whole, this is indeed a laudable initiative. Railway Traction System is a high electricity consuming system. This also needs to be covered. The exercise should also extend, in subsequent phases, to office and commercial establishments where designated consumers can be identified on the basis of higher levels of consumption of energy. Similarly baseline data and targets for reduction could be established. Achievement beyond targets could be given tradable Energy Saving Certificates, which others could buy to make up their shortfalls. Role of Energy Exchanges would be crucial.