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Major Initiatives Needed for Saving Energy, Shri R V Shahi, Former Secretary, Ministry of Power

In each constituent of energy our country is faced with shortages. During the year 2008-09, shortages have increased in case of electricity. Power sector has been complaining about the shortages of coal. Shortage of gas has always been a perennial problem. Thus we have, as the baselines, demands in each of the energy segments, substantially in access of supplies. The situation is not likely to soften because while the present shortages linked to present demands would continue, supply side growth is constrained, demand side growth is increasing. In the next 25 years, when the economic growth rate is targeted at around 9 to 10%, commensurate growth rate in supply of energy would be essential. Therefore, unless Demand Side Management (DSM) is appropriately made effective, shortages could sharpen and adversely affect various economic processes. Efficiency in consumption of energy and other methods of conserving energy are, therefore, essential.

Energy Conservation Act 2001 was legislated with objective that effective steps will be taken towards conserving energy and taking actions for more efficient use and consumption of energy. Bureau of Energy Efficiency, as provided in the Act, was established in early 2002 with the task that it would initiate various strategies, evolve Action Plan and ensure implementation. A number of Schemes have been formulated since then and with rewarding results. These include energy efficiency in the large industry sector, identifying industries as designated industries for focussing on energy conservation by way of having energy managers entrusted with the tasks and also having to do periodic energy audits completed by identified and recognised energy auditors. The Labeling Programme which was started with a few high electricity consuming gadgets such as refrigerators have already been extended to cover more products. The Building Codes notified by the Government aim at developing new buildings in a manner that electricity consumption is minimised. It also stipulates retrofits in the existing buildings with a view to reducing electricity consumption. Steps have been taken to expand the use of Compact Fluorescent Lamps (CFL), so that major efficiency gains are secured in lighting. These measures have no doubt made visible impact. However, considering the nature and the size of the problem we are faced with - and the situation is likely to worsen - more effective strategy and steps will be needed to achieve radical reductions and significant improvements. Some of the steps that could be considered are as follows:

  1. It was indeed a thoughtful approach that Labelling the product was not made mandatory from the beginning. A period of voluntary compliance was kept with the specific objective that the industry should prepare itself by way of upgrading manufacturing and testing capability and also a commitment to ensure that energy efficiency is engrained into the technology, the process, the design and the specifications of materials. The fact that making it mandatory right from the beginning would have entailed complications of enforcement was also kept in view. The architecture which was conceived was that large section of the concerned industry for the product being brought into Labelling Programme should itself be so prepared during the period that the non-compliance becomes a very small portion and therefore enforcement becomes easy and smooth. This strategy seems to have worked. The decision of Bureau of Energy Efficiency to now make Labelling mandatory for the products which were launched under the programme during 2006 is therefore well placed. Similar trend should continue for other products which are brought into the gamut of Labelling initiative.

  2. It has been found that market has started responding to the Star Rating System. However, it cannot be said that the market penetration has been extensive even in urban settings let alone rural areas. Massive consumer awareness programme is a must. Bureau of Energy Efficiency, Ministry of Power and Department of Consumer Affairs, need to pool their resources together. The consumer campaign by way of advertisements and other means to propagate the merits of Star Labelling Programmes will have to be pitched up. We need to appreciate that particularly in peaking hours to meet the shortage we are investing in new power generation capacities. This is a costly option. In the present situation, to meet the power demands during peak hours, the distribution utilities are compelled to purchase power at excessively high rates (in the range of Rs. 8 to Rs. 10 per unit). Even otherwise to meet the peak hour requirement, several State distribution utilities overdraw power from the Grid beyond their entitlements and thereby they are made to pay the penal charges at the rate of almost Rs. 10 per unit. While considering the issue of making consumer aware and fixing an appropriate financial budget, the involvement of distribution companies which will be major beneficiaries would be necessary. Similarly, manufacturer of good quality products qualifying for Three Star, Four Star or Five Star ratings need to be convinced that enough is not being done to convey the message and the merit of Star products. The objective of consumer communication exercises is to see, as a desirable deliverable, that consumers stop even looking at non Star products. Until that happens we should recognise the weakness in our efforts to communicate.

  3. Enforcement of Labelling Programme would obviously entail an appropriate network of testing facilities, a system which should entertain complaints and grievances and a procedure we should deal with these issues in an effective transparent and speedy manner. Consistently the approach of the Ministry vis-?-vis Bureau of Energy Efficiency has been that it need not create a large organisational set up throughout the country. Instead, innovative ways have to be found out so that the task is accomplished through organisations and agencies outside the Government system. Obviously it will call for capacity building so that the required number of qualified agencies and individuals become available. There should be a proper method of recognising them and at the same time derecognising them, if there is any doubt about their quality and reliability.

  4. While on the one hand through Labelling Programme, air conditioners, which are normally large users of electricity among the domestic and office gadgets, the effort is to make a significant dent by way of reducing electricity consumption. There are also reports that third rate air conditioners are being dumped into the market at prices in the range of 40 to 50% of prices of standard brands. Until this type of a phenomenon is eliminated, we will only have partial success of our Labelling Programme. We have to find methods to deal with this problem.

  5. Some of the State Governments have resorted to the practice of free power for agricultural consumers. This is anti climax of energy efficiency. This practice has gone beyond all limits. The issue is not only limited to free power to a pre-specified limit and to an identified group of agricultural consumers in certain income groups. In fact, the practice has extended to free and unmetered supply to all agricultural consumers irrespective of their income levels. In whichever State this has been done, the experience is that it has resulted into massive drawl of power. It has been seen that farmers even don't care to switch off their pumps even when the land has been irrigated. Another undesirable practice, in so far as the objective of efficient electricity use is concerned, is that the farmers have started buying cheaper pumps which are energy guzzlers because they know that they don't have to pay for electricity. This has also led to lowering down of water tables in many areas with inevitable potential of creating serious water shortage problems. This problem is known. Enormity and gravity of this problem is also fairly well understood. What is lacking is determined action. State Governments, have no doubt, authority to do so. Bureau of Energy Efficiency, Ministry of Power and Central Electricity Regulatory Commission could perhaps, in a coordinated manner, compel these States to undo what has been done and if they did not do, perhaps they could be made to suffer by disallowing central allocation of power capacity. The logic should be that if a State has been unable to provide sufficient power to the people who pay, how can it be justified to give power to those who don't pay? The logic that the State Governments compensate the Utility to the extent of free power supply is not entirely true. In a situation of unmetered power supply, the amount of power so consumed itself is not known. Even the rate at which the payment is made may not be fully justified. In any case, while the whole country is preparing for energy efficiency to meet the shortages, reduce consumption to make significant impact on climate change concerns, the policy of free power is completely incompatible with these approaches.

  6. While the issue of free power is an extreme situation, pricing of power in general is an important issue in so far as our effort to bring about overall awareness and action on energy efficiency is concerned. Theoretically, if a commodity is available at low cost, our approach to conserve and use it properly and efficiently is somewhat less serious. When the oil crisis of early 70's occurred, it may be recalled, various innovative methods of saving consumption were employed by consumers. Tariff structure needs to respond in a manner that energy efficiency is given serious consideration. Peak hour tariff has to be substantially higher, so that during these hours, consumers use only such gadgets which are essential. We have tariff structure with absurd levels of cross subsidy. Electricity Tariff Policy has given a direction. From the time it was notified in January, 2006, it is expected that cross subsidy is structured in a manner that it is only plus and minus 20% of average tariff. This was to be done in a progressive manner so that by January, 2011 the final architecture of tariff is in place. The tariff decisions in most of the States do not reflect adequate progress on this front.

  7. Next to the Labelling Programme, norms of consumptions and standards are to be fixed for designated industries and designated consumers. Some work has been done in this regard and a lot more needs to be done. It is understood that the Bureau of Energy Efficiency is already working on this. The task, is no doubt, complex. Obviously in any industry, same norm cannot be given to all the factories. There are factories, within the same sector, which are old with old technologies, and there are factories which have been set up recently. Therefore, there would be various vintages of these industrial establishments. They would justifiably need different standards. The approach of the Bureau that there would be four types of standards is valid. However, progressively during a time frame they should be expected to go from one level to another, something similar to what was conceived for the Labelling Programme.

  8. With reference to norms and standards, it is being considered that the concerned industrial establishments would be given efficiency norm certificates, which can be traded, is a well conceived approach. We need not depend always on the CDM Projects and Carbon Credit advantages internationally. The process is long. There are a large number of proposals. There is uncertainty on how many of them will finally succeed. The exercise has to pick up within the country. Efficiency trading from one industrial establishment which over-performs to another which under-performs can lead to a chain of actions leading towards overall efficiency environment. If an industrial establishment knows that it has to pay a price if it fails to reach a level of standard of energy consumption and pay to those who have over-achieved, that industrial establishment will be inspired to achieve the specified level of standard. This exercise has a tremendous potential of bringing about energy efficiency.

  9. In the last five years or so, CFL has expanded in terms of production, supply and use. However, there is a big potential which is untapped. The recent Bachat Lamp Yojana of Bureau of Energy Efficiency is a good initiative. If we can assure that the consumers get CFL's at more or less same price as the conventional lamps, propagate this in an effective manner and supply these to the consumers, we would have succeeded. Any intermediate step of financing, getting Carbon Credit, getting the accounting for the saved electricity to service the investments should be made in a manner that the consumers are more or less insulated from these botherations, the exercise would strongly take off. The issue would not be one of conceptual framework but its success would essentially lie in how effectively we are able to tie up the nuts and bolts during implementation.

  10. Fiscal Policy changes are also necessary to promote, encourage and facilitate energy efficiency projects and measures. These could include (a) Tax differentiator on the basis of achievements in energy efficiency. That means an industrial unit having better energy efficiency has an advantage in the matter of tax as compared to others whose level of energy efficiency is lower, (b) Similarly, depreciation benefits, in the form of accelerated depreciation could be structured on a differential basis for efficient industrial units, (c) No income tax should apply to financial gains secured through Carbon Credit. There is no reason why almost 50% of the incentive is getting diluted through such taxation, (d) There should be tax benefits on income earned by venture capital funds which promotes energy efficient projects.