Opinion

Energy efficiency needs a policy charge

Aditya Chunekar/Shweta Kulkarni | Updated on October 18, 2021

Need for more awareness   -  istock.com

This dimension has received scant policy attention compared to renewables and electric vehicles. This needs to change

India’s Energy Conservation Act, which recently completed 20 years, under which the Bureau of Energy Efficiency (BEE) was set up, has implemented quite a few programmes and regulations. Some of these have been successful but energy efficiency’s full potential still remains untapped.

Our forthcoming analysis based on bottom-up energy modelling shows that just a shift in behaviour of use of appliances can reduce the residential electricity demand in 2030 by 25 per cent. These savings can reduce India’s climate change inducing emissions, lower consumer energy bills, strengthen energy security and accelerate the adoption of renewables. But energy efficiency has so far remained at the margins of the policy discourse.

Quite a few provisions of the Energy Conservation Act were never implemented. The Act needs a overhaul. Money has been meagre too. Only about ₹200 crore were allotted for energy efficiency measures out of the Ministry of Power’s (BEE’s parent ministry) Rs. ₹15,000-crore annual budget for 2021-22.

Adoption of energy efficient technologies faces several barriers like high upfront cost, lack of awareness, and limited options to finance industry level upgrades.

What’s to be done

The policy initiatives have so far had limited impact, due to four factors.

First, BEE is trying to do too many things with limited resources. This hampers effective programme implementation and constrains scale-up of its many pilot level initiatives. BEE’s flagship Standards and Labeling (S&L) programme which prescribes minimum energy efficiency standards and comparative energy performance labels covers 28 appliances and equipment.

Perform, Achieve and Trade (PAT), a market mechanism for industry to trade energy saving certificates, has covered 1,073 designated consumers across 13 sectors. Setting standards, revising them regularly, and ensuring compliance requires significant in-house technical expertise, tracking of market conditions, and compliance check for each sector/appliance. Due to limited resources these programmes have seen several instances of less-ambitious targets, delays in revision of standards and lax compliance testing processes reducing their overall effectiveness.

Second, a more recent development, is the unstated approach that bulk procurement is the silver bullet for market transformation of energy efficient technologies and no direct financial incentives are required. Energy Efficiency Services Ltd. (EESL), a public sector company, used this model extremely well to enable a rapid market transformation to highly efficient LED lighting. However, this model has not been able to achieve similar success for other appliances. But still there are no financial incentives or tax concessions for energy efficient appliances.

BEE’s Super-Efficient Equipment Programme (SEEP), with a proposal to give time-bound incentives to manufacturers to cover incremental cost of manufacturing super-efficient appliances, has been gathering dust for the last five years. The level of State and Central-level incentives seen in EVs and solar rooftop are lacking for energy efficiency.

Third, the market for energy service companies (ESCOs), which conduct energy efficiency projects, is still at a nascent stage. There are only 150 ESCOs empanelled by BEE and it estimates that only 5 per cent of the 1.5 lakh crore market has been tapped so far. EESL was supposed to be a super ESCO but that has not happened either.

Fourth, the role of Discoms in promoting energy efficiency has been minimal. Even though all States have notified Demand Side Management (DSM) regulations and many electricity distribution companies have DSM cells, the expenditure on the programmes and the resultant savings are a small fraction of Discom’s annual sales.

Going ahead, India needs to prioritise energy efficiency. One starting point can be to set ambitious sector wise energy efficiency targets, which can spur policy action as well as investments.

Hence the targets need to be measurable with rigorous methodology and adequate data. BEE’s role as the nodal agency needs to be strengthened with higher budgetary allocation. BEE can use these funds to open up regional offices for better coordination with the State agencies and local governments. It can operationalise its long stalled programmes like SEEP and also rapidly scale-up its various other initiatives.

Despite BEE’s attempts, several surveys have shown that awareness of star labels remains limited particularly for smaller appliances and in rural areas. Lastly, BEE can use the funds to bolster its check testing mechanism to ensure compliance and increase credibility. Beyond BEE, innovative business and regulatory models are required to get the energy suppliers to play a much larger role in facilitating energy efficiency.

A revamp of the Energy Conservation Act can be a good place to incorporate many of the suggested changes. Without this urgent shift in strategy, we will continue paying lip service to energy efficiency.

The writers are with Prayas (Energy Group)

Published on October 18, 2021

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