Demand Side Management in India

1
Demand Side Management in India

• Jitendra Sood, Energy Economist
• Bureau of Energy Efficiency, India

2
Content

• Energy trends in India
• Design for best DSM practices in India
• Utility driven energy efficiency programmes
• Super efficient appliances

3

• Energy Trends in India

4
Per Capita Consumption of Electricity in India
Growth Pattern
(Projected)
As per UN Methodology (Gross Electrical Energy
Availability / Population)

• Source CEA

5
India - Intensity Trends

• Economic growth has been much faster energy
  intensity and carbon intensity has been declining

6
Energy Intensity is amongst the lowest in the
world

• Japan, Denmark, UK and Brazil have lower energy
  intensity
• Energy intensity is declining at about 1.5 per
  year

7
Energy Trends in India

• Energy consumption in India is low
• Per capita energy consumption is 530 kgoe world
  average is 1770 kgoe.
• Per capita electricity consumption is 704 kWh
  against world average of 2500 kWh
• Increase in quality of life (HDI) requires
  increase in energy consumption
• Energy demand is increasing due to rising
  incomes, accelerated industrialization,
  urbanization and population growth
• 2003-04 572 Mtoe
• 2016-17 842-916 Mtoe
• 2026-27 1406-1561 Mtoe
• The country is facing power shortages
• Peak shortage 15.2 ,
• Average shortage 9
• Meeting the increasing demand only through
  increases in supply may lead to
• Reduced energy security due to volatility in
  availability and prices of imported fuels
• Adverse environmental impacts
• Strain on balance of payments

8
Energy efficiency potential outcome
Energy Conservation potential assessed as at present (IEP) (15 by DSM) - 20000MW
Verified Energy Savings Verified Energy Savings
During X Plan period During 2007-08 2008-09 2009-10 - 877 MW 2127 MW 2868 MW
Target for XI Plan period (5 reduction of energy consumption) - 10000 MW
Only as indicated by participating units in the National Energy Conservation award scheme, for the previous five years. Only as indicated by participating units in the National Energy Conservation award scheme, for the previous five years. Only as indicated by participating units in the National Energy Conservation award scheme, for the previous five years.
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Reduction in generation capacity due to energy
efficiency interventions during the financial
year 2007-08 2008-09
3.5 BU in 2007-08 and 6.5 BU during 2008-09 is
saved
9
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Electrical Energy Consumption and Conservation
Potential
S. No. Sector Consumption (billion units) Saving Potential ( b units) Savings
1. Agriculture Pumping 92.33 27.79 30.09
2. Commercial Buildings/ Establishments with connected load gt 500 KW 9.92 1.98 19.95
3. Municipalities 12.45 2.88 23.13
4. Domestic 120.92 24.16 19.98
5. Industry (Including SMEs) 265.38 18.57 6.99
Total 501.00 75.36 15.04
Source BEE/ NPC Study 2009
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DSM-Potential opportunities of Energy Savings
S.No. Market Type Investment Potential, bn Rs Energy Savings (KWh) Energy Savings (MW) PayBack Period (Years)
1 Industrial 121 49.00 billion 7000 0.5
1 Generic Energy Efficiency 42 23.70 billion 3400 0.5
1 Process Energy Efficiency 79 25.30 billion 3600 0.5
2 Commercial 5.7 1.71 billion 553 0.7
2 Government Owned        
2 Offices        
2 Hospitals 3.4 0.76 billion 360 1
2 Private Owned 0.85 0.87 billion 140 0.2
2 Hotels 1.44 0.18 billion 53  
3 Municipal 13 3.70 billion 1688 0.9
4 Totals 140 54.40 billion 9240 0.6
S. No. Sector Potential
1. Industry 10 25
2. Lighting 30 35
3. Commercial Buildings 50
4. Agriculture 40 45
Source ADEE, Econoler, IREDA and TERI, Demand Side Management from a sustainable development perspective, 2003 Source ADEE, Econoler, IREDA and TERI, Demand Side Management from a sustainable development perspective, 2003 Source ADEE, Econoler, IREDA and TERI, Demand Side Management from a sustainable development perspective, 2003
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• Design for Best DSM practices in India

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Rationale for designing best DSM practices

• Almost all the States are not able to meet the
  electricity demand of the electrified areas
• Demand Side Management initiatives are still in
  nascent stage
• Existing initiatives by various utilities are
  either pilot programmes or demonstration projects
• Very little quality information available about
  the existing schemes
• No information available on post implementation
  project performance

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Stakeholders in the design of DSM initiatives
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Steps in the design of DSM projects
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Role of Distribution Utilities

• Undertake load research studies and pursue DSM
  options in various sectors
• Institutional capacity - Create dedicated DSM
  cells within the utility to plan, implement and
  monitor DSM measures
• Consumer awareness
• Develop necessary infrastructure for
  implementation

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Role of Electricity Regulatory commissions

• Direct distribution utilities to create DSM cells
• Direct distribution utilities to submit DSM Plans
  along with ARR/APR Proposals for next tariff
  period
• Develop a mechanism to enable utilities to
  recover the costs incurred in performing DSM
  related activities
• Develop guidelines for evaluating DSM options
• Develop guidelines / methodologies to be adopted
  for integrating DSM options with supply side
  options
• Develop suitable incentive mechanism which will
  enable sharing of benefits between the consumers
  and the utilities

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Role of BEE/Ministry of Power

• National DSM Policy.
• Identification of sectors and end-uses suitable
  for DSM and help create appropriate programme
  design for ease of implementation.
• Identification of DSM measures or technologies
  within the identified end-use.
• Development of appropriate policy/ programme,
  financial, commercial and regulatory framework
  for implementation of identified DSM measures.
• Coordination with various agencies of Central and
  State Governments for implementation of DSM
  measures.
• Identification of capacity building requirements
  for implementation of such DSM programmes within
  stakeholders as well as implementing partners and
  make appropriate arrangements for their
  development and implementation.
• Arrange suitable training programmes for
  stakeholders for design and implementation of DSM
  programmes for high replicability.
• Create awareness among various stakeholders about
  energy conservation and need for DSM programmes.
• Provide necessary support to ERCs/ Utilities.

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Role of State Governments

• Financially support the pilot programmes in
  various sectors to enable the market
  transformation
• Take necessary steps to enhance the effectiveness
  of SDAs in planning implementing DSM measures
  in co-ordination with utilities
• Enable fiscal incentives to promote the use
  energy efficient appliances

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• Utility driven energy efficiency programmes

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Utility driven DSM

• The utility driven measures to incentivise DSM
  are
• Tariff Reforms
• Load Management Directives
• Public awareness campaigns
• Funding Options for DSM
• Sector specific programmes in Municipalities/
  Agriculture.

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What is Demand Side Management

• In the electricity industry, demand side
  management (DSM) is used to refer to actions
  which change the demand on the electricity
  system, including
• Actions taken on the customer side of the
  electricity meter (the demand side) such as
  energy efficiency measures
• Fuel switching, such as changing from electricity
  to gas for water heating
• Distributed generation, such as stand by
  generators in office building or PV modules on
  rooftops and
• Pricing initiatives including time of use and
  demand based tariffs

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Peak Clipping
Common DSM implementation strategies
Load Building
Conservation
Valley Filling
Load Shifting
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Agricultural Municipal DSM

• Over 35 of electricity consumed by Agriculture
  and Municipal sector.
• High inefficiencies in pumping system- targeted
  through a subsidy reduction approach Business
  model linked to subsidy reduction being evolved.
• Shelf of bankable DPRs to be prepared- to
  stimulate the market.
• Baseline development, conducive regulatory regime
  and payment security mechanism being worked out.
• Awareness and outreach to local and municipal
  bodies.
• Risk mitigation measures for encouraging PPP
  being evolved CDM benefits for the
  scheme being put in.
• Ag DSM pilot projects started in 5 States
  Maharashtra, Gujarat, Punjab, Rajasthan, Haryana,
  Rajasthan.

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Findings of DPRs- 5 States
State No. of pump s covered in the pilot study Avg. operating efficiency of existing pump sets Avg. operating efficiency of proposed energy efficient pump sets Existing consumption (million kWh) Saving potential (million kWh) of saving potential Total project cost (Rs crores) Annual benefit from Savings (Rs crores)
Maharashtra 3530 28 45 25.26 10.16 40 7.06 2.38
Haryana 2124 34.7 55 47.34 16.7 35 10.58 5.319
Gujarat PGVCL 1782 30 55 17.0 7.46 44 6.47 2.276
Gujarat MGVCL 533 42.64 58 9.18 2.615 28 2.56 0.9
Punjab 2186 33 56 20.0 7.38 37 5.67 2.467
Rajasthan 1806 31.98 50 24.91 11.275 45 8.84 3.012
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Cost Benefit Analysis-Country

• No. of agriculture connections in the country
  13.4 Million
• Total investment envisaged (INR crores) 33470
• Conservative estimate of Energy savings (in MU)
  27790
• Avoided generation capacity (in MW) 4910
• Avoided power purchase (in MU) 32694
• Annual gain due to reduction in power purchase
  (INR crores) 11443
• Loss of sale to agricultural consumers (INR
  crores) 1400
• Annual gain due to reduction in subsidy from
  state govts. (INR crores) 4200
• Total annual gain to Discoms and state govts.
  (INR crores) 14200
• Simple payback period (Years) 2.5

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Hybrid Business Model
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Flow chart of Hybrid business model Ag DSM
Solapur
Initial Capital Cost (Rs. 706)
All figures in Rs. lakhs
Annual subsidy reduction of Rs. 53 lakhs
State Govt.
Payment from savings (30 - 71.62 lakhs)
Annual Savings retained (70 - Rs 167 lakhs)
ESCO/Pump Manufacturer
MSEDCL
Annual benefit from savings of 8.8 MU/annum (Rs.
238.73)
Special DSM fund approved by state commission
(Rs.706 lac)
Annual support of 141.24 lakhs
Operating Expenses for 5 years
Avg. annual Interest Payment (Rs. 28)
Payback 4 years
Avg Annual RM (Rs. 34.60)
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Municipal DSM

• Over 150 Mu DSM projects prepared ESCO
  contracting underway
• DPRs for over 85 ULBs prepared
• Online monitoring system for DPRs put in place
• Awareness and capacity building of municipalities
  initiated

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Market Transformation driven DSM

• Lighting DSM
• Reducing cost of efficient light
• Awareness/ facilitation
• Standards and Labelling
• Mandating standards
• Awareness/ outreach
• Commercial Buildings
• New codes for commercial buildings
• Development of ESCO market for existing buildings
• Agriculture DSM
• Replacement of inefficient pumpsets with
  star-rated on PPP mode
• Municipal DSM
• Replacement of pumpsets with star rated on PPP
  mode
• Replacement of street lighting on PPP mode
• PAT Scheme
• Issue of ESCerts
• CDM
• Programmatic approach
• Issue of CERs

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Energy Savings during 2008-09 Independent Agency
verification
Programme BEE BEE NPC NPC
Programme Electricity Saved (MU) Avoided Generation (MW) Electricity Saved (MU) Avoided Generation (MW)
Standard Labeling 2106.16 567.63 2106.06 599.44
Industry EC Awards 1633.25 239 1633.25 239
SDA Reported 2807.05 667 2755.48 660.43
ECBC - Green Buildings 33.36 7.0 33.36 6.1
Total 6759.82 1480.63 6528.15 1504.97
Total for 2007-08 and 2008-09 2128 MW
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• Super Efficient Equipment/Appliances

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Background

• FOR in its meeting held on 15th January, 2010
  gave in-principle go-ahead to BEE to prepare a
  detailed implementation plan for RMSDP
• National Mission for Enhanced Energy Efficiency
  (NMEEE) calls for measures to accelerate the
  shift to energy efficient appliances in
  designated sectors through innovative measures to
  make the products more affordable by way of
  Market Transformation for Energy Efficiency
  (MTEE)
• International effort for coordinated national
  activities underway Super Efficient Appliances
  Deployment (SEAD) programme
• A similar concept for promoting LED lights have
  been approved by National Manufacturing
  Competitiveness Council (NMCC) on 19.5.2010

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Background - Consultations

• BEE, in consultation with LBNL and PRAYAS Energy
  Group has prepared the detailed implementation
  plan
• The issue of aggregating demand to promote super
  efficient ACs was discussed with the Room
  Airconditioners Manufacturing Association (RAMA)
  in May, 2010 in-principle agreement of concept
• In case of LEDs, detailed discussions with ELCOMA
  and other LED manufacturers have yielded positive
  results
• RMSDP concept presented to Joint Secretary, MOP
  during the EE Global meeting in Washington DC on
  10th May, 2010- appreciation and support from
  several governments
• SEAD is an approved Task of IPEEC, with India as
  one of the participants.

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Key objectives of RMSDP

• Promote long term utility based DSM.
• Reduce transaction costs by bundling future
  demand across several states/ regions - higher
  demand to stimulate reduction in prices -
  necessary to sustain the market in the long run.
• Enhance the ease of administering the programme -
  simpler and more robust evaluation and
  monitoring, leading to greater transparency and
  accountability.
• Enable design and deployment of appliances that
  are better suited to Indian conditions and
  accelerated adoption of superior technology.
• Facilitate better coordination with the Standards
  and Labeling program and allow rapid
  ratcheting-up of energy performance standards.
• Significantly accelerate the pace of market
  penetration of super efficient appliances in the
  market.
• Enable India to take leadership position in
  designing, developing and implementing such a
  programme eg. SEAD

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Possible Impact Of RMSDP
Type of appliance Stock in million KWh/year Total Billion KWh Growth Rate () in HH Sector Saving potential () Savings in billion KWh
Fan 246 112 27.60 10 85 29 8.0
Incandescent bulb 302 80 24.22 1 80 73 17.7
Refrigerator 37 588 21.95 15 85 45 9.9
Television (TV) 99 175 17.27 14 85 30 5.2
Tube light 280 107 30.08 1 66 27 8.1
Air conditioner 5 1199 6.05 25 60 20 1.2
Room heater 9 555 5.00 7 65 20 1.0
Electric Water heating (Geyser) 10 438 4.58 13 85 25 1.1
Stand-by-power 3.06 20 80 20 0.6
Washing machine 15 185 2.77 14 85 25 0.7
Total 145.30 57.4
Could help save 38-40 of household energy
consumption
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RMSDP 3 different interventions

• I. Incentives for SEE
• The incremental cost of SEE is within reasonable
  limit as compared to normal equipment.
• The Standards and Labeling programme of BEE has
  initiated market
• II. Direct Procurement by Utility
• The incremental cost of SEE is many times higher
  that a similar in-efficient equipment (like LEDs
  vis-à-vis the incandescent bulbs).
• The technical standards are in an evolutionary
  stage and the testing facilities are not
  adequate.
• III. Project Based SEE Deployment
• Encourage project development by utilities to
  promote DSM under a regulatory oversight
• Provide a suitable payment security mechanism by
  leveraging the regulatory charge to encourage
  ESCOs.

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Key barriers for promoting SEEs

• High initial cost of SEEs
• The cost of SEE is likely to be high- penetration
  in price sensitive market an issue offtake of 5
  STAR products is low as compared to others
• Lack of availability of information as in
  Standards and Labeling Programme need a SEE
  Label
• Lack of motivation amongst manufacturers
• Manufacturers hesitant to introduce SEEs lack
  of demand, and of willingness of consumers to pay
• SL Programme provides a time- table for
  achieving higher efficiencies no incentive to
  accelerate the process

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Leveraging energy savings
Labeling of super-efficient equipments (SEE)
Determination of incentives based on peak load
reduction
Monitoring sale of SEE, verification and
incentive payout
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Financing DSM EE initiatives

• Due to barriers such as untested outcomes, lack
  of clarity about baseline data and M V
  protocol, lack of financing and huge demand
  supply gap, DSM has not taken off.
• While costs associated with DSM projects are
  usually insignificant due to poor cash
  situation, utilities are finding it difficult to
  arrange necessary funding.
• Following four major sources of finance are
  usually available to utilities
• Self Financing or Recovery of Cost through ARR
• Development of Special Funds
• Grants from Government Agencies
• International Financial Institutions /
  development agencies

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Possible regulatory incentives

• SERC may make suitable provisions in the Tariff
  Regulations to include DSM expenditure in the
  Annual Revenue Requirement and recover the same
  through tariffs.
• SERC may develop suitable incentive mechanism for
  utility to earn additional return on equity for
  procurement of DSM Resources in place of supply
  side resources. Such incentive could be in the
  form of additional ROE (say 1) for DSM/EE in
  subsidised categories like residential,
  municipal, agriculture, etc.
• Higher incremental return on equity (say 2) be
  provided to utility for investments in DSM
  programs in subsidizing categories like
  Commercial and Industrial Sector.

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Possible regulatory incentives contd

• Alternative incentive mechanism in the form of
  savings in costly power purchase may be developed
  where it is possible to identify costly power
  purchase.
• Utilities may be encouraged to develop peak load
  saving programs so that overall power purchase
  cost decreases. Utilities may be allowed to
  retain percentage of such saving.
• Utilities may be encouraged to create their own
  Energy Service Companies (ESCO) as an unregulated
  activity and capture the business opportunities
  by implementation of DSM and EE projects in their
  licensed areas.
• Utilities may be encouraged to design DSM/EE
  schemes where benefits are large enough to allow
  sharing of benefits as a way to reduce utility
  risk.

43
Building Blocks Incentive and Procurement
Interventions

• In-principle approval of FOR under
  consideration
• Approval of funds required from GOI under
  consideration
• Selection of Equipments to be taken up by BEE
  after FOR and GOI approvals
• Technical specifications of Selected Equipments
  Technical Committees to be formed for selected
  equipment having stakeholder participation
• Calculating the amount to be recovered from ARR
  of utilities to be taken up for each selected
  equipment based on the technical specifications
  decided by BEE incentive or procurement price
  to be decided based on competitive bidding of
  aggregated demand by EESL with adequate
  safeguards to ensure proper price discovery -
  draft bidding documents prepared

44
Building Blocks Incentive and Procurement
Interventions

• Monitoring of RMSDP EESL to monitor the sales
  of SEE in each of the participating state on
  behalf of FOR/ ERCs/ BEE necessary draft
  contracts between EESL and the manufacturers
  prepared
• Payment of Incentives/Procurement Costs Based
  on the monitoring of sales of SEEs, EESL to
  propose payment of incentive (or cost)
• State Specific Regulatory Approval - to be taken
  up on behalf of Utilities of participating states
  by EESL
• Evaluation and Impact Analysis Through an
  independent agency

45
Project based SEE deployment

• Energy savings by EE project captured under
  regulatory oversight
• Expenditure on project development,
  implementation, monitoring and evaluation to be
  allowed as pass through in ARR
• Fixed annual payout to ESCO based on performance
  during the project lifecycle
• Sharing of savings with Utility

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Way forward

• National Steering Committee to be constituted
  under DG, BEE with participation from all States
  participating in the programme. The NSC would be
  the overall coordinating body for the programme-
  EESL to provide the Secretariat services to the
  NSC
• Technical Committee for two equipments (Fans and
  ACs) be constituted with participation from all
  manufacturers, test labs, SDAs, other
  stakeholders give recommendations for technical
  specification and label for SEE in a time bound
  manner within 6 months
• BEE to move the MOP for seeking approval of the
  financial resources required for the programme

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