Demand Side Management in India Jitendra Sood, Energy Economist Bureau of Energy Efficiency, India.

Demand Side Management

in India

Jitendra Sood, Energy EconomistBureau of Energy Efficiency, India

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Content Content

• Energy trends in India

• Design for best DSM practices in India

• Utility driven energy efficiency

programmes

• Super efficient appliances

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Energy Trends in India

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Per Capita Consumption of Electricity in India

Source: CEA

(Projected)

As per UN Methodology (Gross Electrical Energy Availability / Population)

Growth Pattern

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India - Intensity Trends India - Intensity Trends

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

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Energy Intensity is amongst the Energy Intensity is amongst the lowest in the worldlowest in the world

• Japan, Denmark, UK and Brazil have lower energy intensity

• Energy intensity is declining at about 1.5% per year

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Energy Trends in IndiaEnergy 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

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Energy Conservation potential assessed as at present (IEP) (15% by DSM)

-

20000MW

Verified Energy Savings :

-During X Plan period

-During 2007-08 & 2008-09- 2009-10

- 877 * MW

2127 MW2868 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.

Energy efficiency potential Energy efficiency potential & outcome& outcome

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9

575

600

625

650

675

700

725

750

2004-05 2005-06 2006-07 2007-08 2008-09

Gen

erat

ion

in

Bil

lio

n U

nit

s

Business as usual Generation due to EE intervation

575

600

625

650

675

700

725

750

2004-05 2005-06 2006-07 2007-08 2008-09

Gen

erat

ion

in

Bil

lio

n U

nit

s

Business as usual Generation due to EE intervation

3.5 BU in 2007-08 and 6.5 BU during 2008-09 is saved

Reduction in generation capacity Reduction in generation capacity due to energy efficiency due to energy efficiency

interventions during the financial interventions during the financial year 2007-08 & 2008-09 year 2007-08 & 2008-09

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10

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 > 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

Industry (Inc luding S ME s)265.38

Domestic120.92

Munic ipa lities12.45

C ommerc ia l B uilding s > 500 K W

9.92

Ag ric ulture P umping92.33

Industry (Inc luding S ME s)18.57

Domestic24.16

Munic ipa lities2.88

C ommerc ia l B uilding s > 500 K W

1.98Ag ric ulture P umping

27.79

Source: BEE/ NPC Study 2009

Electrical Energy Consumption Electrical Energy Consumption and Conservation Potentialand Conservation Potential

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DSM-Potential & DSM-Potential & opportunities of Energy opportunities of Energy

SavingsSavingsS.

No.Sector Potenti

al1. Industry 10 – 25

%2. Lighting 30 – 35

%3. Commerci

al Buildings

50 %

4. Agriculture

40 – 45 %

Source: ADEE, Econoler, IREDA and TERI, Demand Side

Management from a sustainable development perspective, 2003

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

Generic Energy Efficiency

42 23.70 billion

3400

Process Energy Efficiency

79 25.30 billion

3600

2 Commercial 5.7 1.71 billion

553 0.7

Government Owned

Offices Hospitals 3.4 0.76

billion360 1

Private Owned

0.85 0.87 billion

140 0.2

Hotels 1.44 0.18 billion

53

3 Municipal 13 3.70 billion

1688 0.9

4 Totals 140 54.40 billion

9240 0.6111-42

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Design for Best DSM practices in India

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Rationale for designing Rationale for designing best DSM practicesbest 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 Stakeholders in the design of DSM design of DSM

initiatives initiatives

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Steps in the design of Steps in the design of DSM projectsDSM projects

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Role of Distribution Role of Distribution UtilitiesUtilities

• 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 Role of Electricity Regulatory Regulatory

commissionscommissions• 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 Role of BEE/Ministry of Powerof 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 Role of State GovernmentsGovernments

• 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 DSMUtility 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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• 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

What is Demand Side What is Demand Side ManagementManagement

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Peak ClippingPeak Clipping

Valley FillingValley Filling

Load BuildingLoad BuildingConservationConservation

Load ShiftingLoad Shifting

Common DSM Common DSM implementation implementation

strategiesstrategies

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Agricultural & Agricultural & Municipal DSMMunicipal 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 Findings of DPRs- 5 States 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

Slide 25

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Cost Benefit Analysis-Cost Benefit Analysis-CountryCountry

• 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 ModelHybrid Business Model

Slide 27

Consumers

Farmer

Government / Regulatory Commission

•Reduction in Subsidy payments•Policy Guidelines and Approvals•Inclusion in Annual Revenue Requirement

•Sale of saved energy to other consumers

•Free Energy Efficient Pump sets•Reduced Energy Bills•Free Maintenance •Quality Power Supply

Third Party Testing

Agreement

Utility / Discom

•Annual payment from Special DSM fund to support capital expenditure•Sharing of savings to support operating expenses•Improved Collection efficiency•Reduced Losses and Peak Load

ESCO/ Contractor

•Capital investment for Installation of new pumps•Design / Installation / Commissioning & R&M•Demonstrate the energy savings•Repair and Maintenance

Payment Security Package

Policy guidelines & Approvals

Electricity sales

Monitoring Agency

Regulator

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Operating Expenses for 5 years

Initial Capital Cost

(Rs. 706)

Initial Capital Cost

(Rs. 706)

Avg. annual Interest Payment

(Rs. 28)

Avg Annual R&M(Rs. 34.60)

Annual benefit from savings of 8.8 MU/annum

(Rs. 238.73)

Annual benefit from savings of 8.8 MU/annum

(Rs. 238.73)

Annual support of 141.24 lakhsSpecial DSM fund approved by state

commission (Rs.706 lac)

Special DSM fund approved by state

commission (Rs.706 lac)

ESCO/Pump

Manufacturer

ESCO/Pump

Manufacturer

Payment from savings (30% - 71.62 lakhs)

MSEDCLMSEDCL

Annual Savings retained (70% - Rs 167 lakhs)

All figures in Rs. lakhs

Payback – 4 years

Payback – 4 years

State Govt.State Govt.

Annual subsidy reduction of Rs. 53 lakhs

Annual subsidy reduction of Rs. 53 lakhs

Flow chart of Hybrid business Flow chart of Hybrid business model – Ag DSM Solapurmodel – Ag DSM Solapur

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Municipal DSMMunicipal 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 Market Transformation driven DSMDSM

• 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 Energy Savings during 2008-09 Independent 2008-09 Independent Agency verificationAgency verification

Total for 2007-08 and 2008-09 : 2128 MW

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Super Efficient Equipment/Appliances

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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

Background Background

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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.

Background - Background - Consultations Consultations

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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

Key objectives of Key objectives of RMSDP RMSDP

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Type of appliance

Stock in

million

KWh/yea

r

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

Possible Impact Of Possible Impact Of RMSDP RMSDP

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I. Incentives for SEEThe 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 UtilityThe 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 DeploymentEncourage project development by utilities to promote DSM under a regulatory oversightProvide a suitable payment security mechanism by leveraging the regulatory charge to encourage ESCOs.

RMSDP – 3 different RMSDP – 3 different interventions interventions

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Key barriers for Key barriers for promoting SEEspromoting 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– S&L Programme provides a time- table for

achieving higher efficiencies – no incentive to accelerate the process

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Leveraging energy Leveraging energy savingssavings

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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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

Financing DSM EE Financing DSM EE initiativesinitiatives

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• 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.

Possible regulatory Possible regulatory incentives incentives

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• 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.

Possible regulatory Possible regulatory incentives …contdincentives …contd

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Building Blocks – Building Blocks – Incentive and Incentive and Procurement Procurement InterventionsInterventions• 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

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Building Blocks – Building Blocks – Incentive and Incentive and Procurement Procurement InterventionsInterventions• 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

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ESCO’s annual Operating Expenses for 5 years

Overall Project Cost

Funding from DSM Fund

Initial capital Investment by ESCO

Min. Saving erannum

Annual AvgInterest Payment Annual R& M Cost

Annual payment from DSM fund

Payment Security using Regulatory Charge

Cost of third party (NGO)

for M&VBEE

Annual Payout

Shared saving

•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

Project based SEE Project based SEE deploymentdeployment

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Way forwardWay 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

Demand Side Management in India Jitendra Sood, Energy Economist Bureau of Energy Efficiency, India.

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Transcript of Demand Side Management in India Jitendra Sood, Energy Economist Bureau of Energy Efficiency, India.