CENTER OF EXCELLENCE

Strategic vision for energy efficiency in India: establishing centers of excellence

Energy efficiency centers could serve as a hub for availing every kind of information on energy efficiency and also play a catalytic role in promoting public awareness

Energy Efficiency - its Critical Role in India
The Indian economy has grown rapidly over the past decade. The rapid economic growth has been accompanied by commensurate demand for energy services that is increasing the country’s vulnerability to energy supply disruptions. This vulnerability is not unlike that observed in the US and China, which too import an increasing share of their oil and gas requirement.1 It is estimated that by 2025, the global scene of energy supply and demand would alter quite dramatically: China is expected to overtake the US in its quest for energy and India will account for a larger share of energy resources than Japan. In absolute terms, India will be the fourth largest consumer after China, USA and the Russian Federation. The emerging economies of China, India and South Korea are expected to outstrip demand from mature market economies and will account for 75% of the demand among developing countries.

India faces formidable challenges in meeting its energy needs. According to the Integrated Energy Policy report recently released by the Indian Planning Commission, "...to deliver a sustained growth rate of 8% through 2031-32 and to meet the lifeline energy needs of all citizens, India needs, at the very least, to increase its primary energy supply by 3 to 4 times and its electricity generation capacity by 5 to 6 times of its 2003-04 levels. India’s commercial energy supply would need to grow from 5.2% to 6.1% per annum while its total primary energy supply would need to grow at 4.3% to 5.1% annually". The report also makes the pertinent observation that by the year 2030, power generation capacity must increase to nearly 800,000 MW from the current capacity of 160,000 MW (inclusive of captive power). This translates in simple mathematics to an addition of about 500 MW every week over the next 25 years!

The formidable increase in energy demand will serve to increase the country’s reliance on indigenous coal and to a lesser extent oil. While the country has large reserves of coal, it relies on imported oil for almost two-thirds of its oil needs, possesses limited natural gas reserves and faces chronic electricity shortages. The inability of the electricity grid to supply reliable power, particularly to business consumers, has prompted increased use of captive power generation that often uses diesel fuel. The rising demand for petroleum products and natural gas is expected to be met through imports. Coupled with deteriorating coal quality and its vulnerability to volatile fuel prices in a tightening world oil and gas market, India’s energy situation is likely to worsen.

These vulnerabilities are being addressed through diversification of energy imports, the development of indigenous fossil and renewable energy sources and last but not least, reduction of the intensity of energy use of the Indian economy. The thrust of this paper is to focus on ways to stretch India’s existing energy supply capacity by making energy use more efficient.²

Efficiency improvement also has the potential to boost economic growth that can result in higher tax revenue for the government. An analysis of the electricity efficiency potential for India shows that efficiency improvement in combination with new supply can eliminate electricity shortages at the same investment level as for a business-as-usual electricity supply scenario.3 A similar analysis of macroeconomic benefits for India’s state of Maharashtra illustrates that redirecting electricity saved through efficiency improvements to electricity-deficient businesses has the potential to increase economic output and tax revenue. This could reduce the state government’s fiscal deficit by 15-30% depending on the size of backup power generation.4

The vision of energy efficiency as cost-effective and environmentally sound strategies is beginning to emerge. The passage of the Energy Conservation (EC) Bill in late 2001 has immeasurably raised the profile of energy efficiency and its importance to the national developmental agenda. The EC Bill provides a strategic framework for the formulation and development of energy conservation policies. It also attempts a balance between regulatory enforcements and voluntary participation and between market driven methods and government mandates. Energy efficiency will be the cornerstone of the nation’s sustainable development path and will play a key role in advancing national energy security cannot be disputed, although the time frame to realize such level of energy efficiency cannot be fully predicted.⁵

BOX 1
Energy intensity of GDP, defined as the ratio of the energy consumption to the GDP, is often considered to be the index for the economic growth vis-à-vis energy consumption trend for a country. Based on data by International Energy Agency [4], overall energy intensity of GDP in India is the same as in OECD countries, when GDP is calculated in terms of the purchasing power parity (PPP). Energy-GDP elasticity, the ratio of the growth rates of the two, remained around 1.3 from early fifties to mid-seventies. Since then it has been continuously decreasing. Electricity is the most important component of the primary energy. Electricity-GDP elasticity was 3.0 till the mid-sixties. It has also decreased since then. Reasons for these energy-economy elasticity changes are: demographic shifts from rural to urban areas, structural economic changes towards lighter industry, impressive growth of services, increased use of energy efficient devices, increased efficiency of conversion equipments and inter-fuel substitution with more efficient alternatives. Based on the CMIE data, the average value of the Electricity-GDP elasticity during 1991-2000 has been calculated to be 1.213 and that of the primary energy- GDP elasticity to be 0.907. Estimating the future GDP growth rates of India, taking the primary energy intensity fall to be 1.2 percent per year, extrapolating the electricity intensity fall from past data till 2022 and subsequently a constant fall of 1.2 percent year, the growth rates of the primary energy and electrical energy have been estimated as follows.
Period	Primary EnergyPercent Annual Growth	Electricity Percent Annual Growth
2002-2022	4.6	6.3
2022-2032	4.5	4.9
2032-2042	4.5	4.5
2042-2052	3.9	3.9

Establishing Centers of Excellence in Energy Efficiency
In early May 2006, the Ministry of Power in collaboration with the US Department of Energy and the US Agency for International Development organized the US-India Energy Efficiency Technology Cooperation Conference in New Delhi. The Conference, which was attended by experts from the US and India, attracted an audience of over 300 professionals and addressed topics covering energy efficiency technologies, tools and approaches as they applied to the buildings and industry sectors, etc. The main aim of the Conference was to explore the barriers that arise during implementation of energy efficiency in India, to illustrate ways to overcome such barriers and delineate approaches of how energy efficiency markets could be triggered in India in the buildings and industrial sectors.

A key outcome of the Conference was the unanimous view that energy efficiency information dissemination to the general public and technical know-how to industry and public entities such as government agencies and municipalities were critical issues for developing the Indian energy efficiency markets. A proper approach for providing public information and technical know-how was identified as the creation of regional centers of excellence and expertise in energy efficiency. It was the general consensus that such centers could serve as the strategic purpose for energy efficiency market transformation and services development in the country.

The primary purpose of this section is to provide a conceptual framework of the proposed energy efficiency centers and thus initiate a debate in the country on the merits of the program and its approach.

Regional Energy Efficiency Centers (REEC)
An energy conservation center at the regional level will have the prime function of ensuring the proper implementation and monitoring of energy efficiency programs adopted by the government. International experience has shown that such a center operates more effectively as an independent and unbiased body under an autonomously managed structure. The center should preferably function with direct industry participation. Besides its prime function of showcasing a specific end-use technology, its activities could include conducting awareness campaigns, facilitating technology information sourcing, showcasing energy efficiency technologies, promoting technology cooperation and transfer and organizing audits.

Recognizing the importance of such regional centers of energy efficiency, the Ministry of Power has announced the establishment of five centers in the country. The REECs would be part of a major strategic thrust to promote electrical demand side management (DSM) in India, aiming to promote the adoption and commercialization of energy efficiency technologies and services in the country, which would have a direct impact on the reduction of green-house gas (GHG) emissions. The centers are expected to possess certain common features that will form the basic edifice of their operations apart from the distinct and special features that they specialize in. Thus an energy efficiency center would enhance public education on efficient use of energy, share best practices among energy end-users, provide technical know-how on energy efficiency solutions and showcase a thematic area it specializes in. The thematic areas that the six proposed regional centers of energy efficiency are expected to showcase (one per center) are:

• Lighting energy efficiency -Southern Region
• Efficient electric motors and motor drives - Central Region
• Efficient buildings & HVAC - Western Region
• Efficient home appliances - Eastern Region
• Efficient pumping in agriculture - Northern Region
• Industrial Applications of Energy Efficiency - Southern Region

REEC Mission
The mission of the REEC will be to engage the population on efficient energy use, support the development of energy efficiency solutions and to stimulate the transfer of technology into the market place. Each REEC will be uniquely poised to make significant contributions to this effort by working with local institutions that could include SEBs, Discoms, vendors, academia, NGOs and energy professionals.

REEC Objectives
Apart from enhancing public education on efficient energy use and fostering the transfer of energy efficiency solutions from research to the market place, the REEC will have four objectives:

• Serve as an information resource center for the general public, researchers, business and policy groups interested in energy efficiency
• Foster the application of energy efficiency technologies by facilitating demonstrations, showcasing products, development, outreach and educational activities
• Catalyze energy efficiency market transformation and business growth and development in the country
• Encourage and facilitate research and interdisciplinary collaboration on energy efficiency solutions, with each of the proposed five EERCs focusing on one of the following end-use technologies: (i) Efficient lighting, (ii) Efficient motors and motor drives, (iii) Efficient HVAC systems, (iv) Efficient buildings and home appliances and (v) Efficient water pumping in agriculture

REEC - Impacts and Benefits
The State Government of Karnataka in collaboration with the Ministry of Power and in technical partnership with USAID/India plans to establish a Lights Museum and Energy Centre for end users (LIMEC) at Bangalore. The LIMEC will serve the function of a Regional Energy Efficiency Center and will enhance awareness on demand-side management and end-users. It is also intended to promote illumination technology cooperation and transfer, facilitate lighting technology information sourcing, develop human resources and catalyze policy changes. Other likely parties to the partnership are the Karnataka Power Transmission Corporation Ltd. (KPTCL), the Association of Electrical Lighting Manufacturers in India (ELCOMA) and the Bureau of Energy Efficiency (BEE).

Conclusions
Energy efficiency as a strategic option to advance national energy security is a matter of highest importance. In the Indian context, over the years there has been marked progress in the institutionalization of energy efficiency programs and activities among industries, utilities as well as in the framing of national legislation on energy conservation. These policy/regulatory and institutional developments can now serve as the foundation and launch the accelerated thrust in energy efficiency aimed at triggering markets and promoting business transformation. To this end, energy efficiency centers of excellence could play a catalytic role in promoting public education in addition to its primary role of serving as an energy efficiency technology and business incubator.

An energy conservation center at the regional level will have the prime function of ensuring the proper implementation and monitoring of energy efficiency programs adopted by the government. International experience has shown that such a center operates more effectively as an independent, unbiased body under an autonomously managed structure. The center should preferably function with direct industry participation and besides its prime function, its activities could include conducting awareness campaigns, facilitate sourcing technology information, showcasing energy efficiency technologies, promoting technology cooperation and transfer, and organizing audits.

There is considerable evidence that a regional energy conservation center is useful in supporting a national energy efficiency program by mobilizing existing private and public institutions to provide the information and technical expertise needed by energy consumers.

1. Jayant Sathaye, et al and S.Padmanaban (2006), Implementing End-use Efficiency Improvements in India: Drawing from Experience in the US and other countries .Presented at the US-India Energy Efficiency Technology Cooperation Conference, May 2-3, 2006, New Delhi
2. There are two ways of increasing the efficiency of electricity use - 1) using energy efficient technologies to permanently reduce peak demand; and 2) creating mechanisms that allow electricity customers to occasionally reduce electricity usage for short time periods in response to signals from system operators either for economic purposes or grid safety purposes
3. Sathaye J., J. Roy, R. Khaddaria and S. Das, (2005) Reducing Electricity Deficit through Energy Efficiency in India: An Evaluation of Macroeconomic Benefits Accepted for presentation at the Fifteenth International Input-Output Conference held from June 27 to July 1, 2005 at Renmin University, Beijing, China
4. Phadke A., Sathaye J. and Padmanaban S. (2005) Economic benefits of Reducing Maharashtra’s electricity shortage through end-use efficiency improvement. LBNL Report 57053
5. S. Padmanaban (2005), Advancing Energy Security: Triggering Markets for Energy Efficiency in Ind. Presented at the All India Seminar on Energy Smart, ECM Mission, Hyderabad, October 26-27, 2005

Courtesy: S.Padmanaban, Sr. Energy & Environment Advisor, USAID
Email: SPadmanaban@usaid.gov
Phone: 011-24198658