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Editorial Articles

volume - 39, 28 December 2019 - 03 January 2020

Energy Conservation in India

Sushil Chandra Tripathi & Lydia Powell

Energy conservation may be defined broadly as the efficient use of energy. It may be achieved by using less energy to generate a given amount of work or by avoiding the use of energy (for example by using insulation in buildings to avoid energy for heating and cooling).  Globally energy conservation has tremendous potential to boost economic growth and avoid Greenhouse Gas (GHG) emissions.  India embarked on implementing energy conservation measures more than two decades ago and has since established a clear policy architecture for promoting energy conservation. Many of its initiatives have resulted in substantial energy saving and consequently lowered carbon di oxide (CO2) emissions. 

Energy Conservation in India

India's energy consumption of about 916 million tonnes of oil equivalent (mtoe) in 2018 is expected to double by 2040 if policies in place currently are implemented.  Though China will remain the world's largest energy consumer for the foreseeable future, India is likely to be the largest source of energy demand growth in the next two decades adding 378 mtoe to energy demand. In 2018 India, China, and the United States accounted for 70 percent of the total energy demand growth of 2.3 percent.  Growth in energy demand would also mean that India's CO2 emissions will increase from 2.3 giga tonnes (Gt) per year currently to over 4.8 Gt in 2050 with 3.3 Gt per year coming from coal use alone.

It has been estimated that nearly 25,000 MW can be saved by implementing end-use energy efficiency and demand side management measures throughout India. Efficient use of energy and its conservation assumes even greater importance in view of the fact that one unit of energy saved at the consumption level reduces the need for fresh capacity creation by 2 times to 2.5 times. Further, such saving through efficient use of energy can be achieved at less than one-fifth the cost of fresh capacity creation. Energy efficiency would, therefore, significantly supplement India's efforts to meet power requirement, apart from reducing fossil fuel consumption.

The Energy Conservation Act

India enacted the Energy Conservation (EC) Act in 2001. The Act provides the regulatory mandate for standards & labelling of equipment and appliances; energy conservation building codes for commercial buildings; and energy consumption norms for energy intensive industries. The Act also directs states to designate agencies for the implementation of the Act and for promotion of energy efficiency. The Bureau of Energy Efficiency (BEE) was established under the EC Act in 2002 under the EC Act.  The mission of the BEE is to assist in developing policies and strategies with a thrust on self-regulation and market principles, within the overall framework of the Act with the primary objective of reducing energy intensity (conservation of energy) of the Indian economy.The Ministry of Power, through the BEE has initiated a number of energy efficiency initiatives in the areas of household lighting, commercial buildings, standards and labelling of appliances, demand side management in agriculture/ municipalities, Small and medium enterprises (SMEs)  and large industries including the initiation of the process for development of energy consumption norms for industrial sub sectors.

The Government in consultation with the BEE has notified the Perform, Achieve and Trade (PAT) scheme under National Mission for Enhanced Energy Efficiency (NMEEE). NMEEE is one of India's eight missions under the National Action Plan on Climate Change (NAPCC). NMEEE aims to strengthen the market for energy efficiency by creating conducive regulatory and policy regime and has envisaged fostering innovative and sustainable business models to the energy efficiency sector. The NMEEE has four key initiatives underlined below:

The Perform Achieve and Trade Scheme (PAT) is a market based mechanism to enhance the cost effectiveness in improving the energy efficiency in energy intensive industries through certification of energy saving which can be traded. More than 400 entities in eight energy intensive sectors (aluminium, cement, chlor-alkali, fertilizer, iron & steel, paper & pulp, thermal power, textile) were mandated to reduce their specific energy consumption (SEC) i.e. energy used per unit of production under the first cycle of the programme. Under this cycle of PAT energy saving of almost 1.25 per cent of India's primary energy consumption equivalent to 8.67 mtoe was achieved.  Greater savings are expected in the second cycle that would cover larger number of industries. 

The Market Transformation for Energy Efficiency (MTEE) aims to accelerate the shift to energy efficient appliances in designated sectors through innovative measures to make the products more affordable. Under MTEE, two programmes have been developed i.e. Bachat Lamp Yojana (BLY) and Super-Efficient Equipment Programme (SEEP). The BLY is a public-private partnership program comprising of BEE, distribution companies (discoms) and private investors to accelerate market transformation in energy efficient lighting.  Under BLY a working in candescent bulb is exchanged at a small cost of Rs. 15 (a CFL costs Rs. 100) with a CFL by the distribution company, which gets carbon credit for its programme. Replacement of over 29 million in candescent bulbs under BLY helped energy saving of more than 14 million kilowhatt hour (kWh) per day. It also facilitated avoiding peak demand of 1,326 Mega Watt (MW) and resulted in Rs. 55.6 million in cost savings per day as well as a reduction of 28,839 tonnes of CO2 emissions.  The BLY scheme relaunched as Unnat Jyoti by Affordable LEDs for all (UJALA) has resulted in 55.7 million kWh of energy savings and reduced CO2 emissions by over 45,000 tonnes. The Super Efficient Equipment Programme (SEEP) under MTEE is designed to bring accelerated market transformation for super-efficient appliances by providing financial stimulus innovatively at critical point/s of intervention.  Under this program, the ceiling fan has been identified as the first appliance to adopted. SEEP for ceiling fans aims to leapfrog to an efficiency level which will be about 50 percent more efficient than market average by providing a time bound incentive to fan manufacturers to manufacture super-efficient (SE) fans and sell the same at a discounted price. 

The Energy Efficiency Financing Platform (EEFP) aims to create mechanisms that would help finance demand side management programmes in all sectors by capturing future energy savings. Under EEFP MoUs have been signed with financial institutions to work together for the development of energy efficiency market and for the identification of issues related to this market development.

The Frame work for Energy Efficient Economic Development (FEEED) develops fiscal instruments to promote energy efficiency. Under this initiative two funds have been created viz. Partial Risk Guarantee Fund for Energy Efficiency (PRGFEE) and Venture Capital Fund for Energy Efficiency (VCFEE).  The PRGFEE is a risk sharing mechanism to provide commercial banks with a partial coverage of risk involved in extending loans for energy efficiency projects.  The VCFEE is a fund to provide equity capital for energy efficiency projects.

Energy Conservation Building Code

Rapid increase in residential building stock, coupled with increase in electricity use for space cooling and heating is resulting in rapid increase in electricity use in residential buildings. Projection done by NITI Aayog indicates that electricity consumption for the residential sector is expected to increase 6-13 times by 2047. Electricity used for cooling and heating by houses and other buildings contributes 30-60 percent of the annual electricity consumption in India. Providing good insulation and ventilation in buildings will reduce electricity consumption which would in turn reduce CO2 emissions. In 2018 the government launched Eco-Niwas Samhita-I which is an Energy Conservation Building Code for residential buildings. The code aims to promote design and construction of homes including apartments and townships to give the benefits of energy efficiency to the occupants. It sets minimum performance standards to limit heat gains (for cooling dominated climates) and to limit heat loss (for heating dominated climate) and also to ensure adequate natural ventilation and day lighting in buildings. The code is applicable to all residential use building projects on plot area of above 500 m2. The code has been developed with special consideration for its adoption by the Urban Local Bodies (ULBs) into building bye laws.  In the subsequent years, new components are expected to be added to the Eco-Niwas Samhita II, which would address other aspects such as, energy efficiency in electro-mechanical equipment for building operation, renewable energy generation, embodied energy of walling materials and structural systems. An "Energy Efficiency Label for Residential Buildings "programme was also launched in February 2019. The objective of the programme is to make a transparent instrument over the energy performance of a home that is expected to gradually lead to an effective model taken into consideration while deciding over the home prices in future. This is expected to ensure that energy performance of a home an instrument of comparison while deciding over the home prices in the future. It also aims to provide a benchmark to compare one house over the other on the energy efficiency and conservation standards to create a consumer-driven market transformation solution for energy efficiency in the housing sector.

The Standards and Labelling Initiative

The BEE initiated the Standards and Labelling programme for equipment and appliances in 2006 to provide the consumer an informed choice about the energy saving and thereby the cost saving potential of the relevant marketed product. The scheme is invoked for 19 equipment and appliance including household appliances such as lights, fans, air conditioners and pump sets and refrigerators.  The energy efficiency labelling programmes under BEE are intended to reduce the energy consumption of appliance without diminishing the services it provides to consumers. Further, the standards and label for refrigerators and air-conditioners have been periodically made more stringent. As a result, the least-efficient products are removed from the market and more efficient products are introduced. The Corporate Average Fuel Consumption Standards (CAFC) for passenger cars has been notified on 30th January, 2014. The most recent additions to the list of labelled products are diesel pump-sets & diesel generators. Energy labels prescribed by BEE are used as standalone method to increase energy conservation or complement energy standards. In addition to giving information that allows consumers who care to select efficient models, BEE has prescribed labels to provide a common energy-efficiency benchmark that to work in association with other policy measures such as procurement programs, financial incentives to increase energy conservation. Under this programme the equipment maker provides information related to energy efficiency of the product on the label as prescribed in the respective product regulation, statutory order and/or schedule issued by the BEE. A star rating, ranging from 1 to 5 in the ascending order of energy efficiency is provided to products registered with the BEE.

Demand Side Management (DSM) Schemes

In order to tap the energy saving potential, Agriculture Demand Side Management (AgDSM) program was initiated by BEE with the objective to induce energy efficiency in agriculture sector by creating market based frame work for implementation of few pilot projects and create awareness among end users & other stakeholders for adoption of Energy Efficient Pump sets (EEPS). Identifying the immense energy saving potential in municipal sector, BEE initiated Municipal Demand Side Management (MuDSM). The basic objective of the project was to improve the overall energy efficiency of the ULBs, which could lead to substantial savings in the electricity consumption, thereby resulting in cost reduction/savings for the ULBs. Implementation of the project will create a market transformation among technology provider, implementing partners and financial institutions.

Global Effort towards Energy Conservation

According to a new report from the International Energy Agency (IEA) the global rate of progress in reducing energy use through efficiency measures is slowing - a trend that has major implications for consumers, businesses and the environment.  According to the IEA report, global primary energy intensity (energy use per unit of Gross Domestic Product [GDP]), an important indicator of how efficiently the world's economic activity uses energy, improved by just 1.2 percent in 2018, the slowest rate since the start of this decade.  The rate of improvement has declined for three years in a row, leaving it well below the 3 percent minimum that IEA analysis shows is central to achieving global climate and energy goals. If the rate had reached 3 percent over the last decade, the world could have generated a further $2.6 trillion of economic output - close to the size of the entire French economy - for the same amount of energy.  Among reasons for the slowdown in energy conservation are a mixture of social and economic trends, combined with some specific factors such as extreme weather. At the same time, policy measures and investment are failing to keep pace with the rising energy demand. 

The new report includes a special focus on the ways in which digitalisation is transforming energy efficiency and increasing its value. By multiplying the interconnections among buildings, appliances, equipment and transport systems, digitalisation is providing energy efficiency gains beyond what was possible when these areas remained largely disconnected. While efficiency in these areas has always had benefits for energy systems, digitalisation enables these benefits to be measured and valued more quickly and more accurately. The report points out that while digital technologies could benefit all sectors and end uses of energy, uncertainty remains over the scale of those benefits. Much will depend on how policies are designed to respond to the huge opportunities - and to the emerging challenges, most notably the risk of increased energy demand from the mushrooming use of digital devices.

Since 2015, annual technical efficiency gains in the transport sector averaged over 1 percent of final transport energy demand. However, this gain has been offset primarily by users' purchasing decisions and behaviour. For example, while passenger vehicles available in most markets are some of the most technically efficient in history, people are using more energy-intensive modes of transport, buying larger vehicles and travelling with fewer people per vehicle, slowing the rate of efficiency improvement. Since 2015, these structural impacts have led to additional annual increases in energy use equivalent to over 0.5 percent of total transport final demand.

A shift to more energy-intensive transport modes, an appetite for larger cars, and lower vehicle occupancy all mean that despite improvements in the technical efficiency of motor vehicles, passenger transport remains an energy-intensive sector of the economy. While technical efficiency has been improving at a faster rate in recent years, it is not increasing as fast as it could because the global vehicle fleet is ageing, as people are holding on to their cars and vans longer. Another factor affecting technical efficiency in recent years has been the shift away from diesel vehicles, which are mostly being replaced with petrol vehicles.


The largest improvements in energy conservation in the next two decades are projected to take place in China, India and the European Union. In India implementation of more stringent policies such as the PAT scheme and efficiency standards for vehicles are expected to make a substantial contribution.  Energy conservation offers benefits at different levels of the economy.  At the individual level there is improvement in health observed as a result of improved heating and cooling of buildings and air quality from more efficient transport and power generation and less demand for both. As energy demand and bills are reduced for the poor and these households gain the ability to acquire more and better energy services, and also free up income to spend on satisfying other critical needs. At the enterprise level, as electricity utilities (discoms) improve their supply-side efficiency, they can provide more electricity to more house holds, thereby supporting increased access initiatives. Benefits for industrial firms from improvements in energy efficiency improvements include reductions in resource use and pollution, improved production and capacity utilisation, and less operation and maintenance, which leads to improved productivity and competitiveness. At the national level investment in energy efficiency and the increased disposable income can lead to direct and indirect job creation in energy and other sectors. This makes energy efficiency an important part of governments in green growth strategies. The public budgetary position can be improved through lower expenditures on energy.  In addition energy consumption subsidies in India can be reduced which means lowered government budgetary outlays to finance these subsidies.

Energy efficiency can have positive macro economic impacts, including increases in GDP, and the cumulative benefits of the above mentioned impacts of improved trade balance for energy importing countries such as India, national competitiveness, and employment support. At the international level GHG emissions are reduced when energy efficiency improvements reduce demand for fossil fuel energy. If energy demand is reduced significantly across several markets, energy prices can be reduced, particularly relative to the impact of the counter-factual of increased energy demand. Improvements in energy efficiency leading to reduced demand for energy can also improve energy security across the four dimensions of risk: fuel availability (geological), accessibility (geopolitical), affordability (economic) and acceptability (environmental and social) for India and other countries.

Sushil Chandra Tripathi is Former Secretary, Ministry of Petroleum and Natural Gas, Lydia Powell is Sr. Fellow at Observer Research Foundation (ORF)

Views expressed are personal.

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