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Analysis | January 2013

A MW saved is a MW generated

Creating an enabling environment for improved energy efficiency in street lighting
 
India has one of the largest electricity systems in the world with a generation capacity of 205
GW. Thermal energy driven systems constitute 67 per cent of the installed capacity followed by other sources (Figure 1).  Problems in land acquisition, obtaining financing for new power projects, low recoveries by the distribution companies, unviable tariffs, severe shortages of high grade coal as well as the environmental impact both in extraction and burning coal create formidable challenges in meeting our energy needs and in providing adequate electricity of desired quality in a sustainable manner. 

Recent CEA statistics show that the country had an energy shortage of 8.5 per cent and a peak shortage of 11.10 per cent during April'11-March'12 persistent electricity shortages have been identified as a key bottleneck for sustaining India's growth rate as all consumers across the country face scheduled and unscheduled load shedding and even blackouts.  
 
Indian Grid Failure, July, 2012   

The July'12 blackout in Northern India was the largest power outage in history, occurring as two separate events on 30 and 31 July 2012. The outage affected over 620 million people, about 9 per cent of the world population or half of India's population, spread ac­­ross states in North, East, and Northeast India. An estimated 48 GW of consumer load was affected in this black out. The ministry of power constituted an enquiry committee, to analyse the causes of these disturbances and to suggest measures to avoid recurrence of such disturbances in the future. Multiple outages of transmission lines, overdrawal by utilities, inadequate coordination between State and Regional Load Dispatch Centres and over loading on a major interregional transmission line have been identified as some of the major factors contributing to this massive blackout. Supply side measures like generation, transmission and distribution capacity augmentation alone cannot be expected to overcome these challenges as they are not only too expensive, but they also do not address the inefficiencies in consumption that led to the collapse and hence, energy efficiency and conservation should be extensively promoted to complement the planned capacity enhancements.

Need for Energy Efficiency and Conservation  
A recent study by the National Productivity Council (NPC) estimates that the energy use in the agricultural sector has significant potential for improvement with almost 30 per cent savings resulting from energy efficient pumping operations. Other sectors like municipalities, domestic households, and industries show 20 per cent potential. The commercial building segment has about 7 per cent potential for energy savings.

Several studies have conclusively proved that investments in energy efficiency  measures are often more cost effective and socially beneficial than increasing the power supply or transmission capacity. One tool that has proved effective in many countries for delivering energy efficiency is demand-side management, or DSM, which is considered as a key strategy capable of offering unique opportunities to implement energy efficiency and bridge the demand supply gap in the country.
 
Demand Side Management (DSM)  
Methodology and Framework

DSM is a mechanism in which a utility or other state-designated entity promotes energy efficiency through targeted educational or incentive programs whose effects are measured quantitatively. DSM is the selection, planning, and implementation of measures intended to have an influence on the demand or customer-side of the electric meter. DSM programs can reduce energy costs for utilities and customers and in the long term, reduce the requirement for further capacity augmentation and strengthening of transmission and distribution systems. Some of the commonly adopted techniques for the design and implementation of DSM measures are summarised in the following sections.
  1. Load survey, research and profiling: this step involves questionnaire based surveys and other tools/techniques to study the consumption pattern of the consumers by a utility
  2. Load Management Strategies: these strategies help electricity utilities to modify customer load profiles and thereby reduce their peak demands. They include:
  • Dynamic/Real Time Pricing: based on real time system of supply and demand.
  • Time-of-Use Rates: customers are offered different rates for electricity usage at different times of the day.
  • Advanced Smart Metering: this allows for online communication, accurate measurements, local intelligence, load connect-disconnect facility and a consumer friendly display unit.  
  • Web-based/Communication System: this is a tool used along with the above to convey to the customer information on the prevailing demand, supply, prices on a real time basis and the incentives and options for him. This information can be used by the customer to manage the demand.
  1. Direct installation of energy efficient packages: These programs provide complete services to design, finance, and install a package of energy efficient technologies/equipment/measures. To tap these potential opportunities, the Government has provided the sector with various policy and regulatory incentives, which have created a favourable environment for investments in the DSM sector.
 
Policy framework for DSM
The Government of India has recently approved the establishment of the National Mission on Enhanced Energy Efficiency (NMEEE) as one of the eight missions under the National Action Plan on Climate Change. This mission outlines four new initiatives to promote the energy efficiency industry in India:

  • A market based mechanism, called Perform Achieve and Trade (PAT), to enhance cost effectiveness of energy efficient initiatives in energy intensive large industries and facilities through certification of energy savings that could be traded.
  • Accelerating shift to energy efficient appliances in designated sectors - Market transformation of energy efficiency (MTEE)
  • Creating innovative mechanisms to finance energy efficiency and DSM projects through energy savings - Energy efficiency financing platform (EEFP)
  • Developing fiscal instruments to promote energy efficiency - Framework for energy efficient economic development (FEEED)
 
Institutional framework for DSM

Under the provisions of the Energy Conser­vation (EC)Act 2001, the Bureau of Energy Efficiency (BEE) was established in March 2002 with a mission to develop programs and strategies based on self-regulation and market principles to improve energy efficiency in consumption across sectors of  the Indian economy. BEE works closely with State Designated Agencies (SDAs) at the state level to deliver energy efficiency services including DSM. The SDAs coordinate, regulate and enforce the provisions of the EC Act in the respective states. The nodal agencies at the state level are responsible for spearheading DSM efforts to identify and oversee demand reduction programs, including those mandated by BEE.  The major schemes/programmes focusing on DSM are:

  • Utility based Demand side Management  
  • Agriculture Demand Side Management (Ag DSM)
  • Municipal Demand Side Management (Mu DSM)
In their report on 'DSM & Energy Efficiency', the Forum of Regulators suggested the establishment of DSM Cells within the utilities to plan, design and implement DSM initiatives. To further enhance the institutional set up for implementing DSM measures, 'Energy Efficiency Services Limited (EESL)' was established as a joint venture company promoted by four Central Public Sector Undertakings of the Ministry of Power, namely NTPC, PGCIL, PFC and REC. It acts as the implementing arm of BEE focused to play the role of assisting and facilitating the DSM cells, private Energy Services Companies (ESCO's) and other companies to promote and implement energy efficiency/DSM measures.
 
During the XI plan, 22 states have constituted 'State Energy Conservation Funds' (SECF) as mandated under the Energy Conservation Act, 2001. BEE has released substantial funds to 21 states to operationalise the SECF for various energy efficiency initiatives. The state governments of Andhra Pradesh, Rajasthan, Chhattisgarh, Karnataka, Haryana, Gujarat and Mizoram have contributed a matching grant to the SECF. This fund can be utilised for developing and implementing DSM programs in the state. 

In addition, over the years, through BEE, the Government of India has undertaken a variety of programmes across the country for promoting DSM. At the state level, BEE co-ordinates with designated consumers, designated agencies (SDA) and other organisations to identify and utilise the existing resources and infrastructure, in performing the functions assigned to it under the Energy Conservation Act, 2001. 

Having discussed the broad parameters of DSM and its implementation in the country, we now turn its application to the municipal street lighting segment in the country and discuss the opportunities and potential for energy conservation.  
 
Energy profile in municipal street lighting
There are about 4,000 municipalities in India providing civic infrastructure and public services. They spend a large percentage of their revenue on purchasing energy for providing local public services; street lighting, water supply and waste treatment account for the major chunk of the energy demand of municipalities.  The financial condition of the bulk of these municipalities is poor and most of them are defaulters of the electricity distribution companies. The situation is so severe that State Governments have for long been deducting a portion of the grants/allocations paid to municipalities and transferring directly to the energy department. Hence savings in consumption through planning, implementation and management of energy efficient street lighting systems would make a significant impact on the finances of the ULBs.  

Several studies in the past have attempted to estimate the scale of energy consumption by municipal corporations/ULBs in India for operating the public lighting infrastructure. The National Productivity Council in 2009 published a study, which has analysed the findings of various pilot projects and held consultations with key stakeholders, indicating 25 per cent energy saving potential in the public lighting sector of the country. 

The most recent estimate of the scale of energy consumption in public lighting is derived from the report prepared by Power Finance Corporation for assessing the performance of state owned power utilities in the country. As per this report, the total energy consumption in the public lighting sub sector for the year 2009-10 is around 7.2 billion units. Considering 25 per cent as the energy saving potential, which is indicated by NPC, the scale of energy savings is around 1.8 billion units.  Table 2 below presents the state wise energy consumption (public lighting) for 2009-10: Andhra Pradesh tops the table with almost 26 per cent of the total consumption in the country. The states of Maharashtra, AP, UP, Karnataka, TN, MP, Rajasthan, West Bengal, Gujarat and Punjab rank among the top ten states with high energy saving potential.
 
In a second study, its draft 18th electric power survey, the CEA has attempted to forecast the energy consumption in the Indian public lighting sector with 2009-10 as the base year.  According to these forecasts, public lighting sector will consume about 8478 MU in 2012-13 and grows at CAGR of 7 per cent during the XII and XIII plan periods.
 
Opportunities for energy efficiency improvements in street lighting
Street lighting typically accounts for 10-38 per cent of municipalities' energy bill in the country. In India, the majority of street lighting is very poorly designed and operated and maintained very inefficiently. As a result, the energy consumption for street lighting in India is very high. Planning, implementing and managing energy efficient systems in municipal street lighting can save substantial energy reducing costs and simultaneously improving service. In the last few years, technological advancements in lighting have led to the development of energy-efficient lighting systems that consist of one or more of the following components:

  • Electronic ballasts
  • Energy-efficient lamp technologies  
  • Energy efficient luminaire designs
  • Better monitoring and control mechanisms  
  • Optimum pole height and placement configurations
Municipal DSM is a tool designed to retrofit existing street lighting systems with all/most of the above components by leveraging private capital and innovative business models. Globally, energy saving companies have demonstrated benefits through Mu DSM. However, the key to success of many projects worldwide has been an enabling environment created to  
overcome the challenges faced by the stakeholders in this segment.  
 
Barriers preventing use of efficient lighting systems
Experience from pilot projects on energy efficient street lighting retrofit projects initiated by BEE and several other ULBs in the country has highlighted several challenges. Lack of policy, financing, institutional capabilities, and uncertainty in the nature and quantum of savings constitute the crux of the problems faced by ULBs.  The following section lists out some of the major barriers under each of these categories to demonstrate the scale of current challenges.  
 
Lack of policy
Street lighting is generally considered a service rather than infrastructure by the government. The service segment does not enjoy the fiscal incentives of infrastructure facilities defined by the central government. This reduces the financial viability of street lighting initiatives.
There is also an inherent conflict of interest in budget allocation for municipal corporations and ULBs. A lower energy bill generally provides sufficient grounds for state governments to allocate lower budget for municipalities, which strive for higher budget allocations in order to cater to the increasing infrastructure requirements in the cities and towns. Fearing such consequences, many ULBs/municipalities oppose energy efficiency investments.  
 
Poor financial health of ULBs
Funds are key to implementing these projects. Almost all ULBs in India are severely constrained by budgets and struggle to pay their electricity bills. They consequently are challenged in even finding funds for general maintenance and replacements.  The poor financial health of most of the ULBs and questions about their ability to service debt adversely impacts the credit rating of most of the ULBs this limits their ability to raise funds from the market at competitive rates. Moreover, energy efficiency gets lower priority as compared to asset creating projects in health and infrastructure segments.
 
Lack of institutional capabilities
Most of the ULBs in the country lack sufficient expertise to develop projects and structure them appropriately. To address this problem, the BEE has developed guidelines and a manual for developing municipal DSM projects. The absence of energy management cells is another major roadblock for planning and identifying opportunities.
 
Uncertainty in nature and quantum of savings
This uncertainty stems from the significant lack of awareness among ULBs about energy efficiency systems in street lighting and their associated benefits. This is exacerbated by inadequate credible information in the public domain regarding energy efficient systems, technology etc. Data capturing and monitoring systems are essential for clarity on baseline feasibility assessments and raising finances. Absence of such information is creating challenges even for policy makers and nodal agencies for project development at pilot scales that are solely aimed at demonstration of benefits.  
 
Conclusion
DSM is a globally recognised mechanism to tackle rapidly growing electricity demand by utilities. It is environmentally friendly and cost effective. However, there is very little application of this innovative concept in the Indian power sector. 

There is enormous potential for Municipal DSM especially in the public lighting segment. BEE has initiated a national Mu DSM programme in the XI plan and has developed several feasibility studies on sample basis for many ULBs all over the country. In order to overcome the barriers discussed in this paper and create an enabling environment for Mu DSM, BEE has developed guidelines for energy efficiency in street lighting and a manual for development of Mu DSM projects by ULBs. In the XII plan, BEE is looking forward to coordinate with other central departments like JNNURM and Ministry of Urban development for creating an institutional mechanism for Mu DSM and also expand the scope of energy audit studies in various ULBs across the country. BEE is also guiding the state designated agencies to facilitate budget allocations exclusively for Mu DSM while allocating the annual budget for ULBs.

Finally, and perhaps, most important, street lighting projects of ULBs must be given infrastructure status. The fiscal incentives available for urban infrastructure must be extended to street lighting. This will incentivise ULBs to promote energy efficiency in street lighting and plan and implement DSM projects. Infrastructure status will also help in raising private capital as many service providers (ESCOs) may find such projects financially attractive and feasible.  
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