The National Mission on Enhanced Energy Efficiency: A Market Transforming Platform – Really?

Oct 12th, 2011 | By | Category: Advocacy, Biomass, Capacity Development, Energy, Environment, Government Policies, Hydropower, India, Information and Communication, Lessons, M-20 CAMPAIGN, Opinion, Renewable Energy, Solar Energy, Technologies, Wind energy, Youth Speak

Ms.Suman K ASuman K A: The National Mission on Enhanced Energy Efficiency, one of the key missions, of the National Action Plan for Climate Change has at its core – unlocking staggering INR 74,000 crore energy efficiency opportunities, reducing annual fuel savings by 23 mtoe, avoiding energy capacity addition worth 19000 MW, and achieving 98 million tCO2-e emission reductions by 2015. A very ambitious execution plan having 4 pillars namely – Perform , Achieve and Trade (PAT )Mechanism ,  Energy Efficiency Financing Platform (EEFP) ,Market Transformation for Energy Efficiency (MTEE), and Framework for Energy Efficient  Economic Development (FEEED )  under the leadership of Bureau of Energy Efficiency was drafted, stakeholder consulted  and set into motion to achieve the mission’s goals.

Laudable, pioneering as they are, we think the mission could have spent a bit more attention to reducing the complexity and increasing the operational ease of the initiatives across the four pillars.

And how?

1)      PAT Scheme: The market based scheme is meant to improve the energy efficiency in the energy intensive sectors namely – Power, Aluminium, Cement, Pulp and Paper, Iron and Steel, Chlor- Alkali, Fertilizer, Textiles and Railways.  The methodology is broadly to set a unit specific energy consumption target reduction based on sectoral targets, SEC to the best in class ratio and unit specific diversities. The SEC measurement and verification would be by BEE through designated verifiers. The complexity lays herein – the SEC and unit’s usage, the unit diversities, elaborate verification schemas and players.

On the other hand if the mission had considered having ‘money’ as the primary unit and driven the mission through utilities and through ‘monetary savings’ , at once the mission could have achieved several objectives – incentivized the consumers – be in industrial, commercial or residential to focus on money savings, set the monetary savings into simple credit conversion modes, created a market for energy efficient products and services, paved the way for a simple monetary savings to equivalent credits (say 10 INR saved = 1 credit based on the type of the consumer)  conversion,simplified the ESCerts mechanism delivery through existing stock exchanges and passed on the energy saving benefits to the consumers.

2)      Market Transformation for Energy Efficiency (MTEE): Salient among the initiatives under this banner are the national CDM roadmap to capture energy efficiency savings from agricultural, municipal, commercial buildings, household  lighting, distribution transformers, SME players through demand side management, leveraging bilateral/multilateral funds for CDM  projects preparation, super efficient equipment programmes.

Demand side management through the CDM PoA route as attractive a long tail opportunity as it can be, the time, methodology rigor, monitoring and verification , capacity and to be able to consistently deliver on the emerging standards, quantum of savings and importantly spatial and temporal distribution of the targeted sectoral customers makes the MTEE pillar shaky.

The mission instead could have considered SME cluster based public-private technology and finance transfer mechanisms, leveraged the existing franchisee (utility) and SHG institutional setups to distribute solar pumps, lanterns and efficient transformers (to stimulate the markets for off grid renewable products and energy efficient products) and tied once again the monetary savings to equivalent credits to transform the markets; and perhaps without recourse to complex PoA CDM routes. At the end of the day, the CDM  financial instruments are said to shore up no more than 5% of the project bottom lines, expensive and time intensive to develop and administer in an  uncertain post Kyoto framework and not very well known to benefit the final consumers.

3)      Energy Efficiency Finance Platform (EEFP): Promotion of Energy Service Companies (ESCOs), accreditation agencies, capacity building of banks and financial institutions, repository of bankable projects and detailed project reports, finance facilities through banks at reasonable rates to undertake energy efficiency projects, investment grade audits, EESL creation are among the salient features of this third pillar. If suggestions under pillar one are factored, the case seems straight forward to cut the red tape in ESCOs creation, accreditation , audits and the banks being able to fund energy efficient products purchase, use working capital or other existing bank schemes for technology upgrade or modernization. We think pillars 1 and 3 are complementary.

4)     Framework for Energy Efficient Economic Development (FEEED): The partial risk guarantee fund and venture capital fund for energy efficiency seem steps in the right direction. However, the consideration could have been to stimulate entrepreneurial activity, encourage risk taking by the VC community in the country  with a well supported EE innovation voucher scheme wherein the risk is distributed among the government, investor and the entrepreneur say in a 50, 30 , 20 ratio to address the objectives across all the three pillars above.

A case for public procurement could then have become stronger for the success on the funds.

An ambitious mission and with visionaries at the helm of affairs, one wonders if the pillars are ultimately geared to benefit the consumers! Your guess is as good as mine.

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Author: Suman K A wrote this article for Climate Himalaya’s Youth Leaders Speak Column. An Engineer by training. Suman has great interest in climate change and mountain issues. She is the founder of Change Planet Partners foundation.

Disclaimer: The views expressed in this article are personal and do not necessarily reflect the views of Climate Himalaya Initiative’s team.

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