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Economic and environmental implications of demand-side management options
Energy Policy 39 (2011) 3076–3085
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Economic and environmental implications of demand-side management options Amit Garg a,n, Jyoti Maheshwari b, Diptiranjan Mahapatra c, Satish Kumar d a
Wing 16B, Indian Institute of Management Ahmedabad, Vastrapur, Ahmedabad 380015, India Wing 1A, Indian Institute of Management Ahmedabad, Vastrapur, Ahmedabad 380015, India c Adani Institute of Infrastructure Management, Off SGVP Circle, SG Highway, Ahmedabad 382421, India d USAID ECO-III Project, International Resources Group (IRG), an L-3 Company, AADI Building, Lower Ground Floor, 2 Balbir Saxena Marg, Hauz Khas, New Delhi 110016, India b
a r t i c l e i n f o
a b s t r a c t
Article history: Received 16 September 2010 Accepted 1 February 2011 Available online 20 April 2011
End-use electricity efficiency improvements offer an inexpensive way to reduce power shortages. The present study estimates the potential of demand-side management efficiency improvement targeted at (1) short-term efficiency improvement (agricultural pump rectification) that can provide immediate relief, and (2) long-term efficiency improvement (appliance standards such as AC and refrigerator, new agricultural pump purchase and pump replacement) for Gujarat state in India. The methodology includes the calculation of cost of conserved energy for each technology, which works out to be ( 1.18) US$ cents/kW h for new agriculture pump sets, 1.03 US$ cents/kW h for refrigerators and 5.21 US$ cents/kW h for air conditioners. The price of power varies around 1.13 US$ cents to 12.1 cents/ kW h in Gujarat. The annual energy savings from the selected energy-efficient technologies are approximately 8767 GW h over a period of 10 yr, while the estimated peak power savings are about 1814 MW, large enough to eliminate one-fourth of the state’s electricity shortages. Also, the estimated CO2 emissions savings are about 7715 Giga grams (Gg) from implementation of the selected energy efficiency measures over a period of 10 yr. & 2011 Elsevier Ltd. All rights reserved.
Keywords: Demand-side management Energy efficiency measures CO2 emissions
1. Introduction India’s total power generation installed capacity stands at 162,366 MW (CEA, 2010a). Despite the reforms in power sector, and the large generation capacity, electricity shortages are endemic throughout the country. India’s power deficit in the first quarter of 2010–11 increased to 13.8%, against 12.8% in the same period a year ago, despite around 6% improvement in power supply, according to figures released by the Central Electricity Authority (CEA, 2010a). Shortages of this magnitude can significantly constrain industrial activities, reduce economic growth, and would ultimately force businesses to utilize more expensive back-up generation. Reduced economic output also means that these businesses pay less tax revenue to governments at all levels. Increasing the supply of electricity would require higher investment in generation, and possibly for its transmission and distribution. Improving end-use electricity efficiency can offer a much less expensive alternative for providing the desired
n
Corresponding author. Tel.: +91 79 6632 4952; fax: + 91 79 6632 6896. E-mail addresses: [email protected] (A. Garg), [email protected] (J. Maheshwari), [email protected] (D. Mahapatra), [email protected] (S. Kumar). 0301-4215/$ - see front matter & 2011 Elsevier Ltd. All rights reserved. doi:10.1016/j.enpol.2011.02.009
electricity service (Yang, 2006; Thakur et al., 2006; Reddy and Assenza, 2007). Electricity is central to economic development. Indian power sector is coal dominated, which makes it very greenhouse gas (GHG) emission intensive (Garg and Shukla, 2009; Chikkatur et al., 2009; IEP, 2006; Sathaye et al., 2005; Tongia, 2003). India imports over 70% of its oil and almost half of its natural gas requirements (IEP, 2006). The inability of the electricity grid to supply reliable power has prompted increased use of captive power generation that often uses diesel fuel (Joseph, 2010). In this paper, we focus on efficient demand side measures, specifically use of more efficient home appliances and agricultural pump-sets with the intention of stretching existing electricity supply in Gujarat state, India’s most industrialized state. More efficient use of electricity can reduce the nation’s vulnerability in both the imported fuels and electricity markets. The present paper analyzes the use of energy efficiency measures possibly to meet the electricity shortage in Gujarat state, reduce vulnerability to disruptions in the energy markets, increase economic output which would thereby increase profits and also reduce GHG emissions for Gujarat’s electricity utility company responsible for the generation, transmission, and distribution of electricity in the state—Gujarat Urja Vikas Nigam Limited (GUVNL). Tanatvanit et al. (2004) found that long run
A. Garg et al. / Energy Policy 39 (2011) 3076–3085
average cost in the base case is to increase from 3.10 to 3.22 cents/kW h if target of CO2 emission reduction by 30% is to be achieved in Thailand. Kelly (2006) studied the role of energy efficiency in reducing CO2 emissions and assessed the status of the policies and technologies that could bring such reductions in UK.
2. DSM initiatives in Gujarat The state of Gujarat accounted for 6.5% of India’s GDP and 10% of India’s industrial output for year 2006 (CMIE, 2008). It generates 85% of its electricity requirements by its own state and private sources, and purchases the remaining from central sources. Thermal generation accounts for almost 87% of the in-state generation (CEA, 2008a). In 2006–07, GUVNL’s maximum peak (gross) demand registered was 8538 MW and the total energy shortage was 8381 GW h (WRPC, 2008). Accelerated Power Development and Reform Program (APDRP), funded by Indian Ministry of Finance (MoF), in Gujarat has improved financial viability of State power Utilities, reduced Aggregate Technical and Commercial (AT&C) loss, improved customer satisfaction and increased reliability and quality of power supply. The incentives released by MoF under APDRP for Gujarat state were 48.9 million1 for year 2001–02, US$ 30.6 million for year 2002–03, US$ 76 million for year 2003–04 and US$ 60 million for year 2004–05 (APDRP, 2010). Gujarat has taken many steps towards DSM and energy efficiency improvement. It has sponsored ‘‘Jyoti Gram Yojna’’ in 2005 to make three-phase 24 h power supply available to rural areas. It has established separate feeders for residential and agriculture sector in rural areas. It supplies three-phase, 8 h of continuous and adequate power to agriculture sector and threephase, 24 h of power to rural households. About 30% of agriculture consumers are metered in Gujarat. It promotes microirrigation system, mainly for new agriculture consumers by providing about 50% subsidy. Paschim Gujarat Vij Company Limited (PGVCL) has 35% of agriculture load of its total consumption. It has replaced large transformers with small transformers for agriculture power supply to decrease energy losses. It has installed remote checking system to collect real time data for electricity consumption for all HT and about 30% of LT industrial consumers. Different feeders were re-grouped in smaller load (24 groups of 100 MW instead of 5 groups of 500 MW) to improve management of load-curves. Dakshin Gujarat Vij Company Limited (DGVCL) has about 75% electricity consumption from HT and LT industries and about 80% of the industries running with power factor less than 0.8. So, it has established a group of 5 officers to create awareness about DSM and energy efficiency for its consumers. Uttar Gujarat Vij Company Limited (UGVCL) has installed capacitors in agriculture sector of Mehsana and Gandhinagar district. It has replaced about 64 MW of agriculture load with new efficient pumps. It has started installing new energy efficient (EE) pump sets by replacing the existing inefficient pump sets where 33% cost has to be borne by farmers, 33% by utility and rest as subsidy given by government. Madhya Gujarat Vij Company Limited (MGVCL) has segregated agricultural load by supplying 50 MW power to 13 district wise groups during different time period in a day. It has done metering of transformers supplying electricity to urban areas and currently doing metering of transformers supplying electricity to rural areas. 1 Unless otherwise mentioned Rs. 48.3 Indian Rupees is assumed to be US $1 Dollar.
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Gujarat Urja Vikas Nigam Limited (GUVNL) is reducing LT lines and increasing HT lines every year with 60 substations in Gujarat. It has implemented GIS to optimize load management in Baroda city. It has optimized load management with real time data available online in all utility companies through enterprise resource management. Torrent Power supplies electricity to Ahmedabad, Gandhinagar, and Surat. At company level, it has reduced energy losses by using EE transformers. At consumer level, it creates awareness to use EE pump set in residential and commercial complexes and EE motors in industries.
3. Methodology We assess the use of energy efficiency measures as a way to reduce Gujarat’s electricity shortage. We obtained load shedding data from GUVNL and also used telephone interviews to further calibrate and allocate against customer categories. Technical, economic, and market potential were studied based on the information collected in the first step. The market potential defines the actual penetration level of the technology in the market while economic potential defines the penetration potential at an economic cost of the measure without taking into account various types of market failures. The adjustments to the economic cost and potential values get us closer to the market potential. Fig. 1 describes the GUVNL month wise load profile, which illustrates the severity of electricity shortage throughout the year. Administratively, the State Load Dispatch Center (SLDC) is responsible for scheduling and dispatch of electricity within a state. Load shedding is generally avoided in residential and commercial sectors of large cities. Load is shed one day in a week in HT industries of Gujarat Industrial Development Corporation (GIDC) areas. Generally, majority of the load shedding is being done in rural areas where the load mainly consists of agricultural pumping. Electrical Utilities around the world and specifically in the USA (Sathaye et al., 2006) have been able to save demand and demonstrate the cost-effectiveness of many energy efficiency measures—retrofitting residential and commercial establishments, improving industrial energy efficiency, running load curtailment programs, and promoting use of energy-efficient appliances and equipment by providing incentives to customers. Among the above measures, promoting the use of energy-efficient appliances by linking with a national labeling program has proven to be especially effective because of the relatively low overhead cost of running these state- or utility-wide programs (Phadke et al., 2005). Table 1 represents the details of formulas used to calculate the cost of conserved energy (CCE) and Cost of conserved peak capacity (CCP). The first column alphabetizes the Row parameters and the last column displays the equation. The additional cost of energy-efficient technology (EET) compared to a conventional energy technology (CET) is the incremental capital cost (Row D). The capacity of EET and CET are chosen in such a way that they have the same useful output. The EETs save a certain amount of energy every year over its lifetime. The CCE is obtained by dividing the annualized incremental capital cost for the EET by the energy saved annually as shown in Row O, and the CCP is shown in Row P.
4. Estimating the cost of energy efficiency measures We analyze the use of energy-efficient (EE) refrigerators, and EE air-conditioners in residential and commercial sectors.
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15000 12000
MW
9000 6000 Demand MW
3000
Supply MW
0 April May
June
July
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Month Fig. 1. GUVNL system demand and supply, 2008–09 (Anticipated). . Source: CEA, 2008b
Table 1 Method for calculating the cost of conserved energy (CCE) and capital cost of conserved peak (CCP) capacity. Index
Parameter
A B C D E F G H I J K L M N O P
Usage (h/yr) Equipment life (h) Equipment life (yr) Incremental capital cost (US$) Transaction costs (% of capital cost) Total investment (US$) Discount rate Capital recovery factor (CRF) Annualized capital cost (US$/yr) Load saving while in operation at end user (W) T and D losses Annual energy savings at the bus bar (kW h/yr) Peak coincidence factor Peak load saving at the bus bar (W) Cost of conserved energy (CCE) (US$/kW h) Capital cost of conserved peak capacity (CCP)
Equation
B/A
refrigerator. We assume an incremental cost of 52 $ for an EE, 4-star rated refrigerator. As refrigerators operate continually and cycle throughout the day, the compressor activation rate for Indian refrigerators is 38% (Phadke et al., 2005). The peak coincidence factor for refrigerators is equal to the number of hours (10 h) of power shortage in the day divided by the total working hours (24 h) which worked out to be 0.42. The use of EE refrigerator results in an annual electricity saving of 166 kW h for residential as well as commercial consumers (Table 2).
D (1+ E) G/(1 (1 + G)^( C)) FH
J B/(1 K) J M/(1 K) I/L F/N
While in the agricultural sector, we focus on energy efficiency improvements for agricultural pump sets. 4.1. Residential and commercial sectors We collected sales data, market trends and retail as well as wholesale costs of air conditioners (AC) and refrigerators for year 2007–08 and 2008–09 through in-person and telephonic interviews with authorized dealers and manufacturers in the city of Ahmedabad, Gujarat. We have considered baseline of using 4-star rated2 AC over 2-star rated AC and 4-star rated refrigerator over non-star rated refrigerator. 4.1.1. Energy-efficient refrigerators The average electricity consumption of 190–200 l direct cool, non-star rated refrigerator is about 1.33 kW h/d (approx. 486 kW h/yr), while energy efficient, 4-star rated refrigerator (made by LG) consumes about 0.88 kW h/d (320 kW h/yr), and costs about 20 $–52 $ more depending upon the brand of the 2 Star rating is a system initiated by Bureau of Energy Efficiency (BEE), India, to determine the energy efficiency of appliances. Depending on their energy efficiency, appliances are rated on a scale of 1–5 and indicated by stars for easy understanding. Higher the number of stars better is the energy efficiency of an appliance. For details, see BEE website www.bee-india.nic.in.
4.1.2. Energy-efficient air conditioners The average electricity consumption of non-star rated, 1.5 t of refrigeration (TR) split air conditioner is about 2.512 kW/h while the commercially available energy-efficient 4-star, 3 star, and 2-star rated AC (made by LG) consume about 1.78, 1.88, and 2.024 kW/h and retails for EE split AC is 40 $–207 $ more depending upon the brand and star rating of the conventional split AC. We assume an incremental cost of 124 $ between 4-star and 2-star AC. The compressor activation rate is 70–80% for Indian air-conditioners. Since the air conditioners cycle for 8–12 h in a day except winter season, the peak coincidence factor for AC is taken 0.42. The use of 4-star rated AC over 2-star rated AC results in annual electricity savings of 311 kW h in residential sector and 444 kW h in the commercial sector (Table 2). The estimates of incremental capital cost, efficiency ratio, and assumptions are same for EE refrigerators and EE air conditioners in residential and commercial sectors, but estimates of usage are different in both the sectors. 4.2. Agriculture sector In the agriculture sector, we focused on small (5 hp3) agricultural pump sets (APS). Earlier research shows that about 90% of the pump sets used in farms in India are inefficient leading to wastage of large amount of money, electricity, and oil (Purohit and Michaelowa, 2007; Sant and Dixit, 1996). Several technical reasons for inefficiency include—faulty installation, undersized pipes, high friction foot valves, poor maintenance, and inefficient and poor quality pumps. Thus, there is a scope of improving the APS efficiency by 30–50% by taking corrective measures (GEDA, 2006). We consider three different types of energy efficiency measures for APS—(1) purchasing new EE pump set instead of 3
Unless otherwise mentioned 1 hp is equivalent to 0.746 kW.
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Table 2 Data on selected energy efficiency measures (baseline of 2-star rated AC to 4-star rated AC) in residential and commercial sectors. Measure/technology
Power requirement per unit (W) Measure life (yr) Usage (h/yr) Retail market price (US$/unit) Annual electricity use (kW h/yr) Peak coincidence factor a b
Residential
Commercial
Air conditionersa
Refrigeratorsb
2-star rated AC
4-star rated AC
Non-star rated fridge
2024 10 1260 497 2554 0.42
1785 10 1260 621 2243 0.42
147 15 3300 197 486 0.42
Air conditionersa
Refrigeratorsb
4-star rated fridge
2-star rated AC
4-star rated AC
Non-star rated fridge
4-star rated fridge
97 15 3300 248 320 0.42
2024 10 1800 455 3648 0.42
1785 10 1800 621 3205 0.42
147 15 3300 197 486 0.42
97 15 3300 248 320 0.42
1.5 t capacity of split air conditioner. 200 l capacity of direct cool refrigerator.
Table 3 Data on selected energy efficiency measures for agricultural water pumping. Measure/technology
Power requirement (kW/unit) Load while in operation (kW) Measure life (yr) Usage (h/yr) Retail market price (US$/unit) Peak coincidence factor Annual electricity use (kW h/yr) a b c
New pump purchase
Pump rectification
Pump replacement
Substandard new pump
Efficient new pumpa
Existing pump
Pump after rectificationb
Existing pump
Efficient new pumpc
3.7 (5 hp) 3.0 8 1200 145 0.25 3600
3.7 (5 hp) 2.22 8 1200 269 0.25 2664
3.7 (5 hp) 3.7 8 1200 0 0.25 4440
3.7 (5 hp) 3.33 8 1200 52 0.25 3996
3.7 (5 hp) 3.7 8 1200 21 0.25 4440
3.7 (5 hp) 2.22 8 1200 269 0.25 2664
Efficient new pump purchase saves energy up to 20–30%. Pump rectification saves energy up to 10–15% (replacing the foot valves and pipes of existing pump). Pump replacement saves energy up to 40–50% (replacing 10 hp pump by 5 hp pump).
substandard new pump set (2) rectification of the existing APS by replacing pipes and foot valve and (3) replacement of the existing 10 hp substandard pump with 5 hp standard EE pump.
4.2.1. Purchasing EE new pump instead of substandard new pump As the electricity tariff is low (1.13 cents/kW h) to farmers, the electricity consumption and pump efficiency is generally not considered as a criterion by farmers. Also, dealers have an incentive to sell oversized pumps and as a result, an inappropriate size and type of pump gets selected. Monitoring results of REC’s pilot projects have shown that installing EE new pump set instead of substandard new pump set can save energy up to 20–30% (CIRE, 2008; GEDA, 2006). We assume 26% energy saving for EE new pump sets over substandard new pump sets. For a 5 hp ISI mark pump, a farmer would have to pay an incremental cost of 104 $–145 $ per pump. Use of an efficient pump can decrease electricity consumption by 936 kW h/yr (Table 3 and Fig. 2).
4.2.2. Pump rectification (retrofitting) It was found that in case of most APS, undersized pipes and high friction foot valves are used which increases the frictional losses. Replacing the existing undersized pipes with appropriate size and new rigid low friction pipes and replacing high-friction foot valves with low-friction and low head foot valves can improve efficiency of APS by 10–15% (CIRE, 2008; GEDA, 2006). We assume 10% efficiency improvement by pump rectification. The rectification cost is around 41 $–62 $; it is very sensitive to the length of the piping. We consider the incremental cost of 52 $
for pump rectification. Rectification can decrease electricity consumption by 444 kW h/yr (Table 3 and Fig. 2). 4.2.3. Pump replacement If the efficiency of an existing pump is too low then it is worth replacing it with a new EE one. This low efficiency could be the result of many factors like a substandard quality pump, inappropriate/over sizing, multiple motor rewinding, and older vintage. Efficiency improvements of 40–50% are possible by replacing 10 hp old pump by 5 hp monoblock EE pump (CIRE, 2008) and the incremental capital cost is around 248 $ for new EE 5 hp pump. We assume 40% efficiency improvements by pump replacement. Pump replacement can decrease electricity consumption by 1776 kW h/yr (Table 3 and Fig. 2). Load shedding is extensive in agricultural sector and it seldom gets power during the day. We estimate that 75% of the APS consumption happens during the off-peak period (from 10 pm to 6 am), and only 25% of the consumption is during peak, which results in a peak coincidence factor of 0.25. Table 4 represents data on various maintenance costs and life of the APS. 4.2.4. Micro-irrigation systems (MIS) MIS are modern irrigation systems, which include drip irrigation, sprinkler irrigation, and sub-surface irrigation. MIS provide considerable savings in total water and energy demands from agriculture sector. MIS are however not very prevalent in India at present but Gujarat is among the leading states in this field, although the area covered under drip irrigation is 0.18% with respect to net irrigated area. Gujarat Green Revolutionary
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Existing pump B Rectified pump C Substandard new pump A Efficient new pump 1000
0
2000 3000 kWh/year
4000
5000
Fig. 2. Annual electricity consumption (kW h/yr) by selected energy efficiency measures for agriculture water pumping. Where, A: electricity savings for new pump purchase, B: electricity savings for pump rectification and C: electricity savings for pump replacement.
Table 4 Typical agriculture pump set (5 hp) maintenance cost. Description
Data
Pump rewinding frequency (without voltage fluctuation) Pump rewinding cost Foot valve (from 2.5 to 3 in. pipe diameter) cost 2 in. UPVC pipe cost per feet Pump rectification frequency Pump rectification cost Old pump salvage value Maintenance cost of substandard pumpset Life of substandard pumpset Cost of substandard pumpset Maintenance cost of EE standard pumpset after 4 yr Life of EE standard pumpset Cost of EE standard pumpset
3–4 yr 31 $–51.7 $ 12.4 $–15.5 $ 1.2 $–1.4 $ 3–4 yr 51.7 $–62.1 $ 20.7 $–41.4 $ 51.7 $–62.1 $ Max. 4–5 yr 145 $–155.2 $ 31 $–41.4 $ 8–10 yr 248.4 $–289.8 $
Note: the data listed in above Table 4 are based on our interaction with pump manufacturers, traders and users.
Company (GGRC) is promoting MIS to Gujarat farmers as an implementing agency on behalf of Government of Gujarat and Government of India to bring second green revolution in consonance with the agriculture policy of Gujarat Vision 2010 (GGRC, 2009).
negative. This indicates, from a societal perspective, that it is energy efficient to convert inefficient substandard APS to EE standard APS. These are low-hanging fruits which should be plucked with a net negative cost (positive benefit) to the society.
5. Projecting future mitigation potential Energy savings from the installation of energy efficiency measures will accrue over the lifetime of each measure and we estimate the energy savings (GW h) and peak load reduction (MW) over the next ten years. End-use device purchases may be categorized as (1) replacement of existing devices at the end of their life, and (2) satisfying new consumer demand either from the same consumer purchasing additional devices, or due to the formation of new households and/or businesses. In some cases, conventional end-use devices may not be substituted by EE devices because they may not fit the rest of the system at the installation site, due to technological obstacles, high first cost, or due to market failures. Thus the upper limit on penetration of EE devices will be less than 100%. Assuming that all devices are at their equilibrium level in the base year 2006–07, the annual penetration rate of each device is simply the inverse of its life. The energy saved by each EE technologies is aggregated to arrive at the total energy saved annually.
4.3. Cost of conserved energy
5.1. Projecting future energy savings
Energy efficiency measures results in benefits to the consumer, society, and also to the utility. The benefits to consumers arise from the saved electricity at a cost that is less than the electricity tariff, which is also known as cost of conserved energy (CCE). Electricity savings reduce the probability of load shedding. Residential consumers experience a welfare loss due to power cut, while businesses face loss of production. A typical coal power plant in India costs between 663 $ and 828 $ per kiloWatt (Phadke et al., 2005). While all the energy efficiency measures cost much less than that even after including transaction cost and high purchase price of the EE technology (Tables 5 and 6). Comparing the CCE with the average electricity tariff, the CCE is lower than the tariff for all measures, except APS replacement. Thus, energy efficiency measures are economically attractive from an end-user perspective. A sensitivity analysis was conducted for real discount rate of 8% (Table 5) and 25% (Table 6). The CCE increases as the discount rate increases, since the annualized capital cost of equipments increase with higher discount rates. For 8% societal discount rate (average of 6–10%), the CCE is negative for new pump purchase and pump rectification because the net present values of the maintenance difference and purchase cost difference being
New devices are purchased either to satisfy new consumer demand, or to replace an existing one at the end of its life. We project the future growth rate of end-use devices for each consumer category on the basis of data provided by authorized dealers of AC and refrigerators and secondary data available for APS over the next 10 yr. The different end-use devices have different annual growth rates such as ACs are growing at a higher rate of about 20%, refrigerator at 9%, and APS at 5%. The assumptions for growth rate are consistent with historical patterns of growth of appliances sales and ownership data. Total energy saved by energy efficiency measures each year is estimated in the following manner:
Annual energy savings for an end use¼ consumption of con
ventional stock that is to be replaced by an EET percentage energy savings. Consumption of conventional stock that is to be replaced by an EET ¼cumulative annual consumption of the CET that is to be replaced by an EET. Consumption of a CET replaced by an EET every year¼ consumption of new appliances every year percentage of EE appliances sold every year (penetration rate).
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Table 5 Cost of energy efficiency technologies from societal perspective at 8% discount rate. End-use device
Incremental purchase cost**($)
Electricity savings (kW h/yr/unit)
Lifetime (yr)
Discount rate (real) (%)
CCE*** (US$ cents/kW h)
Residential Air conditioners* Refrigerators
93.9 12.3
311 166
10 15
8 8
3.64 0.55
Commercial Air conditioners* Refrigerators
93.9 12.3
444 166
10 15
8 8
3.22 0.55
Agriculture New APS APS rectification APS replacement
55.5 7.7 154.3
936 444 1776
8 8 8
8 8 8
0.38 0.6 1.51
Electricity tariff as on 1/4/2007a (cents/kW h)
9.21 9.21
12.1 12.1
1.13 1.13 1.13
a
CEA, 2007. For air conditioner measure, a 2-star AC is being replaced by a 4-star AC. ** Incremental purchase cost of using a new product instead of old product i s obtained by subtracting the net present value of number of old products replaced over a period of X yr (where X is average life of the new product) from the price of new product. *** The CCE should ideally be compared with the marginal electricity tariff, which would be higher than the average values shown in Tables 5 and 6. *
Table 6 Cost of energy efficiency technologies from individual perspective at 25% discount rate. End-use device
Incremental purchase costc ($)
Electricity savings (kW h/yr/unit)
Lifetime (yr)
Discount rate (real) (%)
CCEd (US$ cents/kW h)
Residential Air conditionersb Refrigerators
107.6 31.7
311 166
10 15
25 25
10.2 5.2
Commercial Air conditionersb Refrigerators
107.6 31.7
444 166
10 15
25 25
7.2 5.2
Agriculture New APS APS rectification APS replacement
17.1 21.8 198.7
936 444 1776
8 8 8
25 25 25
0.57 1.57 3.56
Electricity tariff as on 1/4/2007a (cents/kW h)
9.21 9.21 12.1 12.1 1.13 1.13 1.13
a
CEA, 2007. For air conditioner measure, a 2-star AC is being replaced by a 4-star AC. c Incremental purchase cost of using a new product instead of old product is obtained by subtracting the net present value of number of old products replaced over a period of X yr (where, X is average life of the new product) from the price of new product. d The CCE should ideally be compared with the marginal electricity tariff, which would be higher than the average values shown in Tables 5 and 6. b
Peak energy savings¼load saving while in operation at end user (W) peak coincidence factor/(1-AT&C losses). 5.1.1. Estimation of the penetration rate of energy-efficient technologies (EETs) The maximum market saturation level (%) and the time required to reach this level critically depends on the cost-effectiveness of EETs relative to the electricity tariff and the government policies used to promote their penetration. The saturation level will be higher and the penetration time will be faster for EETs having lower CCE. Table 7 shows the base year penetration rate, saturation penetration rate, and the time required to reach the saturation level for different EETs. The base year penetration rate is based on our understanding of the current popularity of EETs and from market surveys. In the agriculture sector, 90% of the pumps are inefficient and hence it is cost-effective to either replace or rectify them (GEDA, 2006). We assume that about 50% of the current stock of the pumps will be replaced over a period of 4 yr. Following the above procedure, we estimate the energy savings that can be achieved each year (Table 8).
The peak power saved by an EET is the product of load saving when the EET is in use and peak coincidence factor. For each EET, we have already estimated the annual energy savings (see Tables 5 and 6). The total peak load savings¼(expected peak power saved per unit of EET/annual energy savings per unit of EET) total energy savings achieved by that EET. The estimated savings are about 973 MW (Table 9) from the implementation of the selected energy efficiency measures (baseline of using 4-star rated ACs over 2-star rated ACs) in the ninth year. Tables 8 and 9 show that substantial energy (GW h) and capacity (MW) can be saved relatively quickly. The current level of shortages can be completely removed within a few years depending on the policies used to promote energy-efficient technologies. 5.2. Projecting future CO2 emission mitigation We estimate annual CO2 emissions and annual savings in CO2 emission by each energy efficiency measure. The savings in CO2 emission is estimated by multiplying electricity saved by CO2 emission factor per unit of electricity which is 0.88 kg/kW h for western grid (CEA, 2010b) (Table 10).
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Table 7 Penetration rates for selected energy efficiency measures. End-use sector
Residential sector Air conditioners Refrigerators Commercial sector Air conditioners Refrigerators Agricultural sector New APS APS rectification APS replacement
Growth rate (%)
Retirement rate of old appliances (%)
Base-year penetration ratea (%)
Saturation penetration ratec** (%)
Years to reach saturation penetration rate
15 9
10 7
25 15
82 80
6.5 10
23 10
10 7
25 15
82 80
5.5 10
5 5 5
10 10 10
20 10 10
80 80 50
10 10 4
a Base year penetration rate: it is the fraction of newly purchased appliances that are energy-efficient appliances in the base year. In the case of rectification of APS or replacing the highly inefficient pumps, it is the existing stock retrofitted or replaced in the base year. ** Saturation penetration rate: it is the maximum possible percentage of the new appliances purchased that are energy efficient appliances. In the case of rectification of APS or replacing the highly inefficient pumps, it is the maximum possible fraction of the existing stock retrofitted or replaced.
Table 8 Annual energy saved (GW h) by energy efficiency technologies. Year of the program
1
2
End-use sector
GW h saved
Residential sector Air conditioners Refrigerators
8 6
Commercial sector Air conditioners Refrigerators
20 0.7
Agricultural sector New APS APS rectification APS replacement Total (maximum)
51 88 195 230
3
19 43
50 4.8
160 190 421 538
4
38 87
100 9.7
330 309 679 914
5
6
7
8
9
67 142
106 201
151 264
203 331
263 404
331 481
177 15.7
279 22.3
398 29.3
533 36.8
690 44.9
869 53.5
568 445 973 1375
881 599 1306 1914
1242 770 1673 2515
1654 959 2076 3180
2119 1167 2517 3919
2640 1394 2998 4733
6
7
8
9
Table 9 Peak power saved by selected energy efficiency measures. Year of the program End-use sector
1
2
3
4
5
Peak MW saved
Residential sector Air conditioners Refrigerator
1.9 0.8
4.8 5.4
9.6 11.1
17.1 17.9
27.1 25.4
38.5 33.4
51.7 41.9
66.8 51.1
84.2 60.9
Commercial sector Air conditioners Refrigerators
4.5 0.1
11.2 0.6
22.5 1.2
39.9 2.0
63.2 2.8
89.9 3.7
120.7 4.7
156.0 5.7
196.7 6.8
Agricultural sector New APS APS rectification APS replacement Total (maximum)
10.7 18.3 40.7 48
33.2 39.7 87.7 110
68.7 64.4 141.6 186
118.4 92.6 202.8 280
183.6 124.8 272.1 391
258.8 160.5 348.5 514
344.5 199.8 432.5 652
441.4 243.1 524.4 804
549.9 290.4 624.6 973
Base year (2006–07) electricity consumption and CO2 emissions for selected end-use devices are shown in Table 11. The electricity consumption and CO2 emissions are estimated for the total stock of each end-use device in their respective sector for the base year 2006–07.
We estimate savings in Gg of CO2 emissions by each energy efficiency measure from the annul energy saved (see Table 8) over the years. It is estimated by multiplying electricity saved by CO2 emission factor per unit of electricity (0.88 kg/kW h). The estimated CO2 emissions savings are 7714.5 Gg from implementation
A. Garg et al. / Energy Policy 39 (2011) 3076–3085
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Table 10 Annual CO2 emissions and annual savings in CO2 emissions by selected energy efficiency measures. Sr. no.
End-use device
Annual electricity consumption (kW h/yr)
Annual CO2 emissions (kg of CO2/yr)
Residential sector 1 Air conditioner 2 Refrigerator
4015 486
3530 430
394 166
350 150
Commercial sector 3 Air conditioner 4 Refrigerator
4517 486
3970 430
444 166
390 150
Agriculture sector 5 New pump purchase 6 Pump rectification 7 Pump replacement
3600 4440 4440
3170 3910 3910
936 444 1776
820 390 1560
Table 11 Base year (2006–07) electricity consumption and CO2 emissions for selected enduse devices. Sr. no.
End-use device
Base year electricity consumption (GW h/yr)
Base year CO2 emissions (Gg of CO2/yr)
Residential sector 1 Air conditioner 2 Refrigerator
145 122
127.6 107
Commercial sector 3 Air conditioner 4 Refrigerator
379 13.6
334 12
Agriculture 5 6 7 8
sector New pump purchase Pump rectification Pump replacement Existing Old pump
147 220 293 3168
Total annual GHG emissions (kt of CO2/yr)
129 194 258 2787.84 3949
of the selected energy efficiency measures over a period of 10 yr (Table 12).
6. Policy implications From Utilities’ past experiences, it was found that many farmers were not ready to replace their old inefficient pumps even when they had to pay only one third (33%) of the total cost of new efficient pump. We believe that it could possibly be because of a combination of behavioral and economic issue for farmers. So, it would be cost effective for GUVNL to bear the full cost of energy efficiency measures in agriculture sector. For example, in case of pump rectification, the cost of conserved energy is 1.57 cents/kW h (Table 6). One kW h saved in the agricultural sector thus saves 5.94 cents/kW h (average revenue realized by GUVNL per unit), which results in a net cost reduction of 3.22 cents/kW h with agricultural electricity tariff of 1.13 cents/kW h. To tackle the behavioral aspects, we could create awareness in the farmers via ‘‘Gram Panchayats4’’ on benefits of 4 Gram panchayats are local governments at the village or small town level in India. Constitution (73 Amendment) Act, 1992 that came into effect in April 1993 brought about major reform in local governance in India. Although the Panchayats have historically been an integral part of rural life in India, this act institutionalized the Panchayati Raj Institutions (PRIs) at the village, intermediate, and district levels as the third tier of government. For details, see Ministry of Panchayati Raj http://panchayat.nic.in/.
Annual energy savings by EET (kW h/yr)
Annual savings in CO2 emissions (kg of CO2/yr)
adopting and implementing energy efficiency measures in agriculture sector. Also, Utilities may consider buying-back the old pump sets from the farmers at market-driven salvage value, to reduce behavioral barriers. The proportionally high savings per kW h warrant a strong program that includes rebates and even direct replacement/ retrofitting of the existing pump sets. Residential program would target medium and high income households. In most cases medium and high-income consumers purchase non-star or 1 or 2-star rated ACs because 4 and 5-star rated split ACs (1.5 TR) have higher capital cost of about 165.6 $–207 $ than that of non-star rated ones. Further window air conditioners are available with maximum 2-star label in the market. The cost differential between split and window AC of same capacity vary from 165.6 $ to 248.4 $ depending on the brand and star label. A program could be designed in such a way that utility/government provide incentives to AC manufacturers for manufacturing 4- and 5-star rated split and window ACs in bulk and then rebates/discounts be provided to consumers for replacement of old non-star rated ACs with 4- or 5-star rated ones, and also on new purchases for 4- or 5-star rated ACs. Another possibility to reduce the cost of administering such program by Utilities is what is called ‘‘Upstream Marketing’’ where Utilities enter into partnership with vendors and seek substantial discounts on appliances sold under a Utility-sponsored DSM program. This way, the consumers are the final beneficiary in terms of reduced cost of EE appliances and Utilities lower the DSM program cost because they don’t have to provide individual incentives and rebates to customers in their service territory. Refrigerators are available with 3-, 4-, and 5-star labels for various brands in the market. We found from earlier surveys that there was a maximum sale of 4-star rated refrigerators for the year 2008–09. A program could be designed in such a way that utility/government should develop a buy back policy for replacement of old non-star rated refrigerator with 5-star rated refrigerator at rebates of about 82.8 $–124.2 $ to the consumers to cover the price differential. Also, the new purchases should be promoted for 5-star rated refrigerators by providing attractive rebates/discounts. The regulators and Utilities should guard against a phenomenon called the ‘‘Rebound Effect’’ or ‘‘Leakage’’ where inefficient refrigerators become the 2nd refrigerator in affluent households or are sold to poorer sections of the society. Utility-run energy efficiency programs can effectively reduce the price of EETs through their bulk procurement as it can reduce the purchase cost by 30–40% compared to the retail price. Since utilities are in regular contact with consumers for metering, billing, and repairs, can collate information about their consumption patterns, so that they could implement programs at a lower
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Table 12 Annual savings in GHG emission (Gg of CO2 emission) for selected energy efficiency measures. Year of the program
1
End-use sector
Savings in Gg of CO2 emissions
Residential sector Air conditioners Refrigerators
2
3
4
5
6
7
8
9
7.0 5.3
16.7 37.8
33.4 76.6
59.0 125.0
93.3 176.9
132.9 232.3
178.6 291.3
231.4 355.5
291.3 423.3
Commercial sector Air conditioners Refrigerators
17.6 0.6
44.0 4.2
88.0 8.5
155.8 13.8
245.5 19.6
350.2 25.8
469.0 32.4
607.2 39.5
764.7 47.1
Agricultural sector New APS APS rectification APS replacement
44.9 77.4 171.6
140.8 167.2 370.5
290.4 271.9 597.5
499.8 391.6 856.2
775.3 527.1 1149.3
1093.0 677.6 1472.2
1455.5 843.9 1826.9
1864.7 1027.0 2215.0
2323.2 1226.7 2638.2
Total
324.5
781.3
1366.4
2101.2
2987.0
3984.0
5097.7
6340.3
7714.5
cost compared to acquisition of such devices by individual entities. Also, such energy efficiency programs can result in considerable savings in GHG (CO2) emissions which can be initiated as programmatic CDM project.
because of reduced subsidies as a result of lower electricity demand in the residential and agriculture sectors, and resale of electricity to deprived commercial and industrial consumers. It will also be interesting to examine how the direct and indirect magnitude of revenues is going to affect the revenue deficits.
7. Conclusions It can be concluded that the energy efficiency measures studied with regards to refrigerators, air conditioners, and agricultural pump sets are attractive DSM measures in terms of potential electricity savings to conduct energy efficiency programs in Gujarat. However, the use of the saved electricity from selected energy efficiency measures is a policy issue. These savings could be provided as additional power to high-end consumers such as commercial and industrial consumers which would pay higher tariff for this additional power than low-end consumers who provide these savings. Alternatively, the power saved from selected energy efficiency measures could also be supplied to fulfill the social agenda of the government such as providing 1 kW h of electricity per day to every rural household. These consumers would not be able to pay anywhere near the high-end consumers. However, the provision of electricity is an enabling condition for enhancing productivity and income generation. Electricity access, affordability and rural household income levels are linked particularly in relation to lighting. There are studies conducted internationally (World Bank, UNEP, and UNDP) which indicate the enhanced income generation and development of human resources due to increase in electricity consumption at household level. It is also observed that the annual average energy (GW h) saved by the energy efficiency measures in future years could be around 2160 GW h for the next 10-years removing the energy shortages by around 25%. Similarly peak power demand savings would average around 440 MW/yr and could thus save almost 50% of peak demand deficit. Also, this peak power (MW) saved on demand side through energy efficiency measures implies proportionately lower investment to build new power plants on pro-rata basis, even though some new plants would still be required to be built to meet the power shortages. Considerable savings in CO2 emission can be considered through the selected energy efficiency measures as a way ahead to the India’s 2020 target of reducing emission intensity of GDP by 20–25%. Further research is required to understand how the state government could possibly benefit in terms of sales tax revenue
Acknowledgements We acknowledge and thank USAID ECO-III Project for funding IIM, Ahmedabad, to undertake part of this study. We would also like to acknowledge the contributions of Mr. Kailash Mahajan, Dr. Jayant Sathaye and his research team, and Mr. Ranjit Bharvirkar for providing valuable review comments. We thank GUVNL, GERC, PGVCL, MGVCL, DGVCL, UGVCL, GETCO, GEDA, and Alliance to Save Energy officials for providing data and information on Gujarat electricity sector. The authors also acknowledge the regional managers, sales executives, and outlet heads of brands such as LG, Carrier, Voltas, Blue Star, Videocon, Electrolux, Whirlpool, Samsung, and Next retail outlet for providing sales data for air conditioners and refrigerators in Ahmedabad and Gujarat. We also acknowledge all the respondents who provided inputs to our telephone based primary survey on power shortages across the 30 towns and cities in Gujarat.
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Contents lists available at ScienceDirect
Energy Policy journal homepage: www.elsevier.com/locate/enpol
Economic and environmental implications of demand-side management options Amit Garg a,n, Jyoti Maheshwari b, Diptiranjan Mahapatra c, Satish Kumar d a
Wing 16B, Indian Institute of Management Ahmedabad, Vastrapur, Ahmedabad 380015, India Wing 1A, Indian Institute of Management Ahmedabad, Vastrapur, Ahmedabad 380015, India c Adani Institute of Infrastructure Management, Off SGVP Circle, SG Highway, Ahmedabad 382421, India d USAID ECO-III Project, International Resources Group (IRG), an L-3 Company, AADI Building, Lower Ground Floor, 2 Balbir Saxena Marg, Hauz Khas, New Delhi 110016, India b
a r t i c l e i n f o
a b s t r a c t
Article history: Received 16 September 2010 Accepted 1 February 2011 Available online 20 April 2011
End-use electricity efficiency improvements offer an inexpensive way to reduce power shortages. The present study estimates the potential of demand-side management efficiency improvement targeted at (1) short-term efficiency improvement (agricultural pump rectification) that can provide immediate relief, and (2) long-term efficiency improvement (appliance standards such as AC and refrigerator, new agricultural pump purchase and pump replacement) for Gujarat state in India. The methodology includes the calculation of cost of conserved energy for each technology, which works out to be ( 1.18) US$ cents/kW h for new agriculture pump sets, 1.03 US$ cents/kW h for refrigerators and 5.21 US$ cents/kW h for air conditioners. The price of power varies around 1.13 US$ cents to 12.1 cents/ kW h in Gujarat. The annual energy savings from the selected energy-efficient technologies are approximately 8767 GW h over a period of 10 yr, while the estimated peak power savings are about 1814 MW, large enough to eliminate one-fourth of the state’s electricity shortages. Also, the estimated CO2 emissions savings are about 7715 Giga grams (Gg) from implementation of the selected energy efficiency measures over a period of 10 yr. & 2011 Elsevier Ltd. All rights reserved.
Keywords: Demand-side management Energy efficiency measures CO2 emissions
1. Introduction India’s total power generation installed capacity stands at 162,366 MW (CEA, 2010a). Despite the reforms in power sector, and the large generation capacity, electricity shortages are endemic throughout the country. India’s power deficit in the first quarter of 2010–11 increased to 13.8%, against 12.8% in the same period a year ago, despite around 6% improvement in power supply, according to figures released by the Central Electricity Authority (CEA, 2010a). Shortages of this magnitude can significantly constrain industrial activities, reduce economic growth, and would ultimately force businesses to utilize more expensive back-up generation. Reduced economic output also means that these businesses pay less tax revenue to governments at all levels. Increasing the supply of electricity would require higher investment in generation, and possibly for its transmission and distribution. Improving end-use electricity efficiency can offer a much less expensive alternative for providing the desired
n
Corresponding author. Tel.: +91 79 6632 4952; fax: + 91 79 6632 6896. E-mail addresses: [email protected] (A. Garg), [email protected] (J. Maheshwari), [email protected] (D. Mahapatra), [email protected] (S. Kumar). 0301-4215/$ - see front matter & 2011 Elsevier Ltd. All rights reserved. doi:10.1016/j.enpol.2011.02.009
electricity service (Yang, 2006; Thakur et al., 2006; Reddy and Assenza, 2007). Electricity is central to economic development. Indian power sector is coal dominated, which makes it very greenhouse gas (GHG) emission intensive (Garg and Shukla, 2009; Chikkatur et al., 2009; IEP, 2006; Sathaye et al., 2005; Tongia, 2003). India imports over 70% of its oil and almost half of its natural gas requirements (IEP, 2006). The inability of the electricity grid to supply reliable power has prompted increased use of captive power generation that often uses diesel fuel (Joseph, 2010). In this paper, we focus on efficient demand side measures, specifically use of more efficient home appliances and agricultural pump-sets with the intention of stretching existing electricity supply in Gujarat state, India’s most industrialized state. More efficient use of electricity can reduce the nation’s vulnerability in both the imported fuels and electricity markets. The present paper analyzes the use of energy efficiency measures possibly to meet the electricity shortage in Gujarat state, reduce vulnerability to disruptions in the energy markets, increase economic output which would thereby increase profits and also reduce GHG emissions for Gujarat’s electricity utility company responsible for the generation, transmission, and distribution of electricity in the state—Gujarat Urja Vikas Nigam Limited (GUVNL). Tanatvanit et al. (2004) found that long run
A. Garg et al. / Energy Policy 39 (2011) 3076–3085
average cost in the base case is to increase from 3.10 to 3.22 cents/kW h if target of CO2 emission reduction by 30% is to be achieved in Thailand. Kelly (2006) studied the role of energy efficiency in reducing CO2 emissions and assessed the status of the policies and technologies that could bring such reductions in UK.
2. DSM initiatives in Gujarat The state of Gujarat accounted for 6.5% of India’s GDP and 10% of India’s industrial output for year 2006 (CMIE, 2008). It generates 85% of its electricity requirements by its own state and private sources, and purchases the remaining from central sources. Thermal generation accounts for almost 87% of the in-state generation (CEA, 2008a). In 2006–07, GUVNL’s maximum peak (gross) demand registered was 8538 MW and the total energy shortage was 8381 GW h (WRPC, 2008). Accelerated Power Development and Reform Program (APDRP), funded by Indian Ministry of Finance (MoF), in Gujarat has improved financial viability of State power Utilities, reduced Aggregate Technical and Commercial (AT&C) loss, improved customer satisfaction and increased reliability and quality of power supply. The incentives released by MoF under APDRP for Gujarat state were 48.9 million1 for year 2001–02, US$ 30.6 million for year 2002–03, US$ 76 million for year 2003–04 and US$ 60 million for year 2004–05 (APDRP, 2010). Gujarat has taken many steps towards DSM and energy efficiency improvement. It has sponsored ‘‘Jyoti Gram Yojna’’ in 2005 to make three-phase 24 h power supply available to rural areas. It has established separate feeders for residential and agriculture sector in rural areas. It supplies three-phase, 8 h of continuous and adequate power to agriculture sector and threephase, 24 h of power to rural households. About 30% of agriculture consumers are metered in Gujarat. It promotes microirrigation system, mainly for new agriculture consumers by providing about 50% subsidy. Paschim Gujarat Vij Company Limited (PGVCL) has 35% of agriculture load of its total consumption. It has replaced large transformers with small transformers for agriculture power supply to decrease energy losses. It has installed remote checking system to collect real time data for electricity consumption for all HT and about 30% of LT industrial consumers. Different feeders were re-grouped in smaller load (24 groups of 100 MW instead of 5 groups of 500 MW) to improve management of load-curves. Dakshin Gujarat Vij Company Limited (DGVCL) has about 75% electricity consumption from HT and LT industries and about 80% of the industries running with power factor less than 0.8. So, it has established a group of 5 officers to create awareness about DSM and energy efficiency for its consumers. Uttar Gujarat Vij Company Limited (UGVCL) has installed capacitors in agriculture sector of Mehsana and Gandhinagar district. It has replaced about 64 MW of agriculture load with new efficient pumps. It has started installing new energy efficient (EE) pump sets by replacing the existing inefficient pump sets where 33% cost has to be borne by farmers, 33% by utility and rest as subsidy given by government. Madhya Gujarat Vij Company Limited (MGVCL) has segregated agricultural load by supplying 50 MW power to 13 district wise groups during different time period in a day. It has done metering of transformers supplying electricity to urban areas and currently doing metering of transformers supplying electricity to rural areas. 1 Unless otherwise mentioned Rs. 48.3 Indian Rupees is assumed to be US $1 Dollar.
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Gujarat Urja Vikas Nigam Limited (GUVNL) is reducing LT lines and increasing HT lines every year with 60 substations in Gujarat. It has implemented GIS to optimize load management in Baroda city. It has optimized load management with real time data available online in all utility companies through enterprise resource management. Torrent Power supplies electricity to Ahmedabad, Gandhinagar, and Surat. At company level, it has reduced energy losses by using EE transformers. At consumer level, it creates awareness to use EE pump set in residential and commercial complexes and EE motors in industries.
3. Methodology We assess the use of energy efficiency measures as a way to reduce Gujarat’s electricity shortage. We obtained load shedding data from GUVNL and also used telephone interviews to further calibrate and allocate against customer categories. Technical, economic, and market potential were studied based on the information collected in the first step. The market potential defines the actual penetration level of the technology in the market while economic potential defines the penetration potential at an economic cost of the measure without taking into account various types of market failures. The adjustments to the economic cost and potential values get us closer to the market potential. Fig. 1 describes the GUVNL month wise load profile, which illustrates the severity of electricity shortage throughout the year. Administratively, the State Load Dispatch Center (SLDC) is responsible for scheduling and dispatch of electricity within a state. Load shedding is generally avoided in residential and commercial sectors of large cities. Load is shed one day in a week in HT industries of Gujarat Industrial Development Corporation (GIDC) areas. Generally, majority of the load shedding is being done in rural areas where the load mainly consists of agricultural pumping. Electrical Utilities around the world and specifically in the USA (Sathaye et al., 2006) have been able to save demand and demonstrate the cost-effectiveness of many energy efficiency measures—retrofitting residential and commercial establishments, improving industrial energy efficiency, running load curtailment programs, and promoting use of energy-efficient appliances and equipment by providing incentives to customers. Among the above measures, promoting the use of energy-efficient appliances by linking with a national labeling program has proven to be especially effective because of the relatively low overhead cost of running these state- or utility-wide programs (Phadke et al., 2005). Table 1 represents the details of formulas used to calculate the cost of conserved energy (CCE) and Cost of conserved peak capacity (CCP). The first column alphabetizes the Row parameters and the last column displays the equation. The additional cost of energy-efficient technology (EET) compared to a conventional energy technology (CET) is the incremental capital cost (Row D). The capacity of EET and CET are chosen in such a way that they have the same useful output. The EETs save a certain amount of energy every year over its lifetime. The CCE is obtained by dividing the annualized incremental capital cost for the EET by the energy saved annually as shown in Row O, and the CCP is shown in Row P.
4. Estimating the cost of energy efficiency measures We analyze the use of energy-efficient (EE) refrigerators, and EE air-conditioners in residential and commercial sectors.
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15000 12000
MW
9000 6000 Demand MW
3000
Supply MW
0 April May
June
July
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Month Fig. 1. GUVNL system demand and supply, 2008–09 (Anticipated). . Source: CEA, 2008b
Table 1 Method for calculating the cost of conserved energy (CCE) and capital cost of conserved peak (CCP) capacity. Index
Parameter
A B C D E F G H I J K L M N O P
Usage (h/yr) Equipment life (h) Equipment life (yr) Incremental capital cost (US$) Transaction costs (% of capital cost) Total investment (US$) Discount rate Capital recovery factor (CRF) Annualized capital cost (US$/yr) Load saving while in operation at end user (W) T and D losses Annual energy savings at the bus bar (kW h/yr) Peak coincidence factor Peak load saving at the bus bar (W) Cost of conserved energy (CCE) (US$/kW h) Capital cost of conserved peak capacity (CCP)
Equation
B/A
refrigerator. We assume an incremental cost of 52 $ for an EE, 4-star rated refrigerator. As refrigerators operate continually and cycle throughout the day, the compressor activation rate for Indian refrigerators is 38% (Phadke et al., 2005). The peak coincidence factor for refrigerators is equal to the number of hours (10 h) of power shortage in the day divided by the total working hours (24 h) which worked out to be 0.42. The use of EE refrigerator results in an annual electricity saving of 166 kW h for residential as well as commercial consumers (Table 2).
D (1+ E) G/(1 (1 + G)^( C)) FH
J B/(1 K) J M/(1 K) I/L F/N
While in the agricultural sector, we focus on energy efficiency improvements for agricultural pump sets. 4.1. Residential and commercial sectors We collected sales data, market trends and retail as well as wholesale costs of air conditioners (AC) and refrigerators for year 2007–08 and 2008–09 through in-person and telephonic interviews with authorized dealers and manufacturers in the city of Ahmedabad, Gujarat. We have considered baseline of using 4-star rated2 AC over 2-star rated AC and 4-star rated refrigerator over non-star rated refrigerator. 4.1.1. Energy-efficient refrigerators The average electricity consumption of 190–200 l direct cool, non-star rated refrigerator is about 1.33 kW h/d (approx. 486 kW h/yr), while energy efficient, 4-star rated refrigerator (made by LG) consumes about 0.88 kW h/d (320 kW h/yr), and costs about 20 $–52 $ more depending upon the brand of the 2 Star rating is a system initiated by Bureau of Energy Efficiency (BEE), India, to determine the energy efficiency of appliances. Depending on their energy efficiency, appliances are rated on a scale of 1–5 and indicated by stars for easy understanding. Higher the number of stars better is the energy efficiency of an appliance. For details, see BEE website www.bee-india.nic.in.
4.1.2. Energy-efficient air conditioners The average electricity consumption of non-star rated, 1.5 t of refrigeration (TR) split air conditioner is about 2.512 kW/h while the commercially available energy-efficient 4-star, 3 star, and 2-star rated AC (made by LG) consume about 1.78, 1.88, and 2.024 kW/h and retails for EE split AC is 40 $–207 $ more depending upon the brand and star rating of the conventional split AC. We assume an incremental cost of 124 $ between 4-star and 2-star AC. The compressor activation rate is 70–80% for Indian air-conditioners. Since the air conditioners cycle for 8–12 h in a day except winter season, the peak coincidence factor for AC is taken 0.42. The use of 4-star rated AC over 2-star rated AC results in annual electricity savings of 311 kW h in residential sector and 444 kW h in the commercial sector (Table 2). The estimates of incremental capital cost, efficiency ratio, and assumptions are same for EE refrigerators and EE air conditioners in residential and commercial sectors, but estimates of usage are different in both the sectors. 4.2. Agriculture sector In the agriculture sector, we focused on small (5 hp3) agricultural pump sets (APS). Earlier research shows that about 90% of the pump sets used in farms in India are inefficient leading to wastage of large amount of money, electricity, and oil (Purohit and Michaelowa, 2007; Sant and Dixit, 1996). Several technical reasons for inefficiency include—faulty installation, undersized pipes, high friction foot valves, poor maintenance, and inefficient and poor quality pumps. Thus, there is a scope of improving the APS efficiency by 30–50% by taking corrective measures (GEDA, 2006). We consider three different types of energy efficiency measures for APS—(1) purchasing new EE pump set instead of 3
Unless otherwise mentioned 1 hp is equivalent to 0.746 kW.
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Table 2 Data on selected energy efficiency measures (baseline of 2-star rated AC to 4-star rated AC) in residential and commercial sectors. Measure/technology
Power requirement per unit (W) Measure life (yr) Usage (h/yr) Retail market price (US$/unit) Annual electricity use (kW h/yr) Peak coincidence factor a b
Residential
Commercial
Air conditionersa
Refrigeratorsb
2-star rated AC
4-star rated AC
Non-star rated fridge
2024 10 1260 497 2554 0.42
1785 10 1260 621 2243 0.42
147 15 3300 197 486 0.42
Air conditionersa
Refrigeratorsb
4-star rated fridge
2-star rated AC
4-star rated AC
Non-star rated fridge
4-star rated fridge
97 15 3300 248 320 0.42
2024 10 1800 455 3648 0.42
1785 10 1800 621 3205 0.42
147 15 3300 197 486 0.42
97 15 3300 248 320 0.42
1.5 t capacity of split air conditioner. 200 l capacity of direct cool refrigerator.
Table 3 Data on selected energy efficiency measures for agricultural water pumping. Measure/technology
Power requirement (kW/unit) Load while in operation (kW) Measure life (yr) Usage (h/yr) Retail market price (US$/unit) Peak coincidence factor Annual electricity use (kW h/yr) a b c
New pump purchase
Pump rectification
Pump replacement
Substandard new pump
Efficient new pumpa
Existing pump
Pump after rectificationb
Existing pump
Efficient new pumpc
3.7 (5 hp) 3.0 8 1200 145 0.25 3600
3.7 (5 hp) 2.22 8 1200 269 0.25 2664
3.7 (5 hp) 3.7 8 1200 0 0.25 4440
3.7 (5 hp) 3.33 8 1200 52 0.25 3996
3.7 (5 hp) 3.7 8 1200 21 0.25 4440
3.7 (5 hp) 2.22 8 1200 269 0.25 2664
Efficient new pump purchase saves energy up to 20–30%. Pump rectification saves energy up to 10–15% (replacing the foot valves and pipes of existing pump). Pump replacement saves energy up to 40–50% (replacing 10 hp pump by 5 hp pump).
substandard new pump set (2) rectification of the existing APS by replacing pipes and foot valve and (3) replacement of the existing 10 hp substandard pump with 5 hp standard EE pump.
4.2.1. Purchasing EE new pump instead of substandard new pump As the electricity tariff is low (1.13 cents/kW h) to farmers, the electricity consumption and pump efficiency is generally not considered as a criterion by farmers. Also, dealers have an incentive to sell oversized pumps and as a result, an inappropriate size and type of pump gets selected. Monitoring results of REC’s pilot projects have shown that installing EE new pump set instead of substandard new pump set can save energy up to 20–30% (CIRE, 2008; GEDA, 2006). We assume 26% energy saving for EE new pump sets over substandard new pump sets. For a 5 hp ISI mark pump, a farmer would have to pay an incremental cost of 104 $–145 $ per pump. Use of an efficient pump can decrease electricity consumption by 936 kW h/yr (Table 3 and Fig. 2).
4.2.2. Pump rectification (retrofitting) It was found that in case of most APS, undersized pipes and high friction foot valves are used which increases the frictional losses. Replacing the existing undersized pipes with appropriate size and new rigid low friction pipes and replacing high-friction foot valves with low-friction and low head foot valves can improve efficiency of APS by 10–15% (CIRE, 2008; GEDA, 2006). We assume 10% efficiency improvement by pump rectification. The rectification cost is around 41 $–62 $; it is very sensitive to the length of the piping. We consider the incremental cost of 52 $
for pump rectification. Rectification can decrease electricity consumption by 444 kW h/yr (Table 3 and Fig. 2). 4.2.3. Pump replacement If the efficiency of an existing pump is too low then it is worth replacing it with a new EE one. This low efficiency could be the result of many factors like a substandard quality pump, inappropriate/over sizing, multiple motor rewinding, and older vintage. Efficiency improvements of 40–50% are possible by replacing 10 hp old pump by 5 hp monoblock EE pump (CIRE, 2008) and the incremental capital cost is around 248 $ for new EE 5 hp pump. We assume 40% efficiency improvements by pump replacement. Pump replacement can decrease electricity consumption by 1776 kW h/yr (Table 3 and Fig. 2). Load shedding is extensive in agricultural sector and it seldom gets power during the day. We estimate that 75% of the APS consumption happens during the off-peak period (from 10 pm to 6 am), and only 25% of the consumption is during peak, which results in a peak coincidence factor of 0.25. Table 4 represents data on various maintenance costs and life of the APS. 4.2.4. Micro-irrigation systems (MIS) MIS are modern irrigation systems, which include drip irrigation, sprinkler irrigation, and sub-surface irrigation. MIS provide considerable savings in total water and energy demands from agriculture sector. MIS are however not very prevalent in India at present but Gujarat is among the leading states in this field, although the area covered under drip irrigation is 0.18% with respect to net irrigated area. Gujarat Green Revolutionary
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Existing pump B Rectified pump C Substandard new pump A Efficient new pump 1000
0
2000 3000 kWh/year
4000
5000
Fig. 2. Annual electricity consumption (kW h/yr) by selected energy efficiency measures for agriculture water pumping. Where, A: electricity savings for new pump purchase, B: electricity savings for pump rectification and C: electricity savings for pump replacement.
Table 4 Typical agriculture pump set (5 hp) maintenance cost. Description
Data
Pump rewinding frequency (without voltage fluctuation) Pump rewinding cost Foot valve (from 2.5 to 3 in. pipe diameter) cost 2 in. UPVC pipe cost per feet Pump rectification frequency Pump rectification cost Old pump salvage value Maintenance cost of substandard pumpset Life of substandard pumpset Cost of substandard pumpset Maintenance cost of EE standard pumpset after 4 yr Life of EE standard pumpset Cost of EE standard pumpset
3–4 yr 31 $–51.7 $ 12.4 $–15.5 $ 1.2 $–1.4 $ 3–4 yr 51.7 $–62.1 $ 20.7 $–41.4 $ 51.7 $–62.1 $ Max. 4–5 yr 145 $–155.2 $ 31 $–41.4 $ 8–10 yr 248.4 $–289.8 $
Note: the data listed in above Table 4 are based on our interaction with pump manufacturers, traders and users.
Company (GGRC) is promoting MIS to Gujarat farmers as an implementing agency on behalf of Government of Gujarat and Government of India to bring second green revolution in consonance with the agriculture policy of Gujarat Vision 2010 (GGRC, 2009).
negative. This indicates, from a societal perspective, that it is energy efficient to convert inefficient substandard APS to EE standard APS. These are low-hanging fruits which should be plucked with a net negative cost (positive benefit) to the society.
5. Projecting future mitigation potential Energy savings from the installation of energy efficiency measures will accrue over the lifetime of each measure and we estimate the energy savings (GW h) and peak load reduction (MW) over the next ten years. End-use device purchases may be categorized as (1) replacement of existing devices at the end of their life, and (2) satisfying new consumer demand either from the same consumer purchasing additional devices, or due to the formation of new households and/or businesses. In some cases, conventional end-use devices may not be substituted by EE devices because they may not fit the rest of the system at the installation site, due to technological obstacles, high first cost, or due to market failures. Thus the upper limit on penetration of EE devices will be less than 100%. Assuming that all devices are at their equilibrium level in the base year 2006–07, the annual penetration rate of each device is simply the inverse of its life. The energy saved by each EE technologies is aggregated to arrive at the total energy saved annually.
4.3. Cost of conserved energy
5.1. Projecting future energy savings
Energy efficiency measures results in benefits to the consumer, society, and also to the utility. The benefits to consumers arise from the saved electricity at a cost that is less than the electricity tariff, which is also known as cost of conserved energy (CCE). Electricity savings reduce the probability of load shedding. Residential consumers experience a welfare loss due to power cut, while businesses face loss of production. A typical coal power plant in India costs between 663 $ and 828 $ per kiloWatt (Phadke et al., 2005). While all the energy efficiency measures cost much less than that even after including transaction cost and high purchase price of the EE technology (Tables 5 and 6). Comparing the CCE with the average electricity tariff, the CCE is lower than the tariff for all measures, except APS replacement. Thus, energy efficiency measures are economically attractive from an end-user perspective. A sensitivity analysis was conducted for real discount rate of 8% (Table 5) and 25% (Table 6). The CCE increases as the discount rate increases, since the annualized capital cost of equipments increase with higher discount rates. For 8% societal discount rate (average of 6–10%), the CCE is negative for new pump purchase and pump rectification because the net present values of the maintenance difference and purchase cost difference being
New devices are purchased either to satisfy new consumer demand, or to replace an existing one at the end of its life. We project the future growth rate of end-use devices for each consumer category on the basis of data provided by authorized dealers of AC and refrigerators and secondary data available for APS over the next 10 yr. The different end-use devices have different annual growth rates such as ACs are growing at a higher rate of about 20%, refrigerator at 9%, and APS at 5%. The assumptions for growth rate are consistent with historical patterns of growth of appliances sales and ownership data. Total energy saved by energy efficiency measures each year is estimated in the following manner:
Annual energy savings for an end use¼ consumption of con
ventional stock that is to be replaced by an EET percentage energy savings. Consumption of conventional stock that is to be replaced by an EET ¼cumulative annual consumption of the CET that is to be replaced by an EET. Consumption of a CET replaced by an EET every year¼ consumption of new appliances every year percentage of EE appliances sold every year (penetration rate).
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Table 5 Cost of energy efficiency technologies from societal perspective at 8% discount rate. End-use device
Incremental purchase cost**($)
Electricity savings (kW h/yr/unit)
Lifetime (yr)
Discount rate (real) (%)
CCE*** (US$ cents/kW h)
Residential Air conditioners* Refrigerators
93.9 12.3
311 166
10 15
8 8
3.64 0.55
Commercial Air conditioners* Refrigerators
93.9 12.3
444 166
10 15
8 8
3.22 0.55
Agriculture New APS APS rectification APS replacement
55.5 7.7 154.3
936 444 1776
8 8 8
8 8 8
0.38 0.6 1.51
Electricity tariff as on 1/4/2007a (cents/kW h)
9.21 9.21
12.1 12.1
1.13 1.13 1.13
a
CEA, 2007. For air conditioner measure, a 2-star AC is being replaced by a 4-star AC. ** Incremental purchase cost of using a new product instead of old product i s obtained by subtracting the net present value of number of old products replaced over a period of X yr (where X is average life of the new product) from the price of new product. *** The CCE should ideally be compared with the marginal electricity tariff, which would be higher than the average values shown in Tables 5 and 6. *
Table 6 Cost of energy efficiency technologies from individual perspective at 25% discount rate. End-use device
Incremental purchase costc ($)
Electricity savings (kW h/yr/unit)
Lifetime (yr)
Discount rate (real) (%)
CCEd (US$ cents/kW h)
Residential Air conditionersb Refrigerators
107.6 31.7
311 166
10 15
25 25
10.2 5.2
Commercial Air conditionersb Refrigerators
107.6 31.7
444 166
10 15
25 25
7.2 5.2
Agriculture New APS APS rectification APS replacement
17.1 21.8 198.7
936 444 1776
8 8 8
25 25 25
0.57 1.57 3.56
Electricity tariff as on 1/4/2007a (cents/kW h)
9.21 9.21 12.1 12.1 1.13 1.13 1.13
a
CEA, 2007. For air conditioner measure, a 2-star AC is being replaced by a 4-star AC. c Incremental purchase cost of using a new product instead of old product is obtained by subtracting the net present value of number of old products replaced over a period of X yr (where, X is average life of the new product) from the price of new product. d The CCE should ideally be compared with the marginal electricity tariff, which would be higher than the average values shown in Tables 5 and 6. b
Peak energy savings¼load saving while in operation at end user (W) peak coincidence factor/(1-AT&C losses). 5.1.1. Estimation of the penetration rate of energy-efficient technologies (EETs) The maximum market saturation level (%) and the time required to reach this level critically depends on the cost-effectiveness of EETs relative to the electricity tariff and the government policies used to promote their penetration. The saturation level will be higher and the penetration time will be faster for EETs having lower CCE. Table 7 shows the base year penetration rate, saturation penetration rate, and the time required to reach the saturation level for different EETs. The base year penetration rate is based on our understanding of the current popularity of EETs and from market surveys. In the agriculture sector, 90% of the pumps are inefficient and hence it is cost-effective to either replace or rectify them (GEDA, 2006). We assume that about 50% of the current stock of the pumps will be replaced over a period of 4 yr. Following the above procedure, we estimate the energy savings that can be achieved each year (Table 8).
The peak power saved by an EET is the product of load saving when the EET is in use and peak coincidence factor. For each EET, we have already estimated the annual energy savings (see Tables 5 and 6). The total peak load savings¼(expected peak power saved per unit of EET/annual energy savings per unit of EET) total energy savings achieved by that EET. The estimated savings are about 973 MW (Table 9) from the implementation of the selected energy efficiency measures (baseline of using 4-star rated ACs over 2-star rated ACs) in the ninth year. Tables 8 and 9 show that substantial energy (GW h) and capacity (MW) can be saved relatively quickly. The current level of shortages can be completely removed within a few years depending on the policies used to promote energy-efficient technologies. 5.2. Projecting future CO2 emission mitigation We estimate annual CO2 emissions and annual savings in CO2 emission by each energy efficiency measure. The savings in CO2 emission is estimated by multiplying electricity saved by CO2 emission factor per unit of electricity which is 0.88 kg/kW h for western grid (CEA, 2010b) (Table 10).
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Table 7 Penetration rates for selected energy efficiency measures. End-use sector
Residential sector Air conditioners Refrigerators Commercial sector Air conditioners Refrigerators Agricultural sector New APS APS rectification APS replacement
Growth rate (%)
Retirement rate of old appliances (%)
Base-year penetration ratea (%)
Saturation penetration ratec** (%)
Years to reach saturation penetration rate
15 9
10 7
25 15
82 80
6.5 10
23 10
10 7
25 15
82 80
5.5 10
5 5 5
10 10 10
20 10 10
80 80 50
10 10 4
a Base year penetration rate: it is the fraction of newly purchased appliances that are energy-efficient appliances in the base year. In the case of rectification of APS or replacing the highly inefficient pumps, it is the existing stock retrofitted or replaced in the base year. ** Saturation penetration rate: it is the maximum possible percentage of the new appliances purchased that are energy efficient appliances. In the case of rectification of APS or replacing the highly inefficient pumps, it is the maximum possible fraction of the existing stock retrofitted or replaced.
Table 8 Annual energy saved (GW h) by energy efficiency technologies. Year of the program
1
2
End-use sector
GW h saved
Residential sector Air conditioners Refrigerators
8 6
Commercial sector Air conditioners Refrigerators
20 0.7
Agricultural sector New APS APS rectification APS replacement Total (maximum)
51 88 195 230
3
19 43
50 4.8
160 190 421 538
4
38 87
100 9.7
330 309 679 914
5
6
7
8
9
67 142
106 201
151 264
203 331
263 404
331 481
177 15.7
279 22.3
398 29.3
533 36.8
690 44.9
869 53.5
568 445 973 1375
881 599 1306 1914
1242 770 1673 2515
1654 959 2076 3180
2119 1167 2517 3919
2640 1394 2998 4733
6
7
8
9
Table 9 Peak power saved by selected energy efficiency measures. Year of the program End-use sector
1
2
3
4
5
Peak MW saved
Residential sector Air conditioners Refrigerator
1.9 0.8
4.8 5.4
9.6 11.1
17.1 17.9
27.1 25.4
38.5 33.4
51.7 41.9
66.8 51.1
84.2 60.9
Commercial sector Air conditioners Refrigerators
4.5 0.1
11.2 0.6
22.5 1.2
39.9 2.0
63.2 2.8
89.9 3.7
120.7 4.7
156.0 5.7
196.7 6.8
Agricultural sector New APS APS rectification APS replacement Total (maximum)
10.7 18.3 40.7 48
33.2 39.7 87.7 110
68.7 64.4 141.6 186
118.4 92.6 202.8 280
183.6 124.8 272.1 391
258.8 160.5 348.5 514
344.5 199.8 432.5 652
441.4 243.1 524.4 804
549.9 290.4 624.6 973
Base year (2006–07) electricity consumption and CO2 emissions for selected end-use devices are shown in Table 11. The electricity consumption and CO2 emissions are estimated for the total stock of each end-use device in their respective sector for the base year 2006–07.
We estimate savings in Gg of CO2 emissions by each energy efficiency measure from the annul energy saved (see Table 8) over the years. It is estimated by multiplying electricity saved by CO2 emission factor per unit of electricity (0.88 kg/kW h). The estimated CO2 emissions savings are 7714.5 Gg from implementation
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Table 10 Annual CO2 emissions and annual savings in CO2 emissions by selected energy efficiency measures. Sr. no.
End-use device
Annual electricity consumption (kW h/yr)
Annual CO2 emissions (kg of CO2/yr)
Residential sector 1 Air conditioner 2 Refrigerator
4015 486
3530 430
394 166
350 150
Commercial sector 3 Air conditioner 4 Refrigerator
4517 486
3970 430
444 166
390 150
Agriculture sector 5 New pump purchase 6 Pump rectification 7 Pump replacement
3600 4440 4440
3170 3910 3910
936 444 1776
820 390 1560
Table 11 Base year (2006–07) electricity consumption and CO2 emissions for selected enduse devices. Sr. no.
End-use device
Base year electricity consumption (GW h/yr)
Base year CO2 emissions (Gg of CO2/yr)
Residential sector 1 Air conditioner 2 Refrigerator
145 122
127.6 107
Commercial sector 3 Air conditioner 4 Refrigerator
379 13.6
334 12
Agriculture 5 6 7 8
sector New pump purchase Pump rectification Pump replacement Existing Old pump
147 220 293 3168
Total annual GHG emissions (kt of CO2/yr)
129 194 258 2787.84 3949
of the selected energy efficiency measures over a period of 10 yr (Table 12).
6. Policy implications From Utilities’ past experiences, it was found that many farmers were not ready to replace their old inefficient pumps even when they had to pay only one third (33%) of the total cost of new efficient pump. We believe that it could possibly be because of a combination of behavioral and economic issue for farmers. So, it would be cost effective for GUVNL to bear the full cost of energy efficiency measures in agriculture sector. For example, in case of pump rectification, the cost of conserved energy is 1.57 cents/kW h (Table 6). One kW h saved in the agricultural sector thus saves 5.94 cents/kW h (average revenue realized by GUVNL per unit), which results in a net cost reduction of 3.22 cents/kW h with agricultural electricity tariff of 1.13 cents/kW h. To tackle the behavioral aspects, we could create awareness in the farmers via ‘‘Gram Panchayats4’’ on benefits of 4 Gram panchayats are local governments at the village or small town level in India. Constitution (73 Amendment) Act, 1992 that came into effect in April 1993 brought about major reform in local governance in India. Although the Panchayats have historically been an integral part of rural life in India, this act institutionalized the Panchayati Raj Institutions (PRIs) at the village, intermediate, and district levels as the third tier of government. For details, see Ministry of Panchayati Raj http://panchayat.nic.in/.
Annual energy savings by EET (kW h/yr)
Annual savings in CO2 emissions (kg of CO2/yr)
adopting and implementing energy efficiency measures in agriculture sector. Also, Utilities may consider buying-back the old pump sets from the farmers at market-driven salvage value, to reduce behavioral barriers. The proportionally high savings per kW h warrant a strong program that includes rebates and even direct replacement/ retrofitting of the existing pump sets. Residential program would target medium and high income households. In most cases medium and high-income consumers purchase non-star or 1 or 2-star rated ACs because 4 and 5-star rated split ACs (1.5 TR) have higher capital cost of about 165.6 $–207 $ than that of non-star rated ones. Further window air conditioners are available with maximum 2-star label in the market. The cost differential between split and window AC of same capacity vary from 165.6 $ to 248.4 $ depending on the brand and star label. A program could be designed in such a way that utility/government provide incentives to AC manufacturers for manufacturing 4- and 5-star rated split and window ACs in bulk and then rebates/discounts be provided to consumers for replacement of old non-star rated ACs with 4- or 5-star rated ones, and also on new purchases for 4- or 5-star rated ACs. Another possibility to reduce the cost of administering such program by Utilities is what is called ‘‘Upstream Marketing’’ where Utilities enter into partnership with vendors and seek substantial discounts on appliances sold under a Utility-sponsored DSM program. This way, the consumers are the final beneficiary in terms of reduced cost of EE appliances and Utilities lower the DSM program cost because they don’t have to provide individual incentives and rebates to customers in their service territory. Refrigerators are available with 3-, 4-, and 5-star labels for various brands in the market. We found from earlier surveys that there was a maximum sale of 4-star rated refrigerators for the year 2008–09. A program could be designed in such a way that utility/government should develop a buy back policy for replacement of old non-star rated refrigerator with 5-star rated refrigerator at rebates of about 82.8 $–124.2 $ to the consumers to cover the price differential. Also, the new purchases should be promoted for 5-star rated refrigerators by providing attractive rebates/discounts. The regulators and Utilities should guard against a phenomenon called the ‘‘Rebound Effect’’ or ‘‘Leakage’’ where inefficient refrigerators become the 2nd refrigerator in affluent households or are sold to poorer sections of the society. Utility-run energy efficiency programs can effectively reduce the price of EETs through their bulk procurement as it can reduce the purchase cost by 30–40% compared to the retail price. Since utilities are in regular contact with consumers for metering, billing, and repairs, can collate information about their consumption patterns, so that they could implement programs at a lower
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Table 12 Annual savings in GHG emission (Gg of CO2 emission) for selected energy efficiency measures. Year of the program
1
End-use sector
Savings in Gg of CO2 emissions
Residential sector Air conditioners Refrigerators
2
3
4
5
6
7
8
9
7.0 5.3
16.7 37.8
33.4 76.6
59.0 125.0
93.3 176.9
132.9 232.3
178.6 291.3
231.4 355.5
291.3 423.3
Commercial sector Air conditioners Refrigerators
17.6 0.6
44.0 4.2
88.0 8.5
155.8 13.8
245.5 19.6
350.2 25.8
469.0 32.4
607.2 39.5
764.7 47.1
Agricultural sector New APS APS rectification APS replacement
44.9 77.4 171.6
140.8 167.2 370.5
290.4 271.9 597.5
499.8 391.6 856.2
775.3 527.1 1149.3
1093.0 677.6 1472.2
1455.5 843.9 1826.9
1864.7 1027.0 2215.0
2323.2 1226.7 2638.2
Total
324.5
781.3
1366.4
2101.2
2987.0
3984.0
5097.7
6340.3
7714.5
cost compared to acquisition of such devices by individual entities. Also, such energy efficiency programs can result in considerable savings in GHG (CO2) emissions which can be initiated as programmatic CDM project.
because of reduced subsidies as a result of lower electricity demand in the residential and agriculture sectors, and resale of electricity to deprived commercial and industrial consumers. It will also be interesting to examine how the direct and indirect magnitude of revenues is going to affect the revenue deficits.
7. Conclusions It can be concluded that the energy efficiency measures studied with regards to refrigerators, air conditioners, and agricultural pump sets are attractive DSM measures in terms of potential electricity savings to conduct energy efficiency programs in Gujarat. However, the use of the saved electricity from selected energy efficiency measures is a policy issue. These savings could be provided as additional power to high-end consumers such as commercial and industrial consumers which would pay higher tariff for this additional power than low-end consumers who provide these savings. Alternatively, the power saved from selected energy efficiency measures could also be supplied to fulfill the social agenda of the government such as providing 1 kW h of electricity per day to every rural household. These consumers would not be able to pay anywhere near the high-end consumers. However, the provision of electricity is an enabling condition for enhancing productivity and income generation. Electricity access, affordability and rural household income levels are linked particularly in relation to lighting. There are studies conducted internationally (World Bank, UNEP, and UNDP) which indicate the enhanced income generation and development of human resources due to increase in electricity consumption at household level. It is also observed that the annual average energy (GW h) saved by the energy efficiency measures in future years could be around 2160 GW h for the next 10-years removing the energy shortages by around 25%. Similarly peak power demand savings would average around 440 MW/yr and could thus save almost 50% of peak demand deficit. Also, this peak power (MW) saved on demand side through energy efficiency measures implies proportionately lower investment to build new power plants on pro-rata basis, even though some new plants would still be required to be built to meet the power shortages. Considerable savings in CO2 emission can be considered through the selected energy efficiency measures as a way ahead to the India’s 2020 target of reducing emission intensity of GDP by 20–25%. Further research is required to understand how the state government could possibly benefit in terms of sales tax revenue
Acknowledgements We acknowledge and thank USAID ECO-III Project for funding IIM, Ahmedabad, to undertake part of this study. We would also like to acknowledge the contributions of Mr. Kailash Mahajan, Dr. Jayant Sathaye and his research team, and Mr. Ranjit Bharvirkar for providing valuable review comments. We thank GUVNL, GERC, PGVCL, MGVCL, DGVCL, UGVCL, GETCO, GEDA, and Alliance to Save Energy officials for providing data and information on Gujarat electricity sector. The authors also acknowledge the regional managers, sales executives, and outlet heads of brands such as LG, Carrier, Voltas, Blue Star, Videocon, Electrolux, Whirlpool, Samsung, and Next retail outlet for providing sales data for air conditioners and refrigerators in Ahmedabad and Gujarat. We also acknowledge all the respondents who provided inputs to our telephone based primary survey on power shortages across the 30 towns and cities in Gujarat.
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