Bulletin

Importance of states’ participation in realising India’s energy efficiency ambitions: ...

28 Sep 2017

Importance of states’ participation in realising India’s energy efficiency ambitions: A look at their implementation readiness

By Shyamasis Das, Energy Management Consultant

Introduction: India’s outlook towards energy efficiency

India is currently one of the fastest growing major economies in the world. It is also the third largest energy consumer globally, with 514.71 million tonnes of oil equivalent (Mtoe) consumed in 2014 - more than 70% of which is supplied by fossil sources[1]. Rising energy demand naturally puts enormous pressure on a country’s resources and impacts the local, national and global environment. This in turn necessitates a decoupling of economic growth and energy demand.

India considers energy efficiency as one of the most cost-effective ways forward to achieve this decoupling, along with a number of ‘co-benefits’. The Government of India in its key national policies and global level commitments has underlined the importance of energy efficiency towards achieving a sustainable energy future. The National Action Plan on Climate Change (NAPCC) launched in 2008 and India’s Nationally Determined Contribution (NDC) both recognise energy efficiency as an important mitigation strategy. However, for the potential of energy efficiency to be fully realised, it must be implemented more significantly at the level of India’s sub-national states.

How India’s NDC plans to leverage Energy efficiency

India’s NDC aims to reduce the emissions intensity of India’s GDP by 33% to 35% by 2030 from 2005 level. It also recognises the need to leverage “efficient use of energy through various innovative policy measures under the overall ambit of Energy Conservation Act”.A key energy efficiency action outlined is the National Mission for Enhanced Energy Efficiency (NMEEE) which seeks to scale up the efforts to unlock the market for energy efficiency and help achieve total avoided capacity addition of 19,598 MW and fuel savings of around 23 million tonnes per year.

India’s NDC aims to reduce the emissions intensity of India’s GDP by 33% to 35% by 2030 from 2005 level. It also recognises the need to leverage “efficient use of energy through various innovative policy measures under the overall ambit of Energy Conservation Act”.

A key energy efficiency action outlined is the National Mission for Enhanced Energy Efficiency (NMEEE) which seeks to scale up the efforts to unlock the market for energy efficiency and help achieve total avoided capacity addition of 19,598 MW and fuel savings of around 23 million tonnes per year.

 

Importance of state institutions in advancing the energy efficiency agenda

India consists of 29 states, the National Capital Territory of Delhi and six union territories (UTs).Great variations in terms demography, geographic and climatic patterns, and economic profiles are seen across the length and breadth of the country, which are reflected in the energy use profiles of the states. Figure 1 depicts this state-level variation in terms of electricity consumption per gross state domestic product (GSDP).

It is therefore impractical to take a “one-size-fits-all” approach in solving India’s energy efficiency challenges. It is imperative to consider policies, programmes, or activities tailor-made for local conditions. India’s governance architecture also acknowledges this need. In the existing energy efficiency and electricity governance framework, the states have an important role to play in developing and enforcing critical energy efficiency standards and regulations, building institutional capacity, formulating policies, planning and implementing projects, extending financial support, and creating self-sustaining markets for energy efficiency. Moreover, the state electricity regulatory commissions responsible for overseeing the functioning of electricity generation, transmission, and distribution companies in the states are poised to play a vital role in promoting energy efficiency at local level. Hence, considering the federal governance architecture, advancing the energy efficiency agenda in India requires concerted effort at the central and state levels. It also necessitates an evaluation of institutional capacity, policies, programmes, and markets at the state level to identify best practices and promote cross learning.

Assessment of state-level energy efficiency implementation readiness

Against this backdrop, the World Bank/ESMAP instituted a study[2] in 2014-2016, with PricewaterhouseCoopers (India) Private Limited as the knowledge partner, to evaluate the readiness of Indian states[3] to scale-up energy efficiency interventions and also identify the key barriers with respect to institutional capacity, policies, programmes, financing and markets at the state level. The study used comparative benchmarking as its methodology, which is well-suited to evaluating states and developing recommendations for improving their governance performance. The study developed a framework for an “energy efficiency implementation readiness index” consisting of readiness factors under three broad categories: Policy and Incentives, Market Maturity, and Institutional Capacity. These factors were further evaluated by a suite of both qualitative and quantitative evidence indicators. The qualitative evidence indicators capture whether specific policy, mandate, incentive, institution, financing mechanism, and other characteristics exist under each of the readiness factors. The quantitative evidence indicators aim to assess the energy efficiency potential already unlocked and also reflect the current progress towards implementing important energy efficiency measures or programmes. The highlights of the study are presented below.

Highlights of the study

  • Andhra Pradesh, Rajasthan, Karnataka, Maharashtra and Kerala are the top five states in terms of energy efficiency implementation readiness. Below are benchmarks of states’ performance in percentage scores.

Andhra Pradesh

Rajasthan

Karnataka

Maharashtra

Kerala

India average

           

 

  • Most of the State Designated Agencies – which are responsible for promoting energy efficiency in the states-, are vested with other non-energy efficiency missions (ranging from renewable energy to power distribution) even though they are not fully equipped and/or prepared to deliver all these missions.
  • Specific energy savings targets are lacking in some of the state energy efficiency action plans to reflect national targets.
  • State participation in enforcement of energy efficiency compliance requirements, such as star labelling of appliances and Energy Conservation Building Codes (ECBC), is lacking. Currently, these are mostly centrally driven.
  • Progress and achievements in utility Demand Side Management (DSM) are primarily driven by national institutions, policies, and programmes in the broader context of energy efficiency. Greater involvement of state regulators is desired.
  • An energy efficiency policy or legislation is absent at the state level in some cases. For instance, notification of state ECBC is limited to six states due to a myriad of challenges.
  • The full potential of the financial support line is not realised at state level, although some of the states have constituted the State Energy Conservation Fund.
  • Access to information by electricity consumers is limited, which handicaps the latter’s ability to make informed decisions in response to price signals or utility incentives. This in turn restricts the overall capacity for DSM.

Conclusion

To conclude, state-level institutions should give greater attention to the energy efficiency agenda and strengthen efforts towards ongoing initiatives. Benchmarking states’ energy efficiency readiness is one way to both assess their situations and to infuse a sense of competitiveness, motivating the states to go for more aggressive reforms and programmes for energy efficiency. What the World Bank/ESMAP study shows is the importance of establishing a system for periodic assessment and benchmarking of the states’ performance in driving energy efficiency, which will help monitor the evolving scenario at state-level and create a conducive environment for cooperative and competitive federalism to implement energy efficiency interventions at scale.

Promoting and implementing energy efficiency policies and programmes is a responsibility that must be shared by national and regional/ local authorities. To pursue national energy efficiency goals, policymakers at the centre should engage with state-level institutions; at the same time, sub-national agencies should complement central efforts, guided by local priorities and conditions. Together, these efforts can drive energy efficiency forward for a sustainable future.

Mr. Shyamasis Das is an energy management professional with about 10 years of experience consulting and researching on a range of complex energy and climate change issues. He has served international development organisations, national and sub-national governments, public agencies, think tanks and corporations, including among others: Ministries in India and other South Asian Countries, the Bureau of Energy Efficiency (BEE) – Government of India, Energy Efficiency Services Limited (EESL), the World Bank, the International Energy Agency (IEA), the United Nations Development Programme (UNDP), the Global Green Growth Institute (GGGI), the UK Department for International Development (DFID), GIZ, and KfW. Mr. Das holds an international Masters in Energy Management from France and has contributed to several peer-reviewed international publications. He has been associated in various capacities with PricewaterhouseCoopers (PwC), The Energy and Resources Institute (TERI), GIZ and Ernst & Young (EY).  

[1] Based on IEA’s latest data on India’s energy balance. Weblink: https://www.iea.org/statistics/statisticssearch/report/?year=2014&country=India&product=Balances

[2] Sarkar, Ashok; Mukhi, Neha; Padmanaban, Padu S.; Kumar, Amit; Kumar, Kulbhushan; Bansal, Manoj; Das, Shyamasis; Ganta, Shuboday; Verma, Anurag. 2016. India’s State-Level Energy Efficiency Implementation Readiness. World Bank, Washington, DC. © World Bank. https://openknowledge.worldbank.org/handle/10986/26318 License: CC BY 3.0 IGO.

[3] 28 states (excluding the newly formed state of Telangana) and the National Capital Territory of Delhi.