The problem with energy efficiency

Residential electricity consumption in India has gone up by 50 times since 1971. Currently, this sector accounts for 24 per cent of the total consumption. Demand is further expected to grow on account of rapid electrification, increasing household purchasing power and technology advancement. The 2014 Planning Commission report estimated how different appliances contribute to the total annual residential electricity consumption. In this sector, lighting and cooling requirements constitute 75 per cent of the total electricity consumption. Requirements are further projected to grow by 260 per cent in 2021, as per World Bank estimates.

Enhancing energy efficiency will be the key in controlling energy demand and transitioning towards a low-carbon future. Anecdotal evidence suggests that in general, Indian consumers are more cost-conscious than their Western counterparts. Majority of individuals - mostly, middle and low income - switch off appliances (eg lights, fans, television etc) when not in use. Consequently, one would expect that higher adoption of energy efficiency technology is more likely to happen in India than in the West.

However, market penetration of energy efficiency is hampered by certain barriers that are influenced by high upfront costs, discounted future savings, uncertainty associated with energy savings, lack of awareness and access to capital, inability to assess lifetime benefits and costs of the decision. Addressing these issues requires strategies. Moreover, goal seven of the Sustainable Development Goals aims to "ensure access to affordable, reliable, sustainable and modern energy for all" wherein, third sub-target focuses on doubling global rate of improvement in energy efficiency by 2030. Energy savings can then be used to power more households.

Electricity Act, 2003 provides an overarching framework for enhancing energy efficiency in the residential sector. The Government has been promoting energy efficiency through initiatives such as Standards and Labeling Scheme, outreach activities, incentives for adopting and manufacturing energy efficient appliances (Bachhat Lamp Yojana, Super-Efficient Equipment Programme) and voluntary building codes (Energy Conservation Building Code that have been made mandatory for commercial buildings). Occasionally, it has implemented demand side management pilot programmes targeted towards accelerating adoption of energy efficient appliances. However, in spite of the large potential and existing efforts to foster energy efficiency in the residential sector, much remains to be achieved.

Market shares of Bureau of Energy Efficiency (BEE)-labeled appliances continue to be low. For instance, India First Biennial Update (2016) to United Nations Framework Convention on Climate Change by the Ministry of Environment, Forest and Climate Change indicates a paltry 21 per cent share for BEE-labeled air conditioners in 2011-12, which articulates a case for accelerating market penetration of efficient appliances. Moreover, with BEE periodically revising energy efficiency standards, the role of information and market-based instruments becomes critical in driving consumers towards more energy efficient appliances as the technology advances.

Information-based instruments can be classified as direct and indirect feedback from energy suppliers on household's energy consumption and interventions targeted for greater penetration of energy efficient technologies. It uses instruments like energy certificates, energy audits, information on energy use and energy efficiency, community-based marketing, peer comparisons, target setting, etc. Countries have also been using fiscal incentives and subsidies for encouraging sustainable household energy investments. For instance, Ontario, Canada, Italy and the UK provide rebates on provincial sales taxes for purchases of select energy-saving appliances and replacing outdated energy-intensive products.

Similarly, DISCOMs in Delhi and Mumbai have launched an appliance exchange programme wherein they offer consumers a substantial rebate (to the tune of 40-50 per cent) for replacing old inefficient appliances with new five-star rated appliances. However, programmes have remained at pilot-scale as scaling up will require significant budget outlays and can have a substantial tariff impact, especially for non-participating consumers. One of the major barriers DISCOMs faced is the lack of availability of five-star rated products which comply with latest standards, which creates uncertainty among consumers regarding its performance and potential energy savings.

The scenario seems to be changing with the success of schemes like Unnat Jyoti by Affordable LEDs for All (UJALA) and Street Lighting National Programme, wherein energy efficient devices are promoted in the market through a programme. Under UJALA, families pay for LED bulbs through utility bills at Rs 10 per month covering up the high upfront costs. This has reduced average household electricity bills by 15 per cent. Extending the scheme to energy efficient fans and LED tube lights, Energy Efficiency Services Limited found that the schemes have cumulatively helped India save 32 billion kWh electricity annually, the production of which would otherwise have consumed 19 million tonnes of coal. This has led to an annual reduction of 25 million tonnes of carbondioxide.

Enhancing energy efficiency would not only offer greater access but will further compliment Government initiatives like Make in India, Start-up India and reduce GHG emissions. Access to energy services is a pre-requisite for economic development and makes entrepreneurial activities beyond daylight hours possible. Energy efficiency enables enhanced productivity and helps in keeping global warming under two degree Celsius above pre-industrial levels, the legally binding objective of the Paris agreement, a step closer to meeting the Intended Nationally Determined Contribution's targets. Thus, energy efficiency target seems to be a 'win-win' strategy on essentially all accounts. Every unit of energy saved, either on account of technological advancement or behavioral change, implies a unit that does not need to be produced. Moreover, progress in making use of these potentials would address the demon of energy poverty which has been holding back the development agenda in India.