Managing the demand side

02 Apr 2012

The goal of sustainable development, increasing concerns on environmental pollution, and the continuing demand-supply gap make it necessary that energy conservation and demand side management (DSM) should be an important and integral part of any power development strategy.

As a concept, DSM is not new to utilities in India. The economic benefits accruing from technological and social interventions are also known. Despite such gains and the presence of supporting legislative and regulatory frameworks, results have not been satisfactory. Corrective actions and proactive involvement of utilities, government, consumers, and other stakeholders are imperative to reap the economic benefits of energy conservation and DSM. The following areas need special attention.

Lift self-motivation level: Most often, utilities lack self-motivation. This points to a lack of interest and driving forces. Promoting energy conservation and DSM is often perceived as a non-core business activity. In 2012, average spot tariff fell from R10.78 per unit to R3.55, and a key reason for this was the drop in demand for traded power during peak hours from utilities owing to their inability to buy costly power. This explains their preference for rationing supply over managing demand. Many distribution companies have set up dedicated DSM cells in their licensed areas, but in several cases these remain dysfunctional due to inadequate staffing, lack of authority or vision, old mindset and half-hearted moves. It is important to include DSM and energy conservation in management strategy and human resources development, which would help them better design, implement, and evaluate programmes.

Diagnosis of problems: In general, normal demand pattern of various end-use consuming categories in different seasons is well understood and known. However, utilities do not have a clear fix on the type, efficiency levels and usage pattern of appliances at end-use. Then, how would a utility design a DSM programme benefitting both? It is necessary to strengthen load research capabilities and take up more work in this area. Alongside, measurement and IT infrastructure needs to be upgraded. These will enhance the efficacy of various interventions.

Involve consumers: It is important to take note of consumer's perspectives. Many DSM programmes have failed because utilities have failed to understand the needs and psychology of the people with different socio-economic backgrounds. Consumers should be involved in the design process and they could be incentivised to participate in such efforts. The feedback would help in assessing the potential and intervention areas. The insights received could also serve as an input into the formulation of green growth strategies.

Bring in behavioural changes: Poor public awareness about the gains from energy conservation and DSM has limited the adoption of conservation measures. In the past, efforts have been made to create public awareness through information campaigns. But there is a need to use techniques that influence behavioural changes and social consciousness.

Prevent economic and market distortions: Irrational response to conservation measures because of inappropriate pricing and other market distortions or socio-economic factors is also evident. Non-remunerative tariff leads to misuse of electricity by the subsidised categories. Financial deterrents against misuse/non-productive use of power—through cost-reflective and time varying tariffs—should be adopted.

Create market and value chain: It is important to create a self-sustaining process involving all members of the value chain, including manufacturer, suppliers, retailers, installation and maintenance contractors, ESCOs (energy service companies), and end-use customers. This will transform the market infrastructure and aid product availability. Strong collaborations are also needed among government, utility, and private interests, including consumers and business, to maximise investments in energy efficiency measures. Energy-efficient products are generally expensive. A telescopic nature of tax incentives (i.e., tax decreases with increase in efficiency) may be considered for lowering the high upfront costs.

Energy efficiency and energy modesty are no longer a national issue but a global responsibility of every country.

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