about the funding methodology and system for monitoring and evaluation. However these regulations are silent on the penalty mechanism in case the utilities are not able to meet the DSM targets set for them. Further the Government of India has approved the National Mission on Enhanced Energy Efficiency (NMEEE), which is one out of the eight missions planned under the National Action Plan on Climate Change. Under this initiative the GoI is all set to create one of the worlds’ largest energy saving certificate trading platform by mid of the year 2012 – the market is expected to be USD 3 billion per year. The idea is to set energy efficiency targets for the identified users, which comprise of energy intensive industries such as oil refineries, steel plant, paper mills etc.
in place. These include UK, Italy, Denmark, Belgium (Flanders Region), France, Ireland and the Netherlands. Energy Efficiency Obligations are popular in the US too, where individual states have their own set targets referred to as Energy Efficiency Resource Standards (EERSs). In Australia, the Victorian Government has had announced to introduce a Victorian Energy Efficiency Target, which would require energy retailers with more than 5000 Victorian customers to surrender white certificates proportional to their share of the Victorian energy market.
energy usage information they have and the economies of scale they can bring in terms of procurement and execution. At the same time absence of encouraging regulatory guidelines and tariff setting rules can hinder them to take actions. Nevertheless energy efficiency should be an important and high priority agenda and newer innovative mechanisms are atleast a worth try.
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Is there a possibility that the above two initiatives could be clubbed whereby the Discoms are made a part of this mission and the regulators can perform the monitoring and evaluation task? A mechanism for Energy Efficiency Purchase Obligation (EEPO) can be worked out, which could be conceptually similar to the Renewable Purchase Obligation (whereby a utility has to meet part of its power purchases through renewable sources of power). Energy Efficiency Obligation entails a legal obligation on the power retailers or distributors to promote and stimulate investments in programs which will result in savings of energy for the end users. In lieu of the efforts put in and the resultant effect, the utility is awarded energy saving credits, popularly known as White Certificates. One of the benefits of an EEPO mechanism over the traditional ones is that it leads to low-cost solutions as the utilities will try their best to devise and choose only those programs which could give highest results at the lowest costs. Another advantage of EEPO will be further boost to the ESCOs (Energy Saving Companies) Industry thereby creating more jobs. ESCOs are companies which devise and implement energy efficiency projects and trade the generated white certificates with the utilities. Small and Medium Enterprises can effectively make use of this opportunity to serve as ESCOs. This market based mechanism is fairly popular in the Europe where seven countries have energy efficiency obligation mechanism 72
EQ INTERNATIONAL January/February 12
Source: World Energy Council
The table below provides a brief snapshot of the energy efficiency obligation targets, costs and penalty structure for some of the countries. EEPO has largely been a successful initiative till date. Most notable is the success achieved in Denmark, where over the past 30 years the country’s energy consumption has been almost static even with a moderate economic growth of the country – phenomenon often termed as ‘Danish Miracle’. In the Italian market the White Certificate Program results have outpaced the initial targets. During the period 2005 – 2009, as against a target of 6.5 million toe, the actual energy saving achieved was 6.7 million toe. The UK has gone a step ahead and has introduced the Community Energy Savings Programs (CESP) which has placed energy saving obligation on the generators as well.
Way Forward
About the Author Bio: Rasika is the Founder of MindCrunch, a boutique business outsourcing and advisory firm which aims to assist the SME sector. In the past while working with Management Consulting firms KPMG and PwC, she has advised clients on business plans, market entry and growth strategies, competition analysis and PPP structuring. She regularly writes for business magazines such as SME World and Business Review India.
It cannot be denied that utilities are often best placed to deliver energy efficiency programs, given the amount of end user
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