Improving energy efficiency in India: need for a targeted and tailored strategy

Focus Article

Improving energy efficiencyin India: need for a targetedand tailored strategyDaljit Singh,∗ Girish Sant and Aditya Chunekar

Despite keen interest shown by Indian policymakers and significant efforts to en-hance energy efficiency of the Indian economy, progress has been limited. Initialefforts laudably sought to be comprehensive and cover all sectors and subsec-tors. However, it resulted in limited human and financial resources being spreadtoo thin resulting in sluggish progress in improving energy efficiency. In addi-tion, several of the approaches tried have not been directly applicable in Indiabecause of the challenges of limited institutional capacity and human resources.India should reorganize its efforts, and develop a targeted and tailored strategybased on three principles: (1) target efforts at areas where they will bring about thebiggest reductions in energy use (‘maximum bang for the buck’); (2) design energyefficiency policies and plans to achieve a radically higher level of implementation;and (3) design programs creatively to succeed under the challenging policy andimplementation environment. An approximate estimation of the potential sav-ings in existing and new additions in various consumer categories highlights theimportance of new additions particularly in the commercial buildings sector, andthe relative importance of different categories. As an example of a tailored andtargeted strategy, the paper describes the development of a program for superef-ficient appliances that is expected to be appropriate for the Indian environment.The paper is intended to add to the discourse on rapid improvement in energyefficiency not only in India, but also in other developing countries that face similarchallenges of limited human and financial resources. C© 2012 John Wiley & Sons, Ltd.

How to cite this article:WIREs Energy Environ 2012. doi: 10.1002/wene.45

INTRODUCTION

W ith growing concerns about India’s energy se-curity and climate change, the importance of

improving the energy efficiency of the economy is be-ing realized by Indian policymakers, and significantefforts have been made to enhance it in the coun-try. Yet, progress in energy efficiency implementationhas been slow compared to its potential and benefits.Internationally as well as domestically, energy effi-ciency policies have been undergoing major changesto facilitate rapid implementation of energy efficiency.This paper, with a focus on the electricity sector, isan attempt to enhance the discourse on the requiredtransformation of energy efficiency policies in India.

∗Correspondence to: [email protected]

Prayas Energy Group, Pune, India

DOI: 10.1002/wene.45

Although a variety of approaches and schemesare being, and have been tried in India, several ofthem have originated in developed countries and arenot directly applicable in India because of the chal-lenges of Indian policy and implementation environ-ment that stem from limitations of human and finan-cial resources and institutional capacity. In addition,because of a desire to be comprehensive there has beena tendency to cover as many sectors and subsectorsof the economy as possible. But given the challengesin changing institutions, and consumer attitudes andbehavior, the comprehensive approach seems to havebeen counterproductive because resources are spreadtoo thin resulting in limited progress in improvingenergy efficiency of the economy.

To make the most of the limited resources, In-dia should reorganize its efforts, and develop a tar-geted and tailored approach to improve the energyefficiency of the economy. Three principles should

Volume 00, September /October 2012 1c© 2012 John Wi ley & Sons , L td .

Focus Article wires.wiley.com/wene

guide these efforts: (1) The country’s efforts must bedirected at the areas where they will bring about thebiggest reductions in energy use (‘maximum bang forthe buck’); (2) energy efficiency policies and plansmust be designed for a radically higher level of imple-mentation; and (3) energy efficiency schemes shouldbe designed creatively to address the challenges of theIndian environment.

This paper provides a first-cut at developingsuch a targeted and tailored strategy. We first givea brief background of the efforts being made to im-prove energy efficiency in India and the key playersinvolved. We then identify priority areas based onenergy-saving potential. Next, we describe the char-acteristics of the policy and implementation environ-ment for energy efficiency in India which can posea significant challenge and which must be addressedwhile developing policies for energy efficiency in In-dia. We then provide an example of how a targetedand tailored strategy can be developed, and describethe development of a program to rapidly improve theefficiency of appliances being sold in India taking intoaccount the challenges of the Indian policy environ-ment. We end with our conclusions and suggestionsfor moving forward on rapidly accelerating energyefficiency in the India.

This work is not intended as the last word onan appropriate strategy for energy efficiency in India;rather it is intended as a starting point for discus-sion on this issue. Further, the attempt here is notto find faults in the energy efficiency approaches andprograms that are being implemented or planned, be-cause we recognize that the initial efforts were basedon the information available at that time and that‘hindsight is always twenty-twenty’. Instead, the in-tent is to learn from past experiences and draw lessonsso that we can rapidly improve the energy efficiency ofthe Indian economy as we go forward. We also hopethat this paper will serve to deepen the analytical dis-course for rapid improvement in energy efficiency notonly in India, but also in other developing countriesthat face similar challenges of limited human and fi-nancial resources.

BACKGROUND OF ENERGYEFFICIENCY IN INDIA

There is an urgent need to improve the energy effi-ciency of the Indian economy. About 70% of the in-frastructure in 2030, such as buildings, will be addedin next two decades—between 2012 and 2032.1 If thisis built inefficiently, we will be locking-in this ineffi-ciency. The projections for energy demand in 2032

imply a fourfold increase in requirements.2 Such adramatic increase of energy supply will be difficult toachieve because: (1) siting of power plants is alreadyvery difficult and likely to only get worse; (2) Indiais likely to hit resource constraints. Even for coal,the country’s most abundant energy resource, importdependence is likely to increase to 30–50%; and (3)India’s greenhouse gas (GHG) emissions would dra-matically increase. Although Indian GHG emissionsare much below the global average per capita emis-sions, an increase will exacerbate concerns aboutglobal climate change.

There is an increasing recognition of the bene-fits of energy efficiency in addressing these concerns.In 2001, the Government of India (GoI) passed theEnergy Conservation Act (ECAct, 2001) and the fol-lowing year established the Bureau of Energy Effi-ciency (BEE) under its provisions. The primary ob-jective of BEE is to reduce the energy intensity ofthe Indian economy with participation of all stake-holders leading to rapid and sustained adoption ofenergy efficiency in all sectors.3 In addition to beingresponsible for making recommendations to GoI forstandards and labels on appliances, BEE manages andimplements provisions of the ECAct related to (1) in-dustrial energy consumption benchmarks; (2) energyconservation building codes; (3) energy use in energy-intensive industries; (4) and certification of energy au-ditors and energy managers.

One of the first initiatives of BEE was to pre-pare an Energy Conservation Action Plan,4 whichwas released in August 2002. The plan listed severalprograms that BEE would implement in the initialyears of its operation such as standards and labelingprogram for appliances, energy conservation codesfor buildings, agricultural and municipal demand sidemanagement schemes, awards for energy efficient in-dustrial units, and many others.

In June 2008, India released the first NationalAction Plan on Climate Change (NAPCC) outliningexisting and future policies and programs address-ing climate change mitigation and adaptation. Theplan identified eight core ‘national missions’ includ-ing a National Mission for Enhanced Energy Effi-ciency (NMEEE). The implementation framework5

for NMEEE drafted by Ministry of Power (MoP)and BEE identified four initiatives to enhance ef-ficiency: (1) Perform, Achieve and Trade (PAT), amarket-based mechanism to improve efficiency of en-ergy intensive industrial sectors; (2) Market Transfor-mation for Energy Efficiency (MTEE), acceleratingmarket shift to energy-efficient appliances throughinnovative measures; (3) Energy Efficiency Financ-ing Platform (EEFP), creating mechanisms to finance

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WIREs Energy and Environment Improving energy efficiency in India

energy efficiency measures; and (4) Framework forEnergy Efficient Economic Development (FEEED),developing fiscal instruments to promote energyefficiency.

In parallel with BEE’s efforts to improve energyefficiency levels, there have been initiatives by stateand central electricity regulatory commissions (ERC),which regulate electric utilitiesa in their respective ju-risdictions. However, only a few state ERCs in statessuch as Maharashtra and Delhi have taken any sig-nificant steps to promote energy efficiency.6 In thesestates, some utilities have initiated programs, mostlyfor subsidized sale of CFLs, T-5 tube lights, air con-ditioners, and ceiling fans, where the utility recoversthe cost of the programs through the annual revenuerequirements which form the basis of tariffs. Even therecent utility programs in India are small and can beclassified as pilot programs.

LACK OF PRIORITIZATION

One feature of planning energy efficiency efforts inIndia has been the attempt to be comprehensive andcover all sectors, subsectors, and devices. But thechallenges in changing institutions, consumer atti-tudes and behavior have been greater than initiallyexpected, and consequently implementing energy ef-ficiency programs has been more difficult. Therefore,while the goal to be comprehensive is laudable, itcan be counterproductive in a country with limitedhuman and financial resources, because resources arespread too thin and consequently achievements in im-proving energy efficiency are modest, at best. Boththe Action Plan and NMEEE are comprehensive intheir approach, but because accomplishing all thetasks effectively may be difficult, it would be better ifthere was priority assigned to the proposed actions sothat the more promising areas could receive greaterattention.

Resource constraints require that efforts to im-prove energy efficiency be directed at areas where po-tential energy savings are large; this is particularly im-portant in developing countries such as India wherehuman and financial constraints can be severe. Studiesof energy-saving potential are generally the first start-ing point to identify promising areas. Although therehave been some studies to estimate national potentialof savings from energy efficiency in India,7–9 with fewexceptions,10 they have two limitations: (1) they es-timate current potential which is the potential at thetime when the study was done. Because estimates ofpotential should inform long-term policy making, itwould be more useful if the savings were estimated at

FIGURE 1 | Categorywise share of current and incrementalelectricity consumption until 2020.

the end of a longer period of at least a decade intothe future, taking into account the likely growth dur-ing that period. (2) There is also insufficient effortto directing attention toward promising areas for ac-tion that would help in prioritizing efforts to improveenergy efficiency.

A full-fledged study of energy saving potentialrequires time, resources and data on energy use. Inthis paper, we use a shortcut to identify high-priorityareas. As a first step, we estimate the saving potentialby consumer categories. After doing so, we also divideit between present use and new additions to facilitatethe discussion on appropriate strategies.

Figure 1 shows the categorywise contributionto (1) current consumption and (2) to the incremen-tal consumption between now and 2020. The currentconsumption is for the year 2008–2009, the most re-cent data available.11 The estimates of incrementalconsumption are based on categorywise growth ratesof consumption which in turn, are based on the ob-served rates in the recent past in India (reported in En-ergy Statistics 2011).12 On the basis of these sources,we estimate that agricultural consumption will growat about 4% until 2020, commercial 13%, residential9%, and industrial 10%. For the residential category,our assumption of the growth rate is slightly higherthan the five-year average of 7.7%, due to rapid in-crease in incomes and reductions in power shortagesexpected in the near future. It must be noted that al-though we have used the best available informationto make the above assumptions, our intention is onlyto provide indicative results for saving potential andnot precise calculation of it. The assumptions must beviewed accordingly.

As can be seen from Figure 1, dominance of in-dustrial consumption may increase in the next decade.



TABLE 1 Saving Potential Estimates from Various Studies

Studies Agriculture (%) Commercial (%) Residential (%) Industry (%)

TERI et al, 2002 40–45 40 – 10–25US-AID, 2008 30 25 19 15McKinsey,1 2009 14 33 33 18BEE/NPC, 2009 30 20 20 7Our Assumptions 30 25 25 15

1Authors’ calculations from the data in the report.

The share of residential consumption remains roughlythe same, at 20%. However, agriculture and commer-cial categories show substantial change in their shareof consumption. Agriculture is a significant contribu-tor to current consumption (18%) but it forms a verysmall share of the incremental consumption. In con-trast, commercial consumers contribute only 8% ofthe consumption; but because of a high growth rate,their contribution is likely to nearly double and form15% of the incremental consumption.

As the next step, we look at the saving po-tential associated with present and incremental con-sumption. This first-cut analysis uses the aggregateestimates of saving potential for each consumer cate-gory based on the previous studies1,7–9 and conversa-tions with other researchers. The results from the var-ious studies along with our assumptions are shown inTable 1. In agriculture, water pumps consume mostof the energy. The current stock of pumps is highlyinefficient as electricity is heavily subsidized for thesector. There is a high saving potential throughenergy-efficient pumps which we estimate to be 30%.In commercial and residential sectors, energy con-sumption can be reduced through effective buildingdesign and efficient consumer appliances. We assumea saving potential of about 25% in each sector. Thesaving potential in industry is assumed to be 15%which is consistent with the general view that Indianindustry is fairly efficient and there is a greater effi-ciency potential in other sectors.

Continuing with the broad-brush approach, weassume that these estimates apply to both reductionsin present consumption (through retrofit measures)and incremental consumption through new installa-tions or appliances.b

We wish to note two caveats to this broad-brushanalysis. First, retrofits or premature retirements areless cost-effectivec and more tedious to implementthan new purchases, except for lighting which we dis-cuss in the next paragraph. In addition, the major-ity of existing residential and commercial appliancesas well as equipment such as pumps are expected towear out over the next decade and be replaced bynew appliances and equipment. Hence, our calcula-

FIGURE 2 | Categorywise saving potential of retrofits and newadditions until 2020.

tion overestimates the saving potential of retrofits to acertain extent. Second, in some cases the cost-effectivesaving potential is likely to be higher than we have es-timated. For example, with proper choice of buildingdesign, orientation, materials, and appliances, cost-effective savings for new commercial buildings couldbe as high as 40%. Similarly, super-efficient appli-ances (SEAs) consume 40–50% less energy than av-erage appliances sold today, and their use would in-crease the saving potential. Despite such issues, theestimates are useful to arrive at key conclusions, asdiscussed later.

Lighting forms a special case and many of ourcomments about retrofits do not apply to it. Light-ing retrofits are often very cost-effective. In addition,lighting retrofits are easy to implement particularlywhere the fixture does not have to be changed. Forexample, replacement of an incandescent bulb by aCFL is easy; however, switching from T12 tube lightsto T-5s with a change in the ballast may be more in-volved. Furthermore, where no change in fixture is re-quired, due to the short life of bulbs and other lights,there is not much of a difference between a retrofitand a new purchase. Therefore, lighting needs to betreated differently and our comments on retrofits maynot necessarily apply to this end-use.

Figure 2 shows the saving potential for eachconsumer category, further divided into retrofits andnew additions. Table 2 shows the same information



TABLE 2 Relative Scale of Saving Potential for Different Con-sumer Categories (Relative to Saving Potential for Retrofits in Com-mercial Category)

Category Retrofits New Additions

Agriculture 2.4 1.5Commercial 1.0 3.3Residential 2.4 4.4Industrial 3.1 6.7Others 0.9 0.7

considering saving potential in existing commercialbuildings (commercial retrofits) to be equal to 1 unit.

Some conclusions regarding higher priority ar-eas stand out from this analysis:

• The saving potential from energy efficiency innew additions in industrial, commercial, andresidential consumer categories is far largerthan other segments.

• It is important to focus on new additions:First, the saving potential in new additionsis substantially greater than from retrofits inthese categories. Second, as discussed earlierin this section, retrofits are more expensiveand tedious to implement. The prominence ofthis conclusion for the commercial sector isso striking that we should seriously considerfocusing the limited human resources we haveon new construction only.

• In the case of agriculture, retrofits are moreimportant than new additions. But even here,tackling the existing pump installations by in-fluencing the new pumps sales should be con-sidered.

• The category labeled as ‘others’ has limitedpotential: Railways is a big part of the ‘oth-ers’ category. The remaining constituents ofthis category, such as streetlighting and mu-nicipal water pumping may have benefits suchas visibility, but have limited saving potential.

In summary, given the higher saving potentialof new additions in the residential, commercial andindustrial categories, we need to ensure that new ad-ditions are energy efficient.

DESIGNING PROGRAMSAPPROPRIATE FOR THE INDIANENERGY EFFICIENCY SPACE

After identifying the focus areas, the next task shouldbe to design schemes for rapid adoption of energy effi-

ciency solutions in these areas. The design of schemesrequires consideration of the special characteristics ofthe Indian energy efficiency environment, which maybe quite different from those in industrialized coun-tries. Some of these characteristics are listed here.

Weak InstitutionsIn India, regulatory institutions are weak both at thecenter and states with associated shortage of humanresources and expertise at most levels of the energyefficiency space, from policy formulation to imple-mentation. As an example of where this aspect needsto be considered, initially in India it was thought thatthe best approach to implement demand-side man-agement (DSM) programs was through the utilities,just as in the United States. In the United States, thiswas the initial approach because it was felt that theutilities were the entities that had all the data on cus-tomers and they were in touch with their customers.But in India, this approach has failed to deliver signif-icant energy savings for several reasons: (1) success ofutility-administered programs requires strong regu-latory institutions to prod utilities to develop goodDSM programs and to implement them diligently;however, ERCs in India are not very strong; (2) utili-ties are reluctant to get their highest paying consumersto reduce their consumption because it is this class ofconsumers that subsidizes the poorer consumers.

Most electric utilities are preoccupied with ur-gent tasks such as T&D loss reduction, mitigatingfinancial losses, power shortages, and load shedding,which are part of the utility’s core mandate and areseen as more urgent then energy efficiency. Utilitiesare unwilling to allocate capable human resources forenergy efficiency and are also risk-averse in this newarea. Hence, programs requiring a large role from util-ities are in general unlikely to succeed, although therecould be some exceptions in those rare cases wherethe utility is proactive on energy efficiency and hasthe expertise to carry energy efficiency programs for-ward. Regulatory institutions are often weak becauseof shortage of staff and/or limitation of capacity. Con-sequently, approaches that require strong regulatoryintervention or oversight are difficult to implement.

Limited Capacity to Carry Out EffectiveEvaluation and Monitoring of ProjectsThis is partly due to the weakness of institutionsand partly due to lack of expertise for carrying outsuch tasks. A lack of effective monitoring exacerbatesthe ever-present possibility of corruption. As energyefficiency programs become larger, it will be very



important to control corruption, otherwise, it couldlead to higher costs for energy efficiency programs,poor quality of products, inaccurate estimates of sav-ings, and may even derail the programs.

Prayas carried out a review13 of a pilot CFLprogram that ran from November 2005 and went onuntil about June 2006. We found that the monitoringof the program was extremely poor and the CFLs hada very high failure rate with about 40% of the lampsfailing within 3 months of use.

Significant Presence of Informal SectorConsiderable economic activity takes place throughsmall and medium enterprises (SMEs) in the infor-mal sector, which are partly outside the legal andtaxation ambit, and therefore, difficult to regulate.Consequently, approaches that rely primarily on strictstandards and penalties for nonadherence (stick ap-proach) may not work for SMEs, and instead moreincentive-compatible approaches (carrot approach)may be more effective.d

Some Positive Features of the IndianContextBecause of the high cost of energy relative to in-comes, consumers and manufacturers do respond toeconomic incentives. Another positive feature is theexistence of national agencies such as BEE that canprovide support in policy formulation and imple-mentation for schemes that rapidly scale-up energyefficiency.

These features of the Indian context indicatethat the chances of success are likely to be muchhigher if energy efficiency schemes for India havethe following characteristics: (1) The scheme designis centralized or standardized to make the most oflimited expert resources; (2) reliance on proactiveactions by multiple institutions is avoided to mini-mize the effect of lack of capacity in various insti-tutions; and (3) greater energy efficiency is encour-aged through rewards, such as tariff reduction, ratherthan only through strict standards and penalties fornonadherence.

DEVELOPMENT OF AN APPROPRIATEAPPROACH FOR RESIDENTIAL ANDCOMMERCIAL APPLIANCES

As an example of the application of the ideas on atargeted and tailored strategy, we give the exampleof an innovative approach to rapidly accelerate theshift to highly efficient appliances in India. With higheconomic growth in India, there has been a boom

in the sales of electrical appliances in the residentialand commercial sectors putting a tremendous burdenon the already resource-constrained power sector. Toensure that we are not stuck with a stock of ineffi-cient appliances, there is a need to rapidly improvethe energy efficiency of new appliances being sold inthe Indian market.

BEE has been implementing a standards and la-beling (S&L) program for different electrical appli-ances since 2006. The program is mandatory for someappliances and voluntary for others. Every model israted for its energy efficiency and the rating is givenin the form of stars, a model earning a five-star ratingbeing the most energy efficient. Appliances for whichthe program is mandatory must earn at least one starbefore they can be marketed; thus the one-star per-formance becomes the de facto minimum energy per-formance standard. Although, for some appliances,there is an encouraging shift to more efficient modelsdue to the S&L program, for many others new buyersstill buy inefficient but less expensive models.

In parallel with BEE’s efforts to raise applianceenergy efficiency levels, there have been initiatives bystate and central ERCs, which regulate electric utili-ties in their respective jurisdictions. In these states, thishas led to some utility-administered programs, mostlyfor subsidized sale of CFLs, T-5 tube lights, air con-ditioners, and ceiling fans, where the utility recoversthe cost of the programs through the annual revenuerequirements which form the basis of consumer tar-iffs. Even though these utility programs in India aresmall, these should be classified as pilot programs.

In short, the development of utility-administered DSM programs and the shift toefficient appliances in India has been sluggish. Someof the reasons for the slow development are relatedto the characteristics of the Indian energy efficiencyenvironment discussed earlier in Designing ProgramsAppropriate for the Indian Energy Efficiency Space:(1) lack of expertise in DSM in utilities and regulatorycommissions; (2) diversion of utility attention byother issues such as electricity shortages and highdistribution losses; (3) reluctance of utilities topropose and design programs on their own.

Furthermore, there is still a very large differencein the energy consumption between the best avail-able technology world wide and current efficient (fivestar) level appliances in India.14 Because most Indianconsumers are very conscious of the initial cost of anappliance, highly efficient but more expensive modelsare generally not sold in the Indian market.

A new approach is required to quickly nar-row the gap between average efficiency of appli-ances sold in the Indian market and the most efficient



commercially available appliances world wide, andcapture as much as possible of the energy saving po-tential that exists. At the same time, any alternateapproach must address the challenges of limited ex-pertise, human and financial resources available inutilities and regulatory commissions. Super-EfficientEquipment Program (SEEP)e with a focus on mar-ket transformation through incentives to manufac-turers to develop and sell SEAs provides a promisingalternative.f

Unlike a utility DSM program where the pro-gram design and implementation is done by each util-ity, the design of SEEP and much of the implementa-tion would be done by BEE, considerably reducing theburden on utilities and state regulators and bypassingmany of the difficulties with utility-administered pro-grams. If each state ERC decides to independently ini-tiate DSM in its respective state, the regulatory burdenon each for developing regulations, issuing orders, as-sessing DSM program proposals, approving and thenreviewing monitoring and evaluation (M&E) reportswould be substantial and repetitive. Getting BEE todesign the DSM program, implement it, and arrangefor M&E could substantially reduce the burden onutilities and regulators.

An additional feature of SEEP is that incen-tives will be given to manufacturers’ for selling SEAs.g

The required incentive is expected to be considerablylower compared to an equivalent utility-administeredprogram for two reasons. First, giving upstream in-centives avoids wholesale and retail mark-ups andtaxes—reducing the required incentive to about thehalf. Second, a single entity (e.g., BEE) acting on be-half of all utilities in India would have much greaterbargaining power while negotiating with manufac-turers because of the larger market size at stake ascompared with each utility attempting to negotiatewith manufacturers separately. In addition, manufac-turers can take advantage of the greater economiesof scale from selling appliances to a national marketas compared to selling in each utility service terri-tory and meeting the individual DSM program speci-fications. Both—greater bargaining power and largereconomies of scale—are likely to lead to lower pro-gram costs for a national-scale program as comparedwith several utility-scale programs.

Upstream incentives with SEEP thus serve twofunctions: (1) They provide incentives to manufac-turers to develop and sell SEAs that they would nototherwise do, thus bringing about a market transfor-mation to much more efficient products; and (2) theylower the price that would be seen by customers thusserving the same purpose as customer rebates but ata lower cost to the subsidizing agency.

As we have seen, SEEP will (1) considerablyreduce the burden on state regulators and utili-ties, bypassing many of the difficulties with utility-administered programs; and (2) lower the subsidyrequired to promote SEAs. SEEP has other benefits,such as

• Reduce transaction costs because interactionis with a small number of manufacturers ver-sus millions of customers, therefore, transac-tion costs are lower.

• Monitoring and verification is made easier be-cause focus is only on shipments/sales datainstead of surveying millions of customers.

• SEEP facilitates introduction of SEAs bettersuited to Indian conditions because the con-solidation of the large national market makesthe production of appliances appropriatelydesigned for Indian conditions economicallyfeasible.

• Facilitation of increased consumer awarenessbecause a single national entity BEE will havegreater credibility with consumers and greaterresources at its disposal. It will be able to runa much more effective campaign to increaseconsumer awareness of energy efficiency andSEAs.

While SEEP potentially can greatly acceleratethe market transformation to highly efficient appli-ances, there are some potential pitfalls too that mustbe avoided. Because of the centralization of efforts, afailure of any kind could have much greater ramifi-cations. To tackle these concerns, there will have tobe much greater transparency in the implementation.In addition, evaluation, monitoring, and evaluationof SEEP will have to be designed carefully and imple-mented vigilantly. Although some of the routine mon-itoring is likely to be done by BEE, periodic evaluationand monitoring too will have to be implemented byan independent third party.

Recognizing the urgent need to rapidly increasethe efficiency of appliances, GoI has given its in-principle approval for SEEP, and the launch of theprogram is expected soon.

Prioritizing AppliancesAs discussed earlier, one feature of planning energyefficiency efforts in India has been the attempt to becomprehensive and cover all sectors, subsectors, anddevices. This was seen in many of the studies of es-timation of potential where no prioritization takesplace. Although the goal to be comprehensive is a



FIGURE 3 | Annual saving potential of top 25 products. (Reproduced with permission from Ref 15. Copyright 2011, T. Tathagat.)

laudable one, it can be counterproductive in a coun-try with limited human and financial resources forenergy efficiency. A similar concern applies to the ef-forts to improve appliance efficiency. Figure 3 showsthe annual energy-saving potential for about 25 prod-ucts estimated in a recent study.15 One can see that iffinite amount of resources are available, a good strat-egy would be to focus on the top 7–10 appliancesand capture most of the energy savings. Attemptingto focus on all appliances may be counterproductivebecause attention and resources would be spread outrather thinly with not much to gain from the appli-ances with low annual energy savings. Therefore, itmay be an appropriate time to reconsider the roadmap for extending the standards and labeling pro-grams to many more appliances as planned, and toevaluate whether it would be preferable to focus ona few key appliances now, and postpone extensionof the program to other appliances that have a muchlower energy saving potential.

OTHER CONSUMER CATEGORIESAND END USES

Appliance efficiency has been the focus of our workand hence we have discussed it in greater detail here.The priority analysis done previously shows that thereare of course other areas of energy use where im-provement in energy efficiency is urgently required—building shells (both commercial and residential), in-dustry, and agriculture. We have considered similarideas for other consumer categories but have not de-

veloped them as fully as the work on appliances. Formore details, please see our publication.16 It high-lights some of the issues that need to be considered inthese other consumer categories, as starting points forthe development of suitable approaches for scaling upenergy efficiency efforts in these areas of energy use.

CONCLUSIONS AND WAY FORWARD

If the electricity needs of a rapidly growing India areto be met, attention needs to be focused on key areasand design of schemes that can facilitate rapid scaling-up of energy efficiency implementation. Equally im-portant, the schemes must be designed creatively tomeet the challenges of the Indian energy efficiencyenvironment—limitations of human resources, finan-cial resources, and institutional capacity.

To facilitate the targeting of the country’s en-ergy efficiency efforts, we carried out a broad-brushpriority analysis to see how we could get the ‘max-imum bang for the buck’. Our analysis reveals thatnew additions in industrial, residential, and commer-cial consumer categories have the highest saving po-tential. The potential savings from retrofits is consid-erably less. In addition, retrofits are likely to be moreexpensive and difficult to implement. In the commer-cial sector, the relative benefits of focusing on newadditions are so much greater that we think that forthe commercial category, given the limited human re-sources we have, only new construction should beconsidered seriously for energy efficiency efforts. Incontrast, for agriculture, retrofits are more important



than new additions. Even though the saving potentialfor agriculture is lower than that of other consumercategories, energy efficiency improvement in agricul-ture is important for other reasons such as reducingthe large subsidies in electricity tariffs for agriculturalconsumers.

As an example of an attempt to develop an ap-proach that addresses the challenges of the Indianpolicy and implementation environment, we have dis-cussed SEEP that can potentially bring about rapidimprovements in the efficiency of appliances sold inIndia.

We hope that this paper will deepen the ana-lytical discourse to find ways for rapid scaling-up ofenergy efficiency action not only in India but alsoin other developing countries, which face challengingpolicy environments and severe constraints of humanand financial resources.

NOTESaExcept for the two states of Orissa and Delhi, dis-tribution utilities in states are mostly owned by therespective state government and there are three orfour of them in each state. In addition, some cities(Mumbai, Kolkata, Ahmadabad, and Surat) are ser-viced by private distribution companies.bThe saving estimates need to be refined based on de-tailed bottom-up studies for each consumer categoryand end use.cFor example, suppose the cost of a five-star fan isabout INR 1500, whereas the cost of an unlabeled

fan is INR 1300. Also assume the power consump-tion is 50W and 75W for the two fans, respectively.If a consumer decides to buy a new fan and choosesthe five-star model, then his additional cost is onlyINR 200 (1500–1300) giving a cost of conservedenergy of about INR 0.90 per kWh. On the otherhand, if the consumer decides to replace an exist-ing fan with a new five-star fan, then his additionalcost is INR 1500 and the cost of conserved energy isINR 6.60 per kWh, making it much less economicallyattractive.dEven for segments of the industrial sector that consistof mainly big players, onerous regulations are likelyto incentivize shifting of production and sales intounorganized and unregulated channels.eInitially, in the conceptual stage, we called these pro-grams National Programs (NPs). Later, as BEE de-veloped an initiative based on the concept, it calledit Super-Efficient Equipment Program (SEEP). In therest of the paper, we will refer to these programs asSEEP.fFor a more detailed discussion on SEEP, please see thepaper which we presented at the European Councilfor an Energy Efficient Economy (ECEEE) SummerStudy in June 2011.17

gSEAs will of course need to be distinguished in themarket through their own labels. This could be doneeither through endorsement labels as is done in theUnited States, or a label based on an extension ofthe current star labeling program of BEE, wherean SEA label would be for, say seven (or more)stars.

REFERENCES

1. McKinsey & Company. Environmental and energysustainability: an approach for India, August 2009.

2. Planning Commission. Integrated energy policy. Gov-ernment of India, August 2006.

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Documents

Improving energy efficiency in India: need for a targeted and tailored strategy