Part I Chapter I

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Chapter I

Energy Scenario

Learning Objectives:

Contents

Reading this Chapter would enable you to understand:

Types ofenergysources

Durability of energyresources

Energy situation in India

Energyandeconomic growth

Energypolicies, pricing andreforms

Relationship between useof energy and environment

The need toconserve energy

Features of the EnergyConservation Act, 2001

Renewable energysources and their importance

1.1 Energy Scenario

1.2 Primary and Secondary Energy

1.3 Commercial Energyand Non-Commercial Energy

1.3.1 Commercial Energy

1.3.2 Non-Commercial Energy

1.4 Renewable and Non-Renewable Energy

1.5 Renewable Energy Resources

1.5.1 Bio-mass

1.5.2 Bagasseas Bio-Mass

1.5.3 Wind Energy

1.5.4 Hydro Energy

1.5.5 Solar Energy

1.5.5.1Photovoltaic Cells

1.5.5.2PV System(Solar)

1.6 Tidal Energy

1.7 Geothermal Energy

1.8 Global Primary Energy Reserves

1.8.1 Coal

1.8.2 Oil

1.8.3 Gas

1.9 Global Primary EnergyConsumption

1.10 Indian EnergyScenario

1.10.1Energy Supply

1.11 Final EnergyConsumption

1.12 Sector-wise EnergyConsumption in India

1.13 Energy Needsof aGrowing Economy

1.14 Per Capita EnergyConsumption

1.14.1 EnergyIntensity

1.15 Long TermEnergy Scenario-India

1.15.1Coal

EnergyScenario


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1.15.2 Oil

1.15.3 Natural Gas

1.15.4 Electricity

1.16 Energy Pricing in India

1.16.1Coal

1.16.2 Oil1.16.3 Natural Gas

1.16.4 Electricity

1.17 EnergySector Reforms

1.17.1Coal

1.17.2Oil and Natural Gas

1.17.3 Electricity

1.18 The Electricity Act, 2003

1.18.1The Salient Features of the Electricity Act, 2003are

1.19 Energyand Environment

1.19.1Air Pollution

1.20 Global Warming andClimateChange

1.21 What Do Humans Do that Increases Atmospheric CO

1.22 Acid Rain

1.23 EnergySecurity

1.24 Energy Conservation and its Importance

1.25 What is Energy Conservation?

1.26 Energy Strategy for the Future

1.26.1Immediate-term Strategy

1.26.2Medium-termStrategy

1.26.3Long-term Strategy

1.26.4 Enhancing EnergyEfficiency

1.27 The EnergyConservationAct, 2001and its Features

1.27.1 Policy Framework -EnergyConservation Act, 2001

1.27.2 Standards and Labelling

1.27.3 Designated Consumers

1.27.4 Certification of Energy Managers andAccreditation of Energy

Auditing Firms

1.27.5 Energy Conservation Building Codes1.27.6 Central Energy Conservation Fund

1.28 Bureau ofEnergyEfficiency (BEE)

1.28.1 Role of Bureau of Energy Efficiency

1.29 Role of Central and StateGovernments

1.30 Enforcement through Self-Regulation

1.31 Penalties and Adjudication

Features Extracted fromtheEnergyConservation Act, 2001

2

Summing Up

Self-assessment

References

Annexure I:

General Aspectsof Energy Management and Energy Audit

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EnergyScenario

1.1 Energy Scenario

Introduction

1.2 Primary and Secondary Energy

Energyis neither created nor destroyed.The amountofenergyin theuniverse

remains thesame;whenweuseenergy,wedonotuseitup,wetransformitfrom

one formtoanother formof energy.

Energy is involved in every action that occurs in the universe, including all

human actions, as well as all physical actions - the sun shining, the planets

revolving,themotionofthetides,thegrowthanddecayofplantsandanimals.

Energyis oneofthemost importantresourcefor theeconomic developmentof

anycountry. Energyefficiencydoes not mean rationing or havingtodowithout

energy. Rather it means identifying wasteful energy use, and taking action to

reduceor eliminateit. The objectiveofenergyefficiency initiatives is toreduce

energy costs, and consequently, increase profitability without sacrificing

production.

Since energy represents a resource and a cost for companies, it needs to be

managed efficiently. Energy efficiency should be given a level of priority that

reflects theoverall costofenergy bothonan absolutebasis andrelativetoother

costs incurred by the company. Energy efficiency improvements require

significantinvestment,andit is essentialthatindustries,andmajor energyusers

have full knowledge oftheenergycosts,as well as thepotential for areturn on

investmentforanycapital, thattheymayallocatetowardsit.

Energy efficiency is of greater significance to India, given the very low per

capita energy consumption at present. With economic development, the

demandfor energyin thecountry will growphenomenally in every segmentof

the economy and society. It would be therefore necessary to understand the

importanceandmeanstoachieveenergyefficiencyandensurethatthecostand

availabilityofenergy donotbecomeimpedimentstodevelopment.

Energycanbeclassifiedintoseveraltypesbasedonthefollowingcriteria:

Primary and Secondary energy

Commercial and Non-commercial energy

Renewable and Non-Renewable energy

Primary energy sources are those that are either found or stored in nature.

Commonprimary energy sources are coal, oil, natural gas, andbiomass (such

aswood). Other primary energysourcesfoundonearth includenuclear energy

fromradioactivesubstances, thermal energy stored in theearth's interior, andpotential energy due to the earth's gravity. The major primary and secondary

energysourcesareshowninFigure1.1.

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1.3 Commercial EnergyandNoncommercial Energy

1.3.1 Commercial Energy

1.3.2 Non-commercial Energy

-

Energysources that are availablein themarketfor adefinitepriceareknownas

commercial energy. By far themostimportant forms of commercial energy are

electricity, coal and refined petroleumproducts. Commercial energy forms the

basis for industrial, agricultural, transport and commercial developmentin the

modern world. In the industrialised countries, commercialised fuels are a

predominant source not only for economic production, but also for many

householdtasks.

Examples:Electricity,lignite,coal, oil,naturalgas,etc.

Energysources that are not availablein the commercial market for a priceare

classified as non-commercial energy. Non-commercial energy sources include

fuels such as firewood, cattle dung and agricultural wastes, which are

traditionallygathered(notbought) andareusedespeciallyin rural households.

Thesearealso called traditional fuels. Non-commercial energy is often ignored

inenergyaccounting.

Source Extraction Processing Primary Energy Secondary

Open

orDeep

Mines

PreparationCoal Coal

CokePurification

Hydro

PowerStationNuclear Mining Enrichment Electricity

Natural gasNatural gas

GasWell Treatment

Petroleum Oil

Well

CrackingandRefining

LPG

Petrol

Diesel/ fuel oils

Petrochemical

Thermal

Steam

SteamEnergy

Thermal

Figure 1.1 Primary and secondary sources of energy

Primary energy sources are mostly converted in industrial utilities into

secondary energy sources; for example coal, oil or gas are converted tosteam

andelectricity. Primary energy sources can also beused directly as well. Some

energy sources have non-energy uses; for example coal or natural gas can be

usedasfeedstockin fertiliserplants.

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EnergyScenario

Example: Firewood, agro waste in rural areas; solar energy for water heating,

electricity generation for drying grain, fish and fruits; animal power for

transport, threshing, lifting water for irrigation, crushing sugarcane; wind

energyforliftingwater andelectricitygeneration.

Renewable energy is energy obtained from sources that are essentially

inexhaustible. Examples of renewable resources include wind power, solar

power, geothermal energy, tidal power and hydroelectric power (See Figure

1.2). Themostimportantfeatureof renewableenergyis thatit canbeharnessed

withoutthereleaseofharmful pollutants.

Non-renewableenergyresources are theconventional fossil fuels such as coal,

oil andgas,whicharelikelytodepletewithtime(Ref.Fig1.3).

1.4 RenewableandNon-renewableEnergy

Figure 1.3Non- reneawble energy resources

Figure 1.2Renewable energy resources

BiomassSolar

Geothermal Water

Wind

NuclearOil

Natural Gas

Coal

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1.5 Renewable Energy Resources

1.5.1 Bio mass

1.5.2 BagasseasBio ass

-

Bio-mass is arenewable sourceof energy produced when the sun's radiant

energy is transformed into chemical energy by plants in aprocess called

photosynthesis. Bio-massenergy is theoldestform of energyused by humans, and for

thousands of years was the main sourceof energy for human activity.

Bio-massis themostimportant source of energy; it supports the life

processes of humans and other animals.

Wood, crops, and grasses are all primary sources of bio-mass;

secondary sourcesincludeforest, agricultural, and food manufacturing

waste, as well as garbage.

Bio-mass is used to generateelectricity, fuel vehicles, and produce heat

for climatecontrol and manufacturing.

The fermentation ofgrains principally corn, in the United States, producesafuel called ethanol. It is blended with gasoline and used as transportation

fuel.

Gasification converts decaying bio-mass in landfills and biogas digesters

into a gas called methane, themain ingredient in natural gas.

Using bio-mass energydoes not produce a net increasein carbon dioxide

in theatmosphere.

India is one of the largest producers of sugar in the world. Sugarcane has

substantial biomass, which can be used as a fuel (Bagasse). Sugar production

also yields molasses, which are used to produce ethanol, which is one of theimportant energy sources for transportation. Ethanol is mixed with petrol so

that oil consumption is reduced.InBrazil, mixingofethanol with petrol is being

doneformorethan40yearsandthefuelisknownasGasohol.

Indiaproduces over 16milliontons sugar per annumandtheinstalled capacity

ofethanol is 2825million ltrs. Theproduction is oftheorder of 1440million ltrs

per annum or 50%capacity utilisation. On the basis of 230 ltrs ethanol/ ton of

molasses,themaximumproductioncanbe1886millionltrs/ annum.

As themolasses are notenough, other avenues like useofJowar, MaizeWheat,

Sago or Sweet Potatoneed tobeconsidered for theproduction of ethanol. The

yields are 340, 360, 400, 180 and 110 ltrs (average)/ ton respectively for the

aboveproducts.

Additionofethanol increasestheoctanenumber andreducesair pollutionby15-

20%. The compression ratio can also be increased so that knocking is

considerably reduced. The calorific valueof ethanol is 60%that of gasoline and

henceconsumptionincreases/ KWH.

-m

Bagasseis used as fuel togeneratesteam, which in turn,is used togenerate

power andprocesssteam(co-generationplant).Inviewoflesser fuel cost


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EnergyScenario

(since it is a byproduct), this proves to be a most economical fuel for

cogeneration.

Bagasse calorific value varies with moisture content which depends on

millingefficiency. At zero moisturecontent, it is 4600Kcal/ kg whileat 50%it

is 1900K cal/ kg.

Captive power generation of about 110 kwn per ton of sugar production

using Bagasse as a fuel for cogeneration, have been achieved with steam

generationpressureof64to80kg/ cm2(f).

Wind energy is one of the viable sources of renewable energy, which can be

used effectively for power generation. Power is generated through wind

turbines. Feasibility of generation needs to be evaluated, which depends onseveral factors such as wind speed, duration of availability, feasibility of

distributionandusageetc.

While wind turbines are most commonly classified by their rated power at a

certain rated wind speed, annual energy output is actually a more important

measureforevaluatingawindturbine'svalueatagivensite.

Expected energy output per year can be reliably calculated when the wind

turbine's capacity factor at a given average annual wind speed is known. The

capacityfactor is thewind turbine'sactual energyoutputfor theyear dividedby

theenergyoutputif themachineoperatedatitsratedpower outputfor theentire

year. A reasonable capacity factor would be 0.25 to 0.30. A very good capacity

factorwouldbe0.40.

Usually, one is more interested in power (which changes moment to moment)than energy. Sinceenergy =power x timeanddensity is amoreconvenientway

toexpressthemassofflowing air, thekinetic energyequationcan beconverted

intoaflowequation:

Power in the area swept bythe wind turbine rotor:

P =0.5x x A x V

where:

P =power in watts (746 watts =1hp) (1,000watts =1kilowatt)

=air density (about 1.225 kg/ m at sea level )A =rotor swept area, exposed tothe wind (m )

V =wind speed in metres/ sec

1.5.3 WindEnergy

WindTurbineCapacityFactor

PowerGenerationthroughWindTurbines

3

3

2

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Renewable energy sources in theUK currently generate almost 3%of thetotal

electricitysupply,15%ofwhichisgeneratedfromwind energy.A newlegislation,

theRenewableObligation, has set targets on the generation of electricity from

renewablesourcesto10%by2010. TheUK Government recentlyannounced its

intentiontoincreasethisto15%by2015.

Power generation is directly proportional to kinetic energy of mass, whichdepends on the mass of air and velocity of air. Fig. 1.6 indicates the relation

betweenratedpowerandwind speed.

Kinetic Energy

RotorBlade

GearboxGenerator

Nacelle

Tower

FixedPitchRotorBlade

RotorDiameter

RotorHeight

Gearbox Generator

Horizontal Axis Vertical Axis

RotorDiameter

Rotation

Wind Flow

Lift

Drag

Figure 1.4Principles of wind turbineaerodynamic lift

Thevertical version is shown in thefigure.

Figure 1.5Wind turbineconfigurations


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EnergyScenario

1.5.4 HydroEnergy

1.5.5.1 Photovoltaic Cells

Hydropower is a renewable source of energy. Water continuously moves

through a global cycle, evaporating from lakes and oceans, forming clouds,

precipitating asrain or snow, andflowingbacktotheoceans. This water cycleis

produced by the sun and driven by gravity. Hydropower facilities can capture

the energy in flowing water by building a dam on a river (impoundment), or

channeling a portion of a river through a generating facility (diversion).

Hydropower is considered an efficient, cost-effective, and clean energy source

for generating electricity. Hydropower plants return the water to the system

unchangedin quantityandquality.

Solar energycan beconverted directly or indirectly into other forms ofenergy,

such as heat and electricity. The major drawbacks (problems, or issues to

overcome) ofsolar energyare.

1. The intermittent and variablemanner in which it arrives at theearth's

surface.

2. The largearea required to collectit at a useful rate.

Electric utilities usephotovoltaic devices,in aprocessbywhich solar energyis

converted directly to electricity. Electricity can be produced indirectly from

steamgeneratorsusingsolarthermal collectors toheataworkingfluid.

There are only ahandful of materials, especially treated semi-conductors, that

are known to display the PV effect with reasonable energy conversion

efficiency. At present the vast majority of photovoltaic cells are made from

silicon.Ingeneral, cells areclassifiedaseither crystalline( slicedfromingotsor

castingsor grown ribbons ) or thin film( deposited in thin layers on alow cost

backing).

1.5.5 Solar Energy

0

50

100

10 20 30 40 60

Figure 1.6Idealised power curve for a wind turbine

Rated Wind Speed Cut-outWind Speed

Cut-inWind Speed

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Thephotovoltaic cell is thebasic building block of aPV system. Individual cells

can vary in size from about 1 cm (1/ 2 inch) to about 10 cm(4 inches) across.

However, onecell only produces1or 2watts,which isn'tenoughpower for most

applications. To increase power output, cells are electrically connected into a

packaged weather-tight module. Modules can befurther connected to forman

array. Thetermarrayrefers totheentiregeneratingplant,whether it ismadeup

ofoneor several thousandmodules.

Figure1.7showstheworkingofthephotovoltaiccell

1.5.5.2 PVSystem(Solar)

The lifetimeof aPV systemis assumed to be30years. Many manufacturers

now offer 20-year guarantees, andPV panels mightlast 0to50years in non-

maritimelocations.

In Port Headland in NW Australia, which is an excellent site by world

standards,theaverageirradiationonthepanels is2,500kWh/ m / year.2

PV Array(usually building mounted)

Figure 1.7Application of the photovoltaic cell

DC side isolation switch

Inver

AC side isolation switch

To high

efficiencyappliances

Main Fusebox

AC mains sypply

Meter

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EnergyScenario

1.6 Tidal Energy

1.7 Geothermal Energy

Theworldwidewavepower resourcepotential ishuge.FutureEnergySolutions

highlight that theglobal power potential has been estimated tobearound 8,000-

80,000TWh/ y (1-10TW), which is the same order of magnitude as world

electrical energy consumption. The best wave climates, with annual averagepower levels between 20-70 kW/ m of wave front or higher, are found in the

temperatezones(30-60degreeslatitude)wherestrongstormsoccur.

Geothermal energy is considered a renewable source of energy. It is heat

energyproducedwithintheearth. Itis continuouslygenerated,primarilybythe

decay of radioactive elements in the earth's core. The most active, high

temperature geothermal resources are usually found along major plate

boundarieswhereearthquakesandvolcanoesareconcentrated.

Geothermal reservoirs are formed by rainwater seeping through faults in the

Figure 1.8Solar power tower

Solar Cells

Receiver panel

has fluid insidethat collects heat

Rotating Mirrorsfocus sunlightontoreceiver panel

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contain a mixture of steam and hot water. Once the water has been used, it is

injected back into the ground. Properly managed geothermal reservoirs can

haveextensivelifespans.

Theglobal coal reservewasestimatedtobe9,84,453milliontonnes attheend of

2002.USA hadthelargestshareoftheglobal reserve(25.4%) followedbyRussia

(15.9%),China(11.6%).Indiawas4thin thelistwith8.6%.

Theglobal provenoil reservewasestimatedtobe1047billionbarrelsbytheend

of2002. Saudi Arabiahadthelargestshare ofthereservewith almost25%. (One

barrel ofoil is approximately 160litres. 20000barrels aday is equivalent toonemilliontonsofoil per annum. Saudi Arabiaproducesaround10millionbarrels a

daywhichis equal to500milliontonsoil per annum.

Theglobal proven gas reservewas estimated to be156trillion cubic metres by

the end of 2002. The Russian Federation had the largest share of the reserve

with almost30%.

(Source:BP Statistical ReviewofWorldEnergy,June2003.)

World oil and gas reserves are estimated at just 45 years and 65 years

respectively.Coal islikelytolastalittleover 200years.

The global primary energy consumption at the end of 2002 was equivalent to

9405 million tonnes of oil equivalent (M toe). Figure 1.9 shows in what

proportionsthesourcesmentionedabovecontributedtothisglobal figure.

1.8 Global PrimaryEnergyReserves

1.8.1 Coal

1.8.2 Oil

1.8.3 Gas

1.9 Global PrimaryEnergyConsumption

0102030405060708090100

Developed

Countries

Developed

Countries

Developed

Countries

Developed

Countries

Energy ConsumptionPopulation


Figure1.9Energy distribution for developed and developing countries

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EnergyScenario

The primary energy consumption for a few of the developed and developing

countries is shown in Table 1.1. It may be seen that India's absolute primary

energyconsumption is only 1/ 29th of the world, 1/ 7th of USA, 1/ 1.6th time of

Japan but 1.1, 2.9, 1.3, 1.5 times of Canada, Australia, France and U.K

respectively.

Oil Natural Coal Nuclear Hydro Total ShareofGas Total

USA 894.3 600.7 553.8 185.8 58.2 2293.0 24.4%

Canada 89.7 72.6 30.7 17.0 78.6 288.7 3.1%

France 92.8 38.5 12.7 98.9 15.0 258.0 2.7%

Russian Federation 122.9 349.6 98.5 32.0 37.2 640.2 6.8%

United K ingdom 77.2 85.1 36.5 19.9 1.7 220.3 2.3%

China 245.7 27.0 663.4 5.9 55.8 997.8 10.6%

India 97.7 25.4 180.8 4.4 16.9 325.1 3.5%

Japan 242.6 69.7 105.3 71.3 20.5 509.4 5.4%

Malaysia 22.5 24.3 3.3 - 1.7 51.8 0.6%

Pakistan 17.9 18.8 2.1 0.4 4.6 43.8 0.5%

Singapore 35.5 1.6 - - - 37.1 0.4%

TOTAL WORLD 3522.5 2282.0 2397.9 610.6 592.1 9405.0

Although80percentoftheworld'spopulationliesin thedevelopingcountries(a

fourfold population increase in the past 25 years) their energy consumption

amounts to only 40 percent of the world total energy consumption. The high

standards of living in the developed countries are attributable to high-energy

consumption levels. Also, the rapid population growth in the developing

countries has kept the per capitaenergy consumption lowcompared to that of

highlyindustrialiseddevelopedcountries.

World average energy consumption per person is equivalent to 2.2 tonnes of

coal. In industrialised countries, people use four to five times more than the

world average, andninetimes morethan theaveragefor developingcountries.

AnAmericanuses32timesmorecommercialenergythananIndian.

Coal dominates theenergymix in India,contributing to55%ofthetotal primary

energy production. Over the years, there has been a marked increase in theshare of natural gas in primary energy production from 10%in 1994 to 13%in

1999. Therehas been adeclinein theshareofoil in primary energyproduction

from20%to17%duringthesameperiod.

India has huge coal reserves, at least 84,396 million tonnes of proven

recoverable reserves. This amounts to almost 8.6%of world reserves and they

may lastfor about235years atthecurrentReservetoProduction(R/ P) ratio.I n

contrast,theworld'sproven coal reservesareexpectedtolastonlyfor204years

atthecurrentR/ P ratio.

1.10 IndianEnergyScenario

1.10.1 EnergySupply

a. Coal

Table 1.1Primary energy consumption by fuel (2002) in million tonnes oil equivalent

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Reserves/ Production (R/ P) ratio- If the reserves remaining at the end of the

year are divided by the production during that year, the result is the length of

time that the remaining reserves would last if production were to continue at

thatlevel.

India is the fourth largest producer of coal and lignite in the world. Coal

production is concentrated in the states of Andhra Pradesh, Bihar, MadhyaPradesh,Maharashtra,Orissa,JharkhandandWestBengal.

Oil accounts for about33%ofIndia'stotal energyconsumption.WhileIndiahas

invested considerable resources in this sector, crude oil production has

stagnated at around 32-33million metric tonnes per year over thepast decade.

Themajority of India's roughly5.4billion barrels in oil reserves, arelocated in

the Bombay High, upper Assam, Cambay, Krishna-Godavari and Cauvery

basins.India's averageoil production level for 2002was 793,000barrelsper day.Consumption continues to outstrip production and about 70% of the total

petroleum product demand is met by imports imposing a heavy burden on

foreign exchange. Indiahad netoil importsofover 1.2millionbarrels per dayin

2002. India's annual currentoil import bill is around Rs.80,000crores.In terms

of sector wise petroleum product consumption, transport accounts for 53%

followedbydomestic andindustrybeing18%and17%respectively.

Thegraph below shows thewidening gap between indigenous production and

imports, due to rapid growth in consumption of oil products in India. The

indigenousproductionismoreorlessstagnant.

b. Oil

0

500

1000

1500

2000

2500

1980 1985 1990 1995 2000

Consumption

Production

NetImparts

Source EIA

Figure 1.10 oil production and consumption in India, 1980-2003

c. Natural gassupply

Natural gas accounts for about8per centofenergyconsumption in thecountry.

The current demand for natural gas is about 96 million cubic metres per day

(mcmd) as against availabilityof 67mcmd. By 2007, thedemand is expected to

be around 200 mcmd. Natural gas reserves are estimated at 660 billion cubic

metres.


Net Imports

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EnergyScenario

d. Electrical energysupply

e.Nuclear power supply

f.Hydropower supply

1.11 Final EnergyConsumption

The all India installed capacity of electric power generating stations under

utilities was 1,07,973 MW as on 31st March 2003, consisting of 26,910 MW-

hydro, 76,607 MW - thermal and 2,720 MW- nuclear and 1,736 M W- wind

( Source-MinistryofPower).

The gross generation of power in theyear 2002-2003 stood at 531 billion units

(kWh).

Nuclear Power contributestoabout2.5per centofelectricitygeneratedin India.

India has ten nuclear power reactors at fivenuclear power stations producing

electricity.M orenuclearreactorshavealsobeenapprovedfor construction.

Nuclear Power in India %of Total installed

As of 2004 2720 MW 2.8Planned till 2012 9380 MW 8.1

Total 12100 MW 5.6

Nuclear power plays the waiting gameas many plants are old andhave to

be replaced during thenextfew years. Safetyandsecurity (terrorism) are the

areastobeaddressed.FranceandGermanyhavealargesharein nuclear power

generation, but they are planning more green energy. India will also have to

depend on a power mix containing renewableenergy and nuclear energy. The

comeback ofnuclear energyisonthecardsanditsrolecannotbeignored.

India is endowed with avastandviablehydro potential for power generation of

which only 15%has been harnessed so far. The share of hydropower in the

country'stotal generated units has steadily decreased andit presently stands at

25%as on 31st March 2003. It is assessed that exploitable potential at 60%load

factor is 84,000M W.

Final energyconsumption is theactual energydemand at theuser end. This isthedifference between primary energy consumption and the losses that take

place in transport, transmission and distribution and refinement. The actual

final energyconsumption(pastandprojected)is givenin Tableno.1.2

Source Units 1994-95 2001-02 2006-07 2011-12

Electricity Billion Units 289.36 480.08 712.67 1067.88

Coal M illion Tonnes 76.67 109.01 134.99 173.47

Lignite Million Tonnes 4.85 11.69 16.02 19.70

Natural Gas Million CubicMetres 9880 15730 18291 20853

Oil Products MillionTonnes 63.55 99.89 139.95 196.47

Source: PlanningCommissionBAU:_Business As Usual

Table1.2 Demand for commercial energy for final consumption

(BAU scenario)

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1.12 Sector wiseEnergyConsumptionin India-

Themajor commercial energy consuming sectors in the country are classified

as shown in Figure1.11. As seen fromthefigure, industry remainsthebiggest

consumer of commercial energy and its share in overall consumption is 49%.

(Referenceyear :1999/ 2000).

49%

14%

5%

10%

Transport

Industry

Forest

Solid waste

Others22%

Figure 1.11Sector- wiseenergy consumption (1999-2000)

1.13 EnergyNeedsofaGrowingEconomy

Economic growth is desirable for developingcountries,andenergy is essential

for economic growth.However, therelationship between economic growth and

increased energy demand is not always a straightforward linear one. For

example, under present conditions, a 6%increase in India's Gross Domestic

Product(GDP) wouldimposeanincreaseddemandof9%onitsenergysector.

In this context, theratioof energydemandto GDP is auseful indicator. A high

ratio reflects energy dependence and a strong influence of energy on GDP

growth.Itis worthwhiletonotethatdevelopedcountries-byfocusingonenergy

efficiency and lower energy-intensive routes - maintain their energy to GDP

ratios at values of less than 1. The ratios for developing countries tend to be

muchhigher.

Theplanoutlayvis--vistheshareofenergyis giveninFigure1.12.Asseenfrom

theFigure,30%ofthetotal five-year planoutlayis spentontheenergysector.

80000

70000

60000

50000

40000

30000

20000

10000

0 1951-56 1956-61 1961-66 1969-74 1980-85 1985-90 1992-97 1997-02

35

30

25

20

15

10

5

0

PeriodPlanOutlay Rs. Crores - %Share ofEnergy Sector

Figure 1.12Expenditure towards theenergy sector


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EnergyScenario

1.14 PerCapitaEnergyConsumption

The per capita energy consumption (see Figure 1.13) is too low for India as

compared to developed countries. It is just 4%of USA and 20%of the world

average. Per capitaconsumptionis likelytogrowin Indiawiththegrowthin the

economy,thusincreasingenergy demand.

Planned Nucl. Capacity2020- 20000

MW 600BL kWh to 8000 BL kWh in 2052

Although the figures mentioned in the table are as planned, the investment

required is hugeand without privateparticipation, the government will not be

abletofulfil this target onitsown.In fact, this aspecthas been consideredin the

electricitybill,whichhasnowcomeintoexistenceastheElectricityAct2003.

Energy intensity is energy consumption per unit of GDP. Energy intensity

indicates the development stage of the country. India's energy intensity is 3.7

times of Japan, 1.55 times of USA, 1.47 times of Asia and 1.5 times of World

average.

Coal is the primary energy source for power production in India, generating

approximately 70%oftotal domestic electricity.Energydemandin Indiais

1.14.1 EnergyIntensity

1.15 LongTermEnergyScenario-India

1.15.1 Coal

Figure 1.13Per capita energy consumption

YEAR kWh/ CAPITA

2002 613

2012 1000

2022 1620

2032 2454

2042 36992052 5305

Table1.3Likely growth rate generation per capitakWh

Primary energy consumption per capita

Tonnes of equivalent

0-1.51.5-33-4.54-5.05- 6

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expectedtoincreaseover thenext10-15years; althoughnewoil andgas plantsare planned,coal is expected toremain thedominantfuel for power generation.Despitesignificantincreaseintotal installedcapacityduringthelastdecade,the

gapbetweenelectricitysupplyanddemandcontinuestoincrease.Theresultingshortfall has had anegative impact onindustrial output and economic growth.However, to meet expected future demand, indigenous coal production will

need tobegreatlyexpanded.Productioncurrently stands at around 290milliontonnes per year, but coal demand is expected to more than double by 2010.Indian coal is typically of poor quality Coal imports will also need to increase

dramaticallytosatisfyindustrial andpower generationrequirements.

According to projections for the Tenth Five-Year Plan, India's demand forpetroleumproductsislikelytorisefrom97.7milliontonnesin 2001-02toaround139.95 million tonnes in 2006-07. The plan document puts compound annualgrowth rate (CAGR) at 3.6 % during the plan period. Domestic crude oil

production is likely to rise marginally from 32.03 million tonnes in 2001-02 to33.97 million tonnes by theend of the 10th plan period (2006-07). As shown inFigure1.14,around92%ofIndia'stotal oil demandby2020will havetobemetby

1.15.2 Oil

Figure 1.15 Proven oil reserves/ consumption (in million tonnes)India vs. world (end of 2002)

India 700 97.7

World 1 42700 3522.5

Proved Reserve Consumption

700 97.7 3522.5

14270016000

14000

12000

10000

8000

6000

4000

2000

0

5

4

3

2

1

0

Mbd

1997 2010 2020

57%

85%

92%

Net imports Domestic production

Figure 1.14India's oil balance


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EnergyScenario

Installedcapacityason Gas:10,153

M arch 2001 61,157 Diesel: 864 2720 25,116 100,010

Additional capacity 53,333 20,408 9380 32,673 115,794

(2001-2012)

Total capacity as on 114,490 31,425 12,100 57,789 215.804

M arch 2012 (53.0%) (14.6%) (5.6%) (2.6.8%)

Thermal Gas / LNG / Nuclear Hydro Total

(Coal) (MW) Diesel (MW) (MW) (MW) (MW)

1.15.3 Natural Gas

1.15.4 Electricity

India'snaturalgasproductionis likely torisefrom86.56millioncmpdin 2002-03

to 103.08million cmpd in 2006-07. It is mainly based on the strength of amore

thandoubling ofproductionbyprivateoperators to38.25mmcmpd.

Indiacurrentlyhasapeak demandshortageof around14%andanenergydeficit

of 8.4%. Keeping this in view and to maintain a GDP (gross domestic product)

growth of 8%to10%, theGovernmentof Indiahas very prudently set atarget of

215,804MWpowergeneration capacitybyMarch2012fromthelevelof100,010

MW as onMarch 2001. This is acapacityaddition of115,794M Wi nthenext11

years(Table1.4).

In the areaof nuclear power the objective is toachieve 20,000MW of nuclear

generation capacity by theyear 2020.

Price of energy does not reflect true cost to society. The basic assumption

underlying the efficiency of the market place does not hold in our economy,

since energy prices are undervalued and energy wastages are encouraged.

Pricingpractices in India, like manyother developing countries are influenced

by political, social and economic compulsions at the state and central levels.

Many atimes, this has been the foundation for energysector policies in India.TheIndian energy sector offers many examples of cross subsidies e.g., diesel,

LPG andkerosenebeingsubsidisedbypetrol,petroleumproductsforindustrial

usage and industrial and commercial consumers of electricity subsidising

agricultural anddomesticconsumers.

Gradewisebasic priceof coal at thepithead excluding statutory leviesfor run-

of-mine (ROM) coal are fixed byCoal IndiaLtd from timetotime. Thepithead

price of coal in India compares favourably with the price of imported coal. Inspiteofthis,industries still importcoal dueitshigher calorific valueandlowash

content.

1.16 Energy Pricing in India

1.16.1 Coal

Table 1.4India's perspective plan for power for zero deficit power by 2011/ 12

(sourcetenth and eleventh five-year plan projections)

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1.16.2 Oil

1.16.3 Natural Gas

1.16.4 Electricity

1.17 EnergySectorReforms

As part of theenergy sector reforms, the government has attempted to bring

prices for many of the petroleum products (naphtha, furnace oil, LSHS, LDO

andbitumen) in linewith international prices.Themostimportantachievement

has been the linking of diesel prices to international prices and a reduction in

subsidy. However, LPG and kerosene, consumed mainly by domestic sectors,continue to be heavily subsidised. Subsidies and cross-subsidieshave resulted

in serious distortions in prices, as they do not reflect economic costs at all in

manycases.

Thegovernmenthasbeenthesoleauthorityfor fixingthepriceofnatural gas in

thecountry. It has also been taking decisions ontheallocation ofgas tovarious

competing consumers. Gas prices vary fromRs 5toRs.15per cubicmetre. The

recent find of the Reliance Group has revealed that there is good potential fornatural gas in India. In fact talks are on with Iran to get piped gas for Indian

industry. The present rulingprice in the international market varies between $

2.5to 3.25per millionBtu. Natural gas is going toplay avery importantrolein

India'senergysectorin theformofpower generationandtransportation.

Electricity tariffs in India are structured in a relatively simple manner. While

high tension consumers are charged based on both demand (kVA) andenergy

(kWh), the low-tension (LT) consumer pays only for the energy consumed

(kWh) as per the tariff system in most of the electricity boards. The price perkWh varies significantly across states as well as customer segments within a

state. Tariffs in India have been modified to consider the time of usage and

voltagelevel ofsupply.Inadditiontothebasetariffs,someoftheStateElectricity

Boards make additional recovery from customers in the form of fuel

surcharges, electricity duties and taxes. For example, for an industrial

consumer, the demand charges may vary from Rs. 150 to Rs. 300 per kVA,

whereastheenergychargesmayvaryanywherebetweenRs.2toRs.5per kWh.

As for the tariff adjustment mechanism, even when some of the states have

regulatory commissionsfor tariffreview,thedecisionstoeffectchangesarestillpolitical and there is no automatic adjustment mechanism, which can ensure

recoveryofcostsfortheelectricityboards.

Since the initiation of economic reforms in India in 1991, there has been a

growing acceptanceof theneed for deepening thesereformsin several sectors

of the economy, which were essentially in the hands of the government for

several decades.It has nowbeen realised that if substancehastobeprovided to

macroeconomic policyreforms,then it must bebased onreforms that concern

the functioning of several critical sectors of the economy, among which theinfrastructure sectors in general and the energy sector in particular, are

paramount.


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EnergyScenario

1.17.1 Coal

1.17.2 Oil andNatural Gas

1.17.3 Electricity

1.18 TheElectricityAct, 2003

Thegovernment has recognised theneed for newcoal policy initiatives and for

rationalisation of the legal and regulatory framework that would govern the

future development of this industry. One of the key reforms is that the

government has allowed the import of coal to meet our requirements. The

privatesector is now allowed to participatein the extraction and marketing ofcoal.

The ultimate objective of some of the ongoing measures and others under

consideration is to see that a competitive environment is created for the

functioning of various entities in this industry. This would not only bring about

gains in efficiency but also effect cost reduction, which would consequently

ensuresupply of coal onalarger scale at lower prices. Competition would also

have the desirable effect of bringing in new technology, for which there is an

urgent and overdue need since the coal industry has suffered a prolonged

periodofstagnationin technological innovation.

Since1993, privateinvestors havebeen allowed to import and market liquefied

petroleum gas (LPG) and kerosene freely; private investment has also been

allowedin lubricants,whichare not subjecttopricecontrols.Prices for naphtha

andsomeother fuels havebeen liberalised.In 1997thegovernmentintroduced

the New Exploration Licensing Policy (NELP) in an effort to promote

investment in the exploration and production of domestic oil and gas. In

addition,therefining sector has been opened toprivateandforeign investors inorder to reduce imports of refined products and to encourage investment in

downstream pipelines. Attractive terms are being offered to investors for the

constructionofliquefiednaturalgas(LNG) importfacilities.

Following theenactmentoftheElectricityRegulatoryCommissionLegislation,

the Central Electricity Regulatory Commission (CERC) was set up, with the

main objective of regulating the Central power generation utilities. State level

regulatory bodies havealso been set uptoset tariffs and promotecompetition.

Private investments in power generation were also allowed. The State SEBs

were asked to switch over to separate Generation, Transmission and

Distribution corporations. While,India currently does not have a unified

national power grid,thecountry planstolink theSEB gridseventually,andhas

setupastatecompany,Power grid,tooverseetheunification.

The government has enacted the Electricity Act, 2003, which seeks to bring

about a qualitative transformation of the electricity sector through a new

paradigm. The Act seeks to create a liberal framework of development for thepower sector by distancing the Government from regulation. It replaces the

threeexistinglegislations,namely,IndianElectricityAct,1910,theElectricity

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(Supply) Act, 1948and the Electricity Regulatory Commissions Act, 1998. The

objectives of the Act are to consolidate the laws relating to generation,

transmission, distribution, trading and use of electricity and generally to take

measures conduciveto thedevelopment of theelectricity industry, promoting

competition therein, protecting the interests of consumers and the supply of

electricity to all areas, rationalisation of electricity tariff, ensuring transparent

policiesregardingsubsidies,promotionofefficientandenvironmentallybenignpolicies, constitution of the Central Electricity Authority, Regulatory

Commissions and establishment of the Appellate Tribunal and for matters

connectedtherewith or incidental thereto.

The Act strikes a balance, taking into account the complex ground realities of

thepower sector inIndiawithitsintractableproblems.

i. The Central Government toprepare aNational Electricity Policy inconsultation with StateGovernments. (Section 3)

ii. Thrust to completerural electrification and provide for management of

rural distribution by Panchayats, Co-operativeSocieties, non-Government

organisations, franchisees etc. (Sections 4, 5 & 6)

iii. Provision for license free generation anddistribution in the rural areas.

(Section 14)

iv. Generation being delicensed and captivegeneration being freely

permitted. Hydro projects would, however, need clearance fromthe

Central Electricity Authority. (Sections 7, 8 & 9)

v. Transmission Utility at theCentral as well as State level, to be aGovernment company with responsibility for planned and co-ordinated

development of atransmission network. (Sections 38 & 39)

vi. Provision for privatelicensees in transmission and entry in distribution

through an independent network, (Section 14)

vii. Open access to transmission fromtheoutset. (Sections 38-40)

viii. Open access to distribution to be introduced in phases with asurcharge

for thecurrent level of cross subsidyto begradually phased out along

with cross subsidies andan obligation to supply. SERCs to frame

regulations within one year regarding phasing of open access.

(Section 42)

ix. Distribution licensees would befree to undertake generation and

generating companies would befreeto take up distribution businesses.

(Sections 7, 12)

x. The State ElectricityRegulatory Commission is a mandatory

requirement. (Section 82)

xi. Provision for payment of subsidy through budget. (Section 65)

xii. Trading, adistinct activityis being recognised with the safeguard of the

Regulatory Commissions being authorised to fix ceilings on trading

margins, if necessary. (Sections 12, 79& 86)

xiii. Provision for reorganisation or continuance of SEBs.(Sections 131 & 172)

xiv. Metering of all electricity supplied mademandatory. (Section 55)

xv. An AppellateTribunal to hear appeals against the decision of the CERC

and SERCs. (Section 111)

1.18.1 The alient eatures oftheElectricityAct, 2003S F


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EnergyScenario

xvi. Provisions relating to theft of electricity mademore stringent. (Section

135-150)

xvii. Provisions safeguarding consumer interests.

(Sections 57-59,166) An ombudsman scheme (Section 42) for consumer

grievanceredressal.

1.19 Energy and Environment

IndustrialProcess

Energy

Water

Chemical

RawMaterial

Products

Solid/Liquidwaste

Direct/ IndirectEnergy waste

Inputs Process Outputs

Figure 1.16 Inputs and outputs of process

Permissionfrom

combustion

Permissionfrom

process

1.19.1 Air Pollution

Theusageof energy resources in industry leads to environmental damages by

polluting theatmosphere. A few of examples air pollution are sulphur dioxide

(SO ), nitrous oxide(NOX) andcarbon monoxide(CO) emissions fromboilers

andfurnaces, chloro-fluro carbon(CFC) emissionsfromrefrigerantsused,etc.

In chemical and fertiliser industries, toxic gases are released. Cement plants

and power plants spew out particulate matter. Typical inputs, outputs, and

emissionsfor atypical industrial processareshowninFig.1.16above.

2

42%

35%

8%

5%

10%

Transport

Industry

Forest

Solid waste

Others

Figure 1.17Major pollutants in air-sector wise

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1.20 Global Warming and Climate Change

Climatechange, also called global warming, refers to long-term fluctuations intemperature, precipitation, wind and other elements of the earth's climatesystem. Energy use has attracted huge attention in present times due to its

associatedglobal climatic impacts.

Increasingfossil fuel usehasledtoincreasingcarbondioxideemissionsleadingtothegreenhouseeffectandglobal warming(seeFigure.1.19). Theheatingupof the earth's atmosphere due to trapping of long wavelength infrared rays(reflected from the earth's surface) by the carbon dioxide layer in the

atmosphereis calledthegreenhouseeffect.Thenamegreenhouseeffectcomesfrom thefact that this effect is used usefully in horticulture for growing greenplantsin an enclosuremadeofglassor someother transparentmaterial toactasa heat trap. Scientists generally believe that the combustion of fossil fuels andother humanactivitiesaretheprimary reasonfor theincreasedconcentrationof

carbon dioxide. Plant respiration and the decomposition of organic matterrelease more than 10 times the CO released by human activities; but these

releases have generally had a favourable balance earlier during the centurieswithcarbondioxidebeingabsorbedbyterrestrialvegetationandtheoceans.

The key greenhouse gases driving global warming are shown in Figure 1.20.Carbon dioxide, whose increase is largely produced by the burning of fossilfuels, is theprimary global warming gas.CFC's,even though theyexistin very

small quantities, are significant contributors to global warming. And, (notshownin Figure1.20), perfluorocarbons(PFC's),sulfur hexafluoride(SF6) andhydro fluorocarbons(HFC's) areother growingcontributors.

2

47%

15%

15%

10%

13%CO2

Hydro carbons

S02

N0X

Particulates

Figure 1.18Compositionof major air pollutants


Figure 1.19The greenhouseeffect

Somesolar radiation

is reflected bytheEarthand the

atmosphereSolarradiation

passes

through

the clear

atmosphere

The Greenhouse EffectSome of the infrared

radiation passes through the

atmosphere, and some is

absorbed and re-emitted in

all directions by greenhouse

gas molecules. Theeffect of

this is to warm the Earth's

surface and the lower

atmosphere

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EnergyScenario

There are six gases, which contribute to the greenhouse gas effect. The

emission factor of each gas varies and Table 1.5 gives the factors in terms of

intensities. Thus it will be seen that carbon dioxide has the lowest emission

factor, while SF has thehighest. However the amount of carbon dioxideruns

intoabilliontonnesandthereforeall effortsareontoreduceCO emissionsona

prioritybasis.

6

2

54%

21%

12%

7%6%

C02

CFC

Methane

Ozone

Nox

Figure 1.20Share of green house gases in Gw

Carbondioxide,oneof themostprevalentgreenhousegasesin theatmosphere,has two major anthropogenic (human-caused) sources:thecombustionoffossil

fuels and changes in land use. Net releases of carbon dioxide from these two

sources are believed to be contributing to the rapid rise in atmospheric

concentrationssincepre-industrial times.

Burning offossil fuels like coal, oil andgas contributes to 80%of CO emission.

Whereas cuttingdownforests particularly in tropical regioncontributes 20%of

CO emission. These figures only prove that the land under forest has to bepreserved as CO emission increases. The latest ideas are creation of carbon

basins which means plantation of millions of trees which will absorb the

additional CO emissionandconvert it back tocarbon.USA is in theforefrontin

this regard. Theconditionin Indiais not very encouraging as theforest cover is

going down.Ideally theforestcover shouldbearound 33%ofthetotal land area.

Thispercentageis being drasticallyreduced. It isthereforeabsolutelyessential

totakeupamassiveprogrammeof aforestationduring thecomingyears.

As far as usage of energy is concerned, the following figures throw light on

population verses energy consumption. As India's per capita energyconsumptionis quitelowascomparedtoUSAorotherdevelopednations,dueto

ahighpopulation,thetotal energyusedis quitehigh.Itwill beseenfromTable

1.21 WhatDo umansDo that ncreaseAtmospheric COH I 2

2

2

2

2

Carbon Dioxide 1

Methane 21

Nitrous Oxide 310

Hydrofluorocarbons 140 -9800

Perfluorocarbons 4800- 9200

Sulphur Hexafluoride 23900

Table 1.5Emission factors of GHG

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1.6that India has alreadyovertaken developed nations like France and Italy. It

almost uses the levels of energyas Germany andis likely to exceed this in the

coming years. These figures are very vital as global energy consumption

percentageisrapidlygrowing.

Because estimates indicatethat approximately 80percent of all anthropogenic

carbon dioxide emissions currently are from fossil fuel combustion, worldenergyusehasemergedatthecentreoftheclimatechangedebate.

International accords began in Rio de Janeiro in 1992 (Rio Earth Summit),

wherein developed nations were asked toreduceGHG emissions to1990levels

by the year 2000. New levels of commitment were taken during the third

Conference of Parties (COP) on The Framework Convention on Climate

Change, held at Kyotoin 1997(Kyoto Protocol), which madeGHG reductions

mandatory for 38 developed nations with an average reduction of 5.2%below

1990 levels by 2012. The emergence of the Clean Development Mechanism

(CDM) as a framework for the involvement of industrialised countries in the

developing world may lead to financing opportunities for energy efficiency

projects.


Country Population in millions Energy consumption

in quadrillion Btu's

China 1295 43.2

India 1050 14.0

United States 288 97.4

Brazil 176 8.6

Pakistan 150 1.8

Russia 144 27.5

Bangladesh 144 0.6

Japan 128 22.0

Nigeria 121 0.9

Mexico 102 6.6

Germany 82 14.3

France 60 11.0

United Kingdom 59 9.6

Italy 57 7.6

South Korea 47 8.4

Canada 31 13.1

Table 1.6 Representative countries and energy usage, 2002

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EnergyScenario

Global mean temperature - Projected temperature

increase of 2 C is increasing - 0.3to 0.6 C by year 2100

Global sealevel has - Projected sealevel rise

50 cm risen: 10 to 25 cm by year 2100

o o

1.22 Acid Rain

Acidrain is causedbythereleaseofSOXandNOX fromthecombustionoffossil

fuels, which then mix with water vapour in the atmosphere to form sulphuric

andnitric acidsrespectively.Theeffectsofacidrainareasfollows:

Acidification of lakes, streams and soils

Direct and indirect effects (releaseof metals, for example: Aluminium

which washes away plant nutrients)

Killing of wildlife(trees, crops, aquatic plants, and animals) Decay of building materials and paints, statues, and sculptures

Health problems (respiratory, burning-skin and eyes )

1.23 EnergySecurity

The basic aim of energy security for a nation is to reduce its dependence on

imported energy sources for its economic growth. India will continue to

experiencean energy supply shortfall throughouttheforecastperiod. This gap

has been exacerbated since1985, when the country became a net importer of

coal. Indiahas been unabletoraiseits oil productionsubstantially in the1990s.

Risingoil demandcloseto10percentper year hasledtosizeableoil importbills.In addition, the government subsidises refined oil product prices, thus

compounding theoverallmonetarylosstothegovernment.

Table 1.7Climate has changed and will continue to change

SO2

NOxAcid Rain

Coal-fired electric utilities and other

sources that burn fossil fuels emit

sulpher dioxideand nitrogen oxide

Figure 1.21Acid rain formation

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Imports of oil and coal have been increasing at rates of 7%and 16%per annum

respectively during theperiod1991-99. This dependenceonenergyimports is

projected toincreasein thefuture.Estimates indicatethat oil importswill meet

75%oftotal oil consumption requirementsandcoal imports will meet 22%of the

total coal consumption requirements in 2006. At present, India does notimport

anynatural gas, but demandis supply constrained andimports ofgas andLNG(liquefied natural gas) are likely toariseduring the comingyears. This energy

import dependence implies vulnerability to external price shocks and supply

fluctuations,whichthreatentheenergysecurityofthecountry.

Increasing dependence on oil imports means reliance on imports from the

MiddleEast,aregionsusceptibletodisturbancesandconsequentdisruptionsof

oil supplies.This calls for diversification of sources of oil imports. The need to

deal with oil pricefluctuations also necessitates measurestobetakentoreduce

theoil dependenceof theeconomy,possiblythrough fiscal measures toreduce

demand, and by developing alternatives to oil, such as natural gas and

renewableenergy.

Some of the strategies that can be used to meet future challenges to energy

securityare:

Building stockpiles

Diversification of energy supply sources

Increased capacity of fuel switching

Demand restraint

Development of renewable energy sources

Energy efficiency

Sustainable development

Althoughall theseoptionsarefeasible,their implementationwilltaketime.Also,

for countries like India, relianceonstockpileswould tendtobeslow becauseof

resource constraints. Besides, themarket is not sophisticated enough nor the

monitoringagencies experienced enough topredictthesupply situationin time

totakenecessary action.If Indiahastoincreaseitsenergystockpile,insufficient

storagecapacityneedstobeaugmented.

However, out of all theseoptions, the simplest andthemost easily attainableis

reducing demandthroughpersistentenergyconservationefforts.

Coal and other fossil fuels, which have taken three million years to form, are

likelytodepletesoon.Withinthelasttwohundredyears,wehaveconsumed60%

of all resources. For sustainable development, we need to adopt energy

efficiencymeasures. Today,85%ofprimaryenergy comesfromnon-renewable,and fossil sources (coal, oil, etc.). These reserves are continually diminishing

withincreasingconsumptionandwill notexistforfuturegenerations.

1.24 EnergyConservation andits Importance


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EnergyScenario

1.25 What is nergy onservation?E C

Conservation is achieved when energy consumption is reduced, measured in

physical terms. Energy conservation can therefore be the result of severalprocesses or developments, such as productivity increase or technological

progress. On the other hand energy efficiency is achieved when energy

intensityin aspecific product, process or areaof production or consumption is

reduced withoutaffectingoutput, consumption or comfort levels. Promotion of

energy efficiency will contribute to energy conservation and is therefore an

integral partofenergyconservation promotional policies.

Energy conservation and energy efficiencyare separate, but related concepts.

For example,replacing traditional lightbulbs with CompactFluorescentLamps

(CFLs) means you will use only 1/ 4th of the energy to light a room. Pollutionlevels alsoreducebythesameamount.

Naturesetssomebasic limitsonhowefficientlyenergycan beused,butin most

cases our products and manufacturing processes are still a long way from

operating at this theoretical limit. Very simply, energy efficiency means using

lessenergytoperformthesamefunction.

5

10

15

20

25

01000BC

0 1000AD

2000 3000 4000

Time

Figure 1.22Consumption of fossil fuels

Figure 1.23Energy efficient equipments

Energy Efficient Equipment uses less energy

for same output and reduces C emissionO2

Compact fluorescent lamp

15W

C Emission -16g/ hrO2

Incandescent lamp

60W

C Emission - 65g/ hrO2

29/ MITSDE


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Basedonthepresentefficienciesofthermal power plants theemissionper kwh

is approximately 1kilo ofcarbon dioxide. In theyear 2000, coal was responsible

for generating around 6000 TWh. The international electricity authority gives

the figure of 12000 TWh in 2003. By 2030 the additional global CO emission

fromcoal fired electricity production could be over 5 billion tonnes. Although

this figureis high,theincreasein efficiencywill certainly helpin bringingdown

the emission by 5 %points. The present overall efficiency of acoal fired power

plant is around 35 %with the introduction of super critical temperatures, the

efficiencyis likelytotouch 40-45%in thenear future.This meansthereduction

ofCO per kwhwillbearound30-35%.

Although, energyefficiency has been in practiceever sincethefirst oil crisis in

1973, it has today assumed even moreimportancebecause ofit being themost

cost-effective and reliable means of mitigating the effects of global climatic

change.Recognitionofthispotential hasledtohigh expectationsforthecontrol

of future CO emissions through even more energy efficient improvements

whichhaveoccurredin thepast. The industrial sector accounts for some41per

centofglobal primary energydemandandapproximately thesameshare ofCO

emissions. Thebenefits ofEnergyconservationfor variousplayers are given in

1.24Figure

2

2

2

2

1.26 EnergyStrategyfortheFuture

1.26.1 Immediate-term trategy

Theenergy strategy for thefuturecould beclassified into immediate, medium-and long-term strategy. The various components of these strategies are listed

below:

Rationalising thetariff structure of various energy products.

Optimumutilisation of existing assets.

Efficiency in production systems and reduction in distribution losses,

includingthosein traditional energy sources.

Promoting R&D, transfer anduse of technologies and practices forenvironmentally sound energy systems, including new and renewable

energy sources.

S

Figure1.24 Energy efficiency benefits

. Reduced energy bills

. Increasedcompetitiveness

. Increased productivity

. Improved quality

. Increased profits !

. Reduced energy imports

. Avoided costs can beusedfor povertyreduction

. Conservation of limitedresources

. Improved energysecurity

. Reduced GHG andother emissions

. Maintains asustainableenvironment

Industry GlobeNation

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EnergyScenario

1.26.2 Medium-term ategy

1.26.3 Long-term Strategy

1.26.4 EnhancingEnergy Efficiency

1.27 The Energy Conservation Act, 2001 and its Features

1.27.1 PolicyFramework Energy Conservation Act - 2001

Str

Demand management through greater conservation of energy, optimum

fuel mix, structural changes in the economy, an appropriate modal mix in

thetransport sector, i.e. greater dependence on rail than on road for the

movement of goods and passengers and a shift away fromprivatemodes

to public modes for passenger transport; changes in thedesigns ofdifferent products to reduce thematerial intensity of those products,

recycling, etc.

There is need toshift to lessenergy-intensive modes of transport. This

would includemeasures to improve transport infrastructure viz. Roads,

better design of vehicles, use of compressed natural gas (CNG) and

synthetic fuel, etc. Similarly, better urban planning would also reduce the

demand for energy use in thetransport sector.

There is need tomove away fromnon-renewable torenewableenergy

sources viz. solar, wind, bio-mass energy, etc.

Efficient generation of energy resources

Efficient production of coal, oil and natural gas.

Reduction of natural gas flaring.

Improving energy infrastructure.

Building new refineries.

Creation of urban gas transmission and distribution network.

Maximising efficiency of rail transport for coal production.

Building new coal and gas fired power stations.

Improving energy efficiency in accordancewith national, socio-economic,

and environmental priorities.

Promoting energy efficiencyand emission standards.

Labelling programmes for products and adoption of energy efficient

technologies in largeindustries.

De-regulation and privatisation of theenergy sector.

Reducing cross subsidies on oil products and electricity tariffs. De-controlling coal prices and making natural gas prices competitive.

Privatisation of oil, coal and power sectors for improved efficiency.

Investment legislation to attract foreign investments.

Streamlining theapproval process to attract privatesector participation in

power generation, transmission and distribution.

,

With thebackground of high energysaving potential andits benefits, bridgingthe gap between demand and supply, reducing environmental emissions

throughenergysaving,andtoeffectivelyovercomebarriers,theGovernment

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of India has enacted the Energy Conservation Act, 2001. The Act provides the

much-needed legal framework and institutional arrangement for embarking on

anenergyefficiencydrive.

Under the provisions of the Act, The Bureau of Energy Efficiency has been

established with effect from1st March 2002 by merging the erstwhile Energy

Management Centre of The Ministry of Power. The Bureau would be

responsible for implementation of policy programmes and co-ordination of

implementationofenergyconservation activities.

ImportantfeaturesoftheEnergyConservationActare:

StandardsandLabelling (S & L) has been identified as akeyactivityfor energy

efficiency improvement. The S & L programme, when in place would ensure

that only energyefficientequipmentandappliances would bemadeavailableto

consumers.

ThemainprovisionsoftheEC actonStandardsandLabellingare:

Evolve minimum energy consumption and performancestandards for

notified equipment and appliances.

Prohibit manufacture, sale and import of such equipment, which does not

conformto standards.

Introduce amandatory labelling scheme for notified equipmentappliances to enable consumers to make informed choices.

Disseminate information on thebenefits to consumers.

Themain provisions of theEC Act on designated consumers are:

The government would notify energy intensiveindustries and other

establishments as designated consumers;

The schedule to theAct provides alist of designated consumers whichcover basically energy intensiveindustries, Railways, Port Trust,

Transport Sector, Power Stations, Transmission and Distribution

Companies and Commercial buildings or establishments;

The designated consumer to get an energy audit conducted byan

accredited energy auditor;

Energy managers with prescribed qualifications are required to be

appointed or designated by thedesignated consumers;

Designated consumers would comply with norms and standards of

energy consumption as prescribed by thecentral government.

1.27.2 StandardsandLabelling

1.27.3 Designated Consumers


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EnergyScenario

1.27.4 Certification of Energy Managers and Accreditation of Energy

Auditing Firms

1.27.5 EnergyConservationBuildingCodes

1.27.6 Central Energy Conservation Fund

1.28 Bureau of Energy Efficiency (BEE)

Themain activities in this regard as envisaged in theAct are:

A cadreofprofessionallyqualifiedenergymanagers andauditorswith expertise

in policyanalysis, projectmanagement,financingandimplementationofenergyefficiency projects would be developed through a Certification and

Accreditation programme. BEE designs training modules, and conducts a

National level examinationfor thecertificationofenergy managers andenergy

auditors.

ThemainprovisionsoftheEC ActonEnergyConservationBuildingCodesare:

The BEE would prepare guidelines for Energy Conservation Building

Codes (ECBC);

Thesewould benotified to suit local climate conditions or other

compelling factors by therespective states for commercial buildings

erected after therules relating to energy conservation building codes have

been notified. In addition, thesebuildingsshould have aconnected load of

500kW or contract demand of 600 kVA and above and intended for

commercial purposes.

Energy audit of specific designated commercial building consumers would

also beprescribed.

TheEC Act provisions in this case are:

Thefundwouldbesetupatthecentretodevelopthedeliverymechanism for

large-scale adoption of energy efficiency services such as performance

contracting and promotion of energy service companies. The fund is

expected to give a thrust to R & D and demonstration in order to boost

market penetration of efficient equipment and appliances. It would support

the creation of facilities for testing and development and promote

consumer awareness.

The mission of theBureau of EnergyEfficiency is to institutionalise

energy efficiency services, enabledelivery mechanisms in the country

and provide leadership to energy efficiency in all sectors of theeconomy.

Theprimary objective would be to reduce energy intensity in theIndian

Economy.

Thegeneral superintendence, directionsand management of the affairs of

the Bureau are vested in theGoverning Council with 26members. The

Council is headed by theUnion Minister of Power and consists of

members represented bySecretaries of various line Ministries, the CEOs

of technical agencies under theMinistries, members representing

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equipment and appliancemanufacturers, industry, architects, consumers

and five power regions representing the states. The Director General of

the Bureau shall betheex-officio member-secretary of the Council.

The BEE will beinitially supported by theCentral Government byway of

grants through thebudget. It will, however, in a period of 5-7 years

become self-sufficient. It would beauthorised to collect appropriate fees in

dischargeof its functions assigned to it. The BEE will also use the CentralEnergy Conservation Fund and other funds raised fromvarious sources

for innovative financing of energy efficiency projects in order to promote

energy efficient investment.

The roleofBEE would betoprepare standards andlabels of appliances and

equipment, develop alist of designated consumers, specify certification and

accreditation procedures, prepare building codes, maintain theCentral EC

fund and undertakepromotional activities in co-ordination with thecentraland state level agencies. The role would include development of Energy

service companies (ESCOs), transforming the market for energy efficiency

andcreateawarenessthroughmeasuresincluding clearinghouses.

ThefollowingroleoftheCentral andStateGovernmentis envisagedintheAct-

tonotify rulesandregulationsunder variousprovisions oftheAct,

provide initial financial assistance to theBEE and EC fund, coordinatewithvarious State Governments for notification, enforcement, penalties and

adjudication.

toamendenergyconservation buildingcodestosuittheregional and

local climatic conditions. To designate a state level agency to co-ordinate,

regulate and enforce provisions of the Act and constitute a State Energy

ConservationFundforpromotionofenergyefficiency.

The E.C.Act would require inspection of only two items. The following

procedure of self-regulation is proposed to be adopted for verifying areas that

requireinspectionofonlytwoitems.

The certification of energy consumption norms and standards of

production processes bythe Accredited Energy Auditors is away to

enforce effectiveenergy efficiencyin Designated Consumers.

For energy performanceand standards, manufacturers declared values

would bechecked in Accredited Laboratories by drawing sample from

themarket. Any manufacturer or consumer or consumer association can

challengethevalues of theother manufacturer and bring them to the

notice of theBEE. The BEE is recognised for challenge testing in disputed

cases as ameasure for self-regulation.

1.28.1 Role of theBureau of Energy Efficiency

1.29 RoleofCentralandStateGovernments

Central -

State-

1.30 Enforcementthrough Self-Regulation

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EnergyScenario

1.31 Penalties and Adjudication

Penaltyfor each offence under theAct would be in monetary terms i.e.

Rs.10,000 for each offenceand Rs.1,000 each day for continued non -

compliance.

The initial phaseof 5years would bepromotional and would create

infrastructure for implementation of the Act. No penalties would beeffective during this phase.

Thepower to adjudicatehas been vested with the stateElectricity

Regulatory Commission which shall appoint anyone of its members to an

adjudicating officer to hold an enquiry in connection with the penalty

imposed.

In this chapter the overall energy scenario-Global and Indian is briefly

illustrated. The different types of energyand the long term energyscenario is

also explained.

Energy and environment go hand in hand. Energy conservation has a direct

relation to degradation. The importance of energy conservation and energy

efficiency are also explained. As for the future energy requirement, energy

securityis avery importantaspectandthesamehas beendealt with.As per the

legal aspects are concerned Conservation Act, 2001and its features are briefly

explained.

Summing Up

Self-assessment

1. Bio-mass is a renewable energy

(a) True (b) False

2. Global gas reserves are estimated at

(a) 200 trillion Cum (c) 156trillion Cum

(b) 250trillion Cum (d) 125 trillion Cum

3. World proven oil reserves are estimated at

(a) 1047 billion barrels (c)1500 billion barrels

(b) 1175billion barrels (d) 1300 billion barrels

4. Global energy consumption in 2002was tonnes of oil equivalent.

(a) 11500 million tonnes (c) 13500million tonnes

(b) 9405 million tonnes (d) 8500million tonnes

5. Developed countries consume- percentageof total energy.

(a) 70 (b) 85 (c) 55 (d) 60

6. Coal is themain sourceof primary energy in India.

(a) True (b) False

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7. Hydro power contributes to percentelectricity generation in India

(a) 30 (b) 40 (c) 20 (d) 25

8. 1million cum standard gas/ day has a capacity to generate .

(a) 300M W (b) 250MW (c) 200 MW (d) 185 MW

9. In Indiaindustry consumes percent energy.(a) 55 (b) 45 (c) 49 (d) 40

10.The transport sector consumes percentenergy in India.

(a) 28 (b) 24 (c) 22 (d) 30

11.India is planning to have MW installed capacity by 2012.

(a) 225400 (b) 230120 (c) 215800 (d) 241000

12.India's petroleum product demandis estimated at million tons/ annum.

(a) 160 (b) 125 (c) 165 (d) 140

13.Maximum air pollution in Indiais caused by .

(a) CO2 (b) NOX (c) SO2 (d) CO

14.Industry contributes percent toair pollution in India.

(a) 45 (b) 42 (c) 35 (d) 38

15.Natural gas mainlycontains .

(a) Ethane (b) Carbon M onoxide

(c) Propane (d) M ethane

16.H.T. consumers arebilled on the basis of .

(a) Units (b) M aximum demand

(c) Power Factor (d) All thethree

17.The Bureau of energy efficiency works under the Ministry of .

(a) Commerce (b) Environment & forest

(c) Power (d) Public works

18.The paper industry is designated under theEnergy Conservation Act

2001.(a) True (b) False

19.The world's oil reserves areexpected to last for .

(a) 100yrs (b) 80 yrs (c) 45 yrs (d) 90 yrs

20.The energy consumption code is applicable to commercial buildings

having .

(a) 800 KVA M.D. & 600 kw connected load

(b) 600KVA M.D. & 500kw connected load

(c) 1000 KVA M.D. & 700 kw connected load

(d) 1200KVA M.D. & 900kw connected load

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EnergyScenario

References

1. Encyclopediaof Energy - McGraw Hill Publication

2. Handbook of Energy Engineering, The Fairmont Press Inc - Albert

Thumann

3. Energy Handbook, Von Nostrand Reinhold Company- Robert L.Loftness

4. Cleaner Production - EnergyEfficiency Manual for GERIAP, UNEP,

Bangkok prepared by National Productivity Council

5. Statistics have been drawn fromBP Statistical Reviewof World Energy,

June 2003, International Energy Outlook, March 2002, Energy Information

Administration, Office of Integrated Analysis and Forecasting, US

Department of Energy, Washington

6. Planning Commission Statistics

7. The Energyand Resources Institute (TERI)

8. IEE Review (J ournal) March 2005.

,

In this Act, unless the contextotherwise requires:

a. Accredited energy auditor means an auditor possessing qualifications

specifiedunder clause(p) ofsub-section(2) ofsection13;

b. Appellate Tribunal means Appellate Tribunal for Energy Conservation

establishedundersection30;

c.Buildingmeansanystructureor erectionor part ofastructureor erection,

after the rules relating to energy conservation building codes have been

notified under clause (a) of section 15 of clause (l) of sub-section (2) of

section 56, which has aconnected load of 500kW or contract demand of600kVAandaboveandis intendedtobeusedforcommercialpurposes;

d. Bureau means the Bureau of Energy Efficiency established under

subsection(l) ofsection3;

e.ChairpersonmeanstheChairpersonoftheGoverningcouncil;

f. Designated agency means any agency designated under clause (d) of

section 15;

g. Designated consumer means any consumer specified under clause(e) of

section 14;

Annexure I

Features Extracted From The Energy Conservation Act 2001

Chapter I

Definitions

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h. Energy means any form of energy derived from fossil fuels, nuclear

substances or materials, hydro-electricity and includes electrical energy or

electricity generated from renewable sources of energy or bio-mass

connectedtothegrid;

i. Energy conservation building codes means the norms and standards of

energy consumption expressed in terms of per square metre of the areawhereinenergyisusedandincludesthelocationofthebuilding;

j. Energy consumption standards means the norms for process and energy

consumption standardsspecifiedunder clause(a) ofsection14;

k. EnergyManagementCentremeanstheEnergyManagementCentresetup

under theResolutionoftheGovernmentofIndiain theerstwhileMinistryof

Energy, Department of Power No. 7(2)/ 87-EP (Vol. IV), dated the 5th July,

1989andregisteredunder theSocietiesRegistrationAct,1860;(21of1860)

l. Energy manager means any individual possessing qualifications

prescribed under clause(m) ofsection14;

m.GoverningCouncilmeanstheGoverningCouncil referredtoin section4;

n. Member means the member of the Governing Council and includes the

Chairperson;

o. Notificationmeans anotification in theGazetteofIndiaor, as thecasemay

be,theOfficialGazetteof aState;

p. Prescribedmeansprescribedbyr ulesmadeunderthisAct;

q. RegulationsmeansregulationsmadebytheBureauunderthisAct;

r. SchedulemeanstheScheduleofthisAct;

s. State Commission means the State Electricity Regulatory Commission

established under sub-section (l) of section 17 of the Electricity Regulatory

CommissionsAct,1998;(14of 1998);

t. Words and expressions used and not defined in this Act but defined in theIndian Electricity Act, 1910 or the Electricity (Supply) Act, 1948 or the

Electricity Regulatory Commissions Act, 1998 shall have meanings

respectivelyassignedtothemin thoseActs.(9of1940,54of1948,14of1998).

1) The Bureau shall, effectively co-ordinate with designated consumers,

designated agencies and other agencies, recognise and utilise existing

resources and infrastructure, in performing functions assigned to it by orunder thisAct.

Chapter IV, Section 13

Powers and Functions of the Bureau

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EnergyScenario

2) TheBureau may perform such functions and exercisesuch powers as may

be assigned to it by or under this Act and in particular, such functions and

powers include thefunctions and powers to

a. recommend to the Central Government the norms for processes and

energy consumption standards required to be notified under clause (a) of

section14;

b. recommend to the Central Government the particulars required to be

displayed on labels on equipment or on appliances and the manner of their

displayunder clause(d) ofsection14;

c. recommendtotheCentral Governmenttonotifyanyuser or classofusers of

energyasadesignatedconsumerunderclause(e) ofsection14;

d. take suitablesteps toprescribeguidelines for energy conservation building

codesunder clause(p) ofsection14;

e. take all measures necessary to create awareness and disseminate

informationfortheefficientuseofenergyanditsconservation;

f. arrangeandorganisetrainingof personnel andspecialistsin thetechniques

forefficientuseofenergyanditsconservation;

g. strengthenconsultancyservicesin thefieldofenergyconservation;

h. promoteresearch anddevelopmentin thefieldofenergyconservation;

i. develop testing and certification procedures and promote testing facilities

for certification and testing for energy consumption of equipment and

appliances;

j. formulate and facilitate the implementation of pilot projects and

demonstration projects for thepromotion of efficient use of energy and its

conservation;

k. promote the use of energy efficient processes, equipment, devices and

systems;

l. promoteinnovativefinancingofenergyefficiencyprojects;

m. givefinancial assistanceto institutions for promoting efficientuseof energy

anditsconservation;

n. levy fee, as may be determined by regulations, for services provided for

promotingefficientuseofenergyandits conservation;

o. maintain a list of accredited energy auditors as may be specified by

regulations;

p. specify,byregulations,qualificationsfor theaccreditedenergyauditors;

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q. specify, byregulations,themanner andintervals oftimein which theenergy

auditshall beconducted;

r. specify, by regulations, certification procedures for energy managers to be

designatedor appointedbydesignatedconsumers;

s. prepare educational curriculum on efficient use of energy and itsconservation for educational institutions, boards, universities or

autonomous bodies and coordinate with them for inclusion of such

curriculumintheir syllabuses;

t. implementinternational co-operationprogrammesrelatingtoefficientuseof

energy and its conservation as may be assigned to it by the Central

Government;

u. performsuchother functionsasmaybeprescribed.

TheCentral Government may, by notification, in consultation with the

Bureau,

a. specify the norms for processes and energy consumption standards for any

equipment or appliance which consumes, generates, transmits or supplies

energy;

b. specifyequipmentor applianceor class of equipments or appliances, as the

casemaybe,forthepurposesofthisAct;

c. prohibit manufacture or sale or purchase or import of equipment or

appliance specified under clause (b) unless such equipment or appliances

conformtoenergyconsumptionstandards.

Provided that no notification prohibiting manufacture or sale or purchase or

import or equipmentor applianceshall beissuedwithin two years fromthedate

ofnotification issued under clause (a) of this section; (c) direct display of such

particularsonlabel onequipmentor onappliancespecifiedunder clause(b) andin suchmanner asmaybespecifiedbyregulations;

d. specify, haveregard totheintensity or quantityofenergy consumed andthe

amount of investment required for switching over to energy efficient

equipments and capacity or industry toinvestin it andavailabilityofenergy

efficient machinery and equipment required by the industry, any user or

class of users of energy as a designated consumer for the purposes of this

Act;

e. alter thelistofEnergyIntensiveIndustriesspecifiedintheSchedule;

f. establish and prescribe such energy consumption norms and standards for

designatedconsumers asitmayconsider necessary:

Chapter V, Section 14

Power of the Central Government to Facilitate and Enforce Efficient

use of Energy and its Conservation

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EnergyScenario

Provided that the Central Government may prescribe different norms and

standards for different designated consumers having regard to such factors as

maybeprescribed;

g. direct, having regard to the quantity of energy consumed or the norms and

standards of energy consumption specified under clause (a) energy

intensive industries specified in the Schedule to get an energy auditconducted by an accredited energy auditor in such manner and intervals of

timeasmaybespecifiedbyregulations;

h. direct, if considered necessary for efficient use of energy and its

conservation, anydesignated consumer toget an energyauditconducted by

an accreditedenergyauditor;

i. specifythematters tobeincluded for thepurposes ofinspection under sub-

section(2) ofsection17;

j. direct any designated consumer to furnish to thedesignated agency, insuchformandmanner andwithin such period, as may beprescribed,information

with regard

Documents

Part I Chapter I