Energy markets have become a key enabler in helping distribution services and industrial consumers to plan, meet and optimize their energy consumption in a transparent, competitive and flexible way. Over the past decade, electricity exchanges have made a significant contribution to increasing the efficiency of electricity generation, transmission, procurement and delivery.

Considering that only 6 percent of the electricity consumed in the country is traded on exchanges, this is a significant contribution.

The Perform, Achieve and Trade (PAT) program and the Energy Saving Certificates (ESCerts) it contains play a key role in building an efficient industry and ultimately a sustainable energy economy. According to the International Energy Agency (IEA), primary energy demand in India is currently around 900 Mtoe (million tonnes of oil equivalent) of which the industrial sector accounts for around 20 percent around 140 Mtoe.

Regarding electricity consumption, the consumption of the industrial and commercial sector, at 576,424 GWh, represents about 51% of the total electricity consumption in India, or 11 30,244 GWh. Therefore, it becomes extremely imperative to increase efficiency in this segment to make the entire industrial value chain economically and environmentally sustainable.

Driven by factors such as rising incomes and economic growth, India’s primary energy demand is expected to reach 1,500 Mtoe by 2030. Therefore, efficiency improvements are the backbone of the strategies. long-term decarbonisation of the electricity sector.

To address the relevant area of ​​energy efficiency, the Indian government enacted the Energy Conservation Act, 2001 and established the Bureau of Energy Efficiency (BEE) in March 2002. The government also launched the critical program Perform, Achieve and Trade (PAT) or earn carbon credits through the exchange of Energy Saving Certificates (ESCerts) on electricity exchanges for the industrial sector in order to benefit from their investments in energy efficiency.

While there is no doubt about the efficiency gains leading to savings, it was also deemed necessary to quantify these savings and monetize them, thereby motivating consumers to be proactive in implementing their strategies. About 13 lakh ESCerts traded on power exchanges as part of the PAT-1 cycle have greatly helped the designated energy-intensive industries to optimize their specific energy consumption and gain incentives through trading.

The weighted average price discovered during the first trading cycle was around 770 yen per certificate, implying around 100 crore of incentives for designated consumers. In addition, according to BEE data, at the country level, PAT-1 enabled industry to invest 2,600 crore in energy efficient technologies and helped reduce CO2 emissions by 31 million tonnes. .

ESCert trading

The PAT is a multi-cycle program encompassing several industrial sectors. The first cycle (2012-15) aimed to reduce the specific energy consumption of 478 industrial consumers in eight industrial sectors – aluminum, cement, chlor-alkali, fertilizer, iron and steel, paper and pulp, thermal energy and textiles . The PAT I cycle achieved an energy saving of 8.67 (MTOE which was 30% above target, saving approximately 9,500 crore.

Based on the success of cycle I of the PAT, the market instrument has been extended to the second cycle which includes three other sectors – oil refinery, railways and electric utilities – in addition to the previous eight industry segments. . Thus, a total of 11 industrial segments that consume a lot of energy are covered.

In its second cycle, from 2016 to 2019, the PAT aims to achieve an overall reduction in energy consumption of 8.869 MTEP for which energy reduction targets have been assigned to direct consumers in these 11 sectors.

The exchange of Energy Saving Certificates under Cycle 2 of the PAT began in the first quarter of fiscal year 2022 on the electricity exchanges. The second round has much greater potential in terms of net trade, as the system is deep enough and wide enough to achieve significant efficiency gains. It has 89 additional Designated Consumers (DCs) in existing sectors and 84 new DCs included in other industries, adding to a total of 621 industrial consumers across the country.

The Department of Energy and the Office of Energy Efficiency had notified the price per metric ton of oil equivalent for PAT cycle DCs at 18,402 for the year 2018-19.

Opening the way

As the fastest growing developing country, India’s industrialization and urbanization is expected to increase in the coming years. A crucial – and even more difficult – task ahead is to put the industrial sector on the path to widespread energy efficiency and sustainability and a shift to increasingly low-carbon fuels.

Energy efficiency is essential to promote industrial and economic competitiveness and growth. In addition to the focus on efficiency, the adoption of low-carbon renewable technologies for a competitive and sustainable energy supply as well as the continued search for other cutting-edge technologies, including green hydrogen, to decarbonize energy sources. “hard to reduce” sectors specific policy measures are needed to move towards carbon neutrality.

Additionally, as a signatory to the Paris Climate Agreement, India aspires to reduce global greenhouse gases (GHGs) in order to limit global temperature rise to 1.5 degrees Celsius and reduce emissions intensity by 33-35% from 2005 levels.

All these ambitious aspirations indeed require a radical overhaul of energy systems and an increased role for energy efficiency through innovative policy frameworks, advanced technologies and innovative approaches to accelerate energy efficiency operations and the transition to energy efficiency. low carbon economy.

The writer is a former secretary of the Ministry of New and Renewable Energies