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| Q&A: Ajay Mathur, Bureau of Energy Efficiency | | 'Energy saving certificates will cut carbon emissions by 3%' |
| Sanjay Jog / Mumbai Sep 05, 2010, 00:00 IST |
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 The first phase of the perform, achieve & trade (PAT) mechanism, flagship of the National Mission on Enhanced Energy Efficiency (NMEEE), is expected to start from April 1, 2011. Ajay Mathur, director general of the Bureau of Energy Efficiency (BEE), explains it to Sanjay Jog. Edited excerpts:
What is the PAT mechanism?
It builds on the requirements in the Energy Conservation Act, 2001, for notified industrial facilities to comply with energy consumption norms set by the government. In March 2007, the government notified facilities consuming more than a specified unit quantity of energy in each of nine sectors — aluminium, cement, chlor-alkali, pulp & paper, fertilisers, power generation plant, steel, railways and textiles. These designated consumers, numbering about 700, consume more than 230 million ToE (tonnes of oil-equivalent) every year, more than half the country’s total consumption of fossil fuels.
The PAT mechanism will enable designated consumers who use less energy then the norm set for them to earn Energy Saving Certificates (ESCerts) for the excess savings. These ESCerts can be used by other designated consumers (who may find it expensive to meet their norms) for compliance. They will be denominated in tonnes of oil-equivalent (ToE) and exchanged on special trading platforms to be created in the two power exchanges (IEX and PXIL).
With the use of the ESCerts, more than 10 million tonnes oil equivalent of energy, about two per cent of our energy supply, would be available at no additional cost to the country. It would also avoid carbon dioxide emissions of about 25 million tonnes every year, about three per cent of our annual carbon dioxide emissions.
How are the norms set?
In terms of the specific energy consumption (SEC) of a facility, defined as energy consumption per unit of output, with both energy input and product output being defined on a gate-to-gate basis. The problem in specifying the norms is that almost all the industrial sectors are characterised with a wide bandwidth. In almost all sectors, most new plants are amongst the most energy-efficient; older plants have much higher SEC. The wide bandwidth is a reflection of the differences in the energy-saving possibilities and level of effort needed amongst plants because of their varying vintage, production capacity, raw material quality, product mix.
Under the PAT mechanism, it is proposed to divide the sectoral bandwidth into three of four ranges. All facilities within the same bandwidth range would have the same SEC percentage reduction target, specified in relation to the existing SEC of an individual facility.
How are the energy consumption reduction targets fixed ?
Objectively and transparently. This rules out one-to-one negotiations for this purpose, undesirable from the viewpoint of credibility and legal soundness, as well as from that of information asymmetry. First the overall target reduction would be apportioned amongst sectors. It is proposed that the sectoral reduction is equal, in percentage terms, to the percentage of the energy consumption of all covered facilities in a sector to the overall energy consumption of all designated consumers. The next level of allocation of the reduction target would correspond to the disaggregation of the sectoral reduction target to each facility within the sector. Given the diversity of plant configurations and plant vintages, it is being proposed that the percentage reduction in SEC for a facility is proportional to the ratio of the facilities SEC to that of the most efficient one in that sector.
How does passage of the Energy Amendment Bill by the Rajya Sabha help?
The Bill included 16 amendments which seek to provide flexibility in the manner in which energy savings are achieved in industry and to enable the development of high-quality manpower needed to meet the energy conservation needs. The present level of penalty for non-compliance for a full year is only Rs 3.75 lakh. As PAT is a market-based instrument, the existing non-compliance penalty would tend to become the marginal cost of abatement for a Designated Consumer. The penalty is therefore being linked to the level of non-compliance. It is proposed to be increased to Rs 10 lakh for the first offence (Rs 10,000 at present) and in the case of continuing failure, with an additional penalty not be less than the price for every tonne of oil equivalent of energy in excess of the prescribed norms (at present Rs 1,000 per day).
In addition, a key set of provisions comprise transfer of the provisions for the Appellate Tribunal for Energy Efficiency to the existing Appellate Tribunal on Electricity, created under the Electricity Act, 2003, thereby obviating the need and expense for a separate Appellate Tribunal.
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