Perform Achieve and Trade (PAT) Scheme –Way Forward

K. K. Chakarvarti, Energy Economist,

Bureau of Energy Efficiency

10th Green Cementech 201416 May,2014

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INTRODUCTION

� India's rapid economic growth has made it one of the fastest growing markets in the world.

� That has been translated into the expansion in its total energy use for the past five decades.

• India’s total energy consumption was 750 million toe in 2011, and import dependence of 28%

• This consumption is expected to strain economy and society due to– Limited domestic fuel availability– Environmental impacts

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INTRODUCTION

• Recognizing the formidable challenges of meeting the energy needs, improving energy efficiency has become important component of India’s energy policy.

• Also as a part of domestic actions by India to tackle, mitigate and adapt to climate change, the National Action Plan on Climate Change (NAPCC) was launched by India in 2008.

• NAPCC outlined eight missions – one of them being the National Mission for Enhanced Energy Efficiency (NMEEE).

• The Perform Achieve and Trade (PAT) scheme under NMEEE is a market-based mechanism to enhance energy efficiency in the large energy-intensive industries.

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Perform Achieve and Trade scheme

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2001 2014-2015

Energy

Conservation

Act enacted

National Action

Plan on Climate

Change released

Sector studies

Commenced to

identify DCsBaseline data

collection beginsFinancial outlay of over

US$20 million approved

National Mission for

Enhanced Energy

Efficiency (NMEEE)

Approved by

Ministry of Power

Nation wide Consultation

Workshops organised;

consultation

continues through 2012

NMEEE approved by

Prime Minister's Council

on Climate Change

Energy Conservation Act

amended to make provisions for

issue of energy saving

certificates, imposition of penalty

for non compliance and trading

Of ESCerts

Perform, Achieve and Trade

(PAT) scheme came into effect;

first compliance period begins

(2012-2015)

2008 2009 2010 2011 2012

PAT Overview and Elements

� Covers 478 plants in 8 energy intensive industry ( Aluminium, Cement, Chlor-alkali, Fertilizer, Iron & Steel, Paper & Pulp, Textile and Thermal Power Stations), and gate to gate boundary concept adopted.

� Energy consumption of these plants was about 1/3 rd of the total energy consumed in India in the baseline year (2009-10).

� Large variations in energy intensities of different units in almost every sector� Key Goal :Mandate Specific Energy Consumption improvement � Energy Intensity reduction target for each unit based on its current efficiency in

base line (2009-10)� Multi- cycle process –First PAT cycle till 2014-15� Design based on extensive consultations over 2010-12

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Base line Studies completed,

Draft PAT Rules prepared

and feed back sought on draft targets

Assessment year of

First PAT Cycle

� Resolving the complex task of establishing sub-grou ps within a PAT Sector based on product mix and development of Energy Performance Indicators on normalized basis at base line, which is normally affected by:

� Different Raw Materials used, fuel type and use of imported and self generated power

� Process Technology employed and

� Product Mix and intermediately products imported and exported

� Agreement on Target setting approach- based on gate to gate specific energy consumption (SEC)

- each designated consumer has to reduce SEC in target year (2014-15) as compare to baseline year (2009-10)

- percentage reduction is based on efficiency in baseline year; efficient units in a sector have a lower percentage reduction target as compare to less efficient units

PAT Overview and Elements

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Cement Sector: Baseline and Targets - An Example

Energy Transition for Industry: India and the Global Context, IEA, Jan 2011

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Although Indian Cement Sector being at par with the World best energy intensity, but still has agreed for energy saving targets of 0.85 million ton of oil equivalent energy under PAT

Japan

India

National Target of Energy Saving among all Sectors

S.NO. Sector

No. of

Identified

DCs

Annual

Energy

Consumpti

on (Million

toe)

Share

Consumpti

on (%)

Apportioned

Energy

Reduction

For PAT

Cycle-1

(Million toe)

1 Power

(Thermal) 144 104.56 63.38% 3.211

2Iron & Steel 67 25.32 15.35% 1.486

3 Cement 85 15.01 9.10% 0.815

4Aluminium 10 7.71 4.67% 0.456

5 Fertilizer 29 8.20 4.97% 0.478

6Paper & Pulp 31 2.09 1.27% 0.119

7 Textile 90 1.20 0.73% 0.066

8Chlor- Alkali 22 0.88 0.53% 0.054

Total 478 164.97 100.00% 6.686

Total EE Projects planned in 2012-15: 2057Total anticipated investment : US$ 3095 million

The direct benefit for the participating industries in this period is reductions in input costs related to energy of approximately U S$ 1250 million.

Sectoral Share in Energy Saving Target (%)(2012-15)

�Reduction in India's CO2 emissions by 24 million tons / year in 2014-15.

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M&V, Trading Mechanism� Monitoring and Verification

- Designated Consumers monitor and record their energy purchases and product sales- Data will be verified by accredited energy auditor for verification & check verification

- Check verification on sample basis taken by BEE� Trading Mechanism and trading of excess savings

- Energy Saving Certificates (ESCert) issued for savings in excess of target;

- Value of one ESCert equal to one metric ton of oil equivalent of energy.-Certificates can be traded with other designated consumers on two power exchanges, who can utilize them to show compliance

- Certificates can be banked for one more cycle- In the trading mechanism of ESCerts, Central Electricity Regulatory Commission (CERC) will be the Regulator and BEE would be Administrator of the market of ESCerts.

- An agency is being retained for Depository of ESCerts, and managing the accounts of DCs

� Penalty for Non-Compliance- Quantum of non- compliance is deficiency in meeting target in the Assessment year - Penalty is the energy cost of quantum of non- compliance

- Quantum of non- compliance is provided in verification report and penalty isadjudicated by the State Electricity Regulatory Commission

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Normalization Factors

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Development of Normalization Factors, Monitoring , Verification and Trading

PAT Widening

Overcoming of PAT Challenges

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Market Transformation

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Market Transformation due to PAT–Common Areas of Investment

Energy Efficient Technologies and Processes

Power, Steel, Cement, Fertiliser, Pulp & Paper, Aluminium, Chlor Alkali, Textile

Waste Heat Recovery/ Co Generation

Steel, Cement, Pulp & Paper, Aluminium, Chlor Alkali, Textile

Alternate Fuel and Raw MaterialSteel, Cement, Pulp & Paper, Aluminium, Chlor Alkali, Textile

Renewable Energy

Steel, Cement, Pulp & Paper, Aluminium, Chlor Alkali, Textile

Biomass as Fuel

Steel, Cement, Pulp & Paper, Aluminium, Chlor Alkali, Textile

High Pressure Boiler for Optimum power outputPulp & Paper, Aluminium, Textile

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Market Place due to PAT

Adoption of Best Available EE Technologies increased

Abatement of Wastage and Leakages

Adoption of Renewable energy

Recycling

Increase in R&D activities and adoption of ISO 50001 EnMs by PAT industry

Capacity Building of Energy Auditors/Agencies

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Conclusions-A Scheme to incentivize the industry to achieve

better energy efficiency

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CONCLUSIONSCONCLUSIONS� The PAT scheme is a unique and innovative programme with no

precedence anywhere else in the world.

� PAT would become a valuable model for other emerging economies to adopt for their own energy efficiency programmes with a businessperspective.

� The PAT scheme also sets an innovative approach of introducing market-based instruments within a regulatory framework to encourage compliance.

� PAT has encouraged adoption of energy efficient and Low carbon technology, use of renewable , waste heat recovery and use of Alternate fuel and raw materials (AFR) in Indian industry.

� PAT Scheme is also compatible with ISO 50001 Energy Management System. It is anticipated that about 200 units under PAT may go for ISO 50001 Certification in 2014-15, as PAT industry already full fill majority of the prerequisites of ISO 50001 ( such as plant boundary fixation, establishment of energy performance indicators and targets, normalisation of assessment year operating conditions with base line year etc.)

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First Prize (US$ 2000) winning painting in “National Painting Competition for School Students on Energy Conservation” : December,2013