dsmreport_group5

7/31/2019 dsmreport_group5

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2012

Group 5

Srinivas Singh

Pratik Kundu

Shradha Sapra

Vikas Patel

GREAT LAKES IEMR

9/18/2012

DEMAND SIDE MANAGEMENT


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1Demand Side Management

INDEX

Topic Page No.

BACKGROUND 2

DEFINITION AND SCOPE OF REPORT 3

EXISTING SITUATION AND PROJECTIONS 4

CRITICAL ANALYSIS OF ISSUES 7

CONCLUSIONS/RECOMMENDATION 12


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BACKGROUND

India has a total installed capacity of is nearly 2, 05,340 MW as of June, 2012 plus captive

power plant produces additional 31,500 MW of power. The break-up has been shown in the

chart below. Power is in the concurrent list of Constitution, due to which both the Central andState laws can be implemented, however in case of any clash, the Central law shall prevail. The

country had been achieving a growth rate of nearly 8% in the past few years but lately, the

situation looks gloomy and a growth of even 7% seems to be very ambitious. In such times the

notion of saving electricity is very crucial for the country, not only for economical but also

developmental reasons. The present power system in the country is struggling to overcome

chronic power shortages and poor power quality. With demand exceeding supply, severe peak

(around 18%) and energy (around 12%) shortages continue to plague the sector. Shortages are

exacerbated by inefficiencies in power generation, distribution and end-use systems. The

inefficiencies in the end-use systems is due to irrational tariffs, technological obsolescence of

industrial processes and equipment, lack of awareness, nascent energy services (ESCO)

industry, and inadequate policy drivers (such as energy efficiency standards and labeling

system, financial incentives) in India.

The elementary problem being faced by the power sector is the poor financial conditions of the

State DISCOMs or predecessor entities in most states. Over the years, the SEBs had been

causing an increasingly larger drain on the State Government budgets, now the legacy

continues with the State DISCOMs contributing to 10-15% of the state fiscal deficits adversely

impacting much needed investments in the social sectors of health and education. The powersector is operating with very low or no returns on the equity and no contribution to future

investments from internal resources. This results in inadequate investment in additional

generation capacity which is likely to further exacerbate the existing gap between power

supply and demand.

Thus, the Indian power sector faces two fundamental and interdependent issues: inferior

operational performance leading to poor revenue cash flow, and as a consequence, inadequate

capital mobilization for sector expansion. Current approaches do not completely address these

13%

57%

11%

2%17%

Installed Power Capacity in India (June 2012)

Captive

Thermal

Renewable

Nuclear

Hydro


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issues. Power sector plans focus exclusively on new supply and lately, to an extent, on

improving supply efficiency and reducing T&D losses (for instance, the latter through the

RAPDRP). A major opportunity lies in the DSM system in the country, which is yet to be utilised

properly.The historic problems of the Indian power sector can be traced to three root issues

unacceptably high T&D losses, large commercial losses due to poor billing, metering, collection

and energy theft, and, low end-use efficiency of energy use specifically in agriculture. There isnow widespread agreement that restoration of the financial health of the sector can be only

enabled by demand side initiatives. To be specific, the electricity distribution area is where the

historic problems converge. This convergence is most felt in the agricultural sector where the

water-energy nexus is a major root cause for the precarious financial condition of the power

sector in India today.

Water withdrawal is an energy intensive operation throughout the agricultural sector, with the

result that 30-40% of Indias power consumption is used for irrigation. The irrigation pumping

electricity use is at the heart of the subsidy issue and along with electricity theft and T&Dlosses, comprise the root cause for the sectors financial dilemma. The reasons a power utility

in India may undertake DSM include: a) demand outstripping the capability to provide supply,

particularly peak supply, b) improve the cash flow revenues of the utility, c) improve the quality

and reliability of power supply, and d) mitigate the impact of rising tariffs to the subsidised

customers. For agricultural sector particularly, utility DSM is highly beneficial because of the

subsidized prices and high costs of supply resulting from technical and commercial losses.

DEFINITION AND SCOPE OF REPORT

Demand Side Management (DSM) is described as the planning, implementation and monitoring

of utilitys activities designed to encourage customers to amend their electricity consumption

patterns, both with respect to timing and level of electricity demand so as to help the

customers to use electricity more efficiently. Various factors such as increasing economic

activity and population growth are resulting in additional pressure on ever increasing power

demand when the country is already facing power shortage. In such a scenario, DSM can

complement supply-side strategies to help meet electric service demands by assisting utilities

avoid or delay costly capacity additions by slowing demand growth. To promote DSM, theGovernment is continuously introducing various policies and programmes targeting different

sectors such as appliances, buildings, industries, etc. Despite these policies, the potential

remains largely unrealized due to various technical, financial, economic, and institutional

barriers.

DSM is a concept in which a power utility, such as an unbundled distribution utility, manages

the demand for power among some or all its customers to meet its current or future needs.

DSM is either implemented directly through utility sponsored programs or through market

intermediaries like ESCOs. In India, DSM can be achieved through energy efficiency, which is

the reduction of kilowatt hours (kWh) of energy consumption or demand load management,

which is the reduction of kilowatts (kW) of power demand or the displacement of demand to


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off-peak times. In the former category are programs such as awareness generation programs,

customer or vendor rebates for efficient equipment, etc., while the latter includes time-of-use

tariffs, interruptible tariffs, direct load control, etc. Specific types of programs depend on the

utility objective: peak clipping, load shifting, strategic conservation or strategic load growth.

Reductions in energy demand and consumption at the end users premises can free up

electricity generation, transmission and distribution capacity at a fraction of the costs requiredto provide new capacity. The cost of saved energy has been estimated to be as low as 10% of

the cost of added capacity for some DSM measures. In addition to avoided and deferred

capacity costs, support for energy efficiency at its customers installations brings a utility into

closer contact with its clients, often resulting in better service, and allowing a more efficient

future planning process.

This report aims at understanding the Demand Side Management (DSM) actions taken by the

utility that influence the quantity or patterns of use of energy consumed by end users, such as

actions targeting reduction of peak demand or reduction of energy consumed during periodswhen energy-supply systems are constrained. While, Peak demand management does not

necessarily decrease total energy consumption but could be expected to reduce the need for

investments in networks and/or power plants, the strategic conservation would lead to

reduced energy consumption. Given the acute power shortage in the country and the recent

collapse of the grid, it is imperative that the DSM program is carried out in a better and a more

all-encompassing way than it is being done presently, we shall take a look at a couple of efforts

that had been taken globally to arrest the rising inefficiencies in power transmission and

distribution from the government as well as the consumers perspective. This is to bring to

notice what all various kinds of measures that can be undertaken by the powergeneration/transmission/distribution/regulation institutions in the country for proper

implementation of the DSM techniques.

The benefits from the DSM initiatives are numerous and continue well ahead even when the

initiatives are consciously stopped:

Reductions in customer energy bills

Reductions in the need for new power plant, transmission and distribution

networks

Stimulation of economic development

Creation of long-term jobs due to new innovations and technologies. Increases in the competitiveness of local enterprises.

Reduction in air pollution

Reduced dependency on foreign energy sources.

Reductions in peak power prices for electricity.


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EXISTING SITUATION AND

PROJECTIONS

For long electricity has been considered as a public good instead of a commodity, the first task at handthus becomes, acceptance of the underlying assumption that electricity should be viewed as a

commodity instead of a public good, the principle stated above is equally applicable to electricity.

When consumers do not see the real cost of electricity in their power bills, they over consume energy,

and that misdirects excessive capital and fuel resources to the power sector. This is especially true

during peak periods, when the cost of producing electricity is much higher than during the off-peak

periods, largely because electricity cannot be stored in large quantities economically due to

technological reasons.

DSM is an umbrella term that includes several different load shape objectives, including load

management (LM), energy efficiency (EE) and electrification. The load curve can be changed if DSMmeasures are followed, the diagram below shows what can be done through DSM initiatives.

DSM in the Agricultural SectorThe agriculture sector in India uses 85% of the available fresh water. However, on-farm

irrigation efficiency is only 20-50%. The other 50-80% is wasted. Combining these data indicate

that the agricultural sector in India is wasting from about one half of the countrys total fresh

water supply.

On the energy front there are inefficiencies as well. The agricultural sector, on the average,

accounts for about 30% of the total electricity consumption in India. The figure is somewhat

higher in the agricultural states like AP, Gujarat, MP, UP, Karnataka, Haryana, etc. where

agricultural electricity use is between 35-45%. However from a revenue perspective, the sale

of this electricity amounts to no more than 5-10% of the state electricity boards revenues. The

reason for this perverse state of financial affairs is the adoption of flat rate pricing for

agricultural power. Under this system, when a farmer pays a fixed price per horse power per


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THE VICIOUS CYCLE IN ENERGY AND WATER USE IN

AGRICULTURE11kV/440 V SUBSTATION

Power Curtailment Policy

Long LT lines

I2R Losses; low p.f

Large DTRsLack of resources

Poor Engg. Standards

Sub-optimal planning

Indiscriminate water pumping

Resistance to Tariff increase

Spurious nameplates

Flat rate

Resistance to metering

Customer dissatisfaction

Installation of oversized

pumpsets

Poor VoltageHigher LT Dist. losses

Motor burnouts

DTR burnouts

Load Shedding

Rostering of Power

Low Diversity

Factor

Ground water depletion

Poor water quality

month for electricity, or what is termed as a flat-rate system, the marginal cost of pumping

water is zero. This leads to energy wastages, over pumping and inefficient selection of crops.

Moreover flat rate pumping masks the true cost of power to farmers. When unreliability is

factored in, most farmers incur costs of Rs. 2-3/unit more than what typical urban dwellers

pay. From a political-economic perspective, the flat rate structure enables the state to give the

impression of providing subsidized power to the rural voting population whether or not thatpopulation actually receives the intended subsidy.

Summing up, the tariff structure and the poor combination of technology and management are

responsible for water loss, unsustainable exploitation of ground water and the high energy

losses associated with the distribution and end-use of electricity in irrigation water pumping.

Board of Energy EfficiencyIn the year 2001, the Energy Conservation Act, 2001 was passed which led to the set-up of the BEE

(Bureau of Energy Efficiency), whose tasks were to make the following a mandate:

Standards and labelling for appliances

Energy Conservation Building Codes

Energy consumption norms for Designated Consumers

Certification and accreditation of energy auditors and energy managers

Dissemination of information and best practices


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Capacity Building

Establish EE delivery systems through Public-Private Partnerships (ESCO) route

The various programmes that were undertaken under the DSM initiatives were:

Bachat Lamp Yojana to promote energy efficient and high quality CFLs as replacement

for incandescent bulbs in households.

Standards & Labelling Scheme targets high energy end use equipment and appliances to

lay down minimum energy performance standards.

Energy Conservation Building Code (ECBC) sets minimum energy performance standards

for new commercial buildings.

Agricultural and Municipal DSM targeting replacement of inefficient pump-sets, street

lighting, etc.

Operationalizing EC Act by Strengthening Institutional Capacity of State

Designated Agencies (SDAs): The scheme seeks to build institutional capacity of the

newly created SDAs to perform their regulatory, enforcement and facilitative functions

in the respective States.

Energy Efficiency Improvement in Small and Medium Enterprises (SMEs): To stimulate

energy efficiency measures in 25, high energy consuming small and medium enterprise

clusters.

According to a report by BEE (2010), the present statuses of these projects are:

Programme BEE NPC

Electricity Saved

(MU)

Avoided

Generation (MW)

Electricity Saved

(MU)

Avoided

Generation (MW)

Standard &

Labelling

4369 2468.9 4350.92 2179.31

Industry EC Awards 2450.6 358.6 2450.6 358.6

Energy Savings -

SDA

4588.25 855.66 1874.25 304.59

Buildings 144 27.5 21.06 3.08

Bachat Lamp Yojana 24 20 24 22.43

Total 11575.85 3730.66 8720.83 2868.01

Thus, out of a targeted savings of 10000 MW by 2010, only 6600 MW could have been

achieved, which goes to show that the programs were only 66% successful, and some

different measures need to be taken, to carry forward these initiatives in future.


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CRITICAL ANALYSIS OF ISSUES

The way forward is clear; Government should begin their liberalization program by focusing on

pricing reform. People in all countries do respond to price signals. It is also to be kept in mind

that the restructuring and commercialization activities of the utilities should be designed tomaximize the opportunity of sending cost-reflective price signals to customers and there should

be a premium on price stability over economic efficiency.

Large DSM expenditures on energy efficiency and conservation programs were resulting in

revenue losses to the utilities. These concerns were justified, since DSM spending was lowering

sales but the utilities had to cover their fixed costs regardless of the amount of electricity that

was sold. Several decoupling mechanisms were devised to make the utilities whole by

ensuring that they would recover their revenue requirement regardless of the amount of

power sold. In other words, recognizing that utilities had large fixed costs, the mechanismswould ensure that sufficient revenues would be collected to cover these fixed costs, even if

sales went down.

Types of Price Responsive DSM Programs

PriceResponsive

DSM

Programs

LoanCurtailment

DLC

Demand Bidding

Buy back program

Critical Peak Pricing

EDRP

DADRP

DynamicPricingProgram

Time of Use Pricing

Critical Peak Pricing

Extreme Day Pricing

Extreme Day-CPP

Real Time Pricing


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CRITICAL ISSUES FOR INDIA

Actual savings often fall short of projections, creating a credibility problem for new

programs.

Free riders often join the program and are paid incentives even though they would have

taken the same actions (e.g., purchase an efficient light bulb or air conditioner) even inthe absence of the program.

Program costs often exceed expectations, rendering the programs cost-ineffective.

Utilities will not implement DSM programs without an assurance of cost recovery, the

availability of sales-revenue decoupling mechanisms and financial incentives for

shareholders.

In many situations, standards for appliances (STAR Rating) and building codes (Green

Buildings) may be the cheapest way to achieve long term efficiency gains.

PARAMETERS TO BE CONSIDERED

Targeting customer groups for a Phased Implementation

Differentiating quotas and establishing criteria for differentiation among industrial

customers

Trading quotas in the marketplace

Establishing quotas for distribution utilities

Nature of incentives and penaltiesshould threat of disconnection be used to enforce

quotas?

Pre-paid meters, half-hourly meters and smart meters

% reduction target quota

Communicationidentifying messages and key players

Various countries across the globe has been trying various DSM measures to decrease their

load in the grid and reduced dependency on grid power, some utilise renewable energy, othersdecrease consumption usage, however DSM objectives can be met by pursuing common goals

and objectives.

CALIFORNIAS 20/20PROGRAM

Customers were rewarded for voluntarily reducing their monthly consumption

compared to the prior year by providing a 20% rebate on the commodity portion of

their electricity bill for a 20% minimum reduction in monthly consumption.

The rebate applied only to the summer months of June through September. All

customers were eligible to participate,


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Rebate for large commercial and industrial customers with time-of-use meters was

based on savings in on-peak demand.

Over 200 different programs involving all sectors

Rebates to customers who used less electricity than in the previous year

Public Awareness Campaign

Extensive daily coverage in the media

Rebates for purchase of efficient appliances and equipment

Updated efficiency standards

Higher electricity prices to some consumers

Estimated electricity savings: 14%

Duration of shortage: approximately 9 months

Advanced warning: approximately 12 months

Energy and Capacity Savings in the 20/20 Program

BRAZILS POWER RATIONING MEASURES

As a country reliant on hydroelectricity for its power, Brazil faced a severe shortage of power

when it was hit by a drought in 2001. So it had to go in for a very strict Demand Side

Management response, under emergency to curb the shortage of power. Thus this was when

they undertook these measures.

Quota System approach, in which each customer was obligated to reduce their

consumption relative to a baseline with financial penalties and disconnection for non-

compliance.


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Electricity rationing

Penalties for failure to cut consumption

Extensive coverage of shortage by media

Daily reports on reservoir status

Distribution of conservation devices to the poor

Strong national commitment to conservation

Higher savings goal for public sector

Fuel switching

Estimated electricity savings: 20%

Duration of shortage: approximately 10 months

Permanency effect in Brazils rationing measures

Consumption per household in Brazil

GEOTHERMAL BASEDACSYSTEMS

A traditional air-conditioner functions by absorbing heat from the room and expelling it into

the environment. It uses more power when the outdoor temperature is high (say, 45-49

degrees centigrade) and less when the outdoor temperature is lower (for instance, in

September or October).

This effect is put to use by new geothermal based air-conditioning systems to enhance

efficiencies of traditional AC systems by more than 60%. The geothermal based system makes

use of the ground (or the soil) to generate cooling for the air-conditioning equipment


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throughout the year, thus saving energy required for operating ACs. In fact, a geothermal

system can help cut your power bill by as much as 80%.

CLOSED CIRCUIT SOLAR WATER HEATERS

In a "close-coupled" SWH system the storage tank is horizontally mounted immediately above

the solar collectors on the roof. No pumping is required as the hot water naturally rises into the

tank through thermosiphon flow. In a "pump-circulated" system the storage tank is ground- or

floor-mounted and is below the level of the collectors; a circulating pump moves water or heat

transfer fluid between the tank and the collectors. This reduces the energy consumed from

geysers.

CONCLUSION/RECOMMENDATIONS The Governments, including the Ministry of Energy and appropriate Electricity Regulatory

Commissions, should reform rate design, encouraging consumers to shift their usage to less

expensive periods. They should reform the rate level, encouraging consumer to use less

electricity if initially rates were lower than average costs, as they are in most developing

economies. DSM programs should employ market pull strategies. It is important to create a

self-sustaining process involving all members of the value chain, including the equipment

manufacturer, wholesaler, retailer, installation and maintenance contractors and the end use

customer. This process helps to transform the market infrastructure and is often referred to asmarket transformation.

We felt that the Demand Side Management involves actions at the level of consumers which

would ultimately depend upon numerous factors. These recommendations therefore focus on

the necessary regulatory interventions which have to be primarily in the areas of appropriate

pricing of electricity and enabling regulatory framework for consumer-utilities partnership.

Operational issues should be responsibility of the utilities.

The Forum of Regulators should organize training courses in the area of DSM forcapacity building of the personnel of the SERCs, the staff of DSM, Cells of the utilities in

which the representatives of the State Governments may also be invited.

The SERCs could also consider giving a slightly higher return on equity for the

investments made towards DSM measures.

The Bureau of Energy Efficiency (BEE) must follow-up with its various programs that

have been launched and check the status of the same. BEE needs to be given more

teeth.

Facilitate grid interconnection for Co-generators

State level Energy Efficiency Plans

Mandate least cost Planning Energy Conservation Fund


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Focused DSM programs like Golden Carrot for efficient products, Efficient Lighting

Initiative, Municipal Water Pumping, Efficient Motors Programme

Strengthen labelling Initiative

Energy Performance of New Buildings / Facilities

Improving Energy Efficiency in the Transport Sector by Strengthening Urban Public

Transport / Mass Transit Systems, Increasing Freight Traffic by Railways and Staggering

office / school timings in Urban areas to balance traffic loads

Private Utilities like NDPL and BSES have been doing pretty commendable task towards

DSM and Energy Efficiency. They must be given additional powers and grants from the

government to take this work further.

Primary issue being faced now is educating the consumers for Energy Efficiency.

Agriculture sector is one which can be used as an example for the entire country, a

domain where 50%-60% energy used is wasted, can be brought down to a meagre

number, which again due to technical issues.

Despite the recent blackout in the country, various DISCOMs have been still over-

drawing from the grid and happily paying the meagre penalty being charged. Besides

increasing the penalty amount, DISCOMs need to be disciplined and educated about the

same.

Since energy savings from S&L products are market transformation related , it is

recommended that , towards improved reporting and data accuracy , BEE may consider

specific studies (CRISIL,ICRA,CMIE etc.) pertaining to the market research and market

transformation of BEE S&L schemes, as also to identify enablers for increasing

penetration of S&L products etc.

Since energy savings from S&L products are market transformation related , it is

recommended that , towards improved reporting and data accuracy , BEE may consider

specific studies (CRISIL,ICRA,CMIE etc.) pertaining to the market research and markettransformation of BEE S&L schemes, as also to identify enablers for increasing

penetration of S&L products etc.

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