BWI: Perform, Achieve & Trade (PAT) Scheme to Begin from April 2011

Press release from Business Wire India
Source: The Bureau of Energy Efficiency (BEE)
Thursday, February 10, 2011 03:15 PM IST (09:45 AM GMT)
Editors: General: Consumer interest, Economy; Business: Accounting & management consultancy services, Business services, Chemicals, Energy companies, Healthcare, biotechnology & pharmaceutical, Heavy industries, Information technology, Major diversified industrial groups, Retailers
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Perform, Achieve & Trade (PAT) Scheme to Begin from April 2011
PAT is a market-based mechanism to enhance cost-effectiveness in improving industrial energy efficiency under NMEEE

New Delhi, Delhi, India, Thursday, February 10, 2011 -- (Business Wire India) -- The National Mission for Enhanced Energy Efficiency (NMEEE) is one of the eight Missions set up under the Prime Minister's National Action Plan on Climate Change (NAPCC) in June 2008. Addressing integrated ― multi-pronged and long-term ― strate¬gies to achieve key goals in the context of climate change, the NMEEE functions under the supervision of the Bureau of Energy Efficiency (BEE), which reports to the Ministry of Power (MoP).

Among its four initiatives, NMEEE will usher in a unique programme, Perform, Achieve and Trade (PAT) to enhance cost effectiveness of improvements in energy efficiency in large industries and facilities, through certification of energy savings that could be traded. PAT will start in April 2011 and is likely to result in savings of 9.78 million metric ton of oil equivalent (MMTOE), in electricity saving terms, this amounts to an avoided capacity of 5623 MW over a period of three years.

BEE has prepared a draft paper as a basis for consultation on the proposed implementation framework after a joint effort by many officials from various ministries and departments as well as consultations with various stakeholders since February 2010.

PAT is provided for, as a mechanism by the Energy Conservation Act, 2001, which empowers (under Section 14 (e) of the Act) the Central Government to notify energy intensive industries as Designated Consumers (DCs). The MoP has notified 563 DCs in eight industrial sectors thermal power plants, fertilizer, cement, pulp and paper, textiles, chlor-alkali, iron and steel and aluminium.

Among other things, the Act requires DCs to:
a) Comply with the norms and standards of the Energy Conservation Act
b) Furnish reports of energy consumption;
c) Comply with the energy conservation norms and prescribed standards;
d) Purchase Energy Saving Certificates (ESCerts) in case of default; and
e) Pay a penalty for non-compliance.

BEE is designated as the overall regulator and dispute resolution agency and Energy Efficiency Service Ltd. (EESL) as the process manager.

PAT framework

The PAT framework is based on the requirements under the Energy Conservation Act, 2001, situation analysis of DCs, and the national goals of the Action Plan.

The scheme aims to provide incentives to industry to achieve better energy efficiency, beyond the specific energy consumption (SEC) stipulated for each DC. The first cycle of PAT which is going to be started from April 2011 aims to cover eight industrial sectors to achieve higher energy efficiency in a span of three years. The subsequent PAT cycle will include more sectors in addition to these eight.

It sets in place a monitoring and verification mechanism for the SEC (including auditing by an accredited verification agency), and the processes for issuing and trading in ESCerts as well as the use of ESCerts across sectors and their synergy with renewable energy certificates.

The energy efficiency improvement targets would be unit-specific; this means that each DC would be required to reduce its SEC by a fixed percentage, based on its current SEC (or baseline SEC).

While calculating the total energy input to the plant, all energy sources would be converted to a single unit ¯ i.e., Metric Ton of Oil Equivalent (MTOE) ¯ using standard engineering conversion formula. In this calculation, the following would be considered:
a) All forms of energy (electricity, solid fuel, liquid fuel, gaseous fuel, by-products used as fuel etc.), which are actually consumed for production of output;
b) Energy consumed outside the plant, including transportation, should not be accounted; energy consumed for construction work would also not be accounted, as this is not part of the direct production process;
c) Energy used through renewable energy sources should not be accounted; and
d) The 'Product' is the key parameter; SEC should be calculated taking into consideration only the typical practices in product output.

PAT targets

It is proposed to have targets for reduced SEC defined as percentages from baseline value to that of target year, 2011-2014. In this first commitment period of three years, it is proposed to have improvements (SEC reduction) of about four per cent, estimated to equal about 10 million metric tons of oil equivalent (mMTOE) energy. The guiding principles of the methodology are:
a) The reduction target for each plant will be based on an objective and transparent basis, ruling out one-to-one negotiations.
b) The overall target reduction of 10 mMTOE would be apportioned amongst the sectors in proportion to their relative energy use to ensure that the sector-wise reduction is proportionately equal.
c) Within each sector, the ratio of reduction required from each plant would also be proportionate to the existing percentage of energy consumption. Given the diversity of plant configurations within a sector, and of plant vintages, it is being proposed to apply gate-to-gate approach for each plant. While all DCs would be required to reduce their SEC, the less energy-efficient DCs in a sector would be required to achieve a greater reduction in their SEC than the more energy-efficient DCs in the same sector.
d) In the case of thermal power plants and fertilizer plants, the targets for SEC decrease are to be aligned with the existing tariff-setting context. In the case of thermal power plants, the Central Electricity Regulatory Commission (CERC) and in the fertilizer sector, the Department of Fertilizers are in the process of integrating these targets in their respective tariff setting exercise.
e) Other energy-intensive industries and sectors such petroleum refineries, petrochemicals, gas crackers/naphtha crackers, sugar, chemicals, port trusts, transport (industries and services), hydro power stations, electricity transmission and distribution companies, and commercial buildings and establishments may be added to the list of DCs and included in the PAT scheme in a phased manner.

PAT measurement and verification

The success of the PAT scheme would be ensured through a cohesive and transparent Measurement & Verification (M&V) system.

Data would be verified by Designated Energy Auditors (DENAs), with the audit activity managed by Energy Efficiency Service Ltd. (EESL). The broad principles that the DENA shall apply are:
a) Consistency in applying uniform criteria;
b) Transparency and documentary evidence;
c) Impartiality, independence, and safeguards against conflicts of interest; and
d) Confidentiality of all information obtained or generated during validation or verification.

Accreditation of DENAs will be undertaken by BEE under appropriate rules/ regulations in this regard. The designated energy auditor shall be a legal entity that can enter into contracts, make decisions independently, and may be sued for failure to perform as agreed in the contract. DENA will have appropriate legal and financial liabilities for all its actions under the PAT scheme and such liabilities will be an integral part of the accreditation.

There would not be any M&V during the intermediate years i.e., between 2011 and 2014. However, each DC would be required to submit its annual energy consumption report, in the required format, to BEE. In addition, the Energy Conservation Act requires DCs to conduct energy audits by accredited energy auditors. These would form a basis of M&V system in the target year.

Issuing and Trading in ESCerts

Energy Savings Certificates (ESCerts) would be issued to DCs that achieve the target reduction from the baseline SEC during the stipulated period of three years. The number of ESCerts issued would depend upon the quantum of energy saved during each target year. The value of each ESCert would be based on the crude oil price or will be decided by the trading mechanism. Apart from working on designing the protocols for the above, BEE is also engaged in designing the modalities to work with the two power exchanges (IEX and PXIL) for ensuring compliance and organising reconciliation of ESCerts.

The issue and trading of ESCerts would be managed through a suitable mechanism. The ESCerts will be traded on special trading platforms to be created in the two power exchanges, which will also maintain data on traded prices, traded volumes, and trends. Transfer agents or depositories shall hold the ESCerts in electronic form and provide client services in relation to ESCerts.

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CONTACT DETAILS
Saurabh Bhatnagar, The Bureau of Energy Efficiency (BEE), +91 9013258734

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