Market-based approach has to be part of the strategy

Energy efficiency, in a holistic sense, covers all steps for efficient use of energy resources, resulting in reduced need for production of energy, and thus, enhancing energy security. Energy (namely, electricity, coal, oil and gas) is consumed in various sectors such as industry, power,transport, domestic, etc. Naturally, any energy efficiency policy option will have to deal with all these sectors. The potential of energy savings in consumption as well as supply side of the energy chain (eg., production, conversion, transmission, transportation, and its use) has been found to be substantial. For example, one estimate shows that through suitable policy interventions, the energy saving potential of Delhi?s hotels, hospitals, offices and shopping malls may range between 20-50%, while the thermal efficiency of a power plant could be much higher than its present level of around 30% through improved technological interventions. In any energy efficiency debate, till recently, demand side management has been a less talked about subject, probably due to the complexity in the implementation of various interventions. By far, the most important tool in this regard is the application of suitable energy pricing that aligns with its true costs. Cost reflective energy pricing that gives a correct signal for its optimal use should be the underlying theme for any demand side management, with the caveat that ?should there be energy subsidy to the poor, it has to be properly targeted.? Additional policy options for demand side management in domestic sector, inter alia, include encouraging use of efficient lighting, giving appropriate signals for energy savings through time of day and time of use tariff, encouraging sale of more efficient appliances, incentivising adoption of efficient energy envelope options for commercial and government buildings, and encouraging solar heating systems in residential and commercial set-ups. In the agriculture sector, steps should be taken for encouraging farmers to use energy efficient motors for their pump sets (In India, about 60% of the pumps are driven by poor quality electric motors and the remaining are run on diesel), introducing consumption based agriculture tariff structure for electricity use in pump sets, etc. In the transport sector, policy options should include steps for discouraging the current shift from rail to road (by rationalising tariff in the railways sector and adopting multi-modal facility), encouraging exploitation of modes such as shipping and coastal shipping and inland water transport, increasing use of the public transport system, establishing fuel efficiency standards and promoting fuel-efficient vehicles. On the supply side, there is need for optimal deployment of scarce energy resources across new capacity addition, enhancing capacity through renovation and maintenance, encouraging capacity savings through efficiency improvements, and promoting energy efficient CDM (clean development mechanism) projects. Last but not the least, the strategy should also include non-conventional approaches such as adopting energy efficient better agriculture practices, encouraging better water management, introducing water harvesting and improved urban traffic management. A holistic approach is needed for energy efficiency. Albeit the legislative mandate enshrined in the Energy Conservation Act 2002, and Electricity Act 2003, there is a need to cover other energy sub sectors. A market-based approach has to be a part of a sustained strategy over a longer time-frame. Fiscal incentives (in the form of tax credits, tax deductions, rebates, excise duty concessions, etc) have to be appropriately designed, along with non-monetary incentives that may include lighter regulatory control (especially by the environment regulator) over the energy efficient players, preference for government procurement for energy efficient companies, etc. Since the players are many and diverse and there has to be consensus over particular policy options for their wide acceptability, a well-defined communication strategy should be developed at various levels, especially at the state level. The Delhi Development Sustainable Summit 2006, organised by Teri last week, called for coordinated action on an urgent basis.