Demand-side Management: Saving utility customers money by reducing energy consumption

Saving utility customers money by reducing energy consumption

India’s building sector energy consumption is expected to grow by an average of 2.7 per cent per year from 2015 to 2040, which is more than twice the global average. About 70 per cent of this building sector energy demand will come from the residential sector. To this end, utility-led demand-side management (DSM) programmes represent a significant and largely untapped potential for realising grid-wide energy efficiency gains in India. BSES Rajdhani Power Limited (BRPL), along with Oracle Utilities – and with the help of 0.2 million domestic customers chosen for this pilot programme in BRPL’s Delhi service area – is testing the country’s first large-scale, utility-led behavioural energy efficiency programme using Home Energy Reports (HERs). The novelty of this programme prompted the creation of a white paper, titled “Behavioural Energy Efficiency Potential in India”, co-authored by the Alliance for an Energy Efficient Economy (AEEE) and Oracle Utilities. The white paper highlights the importance of utility actions, and policy and regulatory reforms to tap this huge opportunity going forward.

HER-based behavioural energy efficiency programmes in developing economies

While most behavioural energy efficiency programmes around the world today have been carried out in industrialised economies, such programmes have a potential to achieve energy savings and greenhouse gas emissions reduction at scale among domestic/residential electricity consumers in developing economies as well. Two recent examples are Tenaga Nasional Berhad’s (TNB) HER programme in Malaysia and BRPL’s HER pilot programme in New Delhi. In 2015, Malaysia launched an HER programme led by TNB. On an average, TNB customers receiving HERs have decreased their energy usage (relative to the control group, which receives no such information) by 1-3 per cent. TNB’s HER programme – the first in Association of Southeast Asian Nations (ASEAN) and the first such programme in a non- Organisation for Economic Co-operation and Development (OECD) country – performs favourably compared to similar programmes around the world, even when compared to regions with more mature utility-led DSM initiatives. While 1-3 per cent may sound small, the aggregate impact of these programmes has been significant. In the last 12 months alone, the 450,000 TNB customers receiving HERs (printed and email) saved 50,000 MWh of electricity – or the equivalent of roughly 35,000 tonnes of avoided carbon dioxide (CO2) emissions. With support from the US Trade and Development Agency, BRPL is already undertaking India’s first large-scale behavioural energy efficiency pilot programme, working with Oracle Utilities (Opower) to send personalised HERs to a representative group of 200,000 customers in south and west Delhi. All 200,000 BRPL customers in the treatment group will receive paper-based HERs sent on an opt-out basis bimonthly by post; web- and mobile-based information, insights and analysis made available 24 hours a day through widgets embedded on the BRPL website; and email HERs. In addition to measuring the impact of HERs on year-round energy saving, the BRPL HER pilot programme will also try to identify the impact on peak load, particularly in overloaded network areas.

Why India is ripe for large-scale behavioural energy efficiency programmes

The current BRPL HER programme being piloted in Delhi provides a template for similar programmes that, with the right incentives in place, could effectively be rolled out across the rest of India today. The percentage of households with access to electricity in India increased from 43 per cent in 2000, to more than 80 per cent in 2016. While the country’s average household consumption is currently roughly one-third of the current world average, this is about to change as India is rapidly urbanising. On the verge of becoming the world’s largest air conditioner market, India is expected to account for about 20 per cent of the global growth by 2050. Although some progress has been made, primarily through demand aggregation programmes (such as, Energy Efficiency Services Limited’s UJALA programme, under which over 324 million LED bulbs and 7 million LED tube lights have been distributed to date), the opportunity to change consumer behaviour through utility-led behavioural DSM programmes remains largely untapped.

In recent years, various government policies and programmes for large-scale smart metering infrastructure – such as the National Tariff Policy, the integrated power development scheme and Ujjwal Discom Assurance Yojana (which calls for the installation of at least 35 million smart meters by 2019), and upcoming smart grid pilot projects – have given new impetus to ensure that the customer-facing value of these investments is made clear to the end users.  The primary stated objective of the mandate for discoms to roll out smart meters is to reduce losses, data entry errors and other operational costs associated with human interface/manual meter readings. But with the right incentives in place, smart meters will also enable discoms to engage consumers in DSM programmes and to manage peak load effectively, while also enhancing the customer experience.

Estimating savings potential of HER-based programmes in India

By 2021, an annual reduction of 1,800-5,400 GWh of electricity usage nationwide is estimated. This is equivalent to eliminating 1.2 million-3.6 million residential air conditioners immediately. The resulting reduction of CO2 emissions would be in the range of 1,100-3,400 kilotonnes of CO2. The collective impact in terms of bill savings for Indian customers would be in the range of Rs 9 billion-Rs 27 billion in the year 2021 alone, all of which could be redirected to other parts of the economy.

Over a 10-year time frame (by 2030), the annual national savings in terms of the reduction in electricity consumption is expected to be 3,400-10,200 GWh. The cumulative 10-year electricity savings amount to 25,400-76,000 GWh. The cumulative CO2 emission reduction would be 14,000-41,900 kilotonnes. The collective economic impact for Indian consumers in terms of bill savings would be Rs 17 billion-Rs 51 billion in 2030 (at today’s rate), which is enough to set up 170 MW-510 MW of rooftop solar PV capacity. In terms of prioritising where HER deployments could be scaled quickly in India, prior experience suggests that the following characteristics would indicate regions with higher or more immediate potential for behavioural energy efficiency savings.

  • Areas with higher average levels of per household residential consumption: In global HER programmes to date, per-household energy usage is strongly correlated with – and the best predictor of – energy savings (that is, the higher the per household energy use, the higher is the likelihood of greater energy savings).
  • Areas with lower aggregate technical and commercial (AT&C) losses: Indian utilities have typically been guided by regulators and policymakers to focus on AT&C loss reduction first, above all other priorities. Thus, practically speaking, it will be more difficult to implement behavioural energy efficiency programmes in those utility districts where much progress still remains on addressing AT&C losses.
  • Areas with imminent smart meter roll-outs expected and/or on the list of the government’s designated smart city programme: While certainly not a prerequisite for HER programmes, the existence of advanced metering infrastructure would indicate a higher level of availability of detailed and accurate monthly energy consumption and billing data in the near future (if not already available now).

While all Indian states stand to gain from the direct energy benefits as well as non-energy benefits of HER programmes, locations that have some combination of the above criteria (in no particular order) may have higher or more immediate potential for capturing the benefits of HER deployment.

The way forward

India can claim 1,800 GWh-5,400 GWh cost-effective, achievable energy savings annually in the near term, by creating an enabling environment for HER programmes through the following utility actions, and policy and regulatory reforms:

  1. Making the business benefits of DSM programmes clearer to discoms: Apart from avoiding costly power purchases to meet the peak demand and saving fixed costs otherwise paid towards the committed capacity for generation, transmission and distribution, HER-based behavioural programmes and other behavioural DSM-derived non-wire alternatives are more cost-effective, more customer-centric, and easier to scale.
  2. Making clear the compelling policy impetus: To date, demand-side resources lack the kind of policy thrust given to the promotion of renewable energy by the current legal and policy framework governing the Indian power sector. Policymakers should realise that unlike traditional end-use energy efficiency interventions that seek to hasten market transformation over a period of years or decades, HER-based programmes are easy to deploy, quick to scale, and will start saving energy right away.
  3. Regulators promoting HER-based behavioural programmes: Science and Engineering Research Councils (SERC) have a critical role to play in unlocking the benefits of HER-based programmes. Being a “no price, no device” energy efficiency intervention offering verifiable energy savings at scale with both year-round and peak-load impacts, regulators should have no problem giving the necessary approvals for implementation.

In a nutshell, HER-based behavioural energy efficiency programmes in India can potentially offer a range of energy and non-energy benefits as well as substantial economic opportunities to different stakeholders depending on the actions taken by them.

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