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Mandatory energy norms for firms in India expected to bring investments of Rs.100-120billion in energy efficiency projects

According to reports, top industrial units of Reliance Industries Ltd, Hindalco, NTPC and Vedanta among others would now have to cut down on their energy consumption.

The Union government has notified unit-specific energy use norms that would require these companies to put in an investment of Rs 10,000 crore to Rs 12,000 crore in energy-efficiency projects.

While these norms would help reduce energy consumption, they would also create a market for tradable certificates. Units, which are unable to meet their target either through their own action or through purchase of certificates, will be liable for penalty equivalent to Rs 10,154 for shortfall of one tonne of oil equivalent.

The Bureau of Energy Efficiency (BEE) has set targets for 478 units that account for about one third of 500 mtoe (million tonne of oil equivalent) of commercial energy consumed in the country through a notification issued on March 30, 2012. Issued under the Energy Conservation Act, 2011, the targets are to be achieved by 2014-15.

These units from eight sectors, used 166 mtoe energy in 2009-10, which has to be reduced by 6.6 mtoe in three years. The targets, however, are not defined in terms of absolute energy use reduction, but in terms of the amount of energy used to produce a unit of the product. A senior BEE official said though the mandatory norms have not been notified under any international convention, it would help the country to prepare for any future global norms besides helping in checking energy requirements.

“In countries like the United States, Britain and Canada, the power utilities define targets for users. But we felt such unit specific norms were required since some of them captive generation,” the official said.

In anticipation of the notification, some of the companies have already started adopting energy efficiency measures. “It is a continuous process and we have been endeavouring to introduce more energy efficient sub-systems in our existing projects whenever an opportunity for renovation presents itself,” said a senior NTPC executive.

Those units which are able to achieve greater energy efficiency improvements within the specified targets can capture the excess savings through the issuance of energy saving certificates. These certificates can be traded and bought by other units covered by the programme who may find it expensive to meet their targets through their own actions.

In defining the norms, all energy forms like coal, furnace oil, fuel oil and power, except biomass and renewable energy, have been included. The sectors covered by the notification are iron and steel, cement, fertilizers, aluminium, pulp and paper, chloro-alkali, textiles and thermal power stations. Within each sector, only plants using more than a specified amount of energy are included in the targeted list.

Overall, implementation of the norms would reduce energy consumption of these units by an average three-five per cent over three years.

The BEE official said implementation of the standards would require intervention in three forms — complete change to cut-throat technology, 30-40 per cent adoption of generic technology and repair and maintenance practices.

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