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India launches “PAT” scheme trading-ESCerts Energy Saving of 6.6 million tonnes oil equivalent by 2014-15

The Government of India notified the targets under the Energy Conservation Act, 2001 for 478 industrial units in India on 30th March, 2012. These targets are to be achieved by the units up to 2014-15.The Ministry of Power and the Bureau of Energy Efficiency (BEE) have been in the vanguard of promoting the efficient use of energy and its conservation. This is further supplemented by the National Mission for Enhanced Energy Efficiency (NMEEE) which is one of the missions under  the National Action Plan on Climate Change (NAPCC).

The PAT Mechanism is one of the initiatives under NMEEE programme. It is a market based mechanism to further accelerate as well as incentivize energy efficiency in the large energy-intensive  industries. The scheme provides the option to trade any additional certified energy savings with other designated consumers to comply with the Specific Energy Consumption reduction targets. The Energy Savings Certificates (ESCerts) so issued will be tradable on special trading platforms to be created in the two power exchanges — Indian Energy Exchange and Power Exchange India.

Speaking on the occasion, Mr. Sushilkumar Shinde said, “The PAT scheme is a unique and innovative programme with no precedence anywhere else in the world. PAT would become a valuable model for other countries to adopt for their own energy efficiency programmes with a business perspective. In particular, developing countries would have a proven framework to study and incorporate, with the knowledge that emerging economies can achieve energy savings in a cost-effective way that boosts economic growth. It is expected to bring a transformational change in energy efficiency through energy intensive industries.”

Minister of State for Power, Mr. K.C. Venu Gopal, said, “Today, we are gathered here to witness the start of one of our country’s most promising energy efficiency initiatives. This also has very strong climate change mitigation co-benefits. For the coming years, we look forward to an active participation from both currently notified DCs, and from units that are going to be included in the subsequent PAT cycles.”

According to Mr. P. Uma Shankar, Secretary, Ministry of Power, “The design of PAT is the result of extensive consultations, which have contributed to its robustness and simplicity.  Upon implementation of the first cycle of PAT, it is expected to help our country save energy to the tune of approximately 6.6 million tonnes of oil equivalent by the end of 2014-15.”

During the function, Shri Shinde also launched a book on PAT that covers a brief summary of Designated Consumers’(DC) Energy consumption and target fixation under PAT rules. This book has been designed to help the DCs to understand the do’s and don’ts related to the PAT scheme.

Apart from the book, PATNET was also launched at the function. PATNET will enable the designated consumer to fill all the formats related to PAT including Energy return in electronic form, which further accelerates the communication of DCs with BEE.

During the first cycle of PAT scheme i.e. from 2012-13 to 2014-15, eight energy intensive sectors such as Thermal Power plants, Iron & Steel, Cement, Fertilizer, Aluminum, Textile, Pulp & Paper, Chlor-alkali have been included. There are about 478 numbers of Designated Consumers in these 8 sectors and they account for about 165 million tonnes oil equivalent of energy consumption annually.

The scheme is unique in many ways, particularly from a developing-country’s perspective since it creates a market for energy efficiency through tradable certificates, called Energy Saving Certificate (ESCerts) by allowing them to be used for meeting energy reduction targets. These certificates can be issued by any of the 478 industries who are able to exceed their respective notified target, the value of the certificate being the excess achievement, more than the target set. The beneficiary industry can trade this certificate with any of the other entities (of the 478) that is unable to meet its target. Buying ESCerts has been allowed as sufficient fulfillment of compliance requirement without any penal action.

The PAT scheme has the makings of becoming a benchmark for design and implementation of policies and measures. It also highlights an innovative approach of introducing market-based instruments within a regulatory framework to encourage compliance. Successful implementation of the scheme could serve as a model for addressing upcoming challenges in a transparent and economically efficient manner.

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