5th Meeting of Utility CEO Forum on DSM

Key Features of MAHA-DSM

Cost-Effectiveness Regulations

-by-

Vijay L Sonavane Member, (Technical) MERC Mumbai

Date: 11th April 2014

Agenda for Presentation

• DSM: Legal &

Policy Framework

• DSM Regulatory

Framework in

Maharashtra

• Maha Cases

• Way Forward

WHAT IS DEMAND SIDE MANAGEMENT?

• DSM: modification of consumers’ pattern of Electricity usage to encourage them to use less energy during peak hours or to move time of energy use to the off-peak hours , by incentivising off peak use

• DSM: cooperative activity between utility & its customers to implement options for increasing efficiency of energy utilisation, with resulting benefits to customers, utility & society as a whole

DSM Large Scale Deployment of Energy Efficient Equipments, by use of rebate system.

DSM: Legal & Policy Framework: EC Act 2001

• First major policy initiative to coordinate various activities associated with efficient use of Energy & its Conservation

Set up of Institutional Framework :->

• Bureau of Energy Efficiency at Centre level

• State Designated Agencies at State level

• Appellate Tribunal for EC

Role of Designated Consumer:

• Undertake EA of the plant /factory by an accredited Energy Auditor;

• Appoint a designated Energy Manager with prescribed qualifications;

• Enforce prescribed norms & Standards;

Preamble of EA2003 clearly specifies ‘efficiency’ & ‘promotion of environmentally benign policies’ as one of the key objectives of EA2003 The objective is translated into following sections:

• Section 3(1) – National Electricity Policy • Section 23 (Direction to Licensees) • Section 30 (Transmission within a State) • Section 38 2(c) (CTU and functions) • Section 42 (1) (Duties of DL & OA) • Section 61 (c) (Tariff Regulations) • Section 73 (i) (Functions & duties of Authority) • Section 86(2) (Functions of State Commission) • Section 166 (5) (Coordination Forum)

DSM- Legal & Policy Framework: EA 2003

Prime Minister’s National Action Plan for Climate Change (NAPCC)

One of the 8 Missions of NAPCC is “National Mission for Enhanced Energy Efficiency (NMEEE)”.

Four pillars of the NMEEE are: • Market based mechanism to enhance

cost effectiveness of improvements in EE in Energy-Intensive industries through certification of energy saving that could be traded;

• Accelerating the shift to energy efficient appliances in designated sectors & to make the products more affordable;

• Creation of mechanisms that would help finance DSM programmes;

• Development fiscal instrument to promote EE

Prime Minister launched The National Action Plan on Climate Change (NAPCC) on 30th June 2008.

AI DSM: Stakeholders & AI Savings Potential (as per BEE/ NPC Study 2009)

Sector % saving Potential

AG Pumping 30.09%

COM Buildings & Consumers with > 500 KW CL

19.96%

Municipalities 23.13%

Domestic 19.98%

IND 6.99%

Total 15.04%

Distribution Utilities

Electricity Regulatory

Commissions

Nodal Agencies – BEE, SDAs

etc.. Consumers

State Government

Progression of the DSM Regulatory Framework in India

2005-06

Some States initiated

discussions on DSM under

the Electricity Act 2003

2008-09

Discussion papers on DSM

implementation in Maharashtra

2010

Notification of DSM Regulations in Maharashtra

FOR issued Model Regulations

(developed by BEE)

2010-2013

Final Regulations on DSM notified by 10 States, Draft Regulations by 4

States

Demand Side Management (Need for improving End Use efficiency)

• DSM is an umbrella term which addresses two issues: – Load reduction via EE & EC

– Load shifting via DR &

• Maharashtra First State to notify DSM Regulations in 2010

• Mandate DL to make DSM as a part of day to day operations

• DSM Consultation Committee formed under the Secretary, representatives from DL, CR, IIT/VJTI, Merc & Dr. Mahesh Patankar for approval of DSM Projects .

DSM Consultative Committee : Meets once in two months

REGULATORY DESIGN: MERC (DSM implementation framework) Regulations,2010

• MERC notified two Regulations to promote DSM in Maharashtra in 2010

Basic principles:

• Licensees to make DSM: part of day‐to‐day operations

• Licensees allowed to “recover” DSM costs in ARR only after ensuring cost effectiveness of programs

• Program investments to be “cost‐effective” to DL (avoided PP cost) & also consumer (reduced bills)

Impact of Maha-DSM-CC

• All four Discoms have formulated DSM Cells, with interested Officers, (members DSM-CC)

• Pilot Projects started in all Discoms

• MYT Tariff Regulations mandates Discom to factor the savings in Power Purchase due to DSM

• All Discoms have submitted their DSM plans up to FY 2015-16 & estimated savings in Power Purchase due to the DSM Programs

MERC (Multi Year Tariff) Regulations, 2011 Sample: RInfra –D MYT tariff Order dated 22 August 2013 in Case No. 9 of 2013

Particulars Unit FY 2013-14 FY 2014-15 FY 2015-16

R-Infra D Own sales

MU 6600.37 6797.87 7027.62

Energy Savings through DSM measures

MU 6.69 7.53 7.53

RInfra D Own Sales after DSM Measures

MU 6593.68 6790.34 7020.09

Status of DSM Regulations in various states

Jammu and Kashmir

Himachal Pradesh

Punjab

Delhi Assam

Manipur and Mizoram

Tripura

Jharkhand

Maharashtra

Kerala

Tamil Nadu

Gujarat

Orissa

Final notified Regulations available – 10 States

Draft Regulations available – 3 States

One Draft Regulation jointly for State of Goa and Union Territories of Dadra & Nagar Haveli, Daman & Diu, Puducherry, Chandigarh, Andaman & Nicobar Islands, Lakshwadeep

10 States/Union Territories have notified the final DSM Regulations

Key Provisions of DSM Regulations notified

Assessment of Technical Potential

Setting DSM Targets

Constitution of DSM Cell

Constitution of DSM-Consultation Committee

Preparation of DSM Budgets

Load Research & baseline development

Development of DSM Plan

Preparation of DSM Programme Document

Monitoring &reporting DSM programs

EM&V of DSM Programs

DSM Plan & Program Completion report

Base Work Execution Monitoring and Evaluation

Model DSM Regulations issued by FOR has provisions similar to these & also discusses about issuance of guidelines on Cost Effectiveness of DSM programs.

Cost-effectiveness assessment tests Test Brief Explanation

Total Resource

Cost (TRC) Test

This is the main hurdle test & all other tests are carried out, only if a DSM

program clears TRC test.

The test takes a holistic approach & compares all costs incurred on a DSM

program (by utility & consumers) & all benefits received therein, both over the

technology lifecycle.

As per a recent study by the American Council for an Energy-Efficient Economy

(ACEEE), which analyzed results from various DSM cost-effectiveness tests used

in the USA, TRC test is the most widely used test.

Ratepayer Impact

Measure (RIM)

Test

This test confirms the fact that program implementation & costs incurred would

not impact the tariffs adversely.

This test analyses the impact on the consumer by considering the costs incurred

by the utility on implementing the DSM program.

Benefits are evaluated the same way as in the TRC test.

Lifecycle Revenue

Impact-RIM

(LRIRIM) Test

This test uses the computations of the RIM test & evaluates the tariff impact due

to the implementation of the DSM programme.

Cost-effectiveness assessment tests Test Brief Explanation

Participants

Cost Test

(PCT)

This test helps identify the level of incentives that are required to make a DSM

program attractive to participants.

It focuses on the quantifiable benefits & costs to an “average” consumer for

participating in DSM program.

All program costs paid by the participant & all benefits received by the participant

(reduced bills, tax credits, incentives) are considered in the evaluation.

Under MERC Regulations, test results for PCT are to be submitted but are not

considered ,when shortlisting the DSM programs.

Societal Cost

Test (SCT)

This test is similar to TRC test except that it considers the impact of the DSM

program on the society as a whole.

Under MERC Regulations, test results for SCT are to be submitted but are not

considered when shortlisting the DSM programs.

Cost of

Conserved

Energy (CCE)

This is a simple test that compares the cost of installation of EE equipments/

technologies & the cost towards procuring energy at prevalent rates. It considers

only the cost side of the cost-effectiveness equation.

As per the ACEEE study, Levelized CCE is the best measure for comparing energy

efficiency to other energy resource options.

MAHA- DSM Regulations: Cost effectiveness Assessment

Sr. No.

Method Selection Criteria Action for Implementation

1 Total Resource Cost (TRC) Test

Positive NPV of benefits over the cost

Program should be considered for RIM test

2 Ratepayer Impact Measure (RIM) Test

Positive NPV benefits over the cost for ratepayers

Program should be implemented directly without LCRIM test

3 Life Cycle Revenue Impact (LCRIM) Test

Tariff impact of programme less than 1PS /kWh or less than 1% of existing tariff, which ever is higher

Program should be implemented (may check for PCT & SCT)

Cost-effectiveness assessment tests - Equations

• Cost of Conserved Energy (CSE) is a measure of comparison of costs incurred in energy conservation with other options available such as electricity generation. CSE is computed as shown in the equation below:

Cost of Conserved Energy - Equations

Annual Energy Efficiency program costs may include the following: • Incentives provided to the consumers • Administration costs • Marketing costs • Evaluation, Measurement and Verification (EM&V) costs

Capital Recovery Factor (CRF) is the ratio of constant annuity to the present value of receiving that annuity for a given length of time.

For a given technology, CRF is computed based on the life of the technology. For example, in case of LEDs, CRF is computed for a life of about 12 years.

i is the discount rate and

n is the life of technology

The assumptions for the programs are given below:

Example: Cost-effectiveness assessment : Replacement of Inefficient fans

Parameter Fan Replacement

Costs

Cost of new Technology (Rs.) 1400

Administration, Marketing and EM&V Costs (%) 2%

O&M Costs (%) 1%

Benefits

Average Power Purchase Cost (Rs./kWh) 4.00

Highest marginal cost of power purchase (Rs./kWh) 8.00

Parameter Fan Replacement

Consumption of Old equipment (kW) 0.080

Consumption of new equipment (kW) 0.055

Life of equipment (years) 5

Days of use in a year (days) 300

Example: Cost-effectiveness assessment: Replacement of Inefficient fans – Contd..

Parameter Fan Replacement

Number of Equipments being replaced (no.) 10,000

Total utility sales (kWh) 100,000

Demand Charges (Rs / kVA) 190

Societal Cost of Power (Rs./kWh) 11.58

Escalation Rate (%) 5%

Discount Rates (%) 10.5%

TEST RESULTS: REPLACEMENT OF INEFFICIENT FANS WITH EFFICIENT FANS

Total Resources Cost (TRC) Test 1,43,68,621

Ratepayer Impact Measure (RIM) test 75,54,048

Life-cycle Revenue Impact – RIM (LRIRIM) test -0.0000755

Participants Cost Test (PCT) 51,03,126

Societal Cost Test (SCT) 2,89,67,860

Cost of Conserved Energy (CCE) (Rs/KWH) 4.48

The assumptions for the programs are given below:

Example: Cost-effectiveness assessment: Replacement of bulbs with LEDs

Parameter Bulb Replacement

Costs

Cost of new Technology (Rs.) 450

Administration, Marketing and EM&V Costs (%) 2%

O&M Costs (%) 1%

Benefits

Average Power Purchase Cost (Rs./kWh) 4.00

Highest marginal cost of power purchase (Rs./kWh) 8.00

Parameter Bulb Replacement

Consumption of Old equipment (kW) 0.060

Consumption of new equipment (kW) 0.010

Life of equipment (years) 12

Days of use in a year (days) 300

Example: Cost-effectiveness assessment: Replacement of bulbs with LEDs– Contd..

Parameter Bulb Replacement

Number of Equipment being replaced (no.) 10,000

Total utility sales (kWh) 100,000

Demand Charges (Rs / kVA) 190

Societal Cost of Power (Rs./kWh) 11.58

Escalation Rate (%) 5%

Discount Rates (%) 10.5%

TEST RESULTS: REPLACEMENT OF INEFFICIENT BULBS WITH LEDs Total Resources Cost (TRC) Test 7,38,64,567

Ratepayer Impact Measure (RIM) test 3,00,48,028 Life-cycle Revenue Impact – RIM (LRIRIM) test

-0.0003005

Participants Cost Test (PCT) 3,83,97,583

Societal Cost Test (SCT) 11,24,56,863

Cost of Conserved Energy (CCE) (Rs/KWH) 0.61

MAHA Pilot DSM Schemes

Programs Approved by MERC Utilities

T-5 FTL/ 5 Star Ceiling fans/ Window A/C TPC-D, R-Infra-D, BEST, MSEDCL

Thermal Energy Storage TPC-D, R-Infra-D & BEST

5 Star refrigerators R-Infra-D, TPC-D

Energy efficient Agricultural water pumps MSEDCL

Demand Response TPC-D

Thermal Storage system runs Chillers in night & stores energy in ice cubes. Customers shifts load to night & gets benefit of TOD tariff. (-100 Ps/Unit)

MERC: the first Regulator to introduce TOD tariff for HT IND Consumers in the first Tariff Order of MSEB in May 2000. Subsequently, the changes have been made in TOD tariff to encourage the consumers to shift their load from Peak to Off Peak TOD for all Consumers >20KW Load (TOD Rebate: Rs. 1500 CR)

MSDECL Program: Replacement of 5000 Old Ceiling Fans by 5-Star Rated Ceiling Fans

• Goal: Switch 5000 fans in MSEDCL’s 33/11 KV S/s & Section offices in 13 cities

• Replacing ceiling fans with over 7 years vintage consuming 80-105 W

• 5-Star rated fans: 55 watts

• 25 watts saving & 11 hrs/day use, results in 0.4 M kWh reduction

• EE Fan Cost: Rs. 1135/fan

• MSEDCL Potential Money saving : utility perspective: Rs.575/ year/fan (pay back < 2 years)

• M&V being carried out in 520 site

KOLKATA: BEE will

provide Rs 350-crore incentive to the manufactures of high energy efficient fans

White Roofs (WR): Albedo Effect India: White Roof activity is ancient

• Albedo Effect: 100m2(~1000 ft2) of a white roof, replacing a dark roof, offsets the emission of 10 tonnes of CO2

LBNL’s experiments in India: • In Hyderabad,2007-08: Cool roof on

two air-conditioned buildings at Satyam Computers’ Training Center: 10 -20% reduction in AC load due to white roofs

• In July 2009 LBNL convinced Delhi Govt. for approval of a scheme of mandatory white roofs for all new Govt. buildings in Delhi

• In MSEDCL Office Nagpur, India, 2013: Cool roof on a MSEDCL Nagpur Office (non-AC building)

Albedo: fraction of solar energy (shortwave radiation) reflected from Earth back into space. It is a measure of reflectivity of earth's surface. Ice, especially with snow on top of it, has a high Albedo: most sunlight hitting the surface bounces back towards space.

White roofs around the world… (1) In Hyderabad, India (2) Wal-Mart store in Northern California

28

Nagpur MSEDCL Building Data Example (2013) (White Roof outdoor & indoor temperature difference is 15 degrees

compared to 7 degrees difference in Grey Roof.)

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5

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15

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25

30

4-Jun 5-Jun 6-Jun 7-Jun 8-Jun 9-Jun

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ia1-oa1

ia2-oa2

ia1-oa1 is white roof ia2-oa2 is gray roof

Way Forward… • Regulators need to facilitate the

framework for implementation of DSM

• DL to initiate various program based on load pattern & consumer behaviour

• Consumer awareness to increase the participation in DSM Programs

• Implementation of DSM/DR Programs using SG Technologies

• Devising the suitable pricing mechanism to enable maximum participation

• M&V of DSM project: IMP Issue

When ‘I’ is replaced by ‘WE’ Even ‘ILLNESS’ becomes ‘WELLNESS’!!

Thanks!! I appreciate your participation!!! Let us all work together for success in DSM

(contact me vlsonavane@gmail.com)