pat consultation document_10jan2011 (1)

8/7/2019 PAT Consultation Document_10Jan2011 (1)

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ACKNOWLEDGEMENT

PAT

CONSULTATION

DOCUMENT 2010-11

(As on 10 th January, 2011)

Bureau of Energy EfficiencyMinistry of Power, Govt. Of India

NATIONAL MISSION FOR ENHANCED ENERGY EFFICIENCY

Perform, Achieve & Trade (PAT)


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PAT CON SULTATION DOCUMENT

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AcknowledgementMinistry of Power & Bureau of Energy Efficiency (BEE) have been entrusted to develop

the implementation framework of National Mission for Enhanced Energy efficiency

(NMEEE). PAT (Perform, Achieve and Trade) consultation document has been prepared

to describe the implementation framework of PAT scheme under the said mission by

BEE.

Bureau of Energy Efficiency is grateful to the Ministry of Power (MoP) for entrusting the

task of implementation of PAT scheme by Bureau.

This PAT consultation document is the result of a joint effort by many officials from

various organizations. All those who have contributed to the project by taking part in

the writing process or the numerous discussions are gratefully acknowledged.

Needless to say, some of the participants have also taken more responsibility for

development of various mechanisms under PAT scheme.

I am thankful to all the officials from various Ministries & Departments for their unstinted

cooperation, support and help required for the development PAT framework. I also

place on record my sincere thanks to all the CEOs and Plant Head of Designated

Consumers, Sector experts/ consultants and Energy Managers for extending their

necessary co-operation.

Last but not the least, I wholeheartedly thank Mr. Kapil Mohan, Deputy Director

General, BEE, Ms. Abha Shukla, Secretary, BEE and Mr. S P Garnaik, Energy

Economist, BEE, Mr. Saurabh Diddi, Energy Economist, BEE and Mr. A. K. Asthana, Sr.

Technical Expert, IGEN for their unstinted support towards development of thisdocument and preparation of PAT mechanism.

Ajay Mathur, PhDDirector General


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CONTENTSTable of ContentsPreface ...................................................................................................................... 4

Background:............................................................................................................ 7Legal Framework:..................................................................................................... 9PAT Framework....................................................................................................... 12

Broad Umbrella of PAT Scheme.... ...... ....... ...... ....... ...... ...... ....... ...... ....... ...... ....... ... 12

Establishment of Baseline SEC............. ............. ................ ................ ............. ......... 16

Target Setting ...... ....... ...... ....... ...... ....... ...... ...... ....... ...... ....... ...... ....... ...... ...... ...... 18

Measurement & Verification.................................................................................. 24

Energy Saving Certificates & Trading ....... ...... ...... ....... ...... ....... ...... ....... ...... ...... ..... 26

International Experience ...........................................................................................34Survey of International trading and energy efficiency schemes............. ................ .......34

Approval of PAT Scheme ..........................................................................................37


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Perform Achieve and Trade (PAT)Preface

The Union Cabinet has earlier approved the National M ission for Enhanced EnergyEfficiency (NMEEE). The Mission will usher in the four new initiatives to significantlyscale up implementation of energy efficiency in India. The flagship of the Mission is the

Perform, Achieve and Trade (PAT) mechanism, which is a market-based mechanism tomake improvements in energy efficiency in energy- intensive large industries and

facilities more cost-effective by certification of energy savings that could be traded. The

PAT mechanism is designed to facilitate the Designated Consumers to not only achieve

their legal obligations under the Energy Conservation Act, 2001, but also to providethem with necessary market based incentives to overachieve the targets set for them.

The Bureau of Energy Efficiency (BEE) has already carried out background work toenable design of a transparent, flexible, efficient and robust system for the PAT

mechanism. In compliance with the directions of the Prime Minister's Council on Climate

Change, this consultation document has been prepared to enable stakeholder

consultation and discussion. The key issues that need to be discussed in the final

preparations of the mechanism are:a) Methodology for establishing the baseline energy consumption

b) Methodology for target setting for each sector

c) The process of measurement and verification, in particular the verification

agencies that need to be appointed by BEE for this purpose.

d) The manner in which trading of the certificates can be encouraged, in particular

instruments that could increase liquidity in the system.

BEE has, in this document, provided broad principles on each of the four issues

mentioned above and several other related ones that are important in the overall

design. This document will be shared with all the key stakeholders like Designated

Consumers, Energy Auditors/ Managers, Industry Associations, Academician, etc. to

solicit comments. The timelines for this consultation are as follows:

a) Consultations with CEOs in January 2011

b) Draft PAT document by January 2011

c) Final document, including baseline SEC and %-reduction targets for each DC, by

February 2011


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This document is the first version. It will get revised with incorporations of comments andsuggestions received from various sources time to time before the final version isreleased.

As per the approval of the Government, the first compliance period of PAT would be

from 01.04.2011 to 31.03.2014. This implies that legal notifications for targets for all

Designated Consumers covered by the PAT scheme would be issued by March 2011.

Various consultation workshops & meetings were held by BEE during the recent time to

discuss about the implementation of PAT mechanism and its implications in industry. The

comments and recommendations of each workshop were duly reviewed and

incorporated in this consultation document. The following are the list of consultation

workshops and meetings held by BEE:

About Date & Venue OrganizersStakeholders Workshop Feb 2010 / New Delhi BEEStakeholders Workshop March2010/ Mumbai ABPSStakeholders Workshop July20 10/ Chennai CII

Sectoral MeetingsMay2010/ Mumbai

July2010/ Baroda

Sept20 10/ New Delhi

Indian Chemical Council

Sectoral Meeting Sept2010/ New Delhi Mini-Blast FurnaceAssociation

Ministry Meeting Nov20 10/ Ministry of Steel BEE / Ministry of SteelMinistry Meeting Nov 2010/ DIPP BEE/ DIPP

Ministry Meeting Nov2010/ Ministry ofChemical & Fertilizer

BEE/ DoF

Apart from this, number of plant level meetings has also been organized by various

industries wherein presentations have been made by BEE to highlight the PATcomponent of NMEEE.


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Perform Achieve and Trade (PAT)Consultation Document

Background:The National Action Plan on Climate Change (NAPCC), released by the Prime

Minister on 30th June 2008, recognizes the need to maintain a high growth rate

for increasing the living standards of the vast majority of people and reducing their

vulnerability to adverse impacts of climate change. The Action Plan enunciates the

following principles.

Protecting the poor and vulnerable sections of society through an inclusive and

sustainable development strategy sensitive to climate change

Achieving national growth objectives through a qualitative change in direction

that enhances ecological sustainability, leading to further reduction in emissions

of GHGs

Devising efficient and cost-effective strategies for end-use demand-side

measures

Deploying appropriate technologies for both adaptation to and mitigation of theadverse effects of emissions of GHGs extensively as well as at an accelerated

pace

Engineering new and innovative forms of market, regulatory, and voluntary

mechanisms to promote sustainable development

1.1 The National Action Plan outlines eight national missions that represent multi-

pronged, long-term, and integrated strategies for achieving key goals in the context of

climate change. These missions are listed below.a) National Solar Mission

b) National Mission for Enhanced Energy Efficiencyc) National Mission on Sustainable Habitat

d) National Water Mission

e) National Mission for Sustaining the Himalayan Ecosystem

f) National Mission for a Green India

g) National Mission for Sustainable Agriculture

h) National Mission for Strategic Knowledge for Climate Change

1


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1.2 The Ministry of Power (MoP) and BEE were entrusted with the task of preparing

the implementation plan for the national mission for enhanced energy efficiency

(NMEEE). NMEEE will usher in the following four initiatives, in addition to the policies

and programmes for energy efficiency being implemented by BEE. These initiatives areas follows:

Perform, Achieve, and Trade (PAT), a market-based mechanism to make

improvements in energy efficiency in energy-intensive large industries and

facilities more cost-effective by certification of energy savings that could be

traded

Market transformation for energy efficiency (MTEE) by accelerating the shift to

energy-efficient appliances in designated sectors through innovative measures

that make the products more affordable

Energy efficiency financing platform (EEFP), a mechanism to finance DSM

programmes in all sectors by capturing future energy savings

Framework for energy efficient economic development (FEEED), or developing

fiscal instruments to promote energy efficiency

1.3 The implementation plan of NMEEE seeks to upscale the efforts to create the market for

energy efficiency, which is estimated to be about Rs 74,000 crore. The Mission would

create conducive regulatory and policy regime to foster innovative and sustainable

business models to unlock this market. As a result of implementing NMEEE, we estimate

that by the end of five years, about 23 million tonnes of oil equivalent (MTOE) of fuel

will be saved, capacity addition of over 19,000 MW avoided, and emissions of carbon

dioxide reduced by 98.55 million tonnes annually.

1.4 The NMEEE set out a comprehensive strategy, which comprised the following

components.

Create demand for energy-efficiency products, goods, and services by

spreading awareness about the efficacy of these products and services,

amending government policies and programmes to integrate energy efficiency,

preparing bankable projects to stimulate the process, and offering the right

incentives to cost-effective improvements in energy efficiency in energy- intensive

industries and facilities through certification of energy savings that could be

traded.

Ensure adequate supply of energy-efficient products, goods, and services. This

is being done by creating a cadre of certified energy professionals; promoting

energy service companies (ESCOs), standards, and labelling of end-useequipment and appliances; and preparing structured programmes to leverage


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international financing instruments including the Clean Development Mechanism

(CDM) to reduce transaction costs to attract private investment, etc.

Create and promote the energy efficiency financing platform, set up partial risk

guarantee funds, and develop innovative financial derivatives of performancecontracts and fiscal and tax incentives for investment in this sector.

Create and adopt robust and credible monitoring and verification protocols to

capture energy savings from all energy-efficiency activities in a transparent

manner.

Take necessary steps to overcome market failures by appropriate regulatory and

policy framework to support the measures mentioned above.

Legal Framework:Designated Consumers account for 25% of the national gross domestic

product (GDP) and about 45% of commercial energy use in India. Since 2000,

industrial GDP has been growing at 8.6% annually and energy use in industry at 5.8%.

The lower rate of growth of industrial energy use can be attributed to many reasons. It

has been observed that in recent years, industry has been choosing state-of-the-art

technologies, which are more energy-efficient. Also, there have been many in-house

efforts made by the industry to become more energy-efficient. In order to further

accelerate as well as incentivize energy efficiency, the Perform Achieve and Trade

(PAT) mechanism is being designed. PAT is a market based mechanism to enhance cost

effectiveness of improvements in energy efficiency in energy-intensive large industries

and facilities, through certification of energy savings that could be traded. The genesis

of the PAT mechanism flows out of the provision of the Energy Conservation Act, 2001,

hereinafter referred to as the Act. Section 14 (e) of the Act empowers the Central

Government to notify energy intensive industries, as listed out in the Schedule to the Act,

as Designated Consumers (DCs). The Ministry of Power (MoP) has notified industrial

units and other establishments consuming energy more than the threshold in 9 industrial

sectors namely Thermal Power Plants, Fertilizer, Cement, Pulp and Paper, Textiles,

Chlor-Alkali, Iron & Steel, Aluminum and Railways in March, 2007 as DCs. The Ministry

of Powers notification issued on 2nd March 2007 under section 14 (e) of the Act is

summarised hereunder:

Table 1: Minimum annual energy consumption and estimated number of DesignatedConsumers (DCs) in select sectors

Sector

Minimum annual energy

consumption for the DC(tonnes of oil equivalent)

No. of prob-able DCs

2


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Aluminium 7500 11Cement 30000 83Chlor-alkali 12000 20Fertilizer 30000 23

Iron and steel 30000 101Pulp and paper 30000 51Railways (diesel locosheds and workshops)

8

Textiles 3000 128Thermal power plants 30000 146

2.1 The Act requires the DCs to:

a) Furnish report of energy consumption to the Designated Authority of the State

as well as to BEE (section 14(k)).

b) Designate or appoint an Energy Manager who will be in-charge of submission

of annual energy consumption returns of the Designated Agencies and BEE

(section 14 (l)).

c) Comply with the energy conservation norms and standards prescribed under

section 14 (g) of the Act.

d) Purchase Energy Saving Certificates (ESCerts) for compliance to section 14 (g) in

the event of default. The Act has been amended with the addition of new sub-

section 14A to enable this and section 14A(2) allows such trading. EScerts are

defined by adding a new sub-section 2(ma).

e) Monitoring and Verification of compliance by Designated Energy Auditors

(DENA) which will be prescribed the Government/ BEE under section 14A/ 13

(p) of the Act.

f) Excess achievement of the target set would entail issuance of ESCerts under

section 14A(1).

g) Penalty for non-compliance being Rs. 10 lakhs and the value of non-

compliance measured in terms of the market value of tones of oil equivalent by

inserting a new section 26(1A).


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PAT FrameworkThe PAT framework has been developed considering the legal requirement

under EC Act, 2001, situation analysis of designated consumers, national goalto be achieved by 2013-14 in terms of energy saving and sustainability of the

entire scheme. The PAT scheme is involved in order to incentivize industry to achieve

better energy efficiency improvements than their specified SEC improvement target in a

cost-effective manner. The additional certified energy savings can be traded with other

designated consumers who could use these certificates to comply with their SEC

reduction targets. The Energy Savings Certificates (ESCerts) will be traded on special

trading platforms to be created in the two power exchanges (IEX and PXIL). The

guiding principles for developing the PAT mechanism are Simplicity, Accountability,Transparency, Predictability, Consistency, and Adaptability. The PAT framework

includes the following elements:

1. Methodology for setting specific energy consumption (SEC) for each DC in the

baseline year

2. Methodology for setting the target to reduce the Specific Energy Consumption

(SEC) by the target year from the baseline year.

3. The process to verify the SEC of each DC in the baseline year and in the target

year by an accredited verification agency4. The process to issue energy savings certificates (ESCerts) to those DCs who

achieve SEC lower than the specified value

5. Trading of ESCerts

6. Compliance and reconciliation of ESCerts

7. Cross-sectoral use of ESCerts and their synergy with renewable energy

certificates

The following are few of the explanations on implementation of PAT framework which

has been put in Q&A pattern.

Broad Umbrella of PAT Scheme

(a) W ho w ould pa rticipate in the ensuing PAT scheme ?The PAT scheme will be participated by Designated Consumers (DC) of energy

intensive sector. In the first cycle of PAT scheme i.e. during 2011-12 to 2013-14, 8

energy intensive sectors such as Thermal Power plants, Iron & Steel, Cement, Fertilizer,

Aluminium, Textile, Pulp & Paper, Chlor-alkali have been included. As per annual

3

3.1


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energy consumption reported by industries of these sectors through a mandatory

reporting (section 14(k) EC Act, 2001) or otherwise, there are about 563 number of DCs

in these 8 sectors (Refer Table 1 in section 2). All these DCs except Railways will

automatically be required to participate in the 1

st

cycle of PAT scheme.

Railways are having 8 DCs as per the notification of MoP. As the sectoral energy

scenario and energy usage pattern is under study by BEE, these DCs have been

excluded from the 1st cycle of PAT scheme.

In the next cycle(s) of PAT scheme (post 2013-14), the number of DCs may get revised as

more number of sectors will be added up and more/ less number of plants may be there

in the present 8 sectors.

(b) How w ould the DCs be declared/ notified?Section 14(e) [specify, having regard to the intensity or quantity of energy consumed and the amount

of investment required for switching over to energy efficient equipment and capacity of industry to invest

in it and availability of energy efficient machinery and equipment required by the industry, any user or

class of users of energy as a designated consumer for the purpose of this Act] and 14(f) [alter the list of

Energy intensive industries specified in the schedule] of EC Act, 2001 empowers the central

government to notify the DCs based on the annual energy consumption of a plant and

comparing to the threshold limit prescribed for the sector (Refer Table 1 in section 2). The

industries of a sector are required to submit their energy consumption every year [Section

14(k) of EC Act] the Designated Agency through a mandatory reporting system which

would enable the central government to decide on DC status.

(c) W hat a re the basic phases of PAT scheme?The 1st cycle of PAT scheme would be operational during April 2011 to March 2014. The

following basic phases would be involved during this cycle

(i) Target Setting Phase : By March 2011

(ii) Target Achieve Phase : April 2011 to March 2014

(iii) M&V Phase : April 2012 and beyond

(iv) Trading Phase : After M&V Phase

The tentative mile-stones of 1st cycle scheme is shown in figure 1.

(d) What is the rationale in selecting the 8 industria l sectors in the 1st cycle o f thescheme?The DCs of these 8 sectors account for about 231 mMTOE (million metric tons of oil

equivalent) of energy consumption annually as per 2007-08 data which is about 54%of the total energy consumed in the country. The breakup of energy consumption and


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the average specific energy consumption of each sector is depicted in the table 2. Considering the quantum of energy consumption, the energy intensity, large bandwidth

in energy usage pattern, the above 8 sectors are selected in the 1st cycle of PAT

scheme.

Figure 1: Tentative Milestone

Table 2 : Approximate Energy Consumption by DCs in different sectors (2007 data)

SL SECTOR ENERGY CONSUMPTION (mMTOE*)

1 Power (Thermal) 160.3

2 Iron & Steel 36.1

3 Cement 14.5

4 Fertilizers 12.0

5 Textile 4.5

6 Aluminium 2.4

7 Pulp & Paper 1.4

8 Chlor-Alkali 0.43

TOTAL 231.6

Tentative Milestones.

Freezing ofDC List

Base LineParameters

TargetSett ing

Mar 11Apr 10 Dec 10

Start ofM&V

April 13Mar14

Defining M&V ProtocolCreat ion of DENA

M&V Process

Creation of Trading Plat form,

Traders & Trading Mechanism

CYCLE # 1


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*Million Metric Tons of O il Equivalent

(e) W hat is the basis of fixing an energy consumption norm of a Designated Consumer?As per Section 14(g) of EC Act, 2001 [establish and prescribe such energy consumption norms and

standards for designated consumers as it may be considered necessary: provided that the central

government may prescribe different norms and standards for different designated consumers having

regard to such factors as may be prescribed] the central government can stipulate energy

usage norms for designated consumers. BEE has earlier conducted sector specificstudies through various organizations (See Annexure I) to do the situation analysis. As

per the studies, the wide bandwidth of specific energy consumption (SEC) within anindustrial sector is indicative of the large energy-savings potential in the sector. The

wide bandwidth is also a reflection of the differences in the energy-saving possibilities

amongst plants because of their varying vintage, production capacity, raw material

quality, and product-mix. Such wide variation also makes it difficult to specify a single

benchmark SEC for the sector as a whole: older plants will find the benchmark

impossibly high if it is set at the level of newer plants; newer plants will find it trivial if it

is set at the level of older plants. The broad bandwidth of SEC within a sector, and the

inability of all plants to achieve a sectoral benchmark SEC, suggests that SEC

improvement norms need to be set for individual plants. These SEC improvement targets

can be based on the trend of energy consumption and energy-savings potential of the

plants. In general, the higher the energy efficiency (or the lower the SEC), the lower the

energy-savings potential. Thus, it is evident that it is not feasible to define a single

norm/ standard unless there is significant homogeneity amongst units in a sector.

Therefore, the energy efficiency improvement targets would have to be almost unitspecific . Each DC is mandated to reduce its SEC by a fixed percentage, based on itscurrent SEC (or baseline SEC) within the sectoral bandwidth. The typical SEC

bandwidth in each sector is shown in Table 3:

Table 3: SEC bandwidth in different sectorsSector Range of SEC

a) Power plant 2300 3400 kcal / kwhb) Fertilizer 5.86 9.11 Gcal/ T of Ureac) Cement 665 900 Kcal/ Kg of Clinker (Thermal)

66 127 KWH/ T (Elect)


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d) Integrated Steel 6.15 8.18 Gcal / tcse) Sponge Iron 4.4 7.6 Gcal / T (Thermal)

72 135 KWH/ T (Elect)

f) Aluminum (Smelter)Aluminium (Refinery)

15875 170 83 KWH/ T

3.28 4.12 MKcal / T of Aluminag) Pulp & Paper 25.3 121 GJ/ Th) Textile 3000 16100 Kcal/ kg (Thermal)

0.25 10 KWH/ Kg (Elect)

i) Chlor-Alkali 2300 2600 kwh/ T of caustic soda

Establishment of Baseline SEC

(a) How is the specific energy consumption o f any industry calcula ted?The SEC of an industry would be calculated based on Gate-to-Gate concept with the

following formula.

SEC = Total energy input to the plant boundary

Quantity of the Product

While calculating the total energy input to the plant, all energy sources would be

converted to a single unit i.e. MTOE (metric ton of oil equivalent) using standard

engineering conversion formula. In this calculation, the following would be considered :

(a)All forms of energy (Electricity, Solid fuel, Liquid fuel, Gaseous fuel, by-

products used as fuel etc.) which are actually consumed for production of

output should be considered.

(b)Energy consumed in colony and for outside transportation system should not

be accounted.

(c) Energy used through renewable energy sources should not be accounted.

(d)The Product is the key parameter. The definition of product for various

sectors has been shown below for the purpose of calculating SEC. This has

been arrived at considering the typical practice of defining SEC and

consistency in product output.

Table 4: Definition of Product to calculate SECSector Main Product Unit

3.2


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Cement Cement Tonnes

Fertilizer Urea Tonnes

Iron & Steel (Integrated) Crude Steel Tonnes

Iron & Steel (Sponge Iron) Sponge Iron Tonnes

Aluminium (Refinery) Alumina Tonnes

Aluminium (Smelter) Molten Aluminium Tonnes

Aluminium (Integrated) Molten Aluminium Tonnes

Paper (Pulping) Pulp Tonnes

Paper (Paper Making) Paper Tonnes

Paper (Pulp & Paper) Paper Tonnes

Textile (Spinning)

Textile (Composite)

Textile (Processing)

Fabric

Yarn

Fabric

Fabric

Kg

Kg

Kg

kg

Chlor-Alakli Caustic Soda Tonnes

Power Plant Electricity Million kWh

(e) Any energy consumed for major construction work would not be accounted

as this is not meant for producing the product. Quantity of such energy should be

separated out from total energy consumption.

(b) How is the plant boundary defined?The plant boundary would be selected such that the total energy input and the above

defined product output will be fully captured. Typically it is the entire plant excluding

colony, residential complex and transportation system. Similarly, mining operations in

case of Iron & Steel, Aluminium and Cement sector are not part of plant boundary.

Once the plant boundary has been fixed, the same boundary should be considered for

entire PAT cycle. Ideally, plant boundary should not change during the entire cycle.

(c) W hat is the baseline SEC a nd base year?The base line SEC would be calculated based on the following procedure:

(a)All DCs would submit the details of production and annual energy

consumption since 2005-6 to 2009-10 through a notified form which is a

mandatory as per EC Act, 2001.


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(b)Few additional sector specific information like process technology, process

flow, raw material, product mix etc. would also be collected.

(c) The SEC calculated from step(a) would be the Reported SEC by the DC. As

there may be various variable factors which affect the energy consumptionsignificantly, some Normalization Factors would be considered. It is

proposed to consider the capacity utilization as one of the most important

parameter to have a normalization factor. However, the rationale for

developing the normalization factors is underway by suitable agencies

through a scientific manner.

(d)Now the reported SEC will be normalized after incorporating the

normalization factor.

Normalized SEC = f( Reported SEC , Normalization factors)

(e)The base line SEC will be estimated by taking the average normalized SEC

of last 3 years i.e. 2007-8, 2008-9, 2009-10.

(f) The base year may be defined as 2009-10.

The base line SEC for each DC is expected to be fixed by January 2011. The rules ofestablishing the baseline SEC with an example has been shown in Annexure- III.

Target Setting

(a) How is the target defined and w hat is the rationale in defining this target?The target will be defined in the percentage form. It is the percentage reduction of

SEC from baseline value to

that of target year.

The methodology for setting

target SEC for DCs will besuch that the process is

transparent and has no room

for arbitrariness as directed by

the Prime Minister's Council on

Climate Change. The

methodology will be simple and easy to use and will be based on SEC reduction on a

gate-to-gate basis and will be such as to achieve targeted savings in the first

commitment period of 3 years (2011-2014), about 4.2% reduction which is estimated at10 million metric tons of oil equivalent (mMTOE). Among the 23 mMTOE set as target

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from NMEEE, implementation of PAT scheme do focus on achieving 10 mMTOE by

2014. The guiding principles of the methodology are as under:

(i) The reduction target for each plant will be based on an objective and

transparent basis. This rules out one-to-one negotiations for this purpose, which in any

case would be undesirable both from the viewpoint of credibility

and legal soundness, as well as from the viewpoint of information

asymmetry. Consequently, first the overall target reduction of 10mMTOE would be apportioned amongst the sectors in proportion totheir relative energy use to ensure that the sectoral reduction isequal, in percentage terms, to the percentage of the energyconsumption of all covered plants in a sector to the overall energyconsumption of all covered plants. The next level of allocation ofreduction target would correspond to the disaggregation of the

sectoral reduction target to each plant within the sector. Given the diversity of plant

configurations within a sector, and of plant vintages, it is being proposed to apply

gate-to-gate approach for each plant.

(ii) The target SEC would need to be achieved over a 3 year period commencingfrom 1st April, 2011. The targeted improvement in energy efficiency would be apercentage improvement over its base line SEC.(iii) The methodology is based on the expectation that all DCs would reduce their

SEC, the less energy-efficient DCs in a sector being required to achieve a greater

reduction in their SEC than the more energy-efficient DCs in the same sector. The SEC

targets will be fixed as per a statistical analysis followed by stakeholder consultation in

each designated sector.

(iv) In the case of thermal power plants and fertilizer plants, the targets for SEC

decrease are to be aligned with the existing tariff-setting context. In the case of thermalpower plants, the Central Electricity Regulatory Commission (CERC) and in the fertilizersector, the Department of Fertilizers are in the process of integrating these targets intheir respective tariff setting exercise.

(v) Other energy- intensive industries and sectors such petroleum refineries,

petrochemicals, gas crackers/ naphtha crackers, sugar, chemicals, port trusts, transport

(industries and services), hydro power stations, electricity transmission and distribution

companies, and commercial buildings and establishments may be added to the list of

DCs and included in the PAT scheme in a phased manner.

National Target(10 mMTOE)

SECTORS

DC


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More than 20% 25% 5 and above

The factors affecting the heat rate of the stations and corrections for the followingfactors will be considered for the target setting:

1. Quality of the fuel i.e. (coal)

2. Plant Load Factor (PLF)

Similar approach could be followed in case of gas/ liquid fuel based generating

stations. However the average plant load factor of these stations is much lower than the

coal based stations perhaps due to low availability of gas/ liquid fuel. Also the heat

rate of the gas turbines is very sensitive to the unit loading and ambient air conditions.

However, quality of gas supply does not vary widely and so correction for fuel quality

would not be required.

Correction factor to be considered for target setting for coal/ lignite based powerstationsThe generating companies have no control over the quality of coal supplied. Due to

raw coal mainly being supplied to the power stations, there could be variation in coal

quality. Further, imported coal is also being used and blended by large number of

stations, which could lead to variations in coal quality. Thus the methodology should

have provisions to take care of the impact of variations in coal quality on the target

prescribed. Therefore, average Ash and Moisture contents during the baseline

period would be considered for corrections and the correction factor would be worked

out based on the boiler efficiency formula adopted in the draft CEA regulations on

(construction of Electrical Plants and Electric lines).

Sample Calculation for Target Setting for Power Station1. Installed Capacity = 1000 MW

2. Average Plant Load Factor = 90%


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3. Station Gross Design Heat Rate (as reported) = 2295 kCal/ kWh

4. Norms for Auxiliary Power Consumption (as reported) = 9%

5. Average Auxiliary Power Consumption for last 3 years (2007- 2010) = 8%

6. Station Average Gross Heat Rate for last 3 years (2007-2010) = 2450

kCal/ kWh

7. Station Net Design Heat Rate = 2295/ 0.91 = 2522 kCal/ kWh

8. Station Average Net Heat Rate = 2450/ 0 .92 = 2663 kCal/ kWh

9. Deviation in Station Net Heat Rate from Design Net Heat Rate = (2663-

2552)/ (2552)=0.53 or 5.3%

10.Target (for deviation more than 5% in Net Station Heat Rate from Design HeatRate= 15% of percentage deviation) = 0 .795%

11. Net Station Heat Rate target for Pat- cycle 1 i.e. from April11 to March14 =2502 kCal/ kWh

(d) W ill there be any targ ets for subsequent PAT cycles ?Yes, there will be different targets for subsequent PAT cycles. The baseline SEC and

targets will be revised in subsequent PAT cycles. The SEC reduction target will be

progressively stringent in subsequent PAT cycles to keep pace with the national energy

efficiency mission.

It is also expected that the number of DCs will get revised in a sectors depending upon

the annual energy consumption norm. The number of DCs may go up as new plants are

coming up in a sector and capacity addition is happening in the existing smaller sizeplants. At the same time, more sectors which are energy intensive (as defined in the EC

Act, 2001) will also be included in the umbrella of PAT mechanism.


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Measurement & Verification

The success of this scheme depends upon a cohesive and transparent Measurement &

Verification (M&V) system. A proper M&V system is being designed for this purpose.

(a) W hat w ould be M &V system in the base year?As defined earlier, the baseline SEC would be estimated based on the reported data of

DCs through the mandatory reporting system of annual energy consumption and

quantity produced. As it is a self declared data, this would form the basis of

establishing baseline SEC. As the baseline SEC is on gate-to- gate basis, there is no

such measurement involved in any sub-system or sub- process of the plant.

The reported data would get verified through Designated Energy Auditors (DENA) (See

Annexure II. For definition of DENA) who would be conducting a Baseline Energy

Audit in the DCs. The baseline energy audit is aimed at knowing the energy

performance of various key equipments, energy balance, energy saving potential,

various energy conservation options implemented in the plant etc. This audit activity will

be managed by Energy Efficiency Service Ltd. (EESL) during January 2011 onwards.

(b) W ho would be conducting the M &V in the target year?In principle, the M&V will be carried out by Designated Energy Auditors (DENA). The

broad principles that the DENA shall apply are:

a) Consistency by applying uniform criteria to meet the requirements of the applicable

approved methodology throughout the crediting period(s), applying uniform criteria

to expert judgments over time and among projects

b) Transparency: Information in the validation and verification reports shall be

presented in an open, clear, factual, neutral, and coherent manner based on

documentary evidence.

c) Impartiality, independence, and safeguards against conflicts of interest by

remaining free of any commercial, financial, or other processes that influence their

judgment or jeopardize trust in their independence and integrity. The designated

energy auditors shall base their findings and conclusions upon objective evidence,

conduct all activities in connection with the validation and verification processes in

accordance with the rules and procedures laid down by BEE, and state their

validation or verification activities, findings, and conclusions in their reports truthfully

and accurately.

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d) Confidentiality: In accordance with the requirements of the PAT scheme, DENAs

shall safeguard the confidentiality of all information obtained or generated during

validation or verification.

e) Validation of the PAT scheme: DENA shall convey the results of their assessmentthrough a validation report they shall submit, along with the supporting documents,

to BEE as part of the request for compliance as a PAT project activity. A positive

recommendation shall be submitted only if the proposed project activity complies

with all the requirements stipulated under the PAT scheme. DENA shall take into

consideration all evidence that is likely to alter the recommendation about

validation.

f) Verification/ Validationmethods DENA shall apply standard auditing techniques to

assess the correctness of the information provided by the project DC, including but

not limited to the following:

Assessment and verification that the implementation of the project activity and the

steps taken to report that the specific energy consumption comply with the PAT

criteria and relevant guidelines are as prescribed by BEE. This assessment shall

involve a review of relevant document action as well as an on-site assessment.

The verification by DENA of project documentation provided by the project DC shall

be based upon both quantitative and qualitative information on SEC. Quantitative

information comprises the reported numbers in the monitoring report submitted to

the DENA. Qualitative information comprises information on internal management

controls, calculation procedures, procedures for transfer, frequency of SEC reports,

and review and internal audit of calculations and data.

Review of the PAT Assessment Document (PAD), including the monitoring plan and

the corresponding validation report, earlier verification reports, the methodology

used for monitoring, relevant decisions, clarifications, and guidance from BEE, any

other information and references relevant to the project activity that have a bearing

on SEC (data on electricity generation or laboratory analysis, for example).

In addition to reviewing the monitoring documentation, the DENA shall confirm that

the project DC has complied with requests, if any, made during validation.

(c) How w ould be the DEN A selected o r accredited?Accreditation of DENAs will be undertaken by BEE under appropriate rules/ regulationsin this regard. The designated energy auditor shall be a legal entity and that it can

function legally, enter into contracts, make decisions independently, and may be sued

for failure to perform as agreed in the contract. DENA will have appropriate legal and


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financial liabilities for all its actions under the PAT scheme and such liabilities will be an

integral part of the accreditation.

(d) W ill there be any M &V in intermediate years?There would not be any M&V during the intermediate years i.e. between 2011 & 2014.

However, each DC would be required to submit the annual energy consumption

through the Form-1 to BEE. Apart from this, one to two energy audits by Accredited

energy auditors will be conducted by DCs as per the provision of EC Act, 2001. These

would form a basis of M&V system in the target year.

Energy Saving Certificates & Trading

(a) W hat is energy saving certifica te (ESCerts)?Energy saving certificates (ESCerts) would be issuable to a DC who achieves the target

reduction from the baseline SEC during the stipulated period of 3 years. The number of

e-certs which would be issued depends upon the quantum of energy saved at the

target year. The value of each e-scert would also be based on the crude oil price and

to be controlled in a suitable mechanism.

(b) How w ill the promotion of ESCerts be done ?The following protocols are being designed to promote trading of ESCerts :

Verifying the SEC of each DC in the baseline year and in the target year by an

accredited verification agency which will verify the compliance based on the

current SEC of the DCs on a gate-to-gate basis. DENAs will be appointed by

BEE to undertake this activity.

Issuing energy savings certificates (ESCerts) to those DCs who exceed the target

efficiency levels, that is who manage an even lower SEC than stipulated. This

would be quantified on the basis of the report by DENA and provided to the DCs

in the form of ESCerts.

Trading the ESCerts by DCs with other DCs who are unable to meet their target

specific energy consumption by their own actions. This trading can be carried

out bilaterally between any two DCs (within or across the designated sectors) or

on special platforms for their trading created in power exchanges.

Ensuring compliance and organizing reconciliation of ESCerts will be undertaken

by BEE in association with the two Power Exchanges.

Fungibility of ESCerts is also being discussed with the proposed Renewable

Energy Certificates (RECs) being developed by the Ministry of New and

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Renewable Energy (MNRE). The conversion factor for enabling this fungibility will

be based on verifiable parameters such as energy consumption in kgOE.

(c) Is there any penalty for non-comp liance of the target ?DCs who would fail to achieve the target by the time frame would be imposed with

penalty for the non-compliance as per the provision of the EC Act. Penalty for non-

compliance is Rs. 10 lakhs and is also linked to the value of non-compliance measured

in terms of the market value of tones of oil equivalent by inserting a new section 26(1A).

A sample calculation of the compliance scenario against the target of a Designated

Consumer is given below.


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The following case situations are illustrated for a Designated Consumer (DC) based on

the actual data obtained.

Example : Cement SectorPlant Reference P-10

Prodn. In Base Year 156 2541 Tonne (From Baseline Analysis)

Baseline SEC 750 Kcal/ kg (From Baseline Analysis)

Target 3.22 % (From Statistical Analysis)

Target SEC 725.6 Kcal/ kg (Calculated)

Target Energy Saving 3774.10 MTOE (Calculated)

Scenario#1 (Over-Achieved)SEC in the Target Year 720 Kcal/ kg (Assumed)

% reduction 4.0 % (Calculated)

Estimated Energy Saving 46 51.4 MTOE

Extra Energy Saved 877.3 MTOE

Value of escerts for issuance 877.3 X INR (@ X INR per MTOE)Scenario#2 (Under-Achieved)SEC in the Target Year 735 Kcal/ kg (Assumed)

% reduction 2.0 % (Calculated)

Estimated Energy Saving 2307.6 MTOEShortfall in Energy Saving 1466.5 MTOE

Equivalent Monetary Value 1466.5 XCompliance

(Say 80% by) Purchase of

Ecerts 1173.2 MTOE

Monetary Value (A) 1173.2 X INR(Rest 20% by) Paying Penaltyfor 293.3 MTOE (Calculated)

Upfront penalty 100 000 0 INR (As per Act)

Non-compliance Penalty 293.2 X INR

Total Penalty Value(B)

1000 000 +293.2X INR

Total Monetary Implications to DC A + B INR


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(d) W hat w ould b e the market design criteria of ESCerts trad ing ?Trad ing mechanism design: The Energy Savings Certificates (ESCerts) will be traded onspecial trading platforms to be created in the two power exchanges (IEX and PXIL). The

exchanges would create an efficient and transparent market for trading by taking

measures to safeguard market integrity and enhance transparency in operations. The

exchanges will also maintain data on traded prices, traded volumes, and trends.

Transfer agents or depositories shall hold the ESCerts in electronic form and provide

client services in relation to ESCerts.

To ensure liquidity and demand for ESCerts, bulk buying and bundling of ESCerts

should be encouraged. Some of the issues that are being discussed in order to enhanceliquidity are:

a) Intermediate compliance timeframes to enhance market liquidity: Different

approaches have been adopted in schemes to balance issues such as

environmental integrity, monitor progress against targets and cost burden. Shorter

compliance periods enhance market liquidity but tend to generally increase

transaction costs and potentially the market price of the certificates. Regular

reporting allows for effective monitoring against targets and early detection of any

discrepancies. Penalties and incentives could be linked to intermediate compliance

targets.

b) Energy Allowances vs ESCerts: The size of certificates influences the prices and

tradability. The smaller the size of certificates, the higher the administration costs.

Energy allowances provide an alternative to increase the trading volumes as

compared to the incremental energy saving certificate.

c) Banking of Certificates: The lifetime of ESCerts also affects it price; shorter lifetimes

of certificates may significantly distort market prices as the market will tend to

respond to short term demand and supply issues. Most international schemes allow

for borrowing and/ or banking of excess savings across compliance periods. The use

of banking is perceived as being essential in building investor confidence and

market stability.

d) Auctions/ buy-back of ESCertsby the Government/ BEE to ensure stability of price

as well as to provide price signals upfront. The use of market maker to enable this

process is also important.


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A separate study on market design & institutional mechanism has been done by PXIL and the

study reports are under review. The executive summary of the study has been placed in

Annexure V


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(e) How would information be exchanged between all the stakeholder related to Escerttrad ing mechanismThe proposed ESCerts trading mechanism involves extensive information exchange

between Designated Consumers (DCs), State Designated Agencies (SDAs), Designated

Energy Auditors (DENAs), Power Exchanges, Bureau of Energy Efficiency (BEE) and

Central Registry on a regular basis. Timely and accurate information exchange while

maintaining confidentiality, transparency and security could be achieved through

adopting an online integrated information system for the program. Therefore, a central

online integrated information system (IIS) i.e. PAT-Net connecting all the DCs, SDAs,DENAs, Trading Exchanges, Central Registry and BEE is suggested for this purpose.

Development of such a common platform would not only support a simple and much

faster transfer of information between the stakeholders but through a selective viewing

rights. Apart from this in-built approval mechanisms would ensure security of the energy

consumption details of DCs. The software will help data processing and analysis that

will facilitate an MIS/ reporting mechanism and industry performance measure for BEE

to regulate PAT implementation. Moreover, on the basis of industry performance, BEE

can also inform the DCs of the progress and subsequently, help give indicators to the

exchanges and market intermediaries for help with price discovery of ESCerts.

Moreover, by integrating DC, DENA & SDA, PAT-Net will enable tracking, monitoringand reporting of energy reduction details (consumption, energy audit and verification

by DENA and supporting documents) by DCs to the DEA. In case of non-achievement

of targets by the DC at the end of 3 years, SDA may also access the information

available on PAT-NET to calculate and levy penalty on the respective DCs.

A central online integrated information system (IIS) i.e. PAT-Net connecting all the DCs,

SDAs, DENAs, Trading Exchanges, Central Registry and BEE will be employed. Each

one of them will be provided with a unique access depending on their category, with

user rights assigned accordingly. Overall administrative rights will be with a BEE.

The indicative process flow diagram involving all institutions/ entities has been

illustrated in Figure 2:


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and DENAs along with their performance details could be maintained with PAT-Net.

Constant performance monitoring of the program by the Administrator, through

parameters like total ESCerts issued & traded, complying sectors or participants, market

liquidity etc., will also be carried out. Delays at any point of the process-chain will beidentified and timely action be taken by the Administrator/ Regulator. Targets will be

issued to participants through PAT-Net and also end-of-the-phase reconciliation be

carried out. Penalties will be imposed on non-compliant participants and its adherence

could be monitored through PAT-Net. Automation of processes wherever feasible will

be carried out for seamless implementation of the proposed ESCerts program. A single

PAT-Net connecting all the stakeholders and participants ensures implementation of

common standards at all the levels and promotes consistency.


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International ExperienceThe PAT mechanism is a unique scheme that, perhaps, does not have any

international benchmark. However, while designing the scheme, a survey of

best practices and lessons learnt from several international schemes was undertaken.

The same is discussed in brief below.

Survey of International trading and energy efficiency

schemes

a) European Union Emission Trading Scheme (EU ETS)The EU ETS is a mandatory emissions trading scheme covering over 10,000 energy

intensive installations across the 25 Member States of the European Union. The Scheme

is one of the EUs key measures for delivering its commitments under the Kyoto Protocol

and for delivering its objective of demonstrating leadership in reducing emissions of

greenhouse gases. Phase 1 of the scheme operated from 2005 to 2007. Phase 2

started in 2008 and will last until 2012, and phase III will operate from 2013 to 2020.

b) Climate Change Agreements (CCAs)CCAs are voluntary mechanisms that encourage energy efficiency in energy intensive

industries in the UK. The Government has provided an 80% discount from the Climate

Change Levy for those industry sectors that agree challenging targets for improving

their energy efficiency or reducing carbon emissions. CCAs cover ten major energy

intensive sectors (aluminum, cement, ceramics, chemicals, food & drink, foundries,

glass, non-ferrous metals, paper, and steel) and there are over thirty smaller sectors

with agreements. CCAs were introduced in 2001 and are set to expire in March 2013.

However, the Government intends for the scheme to continue until 2017.

c) CRC Energy Efficiency Scheme (CRC)The CRC is the UK's mandatory energy saving scheme aimed at improving energy

efficiency and reducing carbon dioxide emissions, as set out in the Climate Change Act

2008. It has been designed to raise awareness in large organisations and encourage

changes in behaviour and infrastructure. The scheme will affect approximately 20,000

organisations, with around 5,000 of these required to participate in the scheme. The

scheme is due to start in April 2010, with a three-year introductory phase.

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scheme imposes benchmark targets on all NSW electricity retail suppliers, certain

generators and all market customers that take electricity supply in NSW directly from

the National Electricity Market. The scheme commenced in January, 2003.

i) Chicago Climate Exchange (CCX)CCX is a voluntary, legally binding greenhouse gas reduction and trading system for

emission sources and offset projects in North America and Brazil. The companies joining

the exchange commit to reducing their aggregate emissions by 6% by 2010. CCX has

more than 350 members ranging from corporations, educational institutions and

government organisations. The exchange was launched in 2003.

j) US Acid Rain Programme (ARP)The ARP is an initiative undertaken by the United States Environmental Protection

Agency, aiming to reduce overall atmospheric levels of sulphur dioxide and nitrogen

oxides, which cause acid rain. The program primarily targets coal-burning power

plants. Phase 1 began in 1995 and Phase 2 began in 2000.

k) China's Top-1000 Energy-Consuming Enterprises ProgramThe National Development Reform Commission (NDRC) in China launched the 'Top-

1,000 Program,' which targets energy efficiency improvements in the 1,000 largest

enterprises that together consume one-third of all China's primary energy. The scheme

was launched and aims to save approximately 100 million tons of coal equivalent in

2010.

Lessons learnt from these international schemes:The key lessons learnt from these schemes are indicated hereinbelow:

4.2.1 Ambition and target setting methodology must be such that targets need to befair, realistic, provide clarity in terms of short and long-term actions, and most critically,

make allowance for growth in developing economies. The key elements of this are:

The need for consistent and comprehensive baseline data to make sure that setting

baselines is balanced and not too high for individual sources that can undermine the

effectiveness of a scheme.

4.2


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Banding of targets based on historical datawith the aim to keep payback periods forenergy saving investments the similar across all units and sectors to ensure an

equitable approach that does not penalise early action, and will be most effective for

industrial sectors that have a wider bandwidth in specific energy consumption (SEC).As performance within a sector or subsector converges, then it might be possible to

move towards a single benchmark across all installations.

Intermediate compliance timeframes to enhance market liquiditywhich would enableeasier economic decisions by DCs

Allowing for a growth metricmakes the scheme more attractive - thus intensity targetsare better than absolute caps.

4.2.2 Institutional capacity / governance: Key considerations for effective on-going stable scheme operation are institutional capacity, avoidance of conflict of

interest between scheme administrator/ regulator and scheme assessor, and where

possible, integration with existing institutions.

4.2.3 Simplicity in the scheme design and integration with other policy to ensure itsattractiveness to the industry and to reduce the cost of compliance as well as other

transaction costs.

4.2.4 Monitoring, reporting and verification need to have desirable attributes likeconsistency, reliability, accuracy, flexibility, low cost of implementation for both scheme

participant and administrating authority, and rigour that allows a scheme to establish

inter-linkages with other similar schemes. Some of the building blocks are the need for

data accuracy and reliability, creating incentives for self-regulation, and balancing

accuracy and transaction costs for MRV.

Approval of PAT Scheme

The Cabinet approved the financial outlay of Rs.235.35 crores for National Mission on

Enhanced Energy Efficiency (NMEEE) in May, 2010 of which PAT is a component.

5


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Annexure-I

Different Sectoral Studies Carried out by BEE

S.N o Sector Sectoral study (Agency) Remarks1 Aluminum Completed (FICCI) Under review by BEE2 Cement Study under revalidation3 Chlor Alkali Completed (NPC) Under review by BEE4 Fertilizer Completed (NPC) Discussions with Ministry of Fertilizer initiated

for setting targets under their existing tariff

(subsidy) programme

5 Iron & Steel Completed (MITCON) Under review by BEE6 Pulp &

Paper

Completed (CPPRI) Under review by BEE

7 Textiles Completed (NITRA,BITRA, SITRA)

Under review by BEE

8 ThermalPower

Completed (CEA/ CERC) Target setting being aligned by CERC and

CEA under the tariff setting process.

9 Railways - Discussions initiated with Railway Board


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Annexure-II

Designated Energy Auditor (DENA) FIRM or COMPANY orASSOCIATIONS

Qualification (Qualifications for accreditation of DENA is under process): Should be a firm/ company registered/ incorporated in India. Should have at least 3 certified energy auditors or organization/ sectoral

associations having more than 3 personnel with more than 10 years of experience

in particular designated energy intensive industrial sector (however, association

should have 3 certified energy auditors within stipulated time).

Should have conducted at least 3 energy audit, in the particular designated

energy intensive industrial sector, in last 5 years.

Should have energy auditing instruments

Role of DENA: DENA have been proposed for the various activities under PAT (Perform, Achieve

& Trade) likeo Baseline data collection

o Baseline Energy Audit

o Monitoring & Verification

o And other PAT related activities


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Annexure-III

METHODOLOGY FORESTIMATION OF BASELINE SPECIFIC ENERGY

CONSUMPTION (SEC)


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This section describes the various Rules that are proposed for estimating Baseline SEC

within the PAT methodology. The implementation of these and other Rules described in

this document will be subject to revisions or modifications based on periodic review by

the BEE based on inputs from the technical expert committees.

Rules for Estimating Baseline SECRule # 1 : Eight industrial sectors and Rai lw ays amo ng the 15 energy intensive sector asper EC Act, 200 1 have been included in the 1st cycle o f PAT.Rule # 2 : Each industrial sector is divided into sub- sectors ba sed on certain factorswhich are most common and prevalent.

Sector Basis for Sub-sector Sub-SectorThermal Power plant Fuel Based Coal, Gas, Oil

Cement Process Based Dry, WetIron & Steel Operation Based Integrated, Sponge Iron

Fertilizer Feedstock Based Natural Gas, Naptha

Aluminum Product Based Refinery, SmelterPulp & Paper Raw Material Based Wood, Agro, RCF

Textile Operation Based Spinning, Processing,Composite, Fiber yarn

Chlor-Alkali Technology Based Membrane cell, Mercury

Rule # 3 : The Specific Energy Consumption (SEC) is comp uted a s the ratio of the totalenergy input to the total q uantity of production of the DC.The SEC of an industry would be calculated based on the follow ing formula.

SEC = Total Energy input to the Plant Boundary (in MTOE)

Total Quantity of Production (in Unit of Product)

Hence, units of SEC would be: MTOE/ Unit of Product.


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While calculating the total energy input to the plant, all energy sources would be

converted to a single unit i.e. MTOE (metric ton of oil equivalent) using standard

engineering conversion formulae:

Electricity purchased from Grid: 1 kWh = 860 kcal.

Solid fuel: Quantity (kg) * GCV (kcal/ kg) kcal.

Liquid fuel: Quantity (m3) * density (kg/ m3) * GCV (kcal/ kg) kcal.

1 MTOE = 107 kcal.

The following items would be considered:

1. All forms of energy (Electricity, Solid fuel, Liquid fuel, Gaseous fuel, by-products

used as fuel etc.) which are actually consumed for production of output should

be considered.

2. Energy consumed in the plant colony, temporary construction and for outsidetransportation system should not be accounted.

3. Energy used through renewable energy sources should not be accounted.

4. Any energy consumed for major construction work would not be considered as

this is not meant for producing the existing product. Quantity of such energy

should be deducted from the total energy consumption.

5. If any DC does not have disaggregated figures of above, then the total energy

may be considered for calculations in both baseline and target phases.

Definition of ProductIn order to calculate the SEC, the definition of product is important. In certain

sectors/ sub-sectors of industry such as Iron & Steel, Aluminium-Smelter, Pulp & Paper

and Textiles a significant product mix is observed. Hence, a robust definition of product

is critical to the definition of the SEC. The following would be used while considering the

product in different sub-sectors.

Sector Main ProductCement CementFertilizer Urea

Iron & Steel (Integrated) Crude SteelIron & Steel (Sponge Iron) Sponge Iron or Crude Steel

Aluminium (Refinery) AluminaAluminium (Smelter) Molten Aluminium

Aluminium (Integrated) Molten AluminiumPaper (Pulping) Pulp

Paper (Paper Making) Paper


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Paper (Pulp & Paper) PaperTextile (Spinning)

Textile (Composite)

Textile (Processing)

Fabric

Yarn

Fabric

Fabric

Chlor-Alakli Caustic SodaPower Plant Electricity


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Rule # 4 : The boundary of a DC is to be defined on a G ate- to-Gate (GtG) concept.The following boundary for different sectors is considered.

(a)Thermal Pow er Plant

OPSS : Other Process Sub-Systems

(b)Cement


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(c ) Integrated Steel Plant

(d) Sponge Iron plant


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(e) Fertilizer

(f) Aluminium


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(g) Pulp & Paper

(h) Textile


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(i) Chlor-Alkali

Rule # 5 : The baseline estimation of SEC w ill be based on historical d ata of individualpla nts as reported b y the DC in the specified format.In the context of PAT, it is proposed to collect data as specified in Form 1 under the

provisions of the Energy Conservation Act 2001. As it was felt that the information may

not be sufficient, an additional annexure has been designed (also provided for

reference in Form 1). As per the EC Act, it has been mandatory for all industrial

consumers to file annual energy consumption returns from 2005-06. As a result, it is

proposed to collect the above data for five years up to 2009-10.

The following items of data relating to energy consumption and production are to be

collected based on the specified format:

1. Installed capacity

2. Actual quantity of production3. Electricity purchased from grid

4. Electricity sold to the grid or other facility

5. In house generation of electricity by CPP/ DG sets/ Co-Generation

6. All solid fuels used

7. All liquid fuels used

8. All gaseous fuels used

9. All recovered energy from process [byproducts etc.,]


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Rule # 6 : The SEC Estimation is ba sed on ap plica tion of the Gate- to- Gate (GtG )concept and the Rule for Definition of SEC. This may be defined as Reported SEC.The following are the explanations on estimating the total energy consumption and specific

energy consumption in various case situations as encountered in Designated Consumer

industries.

The cases have been prepared based on prevailing scenario of energy usage in the energy

intensive sectors like Power Plant, Iron & Steel, cement, Fertilizer, Aluminium, pulp & paper,

Textile, Chlor-Alkali etc.

CASE -I : All Energy Purchased and Consumed

Electricity is purchased from the Grid

PROCESS

Electricit KWH

FO (Liter)

NG (SCM)

Coal (KG)

Others (KG or Ltr)

Product (Kg)

Total Energy Consumption (Etotal) =

Total Electrical Energy Consumption (ELtotal) =

Total Thermal Energy Consumption (THtotal) =

Gate to-Gate SEC =


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CASE -II : Electricity Partially Generated by DG Sets, other EnergyPurchased and Consumed

Electricity is purchased from the G rid & generated by DG set

(a) If X is known and A is known, SFC = ( X / A) kwh/ ltr

(b) If A is known X = ( A x SFC ) kwh where SFC = 3.0 to 3.5 kwh/ ltr(c) If X is known A = ( X / SFC) kwh where SFC = 3.0 to 3.5 kwh/ ltr

Electricity (KWH)

FO (Liter)

NG (SCM)

Coal (KG)

Others (KG or Ltr)

Product (Kg)



Total Thermal Energy Consumption (THtotal) =-

Gate to-Gate SEC =

DG

Set

SFC

A LtrX kwh

Process


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CASE -III : Electricity Generated by CPP, other Energy Purchased &Consumed, Electricity partially sold to grid

Electricity is generated b y Coa l Based C PP, p artially sold to grid

(a) If X is known and A is known, Heat Rate (HR) = [( A x GCVcoal ) / X] Kcal/ kwh

(b) If A is known X = [( A x GCVcoal ) / HR ] kwh where HR = Avg. Plant Heat Rate

(c) If X is known A =[ ( X * HR)/ GCVcoal] KG where HR= Avg. Plant Heat Rate

* If plant HR is not available, then National Avg. HR i.e. 2717 Kcal/ kg may be considered

* The total electricity consumption also includes the auxiliary power consumption of CPP

Coal (KG)

NG SCM

FO (Ltr)

Others KG or Ltr

Product K


Total Electrical Energy Consumption (ELtotal) =-

Total Thermal Energy Consumption (THtotal) =-

CPP

Heat Rate Kcal/ Kwh

A KGX kwh

Process

Y (KWH) to

Grid


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CASE -IV : Electricity Generated by CPP, other Energy Purchased &Consumed, Electricity partially sold to grid from CPP.

Electricity is generated by Coal Based CPP, partially sold to grid. CPP is in separateBoundary

Here, in case of two separate boundaries, two different Norms / Targets to be established

1. For the Production Plant Boundary (A):

B

Gate to-Gate SEC =

A

PROCESS

X (KWH)

FO (Liter)

NG SCM

Coal KG

Others (KG or Ltr)

Product (Kg)

Total Energy Consumption (Etotal) =*

Total Electrical Energy Consumption (ELtotal) = X kwh


CPPY (KWH) to Grid

Coal (KG)

Aux P (a%)Others (KG or Ltr)

G (KWH)


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2. For the Captive Power Plant Boundary (B):

Here, the target setting criteria of Power Plant should be adopted which is based on Net

Heat Rate .

Gate to-Gate SEC =

Total Energy Consumption (Etotal) =[FO x GCVfo + Coal x GCVcoal + Others x GCVeach] Kcal

Total Electrical Energy Consumption (ELtotal) =(G ) x (a/ 100) kwh

Gate to-Gate SEC ( i.e Net Heat Rate) =

-


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CASE -V : Energy Purchased & Consumed, Electricity & Heat partiallyGenerated through Co-Gen plant

Electricity & Heat a re generated by Co- Gen Plant

Coal (KG)

NG (SCM)

FO (Ltr)

Others (KG or Ltr)

Product (Kg)




Gate to-Gate SEC =

Co-

Gen

Plant Eff. %

A KG X kwh

Process

Elect (KWH)

Y Kcal


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Example: Estimation of Reported SEC from historical data

Name of Unit ABC Ltd.Place XYZTotal Installed Capacity 20 00000 TPD Sector : Cement

S. No Particulars Unit 200 5-06 200 6- 07 2007-08 A1 Installed Capacity Tonnes 1700 000.00 1700 000.00 200 0000 .

A2 Actual Production (Cement) Tonnes 1872395 1931782 1616332

A3 Actual Production (Clinker) Tonnes 1355000 1363000 1281000

A4 Capacity Utilization % 110.14 113.63 80.82

B Total Energy Input Million Kcal 1148826.5 1126812.8 1046070 .6B1 Electricity Million Kcal 41839 16684 23194.2

B2 Solid Fuel Million Kcal 1065086.55 1082190.39 1002816.0

B3 Liquid Fuel Million Kcal 4190 0.93 27938.45 20060.33

B4 Gaseous Fuel Million Kcal 0.00 0.0 0 0.00

B5 Other Fuel Million Kcal 0.00 0.00 0.0 0

C1 % Blending % 27.83 29.04 28.34

C2

SEC (Electrical) w.r.t.

Cement kWh/ t 61.83 63.79 76.34

E1 Total Energy Consumption MTOE 114883 112681 104607

E2

Gate-to-Gate SEC w.r.t.

cement Kcal/ kg 614 583 647


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Rule # 6 : The SEC w ill be normalized , during baseline and target period s, based on astatistical procedures.Although there may be multiple factors that affect energy consumption, it is suggested

that only the Capacity Utilization may be considered for Normalization as this is likely

to vary in every year as a result of many factors such as :

The Normalization procedure is proposed to be applied if the Capacity Utilization (CU)

or Plant Load Factor (PLF) has a deviation of more than 30% (and considered by BEE

after a study of the inputs from the technical expert committees) in any of the last three

years when compared to the average CU of the historic data provided. It will be

applied only if CU has deviated due to uncontrollable factors which will be declared by

the DC.

The factors for which Normalization is proposed to be applied are:

(a)Natural disaster

(b)Rioting or Social Unrest

(c) Acute shortage of raw material

(d)Major change in government policy

The Normalization procedure is depicted in the following diagram and comprises thefollowing steps:

1. Calculate the annual SEC for the last 3 years.

2. Calculate the capacity utilization (CU) for the same period.

3. The average CU is also computed for the same period.

The SEC for a specific year will be Normalized if:

If the deviation of the CU in that year is greater than 30% and

If the deviation of the SEC is more than 5% for that year, and

If production operations did not begin in that specific year, and

If capacity did not increase more than 10% as compared to the previous

year.

This Normalization will be done by performing a statistical analysis of the SEC and

production data:

1. Plotting the Production versus Energy Consumption curves.

2. Performing statistical analysis to represent the relationship between the

production and energy consumption.

3. Extrapolating the above relationship to generate CU versus energy consumption

and CU versus SEC data for a suitable range of CU values.

4. The average CU will be used to identify the corresponding SEC value from the

above table.

5. The normalized SEC will be the value as computed in the previous step.


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6. Above Normalization process will be repeated for each year that the CU has

deviated greater than 30% from the average over the last 3 years.

7. In the above description, CU will be replaced by PLF in the case of DCs from the

Thermal Power Plant Sector.

8. The above calculation will result in the Normalized SEC for the DC.

Example :


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Rule # 7 : The ba seline SEC estimation w ill be the simple arithmetic average o f the SECof the last three years. The base year w ill be defined a s 20 09 - 10 .Result of Baseline SEC of 46 Dry Process cement plants.

PlantNo. Avg. Production (Tonne) CU (%)

Baseline SEC(Kcal/ kg)

Total Energy Cons.(MTOE)

P-2 2498446 124.92 691 172665.23

P-3 730858 87.01 1725 12609 5.85

P-4 372218 93.0 5 106 5 39652.43

P-5 1613070 89.03 1083 174757.06

P-6 1730000 89.61 688 119011.12

P-7 1141000 95.08 851 97081.94

P-8 950575 99 .02 1036 98449 .09

P-10 156 2541 71.0 2 750 117154.30

P-11 1032531 103.58 791 81640.38

P-12 2996457 71.34 1489 4460 91.63

P-13 2485522 114.38 1548 384795.30

P-14 3863000 136.99 1174 453348.90

P-15 366 1383 85.45 1058 387222.54

P-16 2433333 72.27 1334 324625.71

P-17 3806667 83.02 1171 445710.59

P-18 814667 113.15 1073 87383.14

P-19 299271 19.95 851 25456.68

P-20 109637 36.91 1067 11698.6 1

P-21 153677 40.44 840 12910.22

P-22 1281267 80.08 789 101104.41

P-27 471283 112.21 940 44308.30

P-29 2082667 86.69 572 119054.91

P-30 417333 62.60 1277 53290.02

P-31 770926 61.63 1088 83861.83

P-32 469095 88.34 1109 52042.0 4

P-33 417333 62.60 1277 53290.02

P-34 2678554 74.40 1254 335880.9 3

P-37 261152 65.29 199 2 520 17.72

P-38 4540 00 88.15 1473 66 862.41

P-39 1107000 73.80 497 55055.01

P-40 2188333 82.89 1174 257015.14

P-41 98169 5 102.26 663 65045.79

P-42 1812930 100.72 1395 252986.30

P-43 2001852 90.99 2112 42280 6.19

P-44 1748049 87.40 659 115281.38

P-45 170000 0 89.47 1007 171241.38


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P-46 372218 93.0 5 106 5 39652.43

P-48 1086333 108.63 1060 115175.79

P-49 3245702 113.88 737 239267.42

P-50 3430000 95.28 1183 405735.06

P-51 2082667 86.69 550 114482.11P-53 2143667 85.75 732 156874.52

P-54 1973333 93.97 979 193177.19

P-55 1322840 95.20 948 125442.99

P-56 1363000 87.55 877 119597.54

P-57 1118000 93.17 877 98099.81

Summary of Steps of Establishing Baseline SEC

REPORTED SEC(from Mandatory Reporting)

Normalized SEC(from Statistical Analysis)

BASELINESEC


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Annexure-IV

METHODOLOGY FORTARGET SETTING


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General Principles of Target SettingThere are certain principles that are proposed for the purpose of target setting, in

addition to the general requirements and principles of the methodology as described

earlier in this document.

Some of the principles of the target setting process are listed below:

1. Industry Focused:This principle indicates that the overall target setting process utilize various scientific

methods and logical techniques that are widely used and in general usage in similar

situations in policy formulation for industrial technical assessments.

2. M&V Compliant:This principle requires that the overall target setting process be designed in such

technical terms so as to be readily amenable to effective and fair Measurement &

Verification (M&V) practices by the M&V infrastructure that will be put in place.

3. Pro-rata Approach:The national energy saving objective will be apportioned to various components of the

industry using a pro-rata approach. This means that in general, a sector or cluster

which consumes more energy shall be apportioned a larger portion of the energy

saving estimate.

4. Percentage SEC Reduction:The targets assigned to each DC shall be a percentage reduction with respect to its

current estimated Baseline SEC.

5. Independent Targets:Each DC shall be assigned independent targets expressed as a percentage reduction

with respect to its current estimated Baseline SEC. This reinforces the principle that a

plant or DC is essentially working to improve energy efficiency with respect to itself.

6. Differential Targets:This principle states that more inefficient plants shall be assigned higher targets or

larger percentage reductions with respect to their current estimated Baseline SEC. This

principle also incorporates the general industry feedback that early movers should be

recognized. The more efficient plants or DCs shall be assigned smaller targets or

smaller percentage reductions with respect to their current estimated Baseline SEC.

7. SEC Captures Plant Variations


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This principle states that the current estimated Baseline SEC, the historic SEC data and

SEC analysis of a DC, captures various characteristics and static and dynamic effects of

the various plant specific parameters that may be unique to that particular plant or DC.

8. Relative SEC Index based targets:This principle states that the targets that are assigned to a DC shall be based on the

Relative SEC Index of that DC. This principle also implies the natural principle that more

inefficient plants shall be assigned larger targets expressed as a percentage reduction

with respect to their current estimated Baseline SEC.

9. Targets for TPP and Fertilizer PlantsIn the case of thermal power plants and fertilizer plants, the targets for SEC decrease

are to be aligned with the existing tariff-setting context. In the case of thermal power

plants, the Central Electricity Regulatory Commission (CERC) and in the fertilizer sector,the Department of Fertilizers are in the process of integrating these targets in their

respective tariff setting exercise.

Rule # 1 :The total estimated energy savings w ill be app ortioned and d isaggrega ted forsectors based on the pro-rata approach in the same ratio as their relative energyconsumption in the baseline year.

SN Sector EnergyConsumption Share ofConsumption Apportioned Energyreduction Target(mMTOE) (%) (mMTOE)

1 Power (Thermal) 160.30 66.64% 6.66

2 Iron & Steel 36.08 15.0 0% 1.50

3 Cement 14.47 6.02% 0.60

4 Fertilizers 11.95 4.97% 0.50

5 Railways (Approx.) 9.00 3.74% 0.37

6 Textile (Approx.) 4.50 1.87% 0.19

7 Aluminium 2.42 1.0 1

pat consultation document_10jan2011 (1)

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