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Electricity End-use Efficiency: A Means to Reduce Electricity Shortage With Economic Benefits Jayant Sathaye and Amol Phadke Lawrence Berkeley National Laboratory University of California Berkeley CA
Synergy for Energy Ahmedabad, India, 15 October 2004
Work supported by US Agency for International Development (AID), Office of Environment, Energy and Enterprise, Delhi, India
Contents 1. Energy efficiency goals and motivation 2. Load shedding -- Maharashtra Case Study 3. Evaluation of economic benefits z Consumer z MSEB z Government 4. Conclusions
2
Electricity End-use Efficiency in India: Goals and Motivation
• Electricity end-use efficiency goals • Reduce electricity shortage, and • Provide economic benefits to • Consumers, • Utility company, and • Government
3
Electricity End-use Efficiency: Typical Economic Benefits •
Consumer benefit •
•
•
Improving efficiency typically costs less than the electricity tariff
Utility company benefits, if •
Tariff is lower than avoided cost of electricity supply, and/or
•
Saved electricity can be resold to higher tariff customers
Country and government benefit due to •
More productive use of capital through investment in energy efficiency - less expensive than building new supply capacity
•
Where electricity supply is short, redirected supply can increase industrial and commercial output, and lower subsidy payments
•
More efficient use of capital and increased economic output leads to more jobs and increased government tax revenue 4
Electricity End-use Efficiency: Key Motivations in the Indian Context • Electricity supply – capacity and energy deficit • State Electricity Boards – financial difficulties • State and national government -- fiscal deficit • Maharashtra electricity case study • Focus on Maharashtra State Electricity Board
5
Economic Output and Fiscal Deficit • • •
Maharashtra Population – 101.27 million (March 2004) Gross state domestic product (GSDP) • Rs. 2,95,191 crores in current 2002-03 prices
•
Government revenue deficit – • Rs. 9,037 crores 2003-04 (Prov.), up from Rs. 609 crores in 1995-96
•
State government debt as percentage of GSDP – • 25%in 2003-04 (R.E.) up from 12.7% in 1995-96
•
Fiscal deficit – • Rs. 18,460 crore (R.E.); 5.6% of GSDP up from 2.8% in 1995-96
•
Maharashtra State Electricity Board (MSEB): • Commercial losses for 2001-02: Rs. 3527 crores • Rate of return on capital: - 31.7 %(without subsidy) 6
MSEB Capacity Deficit – Annual average (2001-02) (528 MW average evening peak load shedding lasting 18 hours a day) 01-02 dispatch 10000 9000 8000 7000
MSEBsupply
6000
MSEBdemand
MSEBhydro
5000 MW
MSEBthermal
DPC
4000
URAN
TEC
3000
CENTRAL
2000 1000 0 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
-1000 HOUR
7
MSEB Capacity Deficit – Annual average (2002-03) (7836 GWh load shedding over 20 hours a day; 1376 MW average evening peak load shedding ) 02-03 dispatch 11000 10000 9000 8000 7000
MSEBsupply
MSEBdemand
MW
6000
MSEBhydro
MSEBthermal
5000
DPC
URAN
4000
TEC
CENTRAL
3000 2000 1000 0 0
1
2
3
4
5
6
7
8
9
10
11
12
-1000 H
13
14
15
16
17
18
19
20
21
22
23
24
8
MSEB: Electricity Consumption by Category (2002-03) Type of consumption
Consumption Percentage (GWh)
Domestic
7,411
19.1
Commercial
1,643
4.2
Industrial
15,593
40.3
Railways
1,012
2.6
576
1.5
10,202
26.3
Public Water Works
1,387
3.6
Miscellaneous
1,014
2.4
38,837
100
Public Lighting Agriculture
Total
9
Electricity End-use Efficiency Selected Measures: Economic Benefit to Consumers
End-use device
Cost of Conserved Increm ental Electricity Capital Cost (CCE)
Electricity Tariff (2003-04)
Maharashtra Potential for Electricity Savings
(Rs./kW)
(Rs./kWh)
(Rs./kWh)
(GWh)
CFL (Lighting)
3,508
0.90
2.79
866
Refrigerators
13,075
1.03
2.79
717
•
Residential
Solar w ater heater Com m ercial Lighting
4,444
2.80
2.79
1271
3,334
1.44
3.91
317
Refrigerators
13,075
1.03
3.91
746
New unit
3,217
0.69
0.00
621
Rectification
2,234
0.48
0.00
621
Replacement
6,032
1.73
0.00
621
Agriculture IPS
•
Metric: Cost of conserved electricity (CCE) Allows the cost of efficiency improvement to be compared against the electricity tariff
Industrial Motors Variable Speed Drives
16,000
0.60
3.00
318
20,000
0.75
3.00
496
Lighting
3,334
1.44
3.00
340
CCE: Cost of conserved electricity includes a transaction cost that adds 30% to the incremental capital cost
Numbers in red indicate enduse efficiency improvement is not cost effective
6933
•80% penetration level; •Over several years 10
Estimated Load Shedding by MSEB Consumer Category Consumer Category Urban (GWh) Domestic 594 Commercial 149 L. T. 171 H. T. 298 Agri. & Irrigation 87 Street lights Railway Traction Railway Non-Traction P.W.W. Military Mula Pravara
Total
Load shedding allocation 2002-03 (GWh) (%) Rural (GWh) (%) Total (GWh) 41% 954 15% 1548 10% 157 2% 306 12% 254 4% 425 21% 860 13% 1159 6% 3620 57% 3708
(%) 20% 4% 5% 15% 47%
38 40 7 37 15 0
3% 3% 0% 3% 1% 0%
101 53 5 148 6 241
2% 1% 0% 2% 0% 4%
138 93 11 185 21 241
2% 1% 0% 2% 0% 3%
1436
100%
6400
100%
7836
100%
Domestic and Agricultural Consumption Total – 5256 GWh in 2002-03. End-use energy efficiency can improve consumer welfare, reduce government subsidy payments, and offset demand growth in the long-run. Commercial, L.T., and H.T. Consumers Total – 1890 GWh. End-use efficiency, and redirected electricity supply can raise economic output, and government tax revenue in the short-run, and offset demand growth in the long-run. 11
Electricity End-use Efficiency Selected Measures: Economic Benefit to MSEB • End-use efficiency potential costs Rs. 3 per kWh or less • 6,933 GWh at 80% penetration level • May be compared with • Electricity shortage -- 7,836 GWh (2002-03) • Equivalent to over 3 years worth of growth at 2,300 GWh/year or 6% a year
• Potential to raise MSEB revenue • Reduce agricultural load and redirect electricity to other paying customers – • Agricultural efficiency potential is 1,863 GWh; about 75% is during 6 hours night-time off-peak
• Assuming that MSEB system is capacity constrained, and only on-peak savings my be resold • Potential avoided cost and revenue increase • Rs. 380 crores/year 12
Electricity End-use Efficiency Selected Measures: Economic Benefit to State Government Reduction in Subsidy Payments Can Easily Offset Potential Agricultural Efficiency Program Costs Consum ption targeted for efficiency Subsidy Rate im provem ent (Rs./kWH)
(GWh/yr)
Estim ated Subsidy Am ount
Efficiency Im provem ent potential
Subsidy Reduction Potential
(Rs. Crores/yr)
(GWh)
(Rs. Crores/yr)
Agricultural
2.83
7,757
2,195
1,863
527
Residential
0.04
7,003
28
2,853
11
14,760
2,223
4,716
539
Total
Potential Agricultural Efficiency Program Capital Costs: – Pump rectification, new efficient pumps, and pump replacement – Rs. 494 crores
13
Electricity End-use Efficiency Selected Measures: Economic Benefit to State Government Impact on Industrial and Commercial Sectors • Electricity shortage definition – • other factors (capital, labor, and materials) of production are present – only missing electricity
• Removal of load shedding leads to • Direct economic benefit – increased output of affected industries and commercial services • Indirect economic benefit – secondary increase in output due to multiplier effect z
Increased output adds to employment and government tax revenue 14
Maharashtra State Government: Revenue Receipts Rs. Crores (2002-03)
Rs. Crores (2003-04 (R.E.))
Revenue Receipt
31,103
37,158
Tax Revenue
25,079
29,111
State’s Own Tax Revenue
22,814
26,074
Sales Tax Revenue
13,488
15,485
Electricity Duties
1,149
1,280 15
Electricity End-use Efficiency Selected Measures: Economic Benefit to State Government (Cont.) Impact on Sales Tax Revenue z
State sales tax revenue in 2002-03: – Rs.13,488 crores – Industrial and commercial electricity consumption -- 22,825 GWh – Sales tax per kWh -- Rs. 5.9 per kWh
z
z
Removing shortage of 1,890 GWh would increase industrial and commercial sector output, and proportionately increase sales tax revenue Magnitude of sales tax increase will depend on extent of backup generation (20% to 50%) and supply-demand elasticities – Estimated to be Rs. 550 – 900 crores per year
z
z
Additional revenues may accrue from electricity duties and other taxes, and from all taxes on the secondary (indirect) increase in output Additional employment in these sectors will add to the benefits 16
Conclusions • Maharashtra faces several challenges – • Growing electricity shortage • Fiscal deficit • Deteriorating MSEB finances
• Energy efficiency can provide relief for these problems. Over time, it has the potential to • Reduce almost 90% of the electricity shortage • About 1300 MW and 6,900 GWh
• Improve MSEB revenue • About Rs. 380 crores/year
• Reduce government subsidy and increase tax revenue • Subsidy reduction about Rs. 530 crores per year • Increased tax revenue about Rs. 550 -- 900 crores per year • Net revenue increase of Rs. 1,080 -- 1,430 crores per year or about 1417% of the state’s revenue deficit
• Agricultural efficiency program costs – Rs. 494 crores
• Additional benefits, not yet quantified, include increased employment and higher indirect industrial and commercial output 17
REFERENCES Slide 6 Maharashtra population and economic statistics from Economic Survey of Maharashtra, 2003-04 MSEB financial statistics from Planning Commission, Annual Report (2001-02) on State Electricity Boards, May 2002. Slides 7 and 8 Maharashtra State Electricity Board (MSEB) (2004). Hourly generation data for period April `01 to march.`03. http://www.msebindia.com/newtariff2003/newtariff2003_index.shtm. (accessed on August 15th , 2004 ( 11.15 PST) MSEB (2004). Generation of Plant Unit Wise. http://www.msebindia.com/newtariff2003/newtariff2003_index.shtm. (accessed on August 15th , 2004 ( 14.00 PST) Slide 9 MSEB (2003). MSEB Annual Report 02-03. MSEB, Mumbai, India Slide 10 Cost and efficiency data for various energy efficiency measures collected from market surveys in Pune and Mumbai. Slide 11 Allocation of load shedding between rural & urban consumers based on Maharashtra State Electricity Board (MSEB) (2004). Schedule of planned load shedding http://www.msebindia.com/consumer/merc_arcieve.shtm. (accessed on August 19th , 2004 ( 20.50 PST) Load shedding allocation based on interviews with MSEB officials – Kalwa Load Dispatch Center Also based on interview with Prayas Energy Group. Total load shedding data obtained from Maharashtra Electricity Regulatory Commission (MERC) (2003). Tariff order for MSEB 03 -04 ( case 2 of 2003). MERC India Slide 13 Avg. cost of supply and tariff obtained form Maharashtra Electricity Regulatory Commission (MERC) (2003). Tariff order for MSEB 03 -04 ( case 2 of 2003). MERC India Slides 15 an d 16 Maharashtra economic statistics from Economic Survey of Maharashtra, 2003-04.
18
Synergy for Energy Ahmedabad, India, 15 October 2004
Work supported by US Agency for International Development (AID), Office of Environment, Energy and Enterprise, Delhi, India
Contents 1. Energy efficiency goals and motivation 2. Load shedding -- Maharashtra Case Study 3. Evaluation of economic benefits z Consumer z MSEB z Government 4. Conclusions
2
Electricity End-use Efficiency in India: Goals and Motivation
• Electricity end-use efficiency goals • Reduce electricity shortage, and • Provide economic benefits to • Consumers, • Utility company, and • Government
3
Electricity End-use Efficiency: Typical Economic Benefits •
Consumer benefit •
•
•
Improving efficiency typically costs less than the electricity tariff
Utility company benefits, if •
Tariff is lower than avoided cost of electricity supply, and/or
•
Saved electricity can be resold to higher tariff customers
Country and government benefit due to •
More productive use of capital through investment in energy efficiency - less expensive than building new supply capacity
•
Where electricity supply is short, redirected supply can increase industrial and commercial output, and lower subsidy payments
•
More efficient use of capital and increased economic output leads to more jobs and increased government tax revenue 4
Electricity End-use Efficiency: Key Motivations in the Indian Context • Electricity supply – capacity and energy deficit • State Electricity Boards – financial difficulties • State and national government -- fiscal deficit • Maharashtra electricity case study • Focus on Maharashtra State Electricity Board
5
Economic Output and Fiscal Deficit • • •
Maharashtra Population – 101.27 million (March 2004) Gross state domestic product (GSDP) • Rs. 2,95,191 crores in current 2002-03 prices
•
Government revenue deficit – • Rs. 9,037 crores 2003-04 (Prov.), up from Rs. 609 crores in 1995-96
•
State government debt as percentage of GSDP – • 25%in 2003-04 (R.E.) up from 12.7% in 1995-96
•
Fiscal deficit – • Rs. 18,460 crore (R.E.); 5.6% of GSDP up from 2.8% in 1995-96
•
Maharashtra State Electricity Board (MSEB): • Commercial losses for 2001-02: Rs. 3527 crores • Rate of return on capital: - 31.7 %(without subsidy) 6
MSEB Capacity Deficit – Annual average (2001-02) (528 MW average evening peak load shedding lasting 18 hours a day) 01-02 dispatch 10000 9000 8000 7000
MSEBsupply
6000
MSEBdemand
MSEBhydro
5000 MW
MSEBthermal
DPC
4000
URAN
TEC
3000
CENTRAL
2000 1000 0 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
-1000 HOUR
7
MSEB Capacity Deficit – Annual average (2002-03) (7836 GWh load shedding over 20 hours a day; 1376 MW average evening peak load shedding ) 02-03 dispatch 11000 10000 9000 8000 7000
MSEBsupply
MSEBdemand
MW
6000
MSEBhydro
MSEBthermal
5000
DPC
URAN
4000
TEC
CENTRAL
3000 2000 1000 0 0
1
2
3
4
5
6
7
8
9
10
11
12
-1000 H
13
14
15
16
17
18
19
20
21
22
23
24
8
MSEB: Electricity Consumption by Category (2002-03) Type of consumption
Consumption Percentage (GWh)
Domestic
7,411
19.1
Commercial
1,643
4.2
Industrial
15,593
40.3
Railways
1,012
2.6
576
1.5
10,202
26.3
Public Water Works
1,387
3.6
Miscellaneous
1,014
2.4
38,837
100
Public Lighting Agriculture
Total
9
Electricity End-use Efficiency Selected Measures: Economic Benefit to Consumers
End-use device
Cost of Conserved Increm ental Electricity Capital Cost (CCE)
Electricity Tariff (2003-04)
Maharashtra Potential for Electricity Savings
(Rs./kW)
(Rs./kWh)
(Rs./kWh)
(GWh)
CFL (Lighting)
3,508
0.90
2.79
866
Refrigerators
13,075
1.03
2.79
717
•
Residential
Solar w ater heater Com m ercial Lighting
4,444
2.80
2.79
1271
3,334
1.44
3.91
317
Refrigerators
13,075
1.03
3.91
746
New unit
3,217
0.69
0.00
621
Rectification
2,234
0.48
0.00
621
Replacement
6,032
1.73
0.00
621
Agriculture IPS
•
Metric: Cost of conserved electricity (CCE) Allows the cost of efficiency improvement to be compared against the electricity tariff
Industrial Motors Variable Speed Drives
16,000
0.60
3.00
318
20,000
0.75
3.00
496
Lighting
3,334
1.44
3.00
340
CCE: Cost of conserved electricity includes a transaction cost that adds 30% to the incremental capital cost
Numbers in red indicate enduse efficiency improvement is not cost effective
6933
•80% penetration level; •Over several years 10
Estimated Load Shedding by MSEB Consumer Category Consumer Category Urban (GWh) Domestic 594 Commercial 149 L. T. 171 H. T. 298 Agri. & Irrigation 87 Street lights Railway Traction Railway Non-Traction P.W.W. Military Mula Pravara
Total
Load shedding allocation 2002-03 (GWh) (%) Rural (GWh) (%) Total (GWh) 41% 954 15% 1548 10% 157 2% 306 12% 254 4% 425 21% 860 13% 1159 6% 3620 57% 3708
(%) 20% 4% 5% 15% 47%
38 40 7 37 15 0
3% 3% 0% 3% 1% 0%
101 53 5 148 6 241
2% 1% 0% 2% 0% 4%
138 93 11 185 21 241
2% 1% 0% 2% 0% 3%
1436
100%
6400
100%
7836
100%
Domestic and Agricultural Consumption Total – 5256 GWh in 2002-03. End-use energy efficiency can improve consumer welfare, reduce government subsidy payments, and offset demand growth in the long-run. Commercial, L.T., and H.T. Consumers Total – 1890 GWh. End-use efficiency, and redirected electricity supply can raise economic output, and government tax revenue in the short-run, and offset demand growth in the long-run. 11
Electricity End-use Efficiency Selected Measures: Economic Benefit to MSEB • End-use efficiency potential costs Rs. 3 per kWh or less • 6,933 GWh at 80% penetration level • May be compared with • Electricity shortage -- 7,836 GWh (2002-03) • Equivalent to over 3 years worth of growth at 2,300 GWh/year or 6% a year
• Potential to raise MSEB revenue • Reduce agricultural load and redirect electricity to other paying customers – • Agricultural efficiency potential is 1,863 GWh; about 75% is during 6 hours night-time off-peak
• Assuming that MSEB system is capacity constrained, and only on-peak savings my be resold • Potential avoided cost and revenue increase • Rs. 380 crores/year 12
Electricity End-use Efficiency Selected Measures: Economic Benefit to State Government Reduction in Subsidy Payments Can Easily Offset Potential Agricultural Efficiency Program Costs Consum ption targeted for efficiency Subsidy Rate im provem ent (Rs./kWH)
(GWh/yr)
Estim ated Subsidy Am ount
Efficiency Im provem ent potential
Subsidy Reduction Potential
(Rs. Crores/yr)
(GWh)
(Rs. Crores/yr)
Agricultural
2.83
7,757
2,195
1,863
527
Residential
0.04
7,003
28
2,853
11
14,760
2,223
4,716
539
Total
Potential Agricultural Efficiency Program Capital Costs: – Pump rectification, new efficient pumps, and pump replacement – Rs. 494 crores
13
Electricity End-use Efficiency Selected Measures: Economic Benefit to State Government Impact on Industrial and Commercial Sectors • Electricity shortage definition – • other factors (capital, labor, and materials) of production are present – only missing electricity
• Removal of load shedding leads to • Direct economic benefit – increased output of affected industries and commercial services • Indirect economic benefit – secondary increase in output due to multiplier effect z
Increased output adds to employment and government tax revenue 14
Maharashtra State Government: Revenue Receipts Rs. Crores (2002-03)
Rs. Crores (2003-04 (R.E.))
Revenue Receipt
31,103
37,158
Tax Revenue
25,079
29,111
State’s Own Tax Revenue
22,814
26,074
Sales Tax Revenue
13,488
15,485
Electricity Duties
1,149
1,280 15
Electricity End-use Efficiency Selected Measures: Economic Benefit to State Government (Cont.) Impact on Sales Tax Revenue z
State sales tax revenue in 2002-03: – Rs.13,488 crores – Industrial and commercial electricity consumption -- 22,825 GWh – Sales tax per kWh -- Rs. 5.9 per kWh
z
z
Removing shortage of 1,890 GWh would increase industrial and commercial sector output, and proportionately increase sales tax revenue Magnitude of sales tax increase will depend on extent of backup generation (20% to 50%) and supply-demand elasticities – Estimated to be Rs. 550 – 900 crores per year
z
z
Additional revenues may accrue from electricity duties and other taxes, and from all taxes on the secondary (indirect) increase in output Additional employment in these sectors will add to the benefits 16
Conclusions • Maharashtra faces several challenges – • Growing electricity shortage • Fiscal deficit • Deteriorating MSEB finances
• Energy efficiency can provide relief for these problems. Over time, it has the potential to • Reduce almost 90% of the electricity shortage • About 1300 MW and 6,900 GWh
• Improve MSEB revenue • About Rs. 380 crores/year
• Reduce government subsidy and increase tax revenue • Subsidy reduction about Rs. 530 crores per year • Increased tax revenue about Rs. 550 -- 900 crores per year • Net revenue increase of Rs. 1,080 -- 1,430 crores per year or about 1417% of the state’s revenue deficit
• Agricultural efficiency program costs – Rs. 494 crores
• Additional benefits, not yet quantified, include increased employment and higher indirect industrial and commercial output 17
REFERENCES Slide 6 Maharashtra population and economic statistics from Economic Survey of Maharashtra, 2003-04 MSEB financial statistics from Planning Commission, Annual Report (2001-02) on State Electricity Boards, May 2002. Slides 7 and 8 Maharashtra State Electricity Board (MSEB) (2004). Hourly generation data for period April `01 to march.`03. http://www.msebindia.com/newtariff2003/newtariff2003_index.shtm. (accessed on August 15th , 2004 ( 11.15 PST) MSEB (2004). Generation of Plant Unit Wise. http://www.msebindia.com/newtariff2003/newtariff2003_index.shtm. (accessed on August 15th , 2004 ( 14.00 PST) Slide 9 MSEB (2003). MSEB Annual Report 02-03. MSEB, Mumbai, India Slide 10 Cost and efficiency data for various energy efficiency measures collected from market surveys in Pune and Mumbai. Slide 11 Allocation of load shedding between rural & urban consumers based on Maharashtra State Electricity Board (MSEB) (2004). Schedule of planned load shedding http://www.msebindia.com/consumer/merc_arcieve.shtm. (accessed on August 19th , 2004 ( 20.50 PST) Load shedding allocation based on interviews with MSEB officials – Kalwa Load Dispatch Center Also based on interview with Prayas Energy Group. Total load shedding data obtained from Maharashtra Electricity Regulatory Commission (MERC) (2003). Tariff order for MSEB 03 -04 ( case 2 of 2003). MERC India Slide 13 Avg. cost of supply and tariff obtained form Maharashtra Electricity Regulatory Commission (MERC) (2003). Tariff order for MSEB 03 -04 ( case 2 of 2003). MERC India Slides 15 an d 16 Maharashtra economic statistics from Economic Survey of Maharashtra, 2003-04.
18
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