(India) firms are gearing up for a new green regime called PAT (perform, achieve, trade). This will ensure that smoke-spewing manufacturing units bring down their energy intensity. The scheme would also produce a
75,000-crore (1.8 Trillion USD) energy efficiency market by 2015 in India
Namrata Singh
Times News Network http://www.timesofindia.com/
Century Group, the Rs 5,000-crore diversified conglomerate owned by B K Birla, has now turned its focus on how its units—comprising textiles, cement, pulp & paper and viscose filament yarn—could be made more energy efficient. The concern is not restricted to Century Group alone. All manufacturers are looking at ways to bring down energy intensity at their respective units.
A year ago, perhaps, one would have linked this overdrive to costcutting measures which companies had undertaken. Even today, cost reduction ranks high on every management’s agenda, but the reasons to achieve higher energy efficiency have changed. Energy audits are being carried out more aggressively than ever before, thanks to the energy efficiency scheme, PAT (perform, achieve,
trade), announced by the Bureau of Energy Efficiency (BEE), the nodal agency spearheading the energy efficiency programme in India.
The plan is to give specific energy efficiency targets to every sector in the industry through PAT. “Companies will be given specific energy reduction targets which they will have to meet in three years. They can meet their targets either by bringing about changes in their manufacturing processes to reduce energy intensity or by purchasing energy saving certificates from the market. We will design a scheme in such a way so that there can be early price discovery,” said Ajay Mathur, director general, BEE.
After the three-year period, if a company meets the benchmark and exceeds the target, it would be issued energy saving certificates or ESCerts. However, if a company fails to meet the target, it will have to purchase ESCerts from other companies to bridge the gap. For a company which has a relatively new plant (new plants are more energy efficient than old ones), it would be easy to meet the target and earn ESCerts, which can then be traded with older plants that fell short of their energy efficiency targets. Given the global urgency on matters such as climate change—and PAT is only one step in the direction of reducing the country’s energy intensity—companies are keen to figure out the exact quantum of their units in the new scheme of things.
PAT is scheduled to be launched in April 2011. This will be done in consultation with individual units. The sectors to be covered by PAT are: aluminum, cement, iron and
steel, chlor alkali, thermal, power plants, fertilizer, pulp & paper, textiles and railways. These, by and large, cover all sectors that directly or indirectly trigger climate change.
BEE has already kicked off the process and is consulting industry bodies to get their views on the proposed format. Climate change consultants have swung into action to assist companies in need of information on how the scheme would work and how price discovery would occur. Clearly, trading of ESCerts will create a parallel market dealing with climate change, independent of the Kyoto Protocol. Under Kyoto Protocol’s clean development mechanism (part of UN Framework Convention on Climate Change), Indian companies—which got their projects registered—were issued carbon credits for offsetting greenhouse gas emissions.
Although trading under PAT will be restricted to the domestic market, industryexperts are talking big money for the kind of market it will create. “Overall, the scheme could generate an energy efficiency market of Rs 75,000 crore by 2015 in India,” said Vivek Dhariwal, senior consultant, EVI, a carbon market consultant. The scheme aims to achieve a 5% reduction in overall energy consumption by industries in three years i.e. during 2011-14. After the end of the first phase, each industry will submit its PAT assessment document, stating the reduction in their specific energy consumption. This report will be validated by an agency designated by BEE.
According to Anmol Singh Jaggi, director, Gensol Carbon Consultants, “After the benchmarks are set, for one year there will be no trading of ESCerts. Companies will be given time to adapt to the benchmarks of energy efficiency. Trading will begin after that.”
Manufacturing companies feel that energy efficiency is not a new concept for them-it is something they have always endeavoured to achieve. “We are constantly looking at ways of reducing energy costs, either through specific modifications or replacements. We also get audits done to assist us in the process. So energy efficiency is not a new thing,” said RK Dalmia, president, Century Textiles.
Consultants, however, believe that companies would have to get their act together to become PATprepared. According to P Ram Babu, CEO, General Carbon Advisory Services, companies would need to establish a robust baseline of energy footprint. They would also need to focus on a continuous process improvement to meet and exceed specific energy consumption targeting. “For this, companies need to graduate from an audit-oriented approach in their energy management to a process-based performance improvement approach,” said Ram Babu. Dhariwal of EVI foresees an important role played by the private sector in the implementation of the various measures. “We, at EVI, are geared now for offering such solutions to our clients,” said Dhariwal.
It is becoming increasingly evident that the Indian industry needs to look at reduction of emissions beyond those supported by projectbased offset generation such as CDM. “While the project-based emission reduction offset generation enables industries to lap up those opportunities which are not viable without revenue from offset sale, the opportunities of becoming energy and emission efficient on other fronts remain untapped,” said Ram Babu.
National actions like the creation of a PAT-type mechanism lead to added risk for those who do not manage their energy-and hence emissions-wisely and reward those who perform well on this front. This will ensure that industries continually undertake a disciplined process-based approach to optimize, reduce energy/specific consumption and, thereby, systematically reduce emission over a period of time.
Given the complexities, it seems like companies have no choice but to work out their math on energy efficiency well in advance. And accounting consultants are more than willing to help firms unearth opportunities to not just meet the target but exceed them to capitalize on opportunities to earn energy efficiency assets.
JSW Steel, for one, has hired one of the big four consultants to conduct a study to assess its carbon footprint to be benchmarked against the best in the world. “We understand that we are 20% higher (than the benchmark), but that may not be as bad based on Indian standards of energy efficiency. We are making an effort to bring it down by 20%,” said Seshagiri Rao, joint managing director, JSW Steel.
***PGI is an Indo-American facilitation group specializing in the migration of technology and sustainable processes that promote ecology, economy and equality. For questions or interest in the PAT program: info@peerlessgreen.net subject PAT
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