India’s Perform Achieve and Trade (PAT) Scheme:

An overview

K. K. Chakarvarti,

Expert Consultant,

New Delhi

Second Workshop on"Best Practices in Energy

Efficiency in Cement Sector”

7th-8th July, 2016

at My Home Industry Ltd., Srinagar , Mellacheruvu,

Nalgonda District, Telangana

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Contents

Legislative and Institutional Framework on

Energy Efficiency in India

EE Initiatives in Industry

National Mission for Enhanced Energy

Efficiency (NMEEE)

Voluntary Initiatives to promote Energy

Efficiency

Conclusions

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Legislative and Institutional

Framework

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Energy Efficiency in India

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EC Act enacted in October 2001

The five major provisions of EC Act relate to:

Designated Consumers

Standards and Labeling

Energy Conservation Building Code

Creation of Institutional Set up (Bureau of Energy Efficiency

at the Federal level and State Designated Agencies at the State

level)

Establishment of Energy Conservation Fund at Centre and

States Schedule to EC Act provides list of 15 energy intensive industries and other establishments to be notified as designated consumers (DC). A DC to

Appoint or designate certified energy manager Submit Annual Energy consumption return Get energy audit conducted by an accredited energy

auditor Implement techno-economic viable recommendations Comply with energy consumption norms and standards

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THE INDIAN ENERGY CONSERVATION ACT

Aluminium;

Fertilizers;

Iron and Steel;

Cement;

Pulp and paper;

Chlor Akali;

Sugar;

Textile;

Chemicals;

Railways;

Port Trust;

Transport Sector (industries and

services);

Petrochemicals, Gas Crackers,

Naphtha Crackers and Petroleum

Refineries;

Thermal Power Stations, hydro

power stations, electricity

transmission companies and

distribution companies;

Commercial buildings or

establishments;

Schedule to EC Act

List of Energy Intensive Industries and other establishments

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1)

Criteria for Notification for a Industry as Designated Consumer

Thermal Power Stations- 30,000 metric tonne of oil equivalent (MTOE) per year

and above

2) Fertilizer- 30,000 MTOE per year and above

3) Cement- 30,000 MTOE per year and above

4) Iron & Steel- 30,000 MTOE per year and above

5) Chlor-Alkali- 12,000 MTOE per year and above

6) Aluminium- 7,500 MTOE per year and above

7) Railways- 16 Zonal Railways ( 70,000 MTOE or above), Production units and

Workshops having total annual energy consumption of 30,000 MTOE and above

8) Textile-3,000 MTOE per year and above

9) Pulp & Paper-30,000 MTOE per year and above

10) Petroleum Refineries-90,000 MTOE per year and above

11)

Electricity Distribution Companies-86,000 MTOE per year and above ( AT& C is

being considered as energy consumption)

Energy Efficiency Initiatives

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Industry

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DCs - Energy Manager Certification and Energy Audits

11 energy intensive industry including Textiles have been notified as

designated consumers (DCs)

DCs are required to appoint or designate Certified Energy Manager ,

get the energy audit done through Accredited Energy Auditor- first

audit in 18 months and subsequent audits once in every 3 years,

Implement techno-economic viable recommendations and Comply

with energy consumption norms and standards

The Government of India has specified the passing of the National

level certification examination as the qualification for Certified

Energy Manager and energy auditors.

The examination establishes a uniform criterion for the certification

of energy managers/energy auditors

16 certification examinations have been conducted since 2004 in 24

main cities (12,228 qualified certified Energy Managers out of which

8,536 are certified Energy Auditors from last 15 exams)

National Mission for

Enhanced Energy Efficiency (NMEEE)

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Mission was approved by Indian Cabinet

on 24th June, 2010 with an 11th Plan outlay

of Rs.2350 Million (US $ 39 Million).

Indian Cabinet has approved continuation

of the Mission for 12th Plan on 6th Aug., 2014

with an outlay of Rs.7750 Million (US $ 129

Million).

National Mission for Enhanced Energy Efficiency (NMEEE)

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Perform Achieve and Trade

scheme

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Regulatory instrument linked with market mechanism

Certification of energy saving

Consultative approach

Ministries/DCs/Associations/FIs/Research Organizations

Outreach/ Capacity Development

Workshops/Seminars/ Visits

“Self – competing”

Unit specific targets

Relative responsibility

Less target for more efficient and more for less efficient

Supports improvement in energy management system

measurement, recording and reporting

PAT- Salient features

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PAT Overview and

Elements

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• PAT Cycle – I Covers 478 plants in 8 energy intensive industrial sectors

• PAT Cycle-II, covers 621 plants in 11 energy intensive industrial sectors

(three new sector, Refinery, DISCOMS and Railway has been added, with

addition of new DCs in existing as well)

• Key Goal :Mandatory Specific Energy Consumption reduction

PAT Overview and Elements

PAT Cycle-1

Covers 478 designated consumers in 8 sectors, consuming about 165 million toe energy.

National Target = 6.686 million toe at the end of 1st PAT Cycle ( by 2014-15)

Reducing India's CO2 emissions by 24 million tons / year in 2014-15.

-Achievement > Target E-Scerts

-Achievement < Target Purchase E-Scerts / Penalty

The Energy Savings Certificates (ESCerts) so issued will be tradable on special trading platforms to be created in the two power exchanges (Indian Energy Exchange and Power Exchange India).

The direct benefit for the participating industries in this period is reductions in input costs related to energy of approximately US$ 1250 million.

• Total EE Projects planned in 2012-15 by industry covered under PAT

: 2057

• Total anticipated investment : US$ 3095 million

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National Target of Energy Saving among all Sectors

S.NO. Sector No. of

Identified DCs

Annual Energy

Consumption (Million

toe)

Share Consumpti

on (%)

Apportioned Energy

Reduction For PAT Cycle-1

(Million toe)

1 Power (Thermal) 144 104.56 63.38% 3.211

2 Iron & Steel 67 25.32 15.35% 1.486

3 Cement 85 15.01 9.10% 0.815

4 Aluminium 10 7.71 4.67% 0.456

5 Fertilizer 29 8.20 4.97% 0.478

6 Paper & Pulp 31 2.09 1.27% 0.119

7 Textile 90 1.20 0.73% 0.066

8 Chlor- Alkali 22 0.88 0.53% 0.054

Total 478 164.97 100.00% 6.686

Total EE Projects planned in 2012-15: 2057

Total anticipated investment : US$ 3095 million

The direct benefit for the participating industries in this period is reductions

in input costs related to energy of approximately US$ 1250 million.

Sectoral Share in Energy Saving Target (%)

(2012-15)

Reduction in India's CO2

emissions by 24 million tons /

year in 2014-15.

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Coal (Indian) (1,03,339 Tons/yr ,GCV 3438 kcal/kg)

Coal1 (Imported) (6246 Tons/yr, GCV 5454 kcal/kg)

Pet Coke (3316 Tons/yr, GCV 8400 kcal/kg)

Furnace Oil (669 Tons/yr, GCV 10000 kcal/kg)

HSD (570 Tons/yr , GCV 8600 kcal/litre)

Grid Electricity (5.308 Million KWh/yr)

Crushed Limestone

Iron Ore, Bauxite,Gypsum

Clinker (0.006 Million Tons/yr)

CPP

(Heat Rate 3135 kcal/kWh)

GRID (Exported) (1.935 million kWh/YR)

Coal2 (Imported) 124746 Tons/yr, GCV 6192 kcal/kg)

Example - Input & Output for a Typical Cement Plant covered under PAT and

exhibiting the complexity involved

PPC (1.492 Million

TON/YR)

PSC /OTHER (0.230 Million TON/YR)

OPC (0.008 Million

TON/YR)

DG SET (Heat Rate

2212 kcal/kWh) 0.209 Million kWh/ yr

Clinkerization (Raw Material Processing &

Pyro-processing)

Grinding (VRM and RP &BM)

Flyash, Slag, etc

314.8 Million KWh/yr

Colony, (0.51 Million kWh/yr)

Crushing and Mining

(Exported) (2.512 million kWh/YR)

Note: All values presented in the above diagram are average of annual energy consumption of 2007-08, 2008-09, 2009-10 16

Cement Sector: Baseline and Targets - An Example

Energy Transition for Industry: India and the Global Context, IEA, Jan 2011

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Although Indian Cement Sector being at par with the World

best energy intensity, but still has agreed for energy saving

targets of 0.85 million ton of oil equivalent energy under PAT

Japan

India

What has been done so far: Capacity Building

What has been done so far: Committee Formation

PAT-I Overview and Status

Capacity building of State Designated Agencies (SDA)

More than 8,500 Certified Energy Auditors (CEA)

Appoint or designate Energy Manager in DCs ( Mandatory)

175 Accredited Energy Auditors (AEA)

53 Empanelled Accredited Energy Auditor (EmAEA) for M&V

PAT Secretariat

48 Nos of Capacity Building Workshops for SDAs, DCs AEAs, EMs, EmAEA

Technical Committee formation in all the sectors

Sub-Technical Committee formation on Normalisation

70 nos of committee meeting for finalization of Pro-forma and Normalisation Factors

Detailed sector specific proforma development

18 Nos of Plant visit to understand the complexities of operation and finalization of Normalization Factors

10 Nos of plant visit for beta testing of data entry form and calculations

Steps in PAT

Cycle Year PAT Cycle -1

2012-15 (3 years)

Notification of Rules and Targets for Designated

consumers

Submission of Form-1 once in a year (Mandatory) by all

DC’s

M&V Audit (Form-A performance of

assessment document, Form-B verification by AEA )

Before compliance period

Form-C ( Check and Verification by AEA)

The verification will be with in I year from date of

submission of compliance report

Issue of Escerts and Trading of Escerts

Submission of From-D by DC’s

Penalty levied by BEE for DC for non-compliance of norms

and standard's as per notification

Completed

Yet to Start

PAT-I : CEMENT SECTOR-SUMMARY (DRAFT)

PAT-1 : ACHIEVEMENTS- CEMENT SECTOR (DRAFT) ( Tentative Data, subject to change )

Notified Units Energy Consumption in Base Year (2009-10) MTOE

Target Savings to be achieved in 2014-15 (MTOE)

Achievements Made (MTOE) -DRAFT

Percentage Over achievement

85 15.01 0.815 1.480 81.6

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Specific Energy Consumption Reduction - 8.5% (Un-normalised)

Specific Energy Consumption Reduction - 11% (Normalised)

WHR implementation - 11 nos. (159 MW)

Saving

Target

Unit over achieves the SEC Target

Baseline

SEC

Target

SEC

Achieved SEC

Unit fails

to

achieve

the SEC

Target

Scenario 1 Scenario 2

Compliance

Issued Escerts

Purchase

Escerts

Penalty

Concept of Target, Compliance, ESCerts & Penalty

If any DC fails to achieve targets, it shall be liable to a

penalty which shall not exceed U$ $ 16000 ( INR 1.0

Million) and, in the case of continuing failure, with an

additional penalty which shall not be less than the price

for every metric ton of oil equivalent of energy ( Appx.

US $ 160) ,that is in excess of the prescribed norms.

M&V, Trading Mechanism Monitoring and Verification

- Designated Consumers monitor and record their energy purchases and product sales

- Data was verified by empanelled accredited energy auditor for verification

- Check verification on sample basis will taken by BEE

Trading Mechanism and trading of excess savings

- Energy Saving Certificates (ESCert) to be issued for savings in excess of target;

- Value of one ESCert equal to one metric ton of oil equivalent of energy.

-Certificates can be traded with other designated consumers on two power exchanges,

who can utilize them to show compliance

- Certificates can be banked for one more cycle

- In the trading mechanism of ESCerts, Central Electricity Regulatory Commission

(CERC) is the Regulator and BEE would be Administrator of the market of ESCerts.

Penalty for Non-Compliance

- Quantum of non- compliance is deficiency in meeting target in the Assessment year

- Penalty is the energy cost of quantum of non- compliance

- Quantum of non- compliance is provided in verification report and penalty is

adjudicated by the State Electricity Regulatory Commission

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ENERGY SAVINGS CERTIFICATES (ESCerts)

The energy savings certificate shall be issued in electronic form.

The value of one energy savings certificates shall be equal to one

metric ton of oil equivalent of energy consumed.

The designated consumer who has been issued energy savings

certificates may sell them through the power exchange. Each

certificate will be unique tradable commodity which will be

traded in two exchanges

The designated consumer who has been issued the energy

savings certificates during the current cycle may use them for the

purpose of banking until the next compliance cycle after which

they stand expired.

Progress So Far

Issuance of Central Electricity Regulatory Commission (Terms and Conditions for Dealing in Energy Savings Certificates) Regulations, 2016

Identification of interface activities, Formulation of Business Procedures for ESCerts Exchange on Power Exchanges

Finalization of Roles and Responsibilities of Entities Involved

Up-gradation of PATNet Portal including M & V process, ESCerts Issuance, Check Verification Process, Trading, Compliance Process, Banked ESCerts.

MoP authorized official for online issuance, advised CERC for market regulation, directed POSOCO for Registry function

Determination of value of one ESCert

Manual on Penalty & Adjudication Process

Structure of Frame work:

Draft regulation on Exchange of Energy saving certificate by CERC

The matching mechanism on Power Exchanges for ESCerts exchange shall be closed bid double-sided auction. Price of ESCerts will be determined by Market

through market clearing price mechanism. Clearing volume of ESCerts in a day will be

determined by Market clearing volume mechanism. The frequency of exchange of ESCerts, through

Power Exchanges, shall be on monthly basis or in such periodicity for all registered and eligible entities as per the procedure approved by the Commission. Removal of Rule 6 in sub-rule (2), Makes ESCerts

cant be issued on yearly basis.

Introduction to PAT-II ( 2016-17 to 2018-19)

MOP Notification on 31st march 2016 - S. O. 1264(E).—PAT cycle-II- Target for DC’s notified.

MOP Notification on 31st march 2016 - G.S.R. 373(E).—Amendment of PAT rules under section (14),(14A) & (14B) of Energy Conservation Act 2001.

3 new Sectors have included in PAT cycle -2 namely:

- Petroleum Refinery.

- Railway – Zonal Railways – Production – Workshops.

- Electricity Distribution company.

New Sectors in PAT cycle-2:

Petroleum Refinery No of Dc-18 no , approximate energy reduction in Million BTU – 1.124 MBTU.

Zonal Railways No of DC’s – 16 no , approximate energy reduction in Kiloliter of Diesel – 120675.6 Kiloliter and Million kWh of Electricity- 261.48 Million kWh.

Production & Workshops of Railway: No of Dc’s – 6 Nos and approximate energy reduction in Toe – 2028.08 Toe.

State Electricity Distribution company No of DC’s – 44 Nos.

Sr.

No

Sector No. of notified

DCs in PAT I

Total no. of

notified DCs

PAT -2

1 Aluminium 10 12

2 Chlor-Alkali 22 24

3 Textile 90 99

4 Pulp & Paper 31 29

5 Iron & Steel 67 71

6 Fertilizer 29 37

7 Cement 85 111

8 Thermal Power

Plants

144 154

9 Refinery NA 18

10 DISCOMS NA 44

11 Railway NA 22

Total 487 621

PAT Cycle II Baseline Year: 2014-15 PAT Cycle year 2016-2019 Assessment Year: 2018-19 M&V period: Apr-2019 to 31st July2019

Total Energy Consumption from 11 sectors 227 mtoe

National Target = 8.869 mtoe at the end of 2nd PAT Cycle (by 2018-19)

PAT-II Overview and Status

Amended PAT rules: Baseline setting Methodology (New DCs in existing and new sector)

Baseline Specific Energy Consumption will be calculated based on the last financial year data, if any conditions mentioned in (A) or (B) or (C) and condition mentioned in (D) are satisfied for the last financial year. In case, conditions are not satisfied for the last financial year, average of all those years where above mentioned conditions are satisfied shall be considered for calculating baseline specific energy consumption.

Normalisation Factors- Broad Categorization

Plant Capacity Utilisation Natural Disaster & Unforeseen Circumstances

Product Mix Intermediary products

Power Mix

Fuel Mix

CPP PLF

Fuel Quality in CPP

Environmental Concern

Amended PAT rules: Form-2 and Form-3 need to be attached with energy audit report.

Average rate of reduction in SEC across all DC’s Determined on the basis of Form -1 (Sector Specific) and Energy Audit report submitted.

DC’s can apply for Global best designated consumer based on comparable intentional benchmarks.

DC’s should make arrangements for taking “AS FIRED "samples from auto sampler which need to at solid fuel feeding points.

Fuel samples to be pickup from auto sampler at least once in a month & got tested at internal and external NABL accreditation lab for GCV and proximate analysis.

Fuel samples to be tested for external NABL accredited lab for ultimate analysis at least once in each quarter.

The State designated agency shall ensure that coal samples are picked up at random through an independent agency engaged by it from the auto-sampler and get the same sample tested at the internal lab of the designated consumer and external National Accreditation Board for Testing and Calibration Laboratories (NABL) accredited lab for GCV and proximate analysis of coal.

Amended PAT rules: ESCerts Energy Saving certificates will be issued to DC

within 45 days from date of receipt of such recommendation from the Bureau. 1 ESCerts = 1 Metric Oil equivalent. ESCerts will be issued in electronic format. ESCerts can be banked or traded through power

exchanges for compliance with in validity period and any excess ESCerts can be used for the compliance of the next cycle. ESCerts remains valid till the completion of the

compliance period of next cycle. Form-D need to submitted within 1 month from

completion of trading of the respective cycle as specified by CERC. Value of per metric tonne of oil equivalent Rs.

10968 for year 2014-15 by GOI.

Amended PAT rules: Baseline setting Methodology (For Existing DCs )

The SEC achieved by the designated consumer on the completion of the target year, as mentioned in the compliance report in Form-‘A‘ & Form –’B’ shall be the baseline for establishment of new plant specific energy consumption norms and standards for designated consumers for the next cycle. SEC achieved -Un-normalised in the target year

2014-15. The existing Product-mix normalization to be made

for the year 2014-15 (The energy factor/Ratio/Clinker factor for target to changed as per target year factor). Intermediary product effect is same as per Pro-

forma Power Export as per Weighted Heat Rate to be

made as per year 2014-15. As Fired GCV will be used for determining the

thermal energy consumption for SEC calculation

Amended PAT rules • For first cycle, value to be rounded to three decimal

places except for cement sector and refinery sector for which value to be rounded to four decimal places. For second cycle, the value to be rounded to four decimal places except for thermal plant sector, electricity distribution companies and railways sector for which value to be rounded to two decimal places.

• Once the designated consumers’ boundary has been fixed, the same boundary shall be considered for entire cycle, and any change in the said boundary such as capacity expansion, merger of two plants, division of operation etc. shall be duly intimated to the Bureau of Energy Efficiency.

• Few additional sector specific information like process technology, process flow, raw material, product mix etc. shall also be collected.

Market Transformation due to PAT

–Common Areas of Investment

Energy Efficient Technologies and Processes

Power, Steel, Cement, Fertiliser, Pulp & Paper, Aluminium, Chlor Alkali, Textile

Waste Heat Recovery/ Co Generation

Steel, Cement, Pulp & Paper, Aluminium, Chlor Alkali, Textile

Alternate Fuel and Raw Material Steel, Cement, Pulp & Paper, Aluminium, Chlor Alkali, Textile

Renewable Energy

Steel, Cement, Pulp & Paper, Aluminium, Chlor Alkali, Textile

Biomass as Fuel

Steel, Cement, Pulp & Paper, Aluminium, Chlor Alkali, Textile

High Pressure Boiler for Optimum power output Pulp & Paper, Aluminium, Textile

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Market Place due to PAT

Adoption of Best Available EE Technologies increased

Abatement of Wastage and Leakages

Adoption of Renewable energy

Recycling

Increase in R&D activities and adoption of ISO 50001 EnMs by PAT industry

Capacity Building of Energy Auditors/Agencies

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For Designated Consumers

Improvement in Energy Intensity will bring down the

specific input energy cost and ultimately triggers

higher profit in company’s balance sheet

The DCs can trade over achieved Energy efficiency

in the trading platform to the under achiever

Capacity building of Man power

For Technology Suppliers

Business opportunities in terms of lower payback

period of energy efficient technologies.

For Service Company’s

Opportunities in terms of Energy Auditing, capacity

buildings, Implementation of projects as ESCO model

All win situation

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Voluntary Initiatives to

promote Energy Efficiency

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ISO 50001 Energy Management System

More than 300 industrial units have declared their energy policy .

PAT mechanism has all factors which are part of EnMS

Relatively easier for Indian industry and buildings to adopt EnMs standard and achieve and sustain higher levels of energy efficiency

Around 270 establishments including buildings and industry in India have been certified for ISO 50001 EnMS

The Delhi International Airport Limited (DIAL) became the first airport operator and Dahanu Thermal Power Station, Maharashtra (India) became the first Thermal Power Station in the world to receive this certification after its publication in mid 2011.

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Conclusions A Scheme to incentivize the industry to achieve

better energy efficiency

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5

CONCLUSIONS

The PAT scheme is a unique and innovative programme with no

precedence anywhere else in the world.

PAT would become a valuable model for other emerging

economies to adopt for their own energy efficiency programmes

with a business perspective.

The PAT scheme also sets an innovative approach of introducing

market-based instruments within a regulatory framework to

encourage compliance.

PAT has encouraged adoption of energy efficient and Low carbon

technology, use of renewable , waste heat recovery and use of

Alternate fuel and raw materials (AFR) in Indian industry.

PAT Scheme is also compatible with ISO 50001 Energy

Management System ( such as plant boundary fixation,

establishment of energy performance indicators and targets,

normalisation of assessment year operating conditions with base

line year etc.)

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