Policy status:In Force
Date Effective:2011
Policy Type:Economic Instruments>Market-based instruments, Regulatory Instruments>Auditing, Economic Instruments, Regulatory Instruments
Policy Target:Energy Utilities, Industry>Energy management, Industry
Agency:Bureau of Energy Efficiency
Funding:Expected investment: USD 15 billion

The Perform, Achieve, Trade (PAT) scheme was establihed by National Mission for Enhanced Energy Efficiency. It is regulatory instrument to reduce specific energy consumption in energy intensive industries, with an associated market based mechanism to enhance the cost effectiveness through certification of excess energy saving which can be traded. 

The first cycle of the PAT Scheme (2012-2015) managed to reduce the energy consumption of more than 400 energy-intensive enterprises (known as Designated Consumers – DCs) by 5.3%, above the initial target of 4.1%. The targets were originally established based on annual specific energy consumption for each DC in 2010 (baseline year) and adjusted to account for factors such as product mix, capacity utilisation, change in fuel quality, import/export of power and other factors.

Following the evaluation of the first cycle, all sectors surpassed their targets except for the thermal power generation sector, which had the highest target of the 8 subsectors covered under the PAT programme. The reason for this was mainly due to the unavailability of new efficient natural gas power plants and partly due to lower than expected electricity demand from the thermal generation sector, which subsequently led to a reduction in power plant performance.

Overall, majority of the DCs implemented relatively low cost measures, such as changes to process control and installation of variable speed drives on electric motors, which were financed through the DCs own resources. In terms of sector specific interventions, for example, in the cement industry the most common measures covered installation of waste heat recovery systems and vertical rolling mills. In the iron and steel sector, measures included installation of top recovery turbines and adoption of coke dry quenching process.

The trading of energy saving certificates (ESCerts) is central to the PAT programme and serves as an incentive to reach or surpass the mandatory targets. The ESCerts, equivalent to 1 tonne of oil equivalent (toe) of energy savings, are given based on quantified energy savings verified by an accredited energy auditor. The ESCerts are awarded after a DC surpasses its target and can then be sold to another DC that has failed to achieve its target, the price for which is determined through market supply and demand. The ESCerts can also be ‘banked’ for next PAT cycles of the respective DC to contribute towards meeting future targets as the PAT programme expands.

The Central Electricity Regulatory Commission acts as the market regulator by defining the regulatory framework for trading of the ESCerts, while the Power System Operation Corporation is responsible for the centralized ESCert registry. The Bureau of Energy Efficiency is the administrator and developed a platform to manage the ESCert trading process. Starting from April 2017, the Indian Energy Exchange and the Power Exchange of India will manage ESCert trading (until now no ESCerts had been traded). The demand for ESCerts is expected to be relatively low, given that about 3.8 million ESCerts have been issued of which about 1.5 million need to be absorbed by the DCs who are falling short of targets.

If a DC has not met its target and fails to purchase sufficient ESCerts to compensate for its shortfall, it will be subject to a penalty. The penalty for non-compliance is 1 million INR (about 15 000 USD) plus the value of the energy savings that have not been obtained by the DC, measured in toe. The price of 1 toe is determined by a combination of coal, fuel, gas and electricity prices as declared by the Indian government. For example, the cost of coal is based on the price of F-grade coal declared by the Ministry of Coal multiplied by the amount of coal consumed by the 478 DCs and the total energy consumed in the 478 DCs. In 2011-2012, the market value of 1 toe was approximately 10 154 INR (approximately 151 USD) and in 2014-2015 it was 10 968 INR (approximately 160 USD). This penalty for non-compliance also serves as a reference for the trading market as the DC is unlikely to purchase ESCerts above this value.

For the second PAT cycle (2016-2019), the baseline is set as the assessment year of the first cycle - 2014-2015. Furthermore, the second PAT cycle’s coverage will be extended to other DCs and sectors bringing the number to a total of 621 DCs including Petroleum Refinery, Electricity Distribution Companies and Railways. The Indian government has also created financial instruments to support the DCs covered under the PAT programme such as providing risk guarantee through Partial Risk Guarantee Fund for Energy Efficiency (PRGFEE) and equity fund through Venture Capital Fund for Energy Efficiency (VCFEE). As the low cost measures start being implemented, this additional support is expected to trigger DCs to invest in higher cost energy efficiency measures.

Last modified: Thu, 02 Nov 2017 19:36:10 CET