The encyclopedia · Strategy & Leadership · Strategic decision · 2012–2015
India's PAT scheme traded energy-saving certificates to cut industry's power use
BEE set efficiency targets for 478 plants and let over-achievers sell ESCerts on power exchanges, targeting 6.6m tonnes of oil equivalent saved by 2015.
Bureau of Energy Efficiency (India)
the move
India's 478 largest energy users — thermal power, aluminium, cement, fertiliser, iron and steel, pulp and paper, textiles and chlor-alkali — together consume a huge share of national energy. In March 2012 the government notified each one a specific-energy-consumption reduction target.
Under the Perform, Achieve and Trade (PAT) scheme, launched on 4 July 2012, plants that beat their target earn tradable Energy Saving Certificates; plants that miss must buy them. Trading takes place on the two power exchanges, with penalties for defaulters.
The eight sectors account for about 40% of India's primary energy consumption, and the first cycle targeted saving 6.6 million tonnes of oil equivalent by 2014-15, with thermal power contributing the largest share.
Because each plant's target was set against its own 2010 baseline, firms competed against themselves; certificates let the cheapest reductions anywhere fund compliance everywhere.
why it works
- Intensity targets let each plant improve against its own baseline.
- Tradable ESCerts priced the gap between cheap and costly reductions.
- Power-exchange trading made the certificates liquid and transparent.
- Penalties gave laggards a reason to buy rather than ignore the scheme.
what transfers
Set each plant an intensity target, then let the market price the gap: plants with cheap reductions sell certificates to those without, so the whole sector meets the target at the lowest total cost.
what came after
PAT completed its first compliance cycle in 2015 and was extended through further cycles covering more sectors and units; the market-based design became a fixture of India's energy-efficiency policy under the National Mission for Enhanced Energy Efficiency.
references
- Union Power Minister Launches PAT Scheme under NMEEE
- Bureau of Energy Efficiency launches PAT scheme for industries to save power
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