L7 Legislations and Policies Supporting DSM in India

Swami Keshvanand Institute of Technology,
Management & Gramothan, Jaipur

Department of Mechanical Engineering
Course: Energy Management (8AG6-60.1)

Lecture: 07
Legislations and Policies Supporting
DSM in India
SKIT, Department of ME Course: Energy Management (8AG6-60.1)
Lecture Outcomes
After studying this lecture, a student will be able to-
 Acquainted with the legislations and policies supporting DSM
in India.
 Identify the phases of evolutions in Electricity Act 1910 to
Energy Act 2001.
 Identify Role of DSM Framework
 Explain the steps for formation of DSM Cell.
 Highlight processes and frameworks of DSM.
 Elaborate the expected outcome of DSM.
2
Coverage
 Legislations and policies supporting DSM in India
 Energy Conservation Act 2001
 Evolutions in Electricity Act 1910 to Energy Act 2001.
 Constitution of DSM Cell
 Role of DSM and ERC
 DSM Process framework
 Expected Outcomes of DSM
3
Legislations and policies supporting DSM in India

• Energy Conservation Act 2001
 Standards & Code (Appliances, Buildings)

 Mandatory activities (Energy return filing, Energy Audit)
• Electricity Act Deepening
commitment;
 National Electricity Policy 2003
moving from
legislation to
 National Tariff Policy regulations,
programs,
 Draft DSM regulation prepared by FOR and schemes
 State level DSM regulation

• National Mission on Enhanced Energy Efficiency
2008
 Energy reduction target (PAT)
 Achieving energy performance benchmark (SEEP)
Energy Conservation Act, 2001

 EC Act 2001 provides for Legal Framework,
Institutional Mechanism & Regulatory
mechanism for Energy Efficiency,
Specify energy
Conservation & related matters conservation norms for
 Establishment of BEE: Under Sec 3(1) of the act, a appliances, equipments,
statutory body Bureau of Energy Efficiency (BEE) buildings and industries
was created on March 2002.
 BEE’s mission is to develop Policy & Strategies to
reduce Energy Intensity of India. Promote innovative
 Major intervention areas: Regulatory, Market financing of energy
Transformation, Fiscal measures, Financial efficiency projects
Incentives.
Evolution of Electricity Act in India 1910 - present
The The
The Indian Electricity
Electricity Electricity Electricity
Supply Regulatory
Act, 1910 Commission Act, 2003
Act, 1948
Act, 1998
After 37 yrs After 49 yrs After 5 yrs
Basic  Mandated  Reforms and

framework for creation of SEBs competition
electric supply Setting up
Private Central / State Protection of
industry
sector Electricity consumer interest
Provision for
participation in Regulatory
license (state Efficient and
generation and Commission
govt.) for electric environment
transmission
supply for benign policies
specified area
Provisions of EA 2003 to promote efficiency in supply and
demand side
SECTION 23: ….... for
maintaining the efficient
supply, securing the equitable
distribution of electricity….
SECTION 62: …..terms and

conditions for determination of SECTION 42(1): …the duty of
tariff to depend on “the factors a distribution licensee to
which would encourage develop and maintain an
EA Act, efficient, coordinated and
competition, efficiency, 2003
economical use of resources, economical distribution
good performance and system in his area of
optimum investment” supply….
SECTION 86(2): ….State

Commission shall advise the
State Govt. on 'promotion,
competition, efficiency and
economy in activities of the
electricity Industry’
Reference of DSM in National Electricity Policy, 2005

 NEP calls for the use of the most efficient technologies and more
funding for R&D
 The Policy emphasizes the need for conservation & DSM including a
national awareness campaign
CLAUSE 5.9.6: CLAUSE 5.4.9:

CLAUSE 5.9.2: CLAUSE 5.9.4: • Adoption of The SERCs
BEE would make • Initial approach
available the Suitable load should
would be management encourage use of
estimated voluntary and
conservation and techniques. pre-paid meters.
self-regulating • Differential In the first
DSM potential,
with emphasis tariff instance,
its staged
on labelling of structure. ToD meters for
implementation
along with cost
appliances. • Adherence to large consumers
estimates for • Gradually energy with a minimum
consideration in moving efficiency load of one MVA
the planning towards setting standards by are also to be
process. standards. utilities. Encouraged.
Evolution of DSM Regulations

DSM
Maharashtra regulation
notifies DSM notified in 14
Regulations states
Pre 2010 Apr 2010 May 2010 2010 - current
Discussion Draft DSM

Model DSM
on DSM regulation in
Regulations
regulations many others
by FOR
by States; states
FOR draft
paper in 2008 Became a
guiding
regulation for
ERCs to follow
Key features of Model DSM Regulation, 2010

 Constitution of DSM cell
 DSM process framework
 Roles and responsibility of distribution licensee and ERC
 DSM objective and target setting
 Timeline of activities
 Indicators for cost effectiveness
 Mechanism for cost recovery
 Incentives to distribution licensee
Note: The regulation aim to provide a guiding document to the States while
preparing DSM Regulations. Modifications/additions may be required to
incorporate State specific conditions/attributes. ERC may also need to
issue detailed guidelines to DISCOMs to properly explain the requirements
and modality of execution.
Constitution of DSM Cell

• Every Distribution Licensee has to constitute a DSM cell
within 1 month from adoption of DSM regulations
• Other activities to be done by DSM cell in a time bound
manner are also specified
1 month DSM Cell

After DSM notification
Load Research &

6 month Baseline data
1 year Formulation of DSM Plan
At least 6 months
before start of next Seeking approval to DSM
MYT control period Plan & Program
Role of DISCOM and SERC

• Role of SERC (State
Role of Distribution Electricity Regulatory
Licensee
Commission)
Follow ERCs order: Constitute DSM • Directs licensee: DSM Cell
cell, conduct load research and load constitution, conduct DSM related
survey, design and develop DSM activities, setting DSM objectives and
plan and projects goal/target setting
Seek ERCs approval: Action Plan, • Issues guidelines: Cost

DSM program effectiveness, EM&V
Implement DSM programs: as per • Develops mechanisms: to
ERC’s approved plan recover DSM costs, incentives to
DISCOMs
Monitor and Report: • Provides approval: DSM plan,
Implementation progress, savings DSM project implementation
DSM Process Framework

DSM objectives and target setting

DSM objectives
• Power shortage mitigation Key Consideration
- National EE objectives
• Seasonal peak reduction - Consistent with BEE’s
• Cost effective energy savings plan
• Lowering the cost of electricity

• Reduction in emissions of GHG
DSM target setting
Key Consideration
• Percentage reductions in load growth - Load profile
• Savings in kW, kWh - Consumer mix
- Technical potential
• Savings as a percent of total resources /
investment to meet load
Mechanism for cost recovery

• Distribution Licensee shall identify the net incremental
costs, if any, associated with planning, design and
implementation of programmes
• Distribution Licensee may propose methodology for
recovery of net incremental costs through tariff or any other
mechanism
• In order to qualify for cost recovery, each program must be
i. Approved prior to implementation
ii. Implemented in accordance with the
approved program plan and
iii. Implemented cost effectively
Source: 2008 FOR report on DSM indicated consideration of higher return on investment for DSM – 2% for subsidized and 1% for
subsidizing category
Specifics not detailed in the Model DSM regulation

 DSM cell – Team’s desired Strength, Expertise, Experience
not indicated
 Objectives – Primarily based on shortage and savings.
What about reliability, affordability, sustainability?
 Goal/Target setting – no mention of economic potential
 Cost effectiveness – parameters not defined. Individual
measures vs bundled measures or whole programs
 Performance Incentive to DISCOMs – not defined
 Implementation Mechanism – utility driven or through
payment made to implementing party for resultant energy or
load reductions
Let us see how other states have customized the Model DSM regulation
and have made it specific.
Different channels through which DSM has been implemented in India
• National Level programs for different consumer

categories:
– Implemented by BEE (Standards & Labeling, PAT)
– Designed by BEE and implemented by States / DISCOMS (ECBC,
AgDSM, MuDSM)
• State level programs:
– Implemented by DISCOMs (Rebate based replacement, Load
shifting, Demand response, DSM Bidding).
– Implemented by ERC (Time of Day tariff, Power factor penalty).
– Implemented by State designated agencies (mainly in the form of
policies).
• Programs by EESL:
– Multi utility programs (Distribution Efficient Lighting Program).
– State/DISCOM/Municipality focused programs.
Standards & Labeling program

■ Aim: To provide customers an informed choice about
the energy savings & thereby cost saving potential.
■ Features: Enables consumers to distinguish energy
efficient product through a comparative or an
endorsement label.
■ Coverage / Status: 17 Nos. Equipments /
appliances (to increase to 27 Nos. by 12th
Five year Plan)
■ Implementation: Mandatory notification, voluntary
participation.
■ Load strategy: Strategic conservation
■ Cost recovery of investment: Product price
Room Air Conditioner Distribution Transformer DG Set

Ceiling Fan Domestic Gas Stove Water Heater
Color TV Frost Free Fridge Ballast
Computer Industrial Motor Solid state Inverter
Direct Cool Fridge Monoset Pump TFL
Submersible Pump Office Automation Product Diesel Engine-pump set
Perform Achieve Trade (PAT)

• Aim: A market-based mechanism to make improvements in EE
in energy-intensive large industries & facilities.
• Features: Mandatory Specific Energy Consumption reduction
target.
• Coverage: 478 large industries from 8 sectors.
• Implementation: Mandatory notification by MoP which is
implemented by covered participants.
• Load strategy: Strategic conservation.
• Cost recovery of investment: Energy savings, certificate
trading, product price.
Energy Conservation Building Code

□ Aim: To inculcate practice of energy efficient design, construction &
operation in new buildings
□ Features: Minimum energy performance standards in
terms of Energy Performance Index (kWh/sq.m/yr)
□ Coverage: 1) Connected load of 100kW or contract demand of 120kVA.
□ Implementation mode: Notification by state govt. for amendment in
building bye-laws which is to be adopted by building developers
□ Load Strategy: Energy Conservation
□ Current status: 10 states notified. Over 300 ECBC Compliant buildings
built till date
Municipal DSM
■ Aim: To improve overall EE of Urban Local Bodies, leading to substantial
savings in electricity, cost & make municipality self sustainable.
■ Feature: 1) Identification of energy saving potential in municipalities

(building, street lighting & water pumping system)
2) Demonstration of best practice and new technologies.
■ Coverage: DPRs prepared for 138 urban local bodies targeting street lighting
and water pumping.
■ Implementation: By Municipalities (self or through ESCOs).

■ Load Strategy: Energy Conservation
■ Cost recovery of investments: Shared Savings in case of ESCO
Agriculture DSM
□ Aim: Reduce energy consumption & losses through replacement of in-

efficient pump with star rated pump.
□ Feature: Mandatory use of star label EE pump-sets in new agriculture
connections.
□ Coverage: Agriculture Pumping System

■ Implementation: By DISCOM through PPP i.e. ESCO
■ Load Strategy: Energy Conservation
□ Cost recovery of investment: Shared Savings in case of ESCO
DSM Potential
Ideal scenario
Technical which sums all
Potential energy efficiency
measures that
are feasible given
Economic technology
Potential limitations.
The fraction of
the technical
potential that is
cost-effective.
Achievable The fraction of
Potential the economic
potential that is
attainable given
actual program
infrastructure and
societal and
market limitations.
Expected outcome from the activities of DSM cell

Activities of DSM cell Expected Outcome
Load research Load duration curve, Load mix, Seasonal
variation.
Market survey Usage pattern, existing penetration of EE,
inclination
to shift towards EE.
Potential estimation Technical and economic potential, Input for
goal setting.
Action plan preparation Prioritization of DSM measures,
Implementation process and schedule.
DSM program preparation Designing a cost-effective program,
and mechanism of cost recovery, implementation
regulatory filing strategy and schedule.
DSM implementation Selection of implementation partners,
project implementation, awareness
creation.
Monitoring and Reporting Progress reporting of savings achieved.
Need for Shift in Focus – Demand Side

Demand Response
• Demand response – A reduction or shift in
energy use during critical periods for short
duration delivered immediately. Demand
response is only needed occasionally and just
for a few hours during the critical time.
Energy Conservation
• Saving energy by taking an action that often
becomes a habit. e.g. Turning of lights when
you leave the room
Energy Efficiency
• A permanent reduction in energy use.
Energy savings are in place all the time
& driven mainly by equipment upgrades,
such as new lighting system.
Demand Response, Energy Conservation and Energy Efficiency provide an

alternative to new generation, helping stabilize the grid, and can help avoid blackouts.
4/18/2016 44
Conclusions
 There is urgent need for DSM compliance using the
available legislations and laws.
 Constitution of DSM cell and further framework is a
essential step for a better DSM.
 DSM is to be done in harmony with the national
level, state level and Discom organizations.
 DSM expected outcomes show the enormous
potential with this without much capacity addition.
26
References
 Handbook for Implementation of Provisions of Energy Conservation Act,
2001, Version 1, 2019,
https://beeindia.gov.in/sites/default/files/Enforcement%20Manual.pdf
 Energy Conservation Guidelines, BEE, Govt. of India, 2019
https://beeindia.gov.in/sites/default/files/EC%20Guidelines-Final.pdf
 The Energy Conservation Building Code, 2017,
https://beeindia.gov.in/sites/default/files/ECBC%20book%20final%20one
%20%202017.pdf
 Energy Management and Audit, 2017
https://beeindia.gov.in/sites/default/files/1Ch3.pdf
 General Aspects of Energy Management and Audit 2017
 P. Venkataseshaiah and K.V. Sharma, Energy Management, Wiley
 WR Murphy and C McKay, Energy Management, Elsevier
27
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Swami Keshvanand Institute of Technology,

Management & Gramothan, Jaipur

Course: Energy Management (8AG6-60.1)

Legislations and policies supporting DSM in India

 Standards & Code (Appliances, Buildings)

 State level DSM regulation

Energy Conservation Act, 2001

Evolution of Electricity Act in India 1910 - present

Basic  Mandated  Reforms and

SECTION 62: …..terms and

SECTION 86(2): ….State

Reference of DSM in National Electricity Policy, 2005

CLAUSE 5.9.6: CLAUSE 5.4.9:

Evolution of DSM Regulations

Pre 2010 Apr 2010 May 2010 2010 - current

Discussion Draft DSM

Key features of Model DSM Regulation, 2010

Constitution of DSM Cell

1 month DSM Cell

Load Research &

1 year Formulation of DSM Plan

Role of DISCOM and SERC

Seek ERCs approval: Action Plan, • Issues guidelines: Cost

DSM Process Framework

DSM objectives and target setting

• Lowering the cost of electricity

Mechanism for cost recovery

Specifics not detailed in the Model DSM regulation

Different channels through which DSM has been implemented in India

• National Level programs for different consumer

Standards & Labeling program

Room Air Conditioner Distribution Transformer DG Set

Perform Achieve Trade (PAT)

Energy Conservation Building Code

■ Feature: 1) Identification of energy saving potential in municipalities

■ Implementation: By Municipalities (self or through ESCOs).

□ Aim: Reduce energy consumption & losses through replacement of in-

□ Coverage: Agriculture Pumping System

Expected outcome from the activities of DSM cell

Need for Shift in Focus – Demand Side

Demand Response, Energy Conservation and Energy Efficiency provide an

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