Electricity End-use Efficiency:

A Means to Reduce Electricity Shortage

With Economic Benefits

Jayant Sathaye and Amol Phadke

Lawrence Berkeley National Laboratory
University of California
Berkeley CA

Synergy for Energy

Ahmedabad, India, 15 October 2004

Work supported by US Agency for International Development (AID),

Office of Environment, Energy and Enterprise, Delhi, India
 Contents
1. Energy efficiency goals and motivation
2. Load shedding -- Maharashtra Case Study
3. Evaluation of economic benefits
z Consumer
z MSEB
z Government
4. Conclusions

2
 Electricity End-use Efficiency in India:
Goals and Motivation

• Electricity end-use efficiency goals

• Reduce electricity shortage, and
• Provide economic benefits to
• Consumers,
• Utility company, and
• Government

3
 Electricity End-use Efficiency:
Typical Economic Benefits
• Consumer benefit
• Improving efficiency typically costs less than the electricity tariff
• Utility company benefits, if
• Tariff is lower than avoided cost of electricity supply, and/or
• Saved electricity can be resold to higher tariff customers
• Country and government benefit due to
• More productive use of capital through investment in energy
efficiency - less expensive than building new supply capacity
• Where electricity supply is short, redirected supply can increase
industrial and commercial output, and lower subsidy payments
• More efficient use of capital and increased economic output leads to
more jobs and increased government tax revenue

4
 Electricity End-use Efficiency:
Key Motivations in the Indian Context

• Electricity supply – capacity and energy deficit

• State Electricity Boards – financial difficulties

• State and national government -- fiscal deficit

• Maharashtra electricity case study

• Focus on Maharashtra State Electricity Board

5
 Economic Output and Fiscal Deficit
• Maharashtra
• Population – 101.27 million (March 2004)
• Gross state domestic product (GSDP)
• Rs. 2,95,191 crores in current 2002-03 prices
• Government revenue deficit –
• Rs. 9,037 crores 2003-04 (Prov.), up from Rs. 609 crores in 1995-96
• State government debt as percentage of GSDP –
• 25%in 2003-04 (R.E.) up from 12.7% in 1995-96
• Fiscal deficit –
• Rs. 18,460 crore (R.E.); 5.6% of GSDP up from 2.8% in 1995-96
• Maharashtra State Electricity Board (MSEB):
• Commercial losses for 2001-02: Rs. 3527 crores
• Rate of return on capital: - 31.7 %(without subsidy)

6
 MSEB Capacity Deficit – Annual average (2001-02)
(528 MW average evening peak load shedding
lasting 18 hours a day)
01-02 dispatch

10000

9000

8000

7000

MSEBsupply
6000
MSEBdemand
MSEBhydro
5000
MSEBthermal
MW

DPC
4000
URAN
TEC
3000
CENTRAL

2000

1000

0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
-1000
HOUR
7
 MSEB Capacity Deficit – Annual average (2002-03)
(7836 GWh load shedding over 20 hours a day;
1376 MW average evening peak load shedding )

02-03 dispatch

11000

10000

9000

8000

7000 MSEBsupply
MSEBdemand
6000
MSEBhydro
MSEBthermal
MW

5000
DPC

4000 URAN
TEC
3000 CENTRAL

2000

1000

0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 8
-1000
H
 MSEB: Electricity Consumption by Category
(2002-03)
Type of consumption Consumption Percentage
(GWh)
Domestic 7,411 19.1
Commercial 1,643 4.2
Industrial 15,593 40.3
Railways 1,012 2.6
Public Lighting 576 1.5
Agriculture 10,202 26.3
Public Water Works 1,387 3.6
Miscellaneous 1,014 2.4

Total 38,837 100

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 Electricity End-use Efficiency Selected Measures:
Economic Benefit to Consumers
Cost of Maharashtra
Conserved Electricity Potential for

End-use device
Increm ental Electricity
Capital Cost (CCE)
Tariff
(2003-04)
Electricity
Savings
• Metric: Cost of
(Rs./kW) (Rs./kWh) (Rs./kWh) (GWh) conserved
Residential electricity (CCE)
CFL (Lighting) 3,508 0.90 2.79 866
Refrigerators 13,075 1.03 2.79 717
• Allows the cost of
Solar w ater heater 4,444 2.80 2.79 1271 efficiency
Com m ercial improvement to
Lighting 3,334 1.44 3.91 317
Refrigerators 13,075 1.03 3.91 746
be compared
Agriculture IPS against the
New unit 3,217 0.69 0.00 621 electricity tariff
Rectification 2,234 0.48 0.00 621
Replacement 6,032 1.73 0.00 621
Industrial
Motors 16,000 0.60 3.00 318
Variable Speed Numbers in red indicate end-
Drives 20,000 0.75 3.00 496 use efficiency improvement is
Lighting 3,334 1.44 3.00 340 not cost effective
CCE: Cost of conserved electricity includes a transaction cost 6933
that adds 30% to the incremental capital cost •80% penetration level;
•Over several years 10
 Estimated Load Shedding by MSEB Consumer Category
Load shedding allocation 2002-03 (GWh)
Consumer Category Urban (GWh) (%) Rural (GWh) (%) Total (GWh) (%)
Domestic 594 41% 954 15% 1548 20%
Commercial 149 10% 157 2% 306 4%
L. T. 171 12% 254 4% 425 5%
H. T. 298 21% 860 13% 1159 15%
Agri. & Irrigation 87 6% 3620 57% 3708 47%
Street lights 38 3% 101 2% 138 2%
Railway Traction 40 3% 53 1% 93 1%
Railway Non-Traction 7 0% 5 0% 11 0%
P.W.W. 37 3% 148 2% 185 2%
Military 15 1% 6 0% 21 0%
Mula Pravara 0 0% 241 4% 241 3%
Total 1436 100% 6400 100% 7836 100%

Domestic and Agricultural Consumption Total – 5256 GWh in 2002-03.

End-use energy efficiency can improve consumer welfare, reduce government subsidy
payments, and offset demand growth in the long-run.

Commercial, L.T., and H.T. Consumers Total – 1890 GWh.

End-use efficiency, and redirected electricity supply can raise economic output, and
government tax revenue in the short-run, and offset demand growth in the long-run. 11
Electricity End-use Efficiency Selected Measures:
Economic Benefit to MSEB
• End-use efficiency potential costs Rs. 3 per kWh or less
• 6,933 GWh at 80% penetration level
• May be compared with
• Electricity shortage -- 7,836 GWh (2002-03)
• Equivalent to over 3 years worth of growth at 2,300 GWh/year
or 6% a year
• Potential to raise MSEB revenue
• Reduce agricultural load and redirect electricity to other
paying customers –
• Agricultural efficiency potential is 1,863 GWh; about 75% is
during 6 hours night-time off-peak
• Assuming that MSEB system is capacity constrained, and
only on-peak savings my be resold
• Potential avoided cost and revenue increase
• Rs. 380 crores/year
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 Electricity End-use Efficiency Selected Measures:
Economic Benefit to State Government
Reduction in Subsidy Payments Can Easily Offset
Potential Agricultural Efficiency Program Costs
Consum ption
targeted for Estim ated Efficiency Subsidy
efficiency Subsidy Im provem ent Reduction
Subsidy Rate im provem ent Am ount potential Potential
(Rs./kWH) (GWh/yr) (Rs. Crores/yr) (GWh) (Rs. Crores/yr)
Agricultural 2.83 7,757 2,195 1,863 527
Residential 0.04 7,003 28 2,853 11
Total 14,760 2,223 4,716 539

Potential Agricultural Efficiency Program Capital Costs:

– Pump rectification, new efficient pumps, and pump replacement
– Rs. 494 crores

13
Electricity End-use Efficiency Selected Measures:
Economic Benefit to State Government
Impact on Industrial and Commercial Sectors
• Electricity shortage definition –
• other factors (capital, labor, and materials) of production are
present – only missing electricity
• Removal of load shedding leads to
• Direct economic benefit – increased output of affected
industries and commercial services
• Indirect economic benefit – secondary increase in output due
to multiplier effect
z Increased output adds to employment and government
tax revenue

14
 Maharashtra State Government:
Revenue Receipts
Rs. Crores Rs. Crores
(2002-03) (2003-04 (R.E.))

Revenue 31,103 37,158

Receipt

Tax Revenue 25,079 29,111

State’s Own Tax 22,814 26,074

Revenue

Sales Tax 13,488 15,485

Revenue

Electricity 1,149 1,280

Duties
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 Electricity End-use Efficiency Selected Measures:
Economic Benefit to State Government (Cont.)
Impact on Sales Tax Revenue

z State sales tax revenue in 2002-03:

– Rs.13,488 crores
– Industrial and commercial electricity consumption -- 22,825 GWh
– Sales tax per kWh -- Rs. 5.9 per kWh
z Removing shortage of 1,890 GWh would increase industrial and
commercial sector output, and proportionately increase sales tax
revenue
z Magnitude of sales tax increase will depend on extent of backup
generation (20% to 50%) and supply-demand elasticities
– Estimated to be Rs. 550 – 900 crores per year
z Additional revenues may accrue from electricity duties and
other taxes, and from all taxes on the secondary (indirect)
increase in output
z Additional employment in these sectors will add to the benefits

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 Conclusions
• Maharashtra faces several challenges –
• Growing electricity shortage
• Fiscal deficit
• Deteriorating MSEB finances
• Energy efficiency can provide relief for these problems. Over
time, it has the potential to
• Reduce almost 90% of the electricity shortage
• About 1300 MW and 6,900 GWh
• Improve MSEB revenue
• About Rs. 380 crores/year
• Reduce government subsidy and increase tax revenue
• Subsidy reduction about Rs. 530 crores per year
• Increased tax revenue about Rs. 550 -- 900 crores per year
• Net revenue increase of Rs. 1,080 -- 1,430 crores per year or about 14-
17% of the state’s revenue deficit
• Agricultural efficiency program costs – Rs. 494 crores
• Additional benefits, not yet quantified, include increased
employment and higher indirect industrial and commercial
output
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 REFERENCES
Slide 6
Maharashtra population and economic statistics from Economic Survey of Maharashtra, 2003-04
MSEB financial statistics from Planning Commission, Annual Report (2001-02) on State Electricity Boards, May 2002.
Slides 7 and 8
Maharashtra State Electricity Board (MSEB) (2004). Hourly generation data for period April `01 to march.`03.
http://www.msebindia.com/newtariff2003/newtariff2003_index.shtm. (accessed on August 15th , 2004 ( 11.15 PST)
MSEB (2004). Generation of Plant Unit Wise. http://www.msebindia.com/newtariff2003/newtariff2003_index.shtm.
(accessed on August 15th , 2004 ( 14.00 PST)
Slide 9
MSEB (2003). MSEB Annual Report 02-03. MSEB, Mumbai, India
Slide 10
Cost and efficiency data for various energy efficiency measures collected from market surveys in Pune and Mumbai.
Slide 11
Allocation of load shedding between rural & urban consumers based on
Maharashtra State Electricity Board (MSEB) (2004). Schedule of planned load shedding
http://www.msebindia.com/consumer/merc_arcieve.shtm. (accessed on August 19th , 2004 ( 20.50 PST)
Load shedding allocation based on interviews with MSEB officials – Kalwa Load Dispatch Center
Also based on interview with Prayas Energy Group.
Total load shedding data obtained from
Maharashtra Electricity Regulatory Commission (MERC) (2003). Tariff order for MSEB 03 -04 ( case 2 of 2003). MERC
India
Slide 13
Avg. cost of supply and tariff obtained form
Maharashtra Electricity Regulatory Commission (MERC) (2003). Tariff order for MSEB 03 -04 ( case 2 of 2003). MERC
India
Slides 15 an d 16
Maharashtra economic statistics from Economic Survey of Maharashtra, 2003-04.

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