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Electricity Boards can save millions by subsidising energy efficiency

The Kerala State Electricity Board (KSEB) and several other electricity boards in India can save millions of rupees by subsidising energy efficiency throughout the country.

Energy efficiency is a concept advocated by environmental groups all over the world to reduce energy consumption and save non-renewable energy sources. Now, economists too see sense in that. Several electric utilities in the United States, Canada and other countries have already adopted the concept

The business principle behind the concept is that if the marginal cost of setting up new generation unit exceeds that of carrying out energy efficiency measures, the latter should be preferred. In the case of KSEB, this principle can also be translated to mean that energy efficiency should be preferred over purchase of costlier power from thermal plants as the Board subsidises power to several groups..

Cost of power
The KSEB now spends more than Rs. 4.00 a unit for power from thermal projects. The average cost of the power sold by it is about Rs. 3.30 a unit. However, its sells power at an average rate of Rs. 2.34 a unit. So, if the KSEB manages to reduce consumption of one unit, it stands to save about Re 1. The actual savings could be even  higher for three reasons.

The Board now taps nearly 3000 million units of thermal power in a year. The cost of this power works out to be Rs. 500 crores.  The potential for savings is at least half of this.

Today, about 20 per cent of the demand in the State is for lighting. The Board's difficulties in managing peak loads in the evenings also arise from this. Energy efficiency can be of  great help in this area.

CFL lamp
Compact fluorescent lamps (CFL) is one of the major technologies available in this field to achieve energy efficiency. A CFL lamp, consuming just about 9 watts, can replace a 60 watts incandescent bulb. This means an energy saving of more than 85 per cent. Similarly, halogen lamps, which is suitable for outdoor lighting, uses 40 per cent less energy and generally lasts two to four times longer than regular bulbs.

As the total power used for lighting is five to six million units a day, energy efficiency measures can theoretically achieve a saving of about four million units. However, achievement of a saving of four million units in lighting alone would be impractical. Some lighting loads like neon signs and factory lighting might have to be excluded from the calculation.

Replacement of existing incandescent and fluorescent lamps with CFL by customers would happen only gradually. So, the KSEB would have to vigorously promote the use of energy efficient lighting by offering subsidies as is done by power utilities in other countries.
The State Central Governments can also offer subsidies as energy efficiency saves natural resources and makes money available for funding development in areas other than power generation.

Currently, the market price of a 9 watt CFL with adapter is about Rs. 350 a piece. (This can directly fit into existing light holders.) Aesthetically more appealing units would cost Rs. 750 or more.
A CFL lamp has nearly ten times the life time of an incandescent lamp. During its life time (8000 hours), each will save about 500 units. At Rs. 1.30 a unit, this means a saving of Rs. 650. Add to this, the cost of ten incandescent lamps (about Rs. 100). One stands to benefit Rs. 400 for an investment of Rs. 350. There is a tremendous saving for commercial establishments who pay about Rs. 6 a unit (though the Board would lose revenues over there). CFLs are good even for textile shops.

Technologies are available in the international market for not less than 1000 products ranging from computers to small appliances that are energy efficient. Devices like dimmer switches (good for bedrooms, dining rooms etc.) and timers (suitable for latrines in offices and public places) can also save energy. Sodium vapour lamps with reflectors on streets gives optimum light. (Only a portion of the light from incandescent street lights, seen in panchayat areas, reach the road. CFL with suitable reflectors would be good alternative if theft can be prevented).

If the lighting load of six million units a day is reduced by just two million units a day, the State will save as much energy as the proposed Pooyankutty project-- a project harmful to the environment. Much more electrical energy could be saved by encouraging replacement of electrical heating with solar heating (in hotels, for example) and use of high efficiency motors and processes in factories and other work places (energy auditing).

However, instead of subsidising energy conservation and efficiency, the Government and Board are now promoting consumption by offering free electricity to small homes and farmers. A better strategy would have been to subsidise high efficiency pumps and drip irrigation (which saves both power and water) and homes that consume less than, say, 10 units a month through the use of energy efficient lights and devices.
(This article was written as part of the study on hydroelectric projects. Updated to reflect current prices in March 2002.)

Note (June 2010): Arguments in favour of subsidy is no more valid as most of the businesses and house holds in Kerala now use CFL. The State should be bringing legislation or setting up facilities to handle small quantities of mecury in the lamps being discarded after use. Currrely, LED lamps are emerging as a better alternative to CFL and incandescent lamps. They provide higher saving of electricity. So, the government and KSEB should be stepping in to promote LED lamps.
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