Fuelling efficient energy management through CSR

Written by Pramod Deo | Updated: Mar 28 2014, 08:47am hrs
Ensuring environmental sustainability is one of the activities that companies can take up as part of their corporate social responsibility (CSR) obligations under schedule VII of the new Companies Act. This provides an excellent opportunity for companies to contribute to Indias energy security and climate change concerns. Demand side management (DSM) initiatives are one crucial and relevant way for companies to work towards environmental sustainability.

DSM generally refers to initiatives undertaken by electric utilities/distribution companies (discoms) to motivate and facilitate their consumers to adopt select electricity saving, load management, fuel substitution (substituting electricity with, say, solar energy) or demand response measures (collectively referred to as DSM measures). DSM includes maintaining or enhancing the economics and quality of service provided to consumers.

Conserving electricity through DSM makes a lot of sense in the Indian context not only because power generation in India is the largest contributor to CO2 emissions (roughly 42-43% of total CO2 emissions of 1.745 billion tonnes in 2011) but also because the potential to save electricity through efficiency measures is huge. The Planning Commissions Integrated Energy Policy Report estimates that at least 15% of total generation can be saved. This translates into a potential saving of 136 billion units of electricity at todays generation levels, or reduction of CO2 emissions by about 136 million tonnes per year at optimum levels.

The beauty of DSM is that, although the funds for facilitating it come from consumers themselves, appropriate selection of DSM measures accomplishes load and energy relief for the power utilities, respite from power cuts for consumers, and reduction of the countrys CO2 emissionsall of this economically, i.e. without burdening consumers with enhanced tariffs, and government and discoms with enhanced subsidy bills. In the Indian context, where consumers face shortages as well as spiralling tariffs, DSM by utility companies is really important.

American, European, Australian and even some Asian power utilities have mainstreamed DSM in their day-to-day operations. The usefulness of DSM can be gauged from the fact that utilities, especially in the US, are now routinely spending as much as 2-3.3% of their annual revenues on DSM. But distribution company-led DSM initiatives have hardly taken off in India, except in Maharashtra. Under the regulatory regime of the Maharashtra Electricity Regulatory Commission, mostly privately-owned utilities in Mumbai have been designing and running DSM programmes since 2005.

It is not as if no efforts have been made to introduce DSM in other states. The Forum of Regulators, a statutory conclave of central and state chairpersons, has been undertaking DSM developmental work on an ongoing basis and, as a result, a few state commissions have issued DSM regulations. But at the ground level, very little DSM work is being done. One major reason for this is the lack of conviction among the top management of state commissions and discoms about the efficacy of DSM. This has resulted in commissions and utilities not making serious efforts to gain knowledge and understanding about the what, why and how of DSM programme development and implementation. As institutions, regulatory commissions and discoms have neither the infrastructure nor the competence to undertake DSM activities.

If utilities in India are to realise DSM potential on a sustained basis, top priority will have to be given to institutionalising DSM within state commissions and discoms. It is here that Indian companies, as part of CSR, can make significant contributions by undertaking well-designed initiatives.

Such initiatives could include business firms providing assistance in conducting a series of one-to-one awareness creation and education events for top management of SERCs to secure regulatory buy-in to the DSM concept, which would help induce utilities to take steps towards DSM. They could also assist in establishing dedicated DSM cells within state regulatory commissions to facilitate the regulatory process within the commissions. Such cells would provide necessary hand-holding support and guidance to discoms in institutionalising DSM as well as getting oriented about the what, why and how of DSM programme development and implementation.

Indian companies could also assist by providing upfront financial resources for implementing pilot DSM programmes as well as conducting consumer surveys and load research, conducting DSM and demand-response potential studies, and developing DSM-related information systems and databases to aid in planning, programme design, cost-effectiveness assessment, and evaluation. Assistance could also be provided in establishing dedicated DSM cells within discoms with a separate staff, budget and resources, as well as hands-on training to utilities personnel in various aspects of DSM. Later, when DSM has become an integral part of the day-to-day operations within state commissions and utilities, Indian firms can contribute by providing financial assistance to implement various DSM programmes and projects under the PPP mode.

By choosing to further the cause of DSM in India, Indian companies would thus not only be able to fulfil their CSR obligations but also make significant contributions to the nations energy security and climate change mitigation efforts.

Pramod Deo is former chairman and Vijay M Deshpande is an energy economist and former principal advisor (economics), CERC