Ajay Mathur, director-general, Bureau of Energy Efficiency (BEE), is responsible for coordinating national programmes and policies to enhance energy efficiency in the country. He was earlier president of Senergy Global, India?s first carbon trading and advisory services company. He also headed the World Bank?s Climate Change team in Washington and the Energy Technology Division of Teri in New Delhi. Excerpts from an interview with FE?s Nanda Kasabe:

How would you describe energy-efficiency landscape in the country today?

The energy intensity of the Indian economy is about 0.15 kgoe per dollar of GDP (in purchasing power parity terms). This is amongst the most efficient countries of the world?more efficient than the US, and most European countries. However, Japan?s energy intensity is about 20% better than that of India.

However, it is also true that only 40% of the people in India have access to electricity or LPG, and that incomes in India are very low. As the economies grow, and incomes rise, energy use will rise as well. It is important that energy consumption continues to be as efficient as possible so that the low energy intensity of the India economy can be maintained.

The avoided generation targeted in the 11th Plan is 10,000 mw. What is BEE doing to reach the target?

BEE?s efforts to promote energy efficiency during the 11th Plan period and to achieve the target of reducing consumption by 5% (equivalent to 10,000 mw of avoided capacity) by 2012 has been initiated through several programmes and schemes targeting household lighting, commercial buildings, standards and labelling of appliances, demand side management in agriculture /municipalities, SMEs and large industries, capacity building of SDAs and industry energy conservation awards. The verified savings related to these programmes of the BEE during 2007-08 was 812 mw and 1,505 mw for 2008-09. The target savings for 2009-10 is 2,600 mw. Given the trend of exceeding our target each year, the final target of 10,000 mw at the end of this plan should be achievable.

What is BEE?s view on offering fiscal incentives to root the idea of energy efficiency among industries and PSUs?

Fiscal incentives send a strong signal for energy efficiency and accelerate investment in energy-efficient goods & services. However, incentives are also sticky, and are difficult to get rid off once they outlive their purpose. On the other hand, energy-efficiency investments pay for themselves in relatively short time periods, and consequently people benefit greatly from energy- efficiency investments. Consequently, we have to be careful that fiscal incentives do not distort the market and do not become a permanent liability. At present, both the direct and indirect taxes are undergoing structural changes, and consequently, it is difficult to propose fiscal incentives at this time.

One of the eight national missions under the National Action Plan on Climate Change is on energy efficiency. How will it catalyse the energy-efficiency movement?

The National Mission on Enhanced Energy Efficiency seeks to create an institutional infrastructure so that robust and sustainable markets for energy savings can be firmed. This would give investors the confidence to invest in energy efficient projects. It is estimated that the energy efficiency market today is worth Rs 74,000 crore. The Mission seems to unlock this market through three market mechanisms: energy savings service; demand creation for energy-efficient products; and energy-efficiency investments through performance contracting.

BEE is introducing tradable energy savings certificates. What kind of mechanisms are you putting in place to create an enabling environment?

The Perform Achieve and Trade scheme is a market-based mechanism to enhance energy efficiency in the designated consumers (large energy-intensive industries and facilities). The scheme includes goal setting where a specific energy consumption (SEC) target is set for each plant, depending on the level of energy intensity (specific energy consumed = energy use/output) of that plant. The target will specify the percentage by which a plant has to improve its energy intensity from the base line value in a period of three years. This involves a reduction phase where the designated consumers try to reduce their energy intensity according to their target within a three-year period (2009-12). The third phase is the trading phase where consumers who exceed their target SEC will be credited tradable energy permits. These permits can be sold to designated consumers who failed to meet their target. Designated consumers who fail to achieve their target have to compensate by buying permits. If they fail to fulfill either of these requirements, they may have to pay penalties. Energy-efficiency targets will be set for over 700 industries that account for 40% of the country?s fossil fuel use by the end of next year.

What has been the response to the energy-efficiency labelling programme?

This is one of the major thrust areas of BEE. A key objective of this scheme is to provide the consumer an informed choice about the energy saving and thereby cost saving potential of the relevant marketed product. The scheme was launched on a voluntary basis in May 2006 for air conditioners, refrigerators, TFLs and distribution transformers. To widen the scope for energy savings, other widely used equipments like motors, colour TVs, ceiling fans, geysers, LPG stoves, agricultural pumps and several other appliances have also been included under the scheme.

The scheme has created a market transformation in favour of energy efficient products. Currently 78% of the refrigerators sold in the market are 3-Star and above and 50% of all air conditioners sold conform to Star labelling standards. Today, almost 95% of buyers of refrigerator and air-conditioners in India are aware of star-labelled appliances. From January 7, 2010, labelling will become mandatory for 10 products including refrigerators, ACs, tube lights and transformers. Labelling will be introduced for five other appliances including washing machines, mobile chargers and set-top boxes.

What about the concept of green buildings? Is it picking up as it?s in foreign countries?

The Energy Conservation Building Code (ECBC) is one of our flagship programmes. The ECBC sets minimum energy standards for new commercial buildings having a connected load of 500kW or contract demand of 600 KVA.

Energy audit studies in buildings have shown large potential for energy savings in government and commercial office buildings. BEE is promoting the implementation of energy efficiency measures in existing buildings through Energy Service Companies (ESCOs).

BEE has developed a Star-rating programme for office buildings, which is based on the actual performance of a building in terms of its specific energy usage in kwh/sqm/year. The programme rates office buildings on a 1-5 Star scale, with a 5-Star labelled building being the most efficient and so on.