Rationality of energy efficiency improvement targets under the PAT scheme in India - A case of thermal power plants

- Rationality of setting target for coal-based thermal power plants, under the Perform, Achieve and Trade (PAT) is examined.
- Data Envelopment Analysis is used as the main analysis tool.
- The results indicate that the PAT targets for ENERGY SAVINGS are much less than the sector's potential
- The scheme undermines the potential of improved managerial practice accounting for 24% of the sector's potential
- At full potential, 4.7 million additional Energy Saving Certificates are expected to be generated.

The market-based Perform Achieve and Trade scheme was introduced in India to enhance the energy efficiency of energy-intensive sectors, and for thermal power plants by reducing their specific energy consumption within the framework of a tradable certificate scheme. International experience suggests that effectiveness of such schemes is greatly influenced by the assigned targets of the obligated units. Setting rational targets is thus, a key aspect of successful implementation of the scheme. In the present study, we examine the rationality of the targets set for the power sector of India, based on comparing it with energy saving potential of the plants, and the targets assigned to the respective plants. Data envelopment analysis models are used to determine relative efficiency and energy saving potential. The study results indicate that in most cases, (i) The targets are much less than the actual potentials of the thermal power sector, (ii) There exist substantial inefficiencies within the system in both energy use and managerial dexterity; and (iii) If the sector realizes its full potential, then the Energy Saving Certificate market may witness a surplus of 4.7 million certificates on account of thermal power sector alone.