1. Energy Needs of Growing Economy Economic growth is desirable for developing countries, and energy is essential for economic growth. The per capita energy consumption is too low for India as compared to developed countries. It is just 4% of USA and 20% of the world average. The per capita consumption is likely to grow in India with growth in economy thus increasing the energy demand.

2. Long Term Energy Scenario For India Coal is the predominant energy source for power production in India, generating approximately 70% of total domestic electricity. Production currently stands at around 290 Million tones per year, but coal demand is expected to more than double by 2010. Indian coal is typically of poor quality and as such requires to be beneficiated to improve the quality; Coal imports will also need to increase dramatically to satisfy industrial and power generation requirements.

3. India's demand for petroleum products is likely to rise from 97.7 million tones in 2001-02 to around 139.95 million tones in 2006-07. Electricity India currently has a peak demand shortage of around 14% and an energy deficit of 8.4%.

4. Energy Pricing in India Price of energy does not reflect true cost to society. Pricing practices in India like many other developing countries are influenced by political, social and economic compulsions at the state and central level.

5. The Indian energy sector offers many examples of cross subsidies e.g. diesel, LPG and kerosene being subsidised by petrol, petroleum products for industrial usage and industrial, and commercial consumers of electricity subsidising the agricultural and domestic consumers.

6. Coal Grade wise basic price of coal at the pithead excluding statutory levies for run-of-mine (ROM) coal are fixed by Coal India Ltd from time to time. The pithead price of coal in India compares favourably with price of imported coal. In spite of this, industries still import coal due its higher calorific value and low ash content.

7. Oil As part of the energy sector reforms, the government has attempted to bring prices for many of the petroleum products in line with international prices. The most important achievement has been the linking of diesel prices to international prices and a reduction in subsidy.

8. Natural Gas The government has been the sole authority for fixing the price of natural gas in the country It has also been taking decisions on the allocation of gas to various competing consumers. The gas prices varies from Rs 5 to Rs.15 per cubic metre.

9. Electricity Electricity tariffs in India are structured in a relatively simple manner. While high tension consumers are charged based on both demand (kVA) and energy (kWh), the low-tension (LT) consumer pays only for the energy consumed (kWh) as per tariff system in most of the electricity boards.

10. The price per kWh varies significantly across States as well as customer segments within a State. In addition to the base tariffs, some State Electricity Boards have additional recovery from customers in form of fuel surcharges, electricity duties and taxes.

11. Energy Sector Reforms Since the initiation of economic reforms in India in 1991, there has been a growing acceptance of the need for deepening these reforms in several sectors of the economy, which were essentially in the hands of the government for several decades.

12. Coal The government has recognized the need for new coal policy initiatives and for rationalization of the legal and regulatory framework that would govern the future development of this industry. One of the key reforms is that the government has allowed importing of coal to meet our requirements. Private sector has been allowed to extract coal for captive use only.

13. The ultimate objective of some of the ongoing measures and others under consideration is to see that a competitive environment is created for the functioning of various entities in this industry. This would not only bring about gains in efficiency but also effect cost reduction, which would consequently ensure supply of coal on a larger scale at lower prices.

14. Oil and Natural Gas Since 1993, private investors have been allowed to import and market liquefied petroleum gas (LPG) and kerosene freely; private investment is also been allowed in lubricants, which are not subject to price controls. In 1997 the government introduced the New Exploration Licensing Policy (NELP) in an effort to promote investment in the exploration and production of domestic oil and gas.

15. In addition, the refining sector has been opened to private and foreign investors in order to reduce imports of refined products and to encourage investment in downstream pipelines.

16. Electricity Following the enactment of the Electricity Regulatory Commission Legislation, the Central Electricity Regulatory Commission (CERC) was set up, with the main objective of regulating the Central power generation utilities. State level regulatory bodies have also been set up to set tariffs and promote competition. Private investments in power generation were also allowed

17. The State SEBs were asked to switch over to separate Generation, Transmission and Distribution corporations. There are plans to link all SEB grids and form a unified national power grid.

18. Electricity Act 2003 The government has enacted Electricity Act, 2003 which seeks to bring about a qualitative transformation of the electricity sector. The Act seeks to create liberal framework of development for the power sector by distancing Government from regulation. The objectives of the Act are “to consolidate the laws relating to generation, transmission, distribution, trading and use of electricity”

19. The salient features of the Electricity Act, 2003 are: i)The Central Government to prepare a National Electricity Policy in consultation with State Governments. (Section 3) ii) Thrust to complete the rural electrification and provide for management of rural distribution by Panchayats, Cooperative Societies, non-Government organizations, franchisees etc. (Sections 4, 5 & 6)

20. iii) Provision for license free generation and distribution in the rural areas. (Section 14) iv) Generation being de licensed and captive generation being freely permitted. Hydro projects would, however, need clearance from the Central Electricity Authority. (Sections 7, 8 & 9) V) Transmission Utility at the Central as well as State level, to be a Government company – with responsibility for planned and coordinated development of transmission network. (Sections 38 & 39)

21. vi) Provision for private licensees in transmission and entry in distribution through an independent network, (Section 14) vii) Open access in transmission from the outset. (Sections 38-40) viii) Open access in distribution to be introduced in phases with surcharge for current level of cross subsidy to be gradually phased out along with cross subsidies and obligation to supply. SERCs to frame regulations within one year regarding phasing of open access. (Section 42)

22. ix)Distribution licensees would be free to undertake generation and generating companies would be free to take up distribution businesses. (Sections 7, 12) x) The State Electricity Regulatory Commission is a mandatory requirement. (Section 82) xi) Provision for payment of subsidy through budget. (Section 65)

23. Energy and Environment

24. The usage of energy resources in industry leads to environmental damages by polluting the atmosphere. Few of examples of air pollution are sulphur dioxide, nitrous oxide and carbon monoxide (CO) emissions from boilers and furnaces, chlorofluro carbons (CFC) emissions from refrigerants use, etc.

25. Air Pollution A variety of air pollutants have known or suspected harmful effects on human health and the environment. These air pollutants are basically the products of combustion from fossil fuel use. Air pollutants from these sources may not only create problems near to these sources but also can cause problems far away.

26. Coal and other fossil fuels, which have taken three million years to form, are likely to deplete soon. In the last two hundred years, we have consumed 60% of all resources. Today, 85% of primary energy comes from non- renewable, and fossil sources. These reserves are continually diminishing with increasing consumption and will not exist for future generations

27. What is Energy Conservation Energy Conservation and Energy Efficiency are separate, but related concepts. Energy conservation is achieved when growth of energy consumption is reduced, measured in physical terms. Energy Conservation can, therefore, be the result of several processes or developments, such as productivity increase or technological progress.

28. On the other hand Energy efficiency is achieved when energy intensity in a specific product, process or area of production or consumption is reduced without affecting output, consumption or comfort levels. Energy efficiency is often viewed as a resource option like coal, oil or natural gas. For example, replacing traditional light bulbs with Compact Fluorescent Lamps (CFLs) means you will use only 1/4 th of the energy to light a room.

29. Energy Strategy for the Future Immediate-term strategy: Rationalizing the tariff structure of various energy products. Optimum utilization of existing assets Efficiency in production systems and reduction in distribution losses, including those in traditional energy sources.

30. Promoting R&D, transfer and use of technologies and practices for environmentally sound energy systems, including new and renewable energy sources.

31. Medium-term strategy: Demand management through greater conservation of energy, optimum fuel mix, structural changes in the economy, an appropriate model mix in the transport sector, i.e. greater dependence on rail than on road for the movement of goods and passengers and a shift away from private modes to public modes for passenger transport; changes in design of different products to reduce the material intensity of those products, recycling, etc.

32. There is need to shift to less energy-intensive modes of transport. This would include measures to improve the transport infrastructure viz. roads, better design of vehicles, use of compressed natural gas (CNG) and synthetic fuel, etc. Similarly, better urban planning would also reduce the demand for energy use in the transport sector. There is need to move away from non-renewable to renewable energy sources viz. solar, wind, biomass energy, etc.

33. Long-term strategy: Efficient generation of energy resources Efficient production of coal, oil and natural gas Efficient use of natural gas Improving energy infrastructure Building new refineries Creation of urban gas transmission and distribution network Maximizing efficiency of rail transport of coal production. Building new coal and gas fired power stations.

34. Enhancing energy efficiency Improving energy efficiency in accordance with national, socio-economic, and environmental priorities Promoting of energy efficiency and emission standards Labeling programmes for products and adoption of energy efficient technologies in large industries

35. Deregulation and privatization of energy sector Reducing cross subsidies on oil products and electricity tariffs Decontrolling coal prices and making natural gas prices competitive Privatization of oil, coal and power sectors for improved efficiency.

36. Investment legislation to attract foreign investments. Streamlining approval process for attracting private sector participation in power generation, transmission and distribution.

37. Electrical Energy Management Energy management includes planning and operation of energy-related production and consumption units.production Objectives are resource conservation, climate protection and cost savings, while the users have permanent access to the energy they need. It is important to integrate the energy management in the organizational structure, so that the energy management can be implemented.

38. Demand side management (DSM) Energy demand management, also known as demand side management (DSM), is the modification of consumer demand for energy through various methods such as financial incentives and education.energy Usually, the goal of demand side management is to encourage the consumer to use less energy during peak hours, or to move the time of energy use to off-peak times such as nighttime and weekends.peak

39. DSM has emerged as a major component of utility planning and operations. It includes the planning, implementation and monitoring of utility activities designed to encourage customers to modify their patterns of electricity usage, including the timing and level of electricity demand. DSM activities are designed to influence electricity demand for the mutual benefit of the utility and the customer.

40. Planning & Implementation The most common rationale for Demand Side Management in the Power Sector is that it is often more cost effective and socially beneficial to reduce or manage electricity demand through investment in efficiency and other demand side measures than to increase power supply or transmission capacity. DSM programmes are used to eliminate or reduce the need for additional peak or base load generating capacity and/or distribution facilities.

41. Develop end-use Demand forecasting Forecasting by end-use is an essential pre-requisite for effective DSM planning and implementation. Mid- and long-term forecasts of power demand variations play a very important role in the development of a DSM programme.

42. Undertake Load/ Market Research to identify end- use patterns and market barriers To design effective DSM programmes it is important to know how electricity is used and what barriers are preventing customers from using efficient technologies.

43. Identify target sectors, end-uses, and measures Choose sectors and end-uses that account for the largest power consumption and peak loads, or will do so in the future. Select DSM measures which will have the largest impact on peak demand and electricity use.

44. Advantages The direct benefits of a DSM programme are the energy savings achieved (e.g. kWh/yr) and the peak demand reduction. The value of these savings to an energy user depends on the energy tariff (electricity price and demand charges). There are also possible maintenance or labour saving benefits associated with the efficient technology.

45. The value of these same savings to the power utility and to society at large depend on the “avoided” or long run marginal cost of new energy supply (e.g. a power plant and/or transmission line). This avoided cost is the energy cost for the next kW of capacity added to the system. The avoided cost depends on whether the savings are at peak or off peak times (as measured by the coincidence factor), and whether there is current excess capacity.

46. Supply side management Supply-side management (SSM) refers to actions taken to ensure the generation, transmission and distribution of energy are conducted efficiently. SSM is used primarily with reference to electricity but it can also be applied to actions concerning the supply of other energy resources such as fossil fuels and renewables.

47. Utility companies may look at means of modifying their load profile to allow their least efficient generating equipment to be used as little as possible. They may improve maintenance and control of existing equipment, or upgrade equipment with state-of-the-art technologies. Energy users will normally focus their efforts on demand-side management methods (DSM) but some will consider the supply side too.

49. ENERGY SCENARIO Energy is one of the major inputs for the economic development of any country. In the case of the developing countries, the energy sector assumes a critical importance in view of the ever-increasing energy needs requiring huge investments to meet them.

50. Energy can be classified into several types based on the following criteria: Primary and Secondary energy Commercial and Non commercial energy Renewable and Non-Renewable energy

51. Primary and Secondary Energy Primary energy sources are those that are either found or stored in nature. Common primary energy sources are coal, oil, natural gas, and biomass (such as wood). Primary energy sources are mostly converted in industrial utilities into secondary energy sources; for example coal, oil or gas converted into steam and electricity.

52. Commercial Energy and Non Commercial Energy The energy sources that are available in the market for a definite price are known as commercial energy. Examples: Electricity, lignite, coal, oil, natural gas etc. The energy sources that are not available in the commercial market for a price are classified as non- commercial energy. Firewood, agro waste in rural areas; solar energy for water heating, electricity generation, for drying grain, fish and fruits etc.

53. Renewable and Non-Renewable Energy Renewable energy is energy obtained from sources that are essentially inexhaustible. Examples of renewable resources include wind power, solar power, geothermal energy, tidal power and hydroelectric power. Non-renewable energy is the conventional fossil fuels such as coal, oil and gas, which are likely to deplete with time.