Agriculture Demand Side Management (AgDSM)

Challenges & Benefits

By
Bureau of Energy Efficiency (BEE)
Contents

1 Energy Scenario of Agriculture Sector

Policy Alternatives for EE in Agriculture 2

3 AgDSM Initiatives by BEE

Proactive Initiatives by States 4

5 AgDSM Pilot Projects

Institutional barriers 6

7 Way ahead
 Agriculture Pumpset Scenario: India

I. Total agricultural pump sets employed ~ 20.27 million

II. Agriculture sector consumes ~ 18% of total electricity supplied (160 BU).

III. New connections per year - 0.5 million

IV. CAGR is more than 6.5 %

V. Electricity supply is free or applicable tariff is very low.

VI. Less or no metering for energy consumption

VII. Poor quality of power supply

VIII. Theft and high T&D losses

IX. Energy saving potential is more than 30%

Source: Directorate of Economics and Statistics;

CEA, Planning Commission.
 Agriculture Pumpset Scenario: India

Concerns:

Market dominated by un-organised sector providing low cost, low efficiency pump-
sets.
Efficiency level of BEE star rated Energy Efficient pump-sets (EEPS) is about 30 to 40
% higher than that of these conventional pumps. However, cost of Energy Efficient
pump-sets is higher by 20% .
Inefficient conventional pumpsets lead to higher subsidy burden on the State
Governments. Rs. 55,000 crores
The average cost of power supply in India during 2012-13 was Rs. 5.01/ kWh and the
realization from agricultural sector during the same period was Rs. 1.48/kWh
No market incentive for purchase/replacement of BEE star rated EEPS because of
subsidized tariff.

Source: Directorate of Economics and Statistics;

CEA, Planning Commission.
Policy Alternatives for EE in Agriculture Sector

Alternative No. 1 Right Pricing for electricity tariffs

Alternative No. 2 Prohibition for manufacturing of in-
efficient pumpsets
Alternative No.3 Agriculture Demand Side Management
Initiatives
A. Efficiency up gradation of existing pumpsets
B. State-wide regulation for mandatory use of star rated EEPS
for new agriculture connections.
 Demand Side Management (DSM)

DSM makes only sense for a power utility, if

DSM is applied to all non paying or below

delivery cost paying customers, or

DSM activities strictly reduce peak load without

cutting into revenues from well paying
customers.
AgDSM Programme

Objective :- To create framework for market based transformation in agriculture pumping

sector by launching few pilot projects and introducing policy based interventions.

Achievements -
Launch star labeling program for agriculture pumps
11 DPRs prepared covering 20,750 pumpsets. Average 40% (96 MU/year) energy
saving potential assessed in the energy consumption of these pumpsets.
Three business models viz. ESCO, Hybrid & DISCOM developed for project
implementation in 8 States (Maharashtra, Rajasthan, Gujarat, Punjab, Haryana,
Madhya Pradesh, Andhra Pradesh & Karnataka).
One pilot project in Solapur, Maharashtra implemented. Annual Savings of 6.1 MU
achieved by replacing 2209 inefficient pumps with BEE Star rated pumps.
Capacity building and awareness workshops held in 7 States for DISCOM officials
and 26 open house sessions for farmers organized.
Designed and implemented M & V protocol
Encouraged states for mandatory use of BEE star rated pumpsets for every new
agricultural connection.
Summary of DPRs
State No. of Avg. Existing Saving % of IRR Status
pumps operating consumpti potential saving (%)
covered efficiency of on (million potential
proposed (million kWh)
EEPS kWh)

Haryana 2124 55% 47.34 16.7 35% 41.4 RFP was floated by M/s UHBVN
for hiring implementation agency,
(UHBVNL)
only one bid received from
Kirloskar pumps but project could
not be taken over by agency.

Gujarat 1782 55% 17.0 7.46 44% 28.7 DPR submitted

PGVCL
Gujarat 533 58% 9.18 2.615 28% 28.3 Consultation sessions were held
MGVCL with DISCOM officials to implement
the project on DISCOM mode but
eventually disagree to take it for
implementation.
Summary of DPRs
State No. of Avg. Existing Saving % of IRR Status
pumps operating consumpti potential saving (%)
covered efficiency of on (million potential
proposed (million kWh)
EEPS kWh)
Punjab 2186 56% 20.0 7.38 37% 42.0 M/s PSPCL floated RFP twice for
selection of implementing agency
(PSPCL)
but no bids were received.
Rajasthan 1806 50% 24.91 11.275 45% 30.0 Consultation is gong on between
EESL & JVVNL for implementation
(JVVNL)
of the project on ESCO mode.
M.P(East) 1918 45% 16.5 6.02 38% 17.5 DPR submitted
MP (West) 1067 51% 5.36 2.53 47% 33.1 DPR submitted
AP (East) 2204 53.35% 49.5 19.76 39% 15.7 DPR submitted
AP 2312 68% 18.77 9.05 48.64% 45.0 DPR submitted
(Central)
Karnataka 1288 45% 10.73 3.599 36.8% 35.0 EESL is implementing the pilot
project in Mysore.
Business Model: DISCOM Mode
The DISCOM utilizes its own funds collected under a tariff regulation for replacement of old
inefficient pumps with new higher energy efficiency pump sets and contract out repair and
maintenance of pumps and certain aspects of project works to a project contractor.

Consumers Electricity Utility / Discom

sales
Sale of saved energy to other Capital for Installation of new pumps
consumers
Improved Collection efficiency
Reduced Losses and Peak Load
Government / Regulatory
Commission
Subsidy Reduction due to saved energy

Reduction in Subsidy payments

Policy
guidelines &
Payment
Security
Policy Guidelines and Approvals Approvals Package
Regulator
Inclusion in Annual Revenue
Requirement
Monitoring
Agency

Farmer Third Party

Contractor Testing
Free Energy Efficient Pump set
Reduced Energy Bills
Agreement
Design / Installation / Commissioning & R&M

Free Maintenance Pump

Demonstrate the energy savings

Quality Power Supply

Repair and Maintenance
Business Model: ESCO Mode
An ESCO which has a contract with DISCOM finances and implements the project; the ESCO
would borrow the project debt and repay it from project energy saving revenues. The
pump manufacturers can also participate as ESCOs in this mode of implementation.

Consumers Electricity Utility / Discom

sales
Sale of saved energy to other
consumers Improved Collection efficiency
Reduced Losses and Peak Load

Government / Regulatory Subsidy Reduction due to saved energy

Commission

Reduction in Subsidy payments

Policy
guidelines &
Payment
Security
Policy Guidelines and Approvals Approvals Package
Regulator
Inclusion in Annual Revenue
Requirement
Monitoring
Agency
Third Party
Farmer ESCO Testing

Free Energy Efficient Pump set Agreement

Capital for Installation of new pumps

Reduced Energy Bills Design / Installation / Commissioning & R&M

Free Maintenance Demonstrate the energy savings

Pump
Quality Power Supply Repair and Maintenance
Business Model: HYBRID Mode
ESCO provides part of project funds through debt & equity and sign a contract with
DISCOM, whereas as the investment made by ESCO would be paid by DISCOM through
LMC fund and from sharing of energy saving revenue.
Utility / Discom
Consumers
Electricity
sales
Sale of saved energy to other
Annual payment from Special DSM fund to
support capital expenditure
consumers
Sharing of savings to support operating
expenses
Government / Regulatory Improved Collection efficiency
Commission
Reduced Losses and Peak Load
Reduction in Subsidy payments
Policy
guidelines &
Payment
Security
Policy Guidelines and Approvals Approvals Package Regulator
Inclusion in Annual Revenue
Requirement

Monitoring
Farmer Agency
Third Party
Testing
ESCO/ Contractor

Agreement
Free Energy Efficient Pump sets Capital investment for Installation of new pumps
Reduced Energy Bills Design / Installation / Commissioning & R&M
Free Maintenance Demonstrate the energy savings
Quality Power Supply Repair and Maintenance
Initiatives by States

States Initiatives
Haryana Mandatory use of EE pumpsets vide notification issued in October
2010.
Financial assistance of Rs. 400/HP for adoption of EE pumpsets by
HAREDA.
Punjab Mandatory use of EE pumpsets vide notification issued in October
2011.
Notification by PSERC for implementation of AgDSM initiatives.
Rajasthan Incentive of Rs. 750/HP for adoption of EE pumpsets.
Chhattisgarh Rebate in electricity bills for adoption of EE pumpsets.
Karnataka Mandatory use of EE pumpsets vide notification issued in
November 2008.
Gujarat DISCOMs of Gujarat are preparing plan for implementation of
AgDSM projects under DSM regulations
Pilot AgDSM Project
AgDSM Pilot Projects Status

State Initiatives
Maharashtra Pilot Project in Solapur district covering 2209 pumpsets is being
implemented, reflecting annual savings of 6.1 MU.
Karnataka Pilot project in Hubli (HESCOM) covering 590 pumpsets is
implemented, reflecting annual savings of 2.92 MU.
Implementation of DPR in Mysore (CESC) is completed.
Rajasthan Implementation of DPR in Jaipur district is under consideration.
Andhra Pradesh Implementation in East Godavari (APEPDCL) is initiated.
First AgDSM Pilot Project in Solapur, Maharashtra

Pilot project on PPP mode is in

progress in Maharashtra (Sholapur
Circle).
Initial capital investment by ESCO
ESCO would get 20% of the capital in
5 yearly installments plus 30% of the
energy savings.
M&V methodology is in place.
Savings of 25% achieved - Annual
Energy Saving of 6.1 MU for 2209
pumpsets.
Energy savings of 9.1 MU is assessed
considering the normalization
factors.
 Solapur pilot project by MSEDCL
Initial capital investment by ESCO
All figures in ESCO would get 20% of the capital in 5 yearly installments plus
Rs. lakhs 30% of the energy saving
2209 pumps have been replaced
Initial Capital Cost Annual energy Saving of 6.1 MU
(Rs. 706 lakh)
DSM fund
Annual subsidy
reduction of Rs. 37 lakh State Govt.

Payment from saving (30% - 49.2 lakh)

Annual Saving
ESCO/Pump retained (70% -
Annual benefit from saving of Rs 114 lakh) MSEDCL
Manufacturer
6.1 MU/annum
(Rs. 164.7 lakh)

Annual support of 141.24 lakh Special DSM fund

approved by MERC
(Rs.706 lakh)
Operating Expenses for 5 years
Avg. annual
Avg Annual R&M
Interest Payment Payback 4
(Rs. 28 lakh) (Rs. 34.60 lakh)
years
M&V result for Energy Savings
Table 1 : Summary of actual energy savings achieved
Feeders Bhose Borale Brhamapuri Nandeshwar Kharatwadi Total
No. of Pumps 339 672 266 500 432 2209
Old Pumps
Average kW 6.39 5.83 7.29 7.16 7.05 6.74
Average Flow , m/hr 19.02 22.35 22.27 17.11 19.89
Avg Efficiency, % 22.45 22.89 20.51 21.85 22.31 22
Baseline Consumption kWh 3554719 6425034 3179556 5871124 4996986 24027420
New Pumps
Avg Voltage , V 384.61 350.03 376.05 356.82 368.55
Average kW 4.75 4.37 5.52 5.24 5.25 5.03
Average Flow , m/hr 23.50 26.96 25.87 21.21 24.23
Average Efficiency, % 40.67 41.47 33.62 39.99 39.46 39.04

Consumption with EEPS, kWh 2639190 4818461 2409001 4293686 3721595 17881934
Energy Savings kWh 915529 1606574 770554 1577438 1275391 6145485
% Savings 25.76% 25.00% 24.23% 26.87% 25.52% 25.58%

Table 2 : Expected energy savings considering normalization factors

Particulars Total (in MU) % Savings
Baseline Energy Consumption of old pump sets 24.0
Actual measured Energy Savings by installation of EEPS 6.14 25.58%
Energy Savings considering Voltage improvement (415V) 6.49 27.04%
Energy Savings considering excess water flow (reduced operating
9.3 38.75%
hours)
Total Estimated Savings considering Voltage improvement and excess
9.66 40.21%
flow
Barriers / Challenges in the pilot project

Ownership verification process and change in ownership name took considerable time.
Farmers reluctance to enter into an agreement for pump.
Pump ownership with 2 3 families is one of the biggest hurdles.
Farmers fear that metering of the pumps power consumption will be later billed to
them.
Farmers bypasses the energy meter post installation of the new pump and energy
meter.
Farmers are reluctant to have their pump HP reduced.
Frequent shift in location of pumpsets at the river bed.
Low voltage issues, voltage and water level variations at several installations.
Difficult terrain at few locations.
Very old and rusted GI pipes used and lower diameter pipe used in Bore wells.
At several locations, it is imperative to replace at free of cost all pump set accessories
with new ones in order to achieve desired results of replacement with efficient pump.
25% pump sets are less than 5 years old and farmers report good performance with
low maintenance, hence reluctant to install new EEPS pumps.
Few farmers are reluctant to give back the old pumps as replacement.
Significant rise in project cost as compared to initial estimates.
Scaling up by EESL

Sl. No. Name of Electricity Distribution Nos. of pump sets Estimated

Company Investment
(Rs. Crore)
1 Hubli Electricity Supply Company Limited 11013 55
(HESCOM), Hubli, Karnataka

2 Chamundeshwari Electricity Supply 1337 5

Company (CESC), Mysore, Karnataka

3 Bangalore Electricity Supply Company 100,000 500

(BESCOM), Bangalore, Karnataka
4 APEDCL 3,000 15

5 APEDCL, APSPDCL 30,000 225

6 MSEDCL 500000
Institutional Barriers

National Level
Limited policy dialogues at national and state level on power and water sector reforms to
develop an integrated energy and water demand side management (DSM) framework
for agricultural sector.
Limited synergy between departments and ministries related to agriculture, irrigation,
water and power.
Unsuitable energy pricing policy and no water pricing policy for agricultural sector
Lack of fiscal incentives for DISCOMs to initiate DSM investments
Weak institutional set-up for encouragement to R&D institutes for developing super
efficient technologies
Limited to no tax structure promoting manufacturing and sales of energy efficient
appliances
Institutional Barriers

State Level
Limited involvement of state designated agencies (SDA) in promoting Ag-DSM program
Often the state electricity tariff policies for agricultural sectors do not reflect the marginal
cost of electricity
No notification by SERCs/ DISCOMs mandating purchase of energy efficient pump-sets for
availing new electricity connection under agricultural tariff
No policy to encourage energy efficient purchase behavior.

End users/ farmers

Limited to no knowledge of energy efficient pump-sets/ technologies
Fear of loss of control, productivity and comfort
Perceived risk in adopting new technology
Limited financial resources
High first cost and limited returns due to subsidized electricity tariff
Unavailability of local technology/ service provider for energy efficient products
No financial commitment by end users under ESCO mode means limited ownership
Ignorance and disbelieve regarding DSM.
Institutional Barriers
ESCOs/ Private organizations
Apprehension about recovery of investment
Limited usage of ESCROW account in India
Availability of capital to invest in Ag-DSM projects
Delayed recovery of capital
Low Voltage Distribution System (LVDS) results in frequent burnout of the EEPS thereby increasing the
O&M cost for the ESCO/DISCOMs investing in the project
Diminishing water table due to inefficient usage of water increases the head required for pumping.
Higher head means bigger pumps reducing energy saving.
DISCOMs
Inability to maintain power quality in agricultural feeders
Limited resource available especially at local level to execute Ag-DSM projects.
Lack of appropriate DSM culture and know - how
Limited coordination with other departments like irrigation, agriculture etc
Apprehension of a negative rate of return
 Way ahead

Goals to accelerate saving potential in Agriculture sector

Establishment of a robust enforcement mechanism at the

state levels to ensure use of Star Rated pumps sets for
every agricultural connection.
Reduction in intensity of energy use in existing agricultural
pump-sets through upgradation programs under Public
Private Partnerships projects.
 Way ahead
Key interventions to achieve goals

State government to play a key role in implementation and enforcement of Ag-DSM

programmes. This includes establishment of specific cells within the DISCOMs for
ensuring enforcement of various DSM activities under agriculture sector.
Differential taxation structure for energy efficient pump-sets in order to encourage
farmers for adopting them.
Link Ag-DSM programme to Deen Dayal Upadhaya Gram Jyoti Yojana.
Provision of resources for incentives for manufacturing of energy efficient pump-
sets through National Clean Energy Fund.
Infrastructure status and priority sector lending for Ag-DSM projects.
EESL to enter into contracts with state electricity distribution companies for
changeover to energy-efficient pump-sets on a performance-contract model; also
to encourage other ESCOs to enter the market.
Regulations and separate DSM funds to enable and require electricity distribution
companies to implement pump-sets demand-side management programmes.
 Way ahead

Key interventions to achieve goals

Business model for large scale upgradation program like DELP

Robust M & V, which will be acceptable to all stakeholders
Use of star labeled EE pumpsets in all center and state schemes
Capacity building of DISCOMs, LSPs and other stakeholders
Metering of agriculture feeders/pumps & release of subsidy through DBT
Dedicated & HVDS feeders
Outreach campaign to sensitize consumers about opportunities for energy savings.
Comments/suggestions to address the
barriers