Energy Efficiency Services Limited (EESL) is all set to roll out its super-efficient ACs under the ‘Energy Efficient AC Programme’. These not only consume less power, but are also 40 per cent more efficient than the 5-star rated ACs currently available in the Indian market.
By Shruti Mishra
After the grand success of its LED programme, EESL (a joint venture company of the PSUs under the Ministry of Power) is introducing yet another remarkable energy-efficient appliance to the Indian public. The company has announced that it will be launching a range of super-efficient ACs, also known as inverter ACs, under the ‘Energy Efficient AC Programme’ to reduce consumers’ energy bills and help meet India’s climate change commitments.
EESL has confirmed to Electronics Bazaar that the company is already in the process of procuring 100,000 energy-efficient ACs of 1.5 tonnes. What’s unique about these ACs is that they consume 1kW of energy when compared to the 5-star rated ones, which consume 1.5kW of energy. The quality management system of the ACs is in accordance with IS/ISO 9001 standards. In addition, these ACs are also expected to reduce peak load considerably, For instance, 100,000 such ACs will save 50MW over a 5-7 year period. It is expected that when using these energy-efficient ACs, consumers will save around ₹ 12,000 per annum on their electricity bills. This implies that by replacing a typical 1.5 tonne 5-star AC with EESL’s super-efficient one, you can achieve almost a 35 per cent reduction in your energy bills.
The 5-star ACs manufactured and sold through existing distribution channels have a 3.5 Energy Efficient Ratio (EER), while EESL’s super-efficient ACs have a minimum Indian Standard Energy Efficiency Ratio (ISEER) of 5.2.
The scheme has been designed in a way that it maximises energy efficiency and minimises cost. There are no subsidies in EESL’s schemes. The low cost is due to market aggregation, efficient procurement methodologies and low procurement costs, resulting in financially viable solutions. The government has ensured transparency and encouraged competition through e-procurement of goods and services. This has resulted in significant reduction in transaction costs and time, and enhanced process efficiency. This, in turn, has led to higher participation of bidders, thereby increasing competition and reducing the procurement cost.
Why we need super-efficient ACs
The country’s air conditioner market is projected to grow at a CAGR of over 10 per cent during the period 2015-20 and so, electricity demand is likely to increase from 1115 billion units in 2015–16 to 1692 billion units in 2022, 2509 billion units in 2027, and 3175 billion units in 2030. The number of ACs sold in 2016 was 4.7 million. With the extremely hot summer experienced this year, the sales figure for 2017 is expected to touch 5 million units. As per a recent study by the International Energy Agency (IEA), the penetration of ACs in the world will rise from 5 per cent to 70 per cent in terms of consumers by 2040. The increasing demand for air conditioners thus poses a challenge to the electricity grids, which are already struggling to satisfy existing demand.
Super-efficient ACs have been designed to meet the challenge of the increasing electricity demand from ACs, while at the same time reducing greenhouse gas emissions.
How exactly does this policy work?
Under this particular policy, EESL offers to sell super-efficient ACs upfront, as well as via an annuity model, depending on the preference of the prospective buyer or institution. Investments made by EESL can be paid back by way of a fixed annuity (payable through EMI) over a period of three years. This annuity covers EESL’s capex, project management cost (PMC), and financing costs, as well as ensuring it a fixed return. In the first phase, the programme will be offered only to institutions and corporates.
Selection process of manufacturers and power utilities
The selection process starts with EESL’s invitation (tender) to the prospective manufacturers to submit a bid for the commercial production of super-efficient ACs. The offers or bids received against the tender are first evaluated as per the techno-commercial qualifying requirements listed in the tender, and also in accordance with the extant procurement policy of EESL. Price bids are opened only for those bidders who qualify against these techno-commercial requirements.
The supply, installation process and maintenance (by a skilled technician, trained and certified by the manufacturer) are handled by the supplier, including offering the warranty for the ACs, as per the technical specifications.
|3-star rated AC**||5-star rated AC**||ESEAP*|
|Annual energy use (kWh)||4081||3614||2433|
|Annual operating cost (₹)||32,646||28,915||19,462|
|Annual additional energy expenses incurred (₹)||13,184||9448||–|
(ESEAP*: EESL Super-Efficient AC Programme)
(**Current BEE table)
What are the key benefits for customers?
The ACs procured under this scheme are supposedly nearly 40 per cent more efficient than the 5-star rated ACs available in the Indian market and come with a three-year comprehensive warranty. Beyond this, customers also get a best-in-class installation kit, which is designed to further improve operating efficiency and increase the product’s life cycle.
The installation will be carried out by trained technicians of the manufacturers. EESL will also provide three annual maintenance visits, free of cost, to ensure continuous operation with high energy efficiency. This implies that the consumers will get an AC with a high design life and low ownership cost, compared to the options the market currently offers. They will not only save upto ₹ 12,000 annually but also reduce their electricity bills by 1600 kWh per air conditioner.
Bottlenecks and their solutions
Lack of awareness of energy-efficient projects and shortage of baseline data are some of the hurdles that the EESL is facing in implementing this policy. But the biggest challenge is financing energy-efficient projects. This is one of the key challenges faced by almost every energy service company (ESCO), in general, when implementing any energy-efficiency project. And EESL is no exception. The company thinks that the lack of interest from financial institutions to fund energy efficiency projects is a crucial barrier to the diffusion of the ESCO business model.
At the customer end, the high price of super-efficient products is one factor that is restricting them from making this shift. The prices of super-efficient ACs range between ₹ 60,000-65,000 in the open market, which explains the lower demand for this product. EESL plans to combat this situation by achieving cost reductions through bulk procurement, thereby increasing uptake.
As achieved in the case of EESL’s LED experiment, this time also, the PSUs are carrying out a comprehensive awareness campaign that will not only help in increasing the demand for energy-efficient products and services, but also help in overcoming the information asymmetry amongst stakeholders.
To make the super-efficient ACs programme as successful as the LED one, EESL is undertaking many of the same measures employed to increase LED adoption. But, replicating the LED experiment in the AC domain might not yield the desired result as the usage of ACs is much lower as compared to LED bulbs. Also, lower manufacturing costs and government support have extended the reach of LEDs to the rural areas. However, due to the relatively higher costs, the usage of ACs is largely confined to a particular section of society in India.
All said and done, this policy has the potential to generate some good investments and business opportunities for both private and state firms that are gravitating towards a low carbon economy.