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Impact of large-scale energy efficiency programs on utility finances and consumer tariffs in India

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  • Abhyankar, Nikit
  • Phadke, Amol

Abstract

The objective of this paper is to analyze the effect on utility finances and consumer tariffs of implementing utility-funded demand-side energy efficiency (EE) programs in India. We use the state of Delhi as a case study. We estimate that by 2015, the electric utilities in Delhi can potentially save nearly 14% of total sales. We examine the impacts on utility finances and consumer tariffs by developing scenarios that account for variations in the following factors: (a) incentive mechanisms for mitigating the financial risk of utilities, (b) whether utilities fund the EE programs only partially, (c) whether utilities sell the conserved electricity into spot markets and (d) the level of power shortages utilities are facing. We find that average consumer tariff would increase by 2.2% although consumers participating in EE programs benefit from reduction in their electricity consumption. While utility incentive mechanisms can mitigate utilities’ risk of losing long-run returns, they cannot address the risk of consistently negative cash flow. In case of power shortages, the cash flow risk is amplified (reaching up to 57% of utilities annual returns) and is very sensitive to marginal tariffs of consumers facing power shortages. We conclude by proposing solutions to mitigate utility risks.

Suggested Citation

  • Abhyankar, Nikit & Phadke, Amol, 2012. "Impact of large-scale energy efficiency programs on utility finances and consumer tariffs in India," Energy Policy, Elsevier, vol. 43(C), pages 308-326.
    • Handle: RePEc:eee:enepol:v:43:y:2012:i:c:p:308-326
    DOI: 10.1016/j.enpol.2012.01.008
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    References listed on IDEAS

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    1. Reddy, Amulya K. N., 1991. "Barriers to improvements in energy efficiency," Energy Policy, Elsevier, vol. 19(10), pages 953-961, December.
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    2. Sousa, José Luís & Martins, António Gomes & Jorge, Humberto, 2013. "Dealing with the paradox of energy efficiency promotion by electric utilities," Energy, Elsevier, vol. 57(C), pages 251-258.
    3. Mahlia, T.M.I. & Tohno, S. & Tezuka, T., 2013. "International experience on incentive program in support of fuel economy standards and labelling for motor vehicle: A comprehensive review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 25(C), pages 18-33.
    4. Venkatraman Indrajayanthan & Nalin Kant Mohanty & Rajvikram Madurai Elavarasan & Lucian Mihet-Popa, 2022. "Investigation on Current and Prospective Energy Transition Scenarios in Indian Landscape Using Integrated SWOT-MCDA Methodology," Sustainability, MDPI, vol. 14(9), pages 1-31, April.
    5. Garg, Amit & Shukla, P.R. & Maheshwari, Jyoti & Upadhyay, Jigeesha, 2014. "An assessment of household electricity load curves and corresponding CO2 marginal abatement cost curves for Gujarat state, India," Energy Policy, Elsevier, vol. 66(C), pages 568-584.
    6. Vieira, Abel S. & Beal, Cara D. & Ghisi, Enedir & Stewart, Rodney A., 2014. "Energy intensity of rainwater harvesting systems: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 34(C), pages 225-242.
    7. Sean Murphy & Natalie Mims Frick, 2023. "Estimating the Drivers of the Cost of Saved Electricity in Utility Customer-Funded Energy Efficiency Programs," Energies, MDPI, vol. 16(5), pages 1-15, February.

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