PROPOSAL FOR PDF BLOCK-B GRANT
1.
COUNTRY:
INDIA
2.
FOCAL AREA:
Climate Change
3.
OPERATIONAL PROGRAMME:
OP- 5; Removal of Barriers to Energy
Efficiency and Energy Conservation
Strategic Priority: CC-1
4.
PROJECT TITLE:
India: Energy Efficiency Market
Transformation Program for Refrigeration
Products (Refrigerators and Air-conditioners)
(PIMS no. 3084)
5.
TOTAL COST:
US $ 280,000
6.
PDF REQUEST:
US $ 160,000
7.
COUNTERPART CONTRIBUTION:
US$ 25,000 in cash and US $ 95,000 in kind
(Bureau of Energy Efficiency, Government of
India)
8.
REQUESTING AGENCY:
UNDP, India
9.
EXECUTING AGENCY:
Bureau of Energy Efficiency (BEE), Ministry
of Power, Government of India
10.
DURATION:
Twelve months, Estimated start date 1st June
2004
1.
Project Objectives
The overall goal of the Indian Energy Efficiency Market Transformation Program in Refrigeration
Sector1 is the reduction of climate change by reducing GHG emissions from inefficient end uses
of energy by cold appliances.
The objective of the project is to achieve widespread commercialization of energy efficient
consumer refrigeration products by removing key market barriers to their production sale and use.
A detailed program of standards and labels will be used to transform the market so that
appliances sold in India remain on a par with those in the rest of the world. The rapidly growing
appliance stock should continue to improve in efficiency in keeping with trends in the rest of the
world. The interventions are proposed as part of the third thrust area of the Bureau of Energy
Efficiency. These interventions are further integrated into the proposed Action Plan of BEE for
2004-2007.
2.
Global Significance
With strong and sustained economic growth, India has now become one of the world's top
energy-consuming nations.. While per capita consumption of energy is currently much lower than
that of the U.S., India's total energy budget is expected to increase dramatically. Over the next
twenty years the Indian economy is forecasted to grow at an annual average rate of over 6%.
Without further efforts to promote energy efficiency, India will soon be amongst the largest
1
Refrigeration Products include both Domestic Refrigerators and Air-conditioners for the purpose of this
proposal
energy-consuming nations in the world. Increased energy consumption will lead to more
greenhouse gas emissions having serious impact on the global environment.
Indian energy sector has undergone transition during the last three decades, with major emphasis
on the capacity addition. At present the installed capacity in India is 100,000 MW, which is
primarily state owned. The per capita consumption of electricity in India has increased from 15.6
kWh in 1950 to 348.5 kWh in 1997-98 (17). As per 1991 census, 100% of towns and 86.4% of
villages in India have been electrified. Currently, the power sector is experiencing an energy
deficiency of 8 % and a peaking shortage of 12 %. In the Planning Commission report published
in the year 2001, the capacity addition target is set to be 100,000 MW during the period 2001 to
2012. To attain this target of adding to the installed capacity by 2012 and to meet the ninth plan
requirement, investment to the tune of USD143 billion is estimated over the next ten years.
The economic development of a country is often closely linked to its consumption of energy.
Although India ranks sixth in the world so far as total energy consumption is concerned, it still
needs much more energy to keep pace with its development objectives. India’s rapid economic
growth would necessitate commensurate growth in the requirement of commercial energy, most
of which is expected to be from fossil fuels and electricity. India’s proven coal reserves may last
for more than 200 years, but the limited known oil and natural gas reserves may last only 18 and
26 years respectively, which is a cause of concern. The continued trend of increasing share of
petroleum fuels in the consumption of commercial energy will lead to more dependence on
imports and energy insecurity.
India’s energy intensity per unit of GDP is higher compared to Japan, U.S.A and Asia as a whole
by 3.7, 1.55, and 1.47 times respectively. This indicates inefficient use of energy but also
substantial scope of energy savings. The increasing global trade liberalization and growing global
competition have made productivity improvement, including energy cost reduction, an important
benchmark for economic success.
2.1.
GHG reduction
As a signatory to the Framework Convention on Climate Change that was adopted at Rio by the
international community, India needs to pursue environmentally sound energy development.
Since fossil fuel use contributes the largest share of GHG emissions in the atmosphere, efficient
production and use of energy can reduce emissions and put India on a low energy intensive
growth path, and thus benefit the environment most in the long term. Equally of concern are the
health effects associated with fossil fuel use, and soil and water pollution due to coal based
power plants. Thus, one of the best ways to improve quality of life and reduce environmental
damage is also by increasing energy efficiency
2.1.1.
Energy growth - India’s contribution to GHG emissions (Energy mix)
India's energy consumption is increasing and it is likely to grow for quite some time as efforts to
provide better living standards to her population are made. During the last decade, India's energy
consumption more than doubled.. . India is still a net importer of energy and in 1997-98 nearly
22% of energy supply was through imports (coking coal, crude oil and petroleum products). Also
on a per-capita basis Indian coal resources are way below the world average.
Coal continues to head the list of energy sources in India contributing over 60% to energy
supply.. The overuse of coal translates to high levels of CO2 missions and resultant impact on
global warming (climate disruptions).
Table 1 Mix of fuel source for electricity generation in India (%)
Electricity Source
Coal based
Natural gas based
Hydro and other renewables
Nuclear power
Diesel based
Total
2.2.
1990
60.2
3.6
29.1
2.8
1.0
100.0
2000
62.0
14.7
21.0
2.0
0.3
100.0
2010
51.3
22.6
25.1
1.0
0.0
100.0
2020
44.3
31.7
23.7
0.3
0.0
100.0
Impacts of current use of India’s energy consumption
The need for using energy efficient technologies is thus important both from the aspect of energy
conservation and mitigation of the global warming phenomenon (through decreased use of
energy ). The vast scale of India’s projected future GHG emissions and the predominance of coal
in its energy mix, both point to the clearly global significance of removing barriers to energy
efficiency in India.
2.3.
India’s exports potential and base for multinational – regional
significance –the only manufacturer of refrigerators and air
conditioners in the region
India is emerging as a manufacturing base for many multinational companies. Products made in
India are increasingly being exported to other countries. India is also the only major manufacturer
of refrigerators and air conditioners in the South Asian 2 region. There is a growing regional
harmonization program3 in this sector, and as with standards and labeling program, any changes
made in this sector in India, will be followed quickly by other countries in the region. The impact of
the GEF program will expand to these countries because of the close network of energy
efficiency programs.
Often, the efficiency of products being sold in India is significantly lower that those of products
being exported from India by the same manufacturer. There are several reasons for this
difference, some of the important once being;

No mandatory requirement for minimum energy performance

Consumers have no way of differentiating between energy efficient and non energy
efficient products

Lack of consumer demand for energy efficient product

Price sensitivity of the consumer and lack of life cycle cost information

Poor power quality in many parts of the country, making design of energy efficient
product more difficult, and the product more expensive compared to other countries.
The energy efficiency standards and labeling program is addressing a number of these issues,
and the proposed GEF project will be designed to tackle the others. An integrated approach is
required to overcome these barriers to energy efficient products being manufactures and sold in
the country.
2
South Asian Region includes India, Sri Lanka, Bangladesh, Nepal, Bhutan, and Maldives
3
South Asian Regional Initiative (SARI) – Energy program, funded by USAID
3.
Background
A paradigm shift in the approach to energy policy issues is needed – a shift from a supply
dominated approach to an integrated approach incorporating a judicial mix of investment in
supply side capacity, operational efficiency improvement of existing power generating stations,
reduction of losses in transmission and distribution, end-use efficiency and renewable
technologies. The policy goals and concepts will have to be shifted from “energy conservation” to
“energy efficiency”, and from “energy inputs” to the “effectiveness of energy use” and “energy
services”.
3.1.
Evolution of EE
Like many other countries around the world, the oil crisis in the 70s triggered an interest in energy
efficiency, and the Indian Government launched number of energy efficiency programs. Over the
years though, these programs have not been able to keep pace with the rising demand for energy
and energy consuming products. The pace of capacity addition in the power production has been
slow resulting in poor and erratic power supply and rising electricity prices. The demand for
electricity in the domestic market is growing rapidly, fueled by increased standards of living for the
vast middle class in India. Recognizing the need for reforms in the power sector, the Government
of India has launched a number of programs and made some policy initiatives in the last few
years. Some of the significant policy reforms are discussed in the following sections.
3.2.
Reforms
3.2.1.
Energy Conservation Act 2001
The Government of India (GOI) passed the Energy Conservation Bill in 2001. This bill was
passed in the lower house of the Indian parliament (Lok Sabha) on August 17, 2001 and then in
the upper house (Rajya Sabha) on August 24, 2001. On September 27, 2001, the President of
India passed an order, which was followed by Gazette Notification (in the form of the “Energy
Conservation Act 2001”) on October 1, 2001. Through the enactment of Energy Conservation Act
2001 (EC Act 2001), a positive environment is created by India to promote energy efficiency.
To put the proposed actions in perspective, the important features of the Act are presented
below:

Improvement in the energy efficiency of equipment and appliances through standards
and labeling (this part of the law is explained in greater detail in further sections)

Establishing energy consumption norms and standards for designated consumers, mainly
energy intensive industries and other establishments.

Enforcement of mandatory energy audits through accredited
designated consumers,

Institutionalization of energy managers in the designated consumers to ensure
management organization structure.

Preparation of energy conservation building codes to suit the regional and local climatic
conditions
energy auditors in the
energy
The Ministry of Power (MOP) has the primary responsibility of programs and policies as notified
implementing reforms in power sector under EC Act 2001. MOP with the help of Central- and
State-level departments controls the electricity generation, transmission, and distribution network.
MOP has the overall responsibility of implementing the programs notified under the EC Act 2001.
the Bureau of Energy Efficiency (BEE) was established effective 1st March 2002under the EC
Act. BEE works under the Ministry of Power, with a mandate to address issues related to energy
efficiency improvement. BEE has the mandate to implement the Standards and Labelling
program in India. It is getting initial financial support from MOP through the central energy
conservation fund. The MoP has earmarked a sum of INR4 500 million ($10 million) for energy
conservation broadly. BEE is also getting technical support from a number of international donors
3.3.
Electricity Act 2003
The Electricity Act provides the policy framework to protect consumers' interest and encourage
good governance through an efficient regulatory mechanism. This has to be backed up by
creating awareness that as electricity generation depletes public resources, it should be
produced, transmitted and distributed at maximum efficiency and at least cost to the consumers.
This also means that the utilities should improve delivery efficiency, billing and revenue collection,
and the public should cooperate in curbing misuse, pilferage and wasteful consumption.
The Act opens up opportunities for entrepreneurs to enter into electricity distribution particularly in
rural areas, where the demand-supply gap is very wide. The options for rural electrification is
vastly increased through distributed generation technologies, which implies that appropriate
renewable technologies could be harnessed to generate power at several smaller sites rather
than at few large power plants
3.4.
Role of BEE - BEE Action Plan
The mission of Bureau of Energy Efficiency (BEE) is to institutionalize energy efficiency services,
promote energy efficiency delivery mechanisms, and provide leadership to improvement of
energy efficiency in all sector of the economy.
The primary objective of BEE is to reduce energy intensity in the Indian economy. The broad
objectives are:
 to assume leadership and provide policy framework and direction to national energy
efficiency and conservation efforts and programmes,
 to coordinate policies and programmes on efficient use of energy and its conservation
with the involvement of stakeholders,
 to establish systems and procedures to measure, monitor and verify energy efficiency
results in individual sectors as well as at national level,
 to leverage multi-lateral, bi-lateral and private sector support in implementation of the
Energy Conservation Act and programmes for efficient use of and its conservation,
 to demonstrate energy efficiency delivery mechanisms, as envisaged in the energy
conservation Act, through private- public partnerships,
 to plan, manage and implement energy conservation programmes as envisaged in the
Energy Conservation Act.
3.5.
Ongoing EE initiatives
Currently, a number of energy efficiency programs are operational in the country. Some of the
programs are supported by international bilateral or multilateral programs or by the international
banks. A summary of the current programs is shown in Appendix A.
3.6.
Current market conditions (Why refrigerators and ACs?)
The energy consumption as well as peak demand savings potential from refrigerator and airconditioners is very high. Several studies have been conducted to assess the potential of
4
Indian Rupees
electricity savings in equipment and appliances selected by the BEE. The table below presents
the available data for energy efficiency potential in India5:
Appliance / Equipment
Refrigerators
Air-conditioners
Motors
Technical Potential (GWh/yr)
9,000.0
1,700.0
13,200.0
Initial estimates for India show a cumulative reduction in green house gas emissions of 4.03
Million Metric Tons of CO2 for air-conditioners6 and 3.71 Million Metric Tons of CO2 for
refrigerators over a timeframe of ten years (2002 to 2012). These figures correspond to a
cumulative reduction in energy use by 3450 GWh and 3180 GWh for air-conditioners and
refrigerators respectively over this period 7.
Figure 1 – Preliminary refrigerator GHG reduction and market growth projections
The sales projection for refrigerators and air-conditioners show a sustained growth of about 10%
every year for the next 8-10 years. India has a very low saturation rate for these products. The
5
USAID – ECO Project
GHG Emissions Reduction Estimation – Indian Standards and Labeling Program, CLASP, 2003
Note on important factors in projection calculations:

In the first two years, 25 % of the new sales are expected to move to higher efficiency*

Between year 3 and 5, 50 % of the new sales are expected to move to higher efficiency*

Year 6 onwards, entire sales are expected to move to higher efficiency

Between year 2002 and 2012, sales will grow by 6 % annually

Average rating is 165 liters, single-door, automatic defrost units and current maximum electricity
consumption is 1.7 kWh/day; and baseline scenario assumes a reduction by 15 %
* This assumption is based on the fact that for the first 5 years, the Standards program will be voluntary in
nature and the market uptake will be largely demand-driven.
1.
7
following figures show the current market size and growth rate of refrigerators and airconditioners in the country.
Nos. (in mn)
----- Growth Rate (%)
9
8
7.7
7
0.1
6
0.094
5
4.79
4
3
0.077
2
1
0
4.36
0.097
1.24
1.13
1.26
1.39
1.64
1.96
1.93
2.18
2.43
2.62
2.83
3.06
3.34
3.64
3.96
1990- 1991- 1992- 1993- 1994- 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 2005- 2006- 201191
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
12
Figure 2 – Sales projection for refrigerators8
Nos. (in '000s)
----- Growth Rate (%)
2500
2000
2000
10
1500
11.6
1000
12.9
500
150
100 120
200 240
330
390 385
495
560
715
800
900
1005
19
90
-9
1
19
91
-9
2
19
92
-9
3
19
93
-9
4
19
94
-9
5
19
95
-9
6
19
96
-9
7
19
97
-9
8
19
98
-9
9
19
99
-0
0
20
00
-0
1
20
01
-0
2
20
02
-0
3
20
03
-0
4
20
04
-0
5
20
05
-0
6
20
06
-0
7
20
11
-1
2
0
25.5
635
1240
1115
Figure 3 – Sales projection for air-conditioners9
The penetration rate of refrigerators and air conditioners is very low. Most of the energyconsuming products that will account for building energy use 20 years from now have not yet
been built. The penetration rate of household refrigerators in India, the fifth largest consumer
8 Source
: Intecos – CIER 2001-02
9 Source : Intecos – CIER 2001-02
durable in terms of penetration, is 13% compared to well over 90% in Malaysia, Australia,
Singapore, Hong Kong and Korea; around 80% in Thailand; close to 40% in Philippines and
China, and 20% in Vietnam and Indonesia. The penetration rate for household air-conditioners is
about 1% compared to 20% in Indonesia, 24% in China, 40% in Thailand, and 45% in Malaysia.10
Figure 4 – Most energy consuming products in 2020 are not yet built
Based on the penetration rate of these products, any change in energy efficiency of these
appliances will have a significant impact on the energy use in the future. Although most
households in India do not yet have major appliances (with refrigerators having the greatest
penetration at less than one-third of urban households), several factors suggest that increased
buying of energy efficient appliances could both decrease demand on the electricity supply and
meet consumer needs. Several factors suggest opportunities in the Indian appliance market for
increased energy efficiency:
1. Even with relatively low penetration rates, the appliance market is large; for instance, over 11
million urban households own refrigerators.
2. Over the past decade, the number of appliances is large and growing (e.g., refrigerator
penetration grew from 23% of urban households in 1997 to 28% in 1999).
3. Many appliances available to consumers are not likely to be energy efficient, and many
appliances are assembled and have no brand names. In addition, no efficiency standards
are in place for either unbranded or branded appliances.
4. Consumers want ways to identify and buy high quality, reliable appliances and associate an
energy efficient product with a quality product.
5. Consumers would like to save money by using energy efficient products.
6. Consumers would like fewer electricity outages and better power quality.
As a whole, India faces electricity shortages, and consumers are often well aware of the
inadequate power supply. Shortages are covered in the media and many consumers experience
power outages and low power quality on a regular basis. Research with Indian consumers shows
they have little experience with the concept of energy efficiency and currently have no way to
determine if an appliance is energy efficient or not. India is currently implementing appliance
efficiency labeling programs to encourage consumers to buy more efficient appliances. These
Source: Extracts from speech by President, Refrigeration and Air-conditioning Manufacturers’ Association
(RAMA) India, 2003
10
programs inform consumers about appliance efficiency, help them compare efficiency among
appliance models through a grading system, and motivate them to choose high efficiency
appliances.
4.
Project Design (Market Transformation)
4.1.
Current scenario
The Bureau of Energy Efficiency has been constituted to address many of these issues, and is
adopting a market-based approach with active participation of the private sector. This is a novel
approach for a Government organization in this sector, and significant resource and
implementation support is needed to successfully achieve the objective of mainstreaming energy
efficiency.
The key barriers to widespread commercialization of energy efficient appliances in India are:

Awareness about energy efficiency in general is very low amongst most consumers

Lack of awareness of the life cycle economic benefits of high-efficiency products

Manufacturer uncertainty about market demand of high efficiency models

Dealer reluctance to stock or promote energy efficient models
The manufacturers will need to spend on additional R&D, increased product cost, and will see
very little change in the purchasing preferences of the consumer. Even if fiscal or financial
incentive is give to the manufacturer for meeting the efficiency standard, it will be a one-shot
effort, and the industry will need to be given more incentive for every change in the standard.
Although this is a cost-effective measure and can have very reliable results, this is essentially a
one shot effort and the impact is usually restricted to the short term.
4.2.
Scenario without GEF intervention
The capacity of many of the government institutions is limited to working on just the regulatory
approach.
The conventional approach for implementing the energy efficiency program in the Refrigeration
product sector would be limited to the literal enforcement of the EC Act, entailing following
activities.
i. Launch of Energy Efficiency labeling: Government will try to launch the labels and MEPS in
a phased manner, but a slow uptake of EE products would be expected. It is likely that the
standards will be all-inclusive, that is, designed to allow all current products in the market to
meet the energy efficiency standards. The role of bilateral and multilateral agencies like the
Collaborative Labeling and Appliance Standards Program (CLASP) in this case ends once the
labels are designed and all the necessary rules and regulations are drafted. This is insufficient
for the stimulation of a market-transformation process.
Consumer demand for EE products may not go up significantly, providing the industry with no
incentive to produce and sell more EE products.
ii. Government will promote the labels: The promotion activity will be done in a limited way,
with little market (industry, consumers, and other non-government institutions) participation.
This will be compounded by low allocation of resources, and little or no expertise in marketing
and outreach. Govt. mass procurements will not take place but it will have to be strengthened
with private sector experience in procurement.
iii. Enforcement of the MEPS: In absence of comprehensive market transformation effort, the
switchover to energy efficiency refrigeration sector will continue at a slow or non-existent pace.
Thus, manufacturers will continue to use existing designs without making any efforts to improve
the energy-efficiency beyond the minimum requirement. Reductions in CO2 emissions (through
constantly evolving and improved efficiency) won’t be achieved and consumers will continue to
pay for the high electricity consumption of existing models. The energy scenario of this country
(wherein demand outstrips supply) will in no way improve.
BEE is set to overcome the existing barriers, but its budget, human resource capacity, and
technical knowledge and skills are limited. Without the support from GEF, it is unlikely that it will
proceed.
4.3.
Alternate Approaches for Energy Efficiency Program
Implementation
The proposed project builds on the experience of programs implemented previously. A closer
look at those programs reveal three distinct approaches. A regulatory approach, industry
incentive based programs, and market based programs. While all these approaches have been
tested in India in individual programs separately, there are few examples of programs adopting an
integrated approach. Most EE programs were designed in response to immediate needs, as a
knee jerk reaction, without pre-testing, considerations of scalability, and access to EE solutions
proposed by the programs. Linkages between policy and market were missing. Several program
evaluations and studies indicate that there is a need for an integrated approach for a successful
EE program.
4.3.1.
Regulatory policy approach (Mandatory Measures Only)
The regulatory approach is the typical Government approach for implementing programs, wherein
mandates are issued for the industry or the consumers. There are few supporting activities, and
the programs usually have limited success. Although strong policy and regulatory action is
essential for a successful program, this has to be supplemented by market driven programs and
other supporting activities. The current standards and labeling program has the policy support of
the Energy Conservation Act. The Act has provisions for mandatory energy efficiency standards
and labeling for a number of products, but this alone will not be enough to bring about the desired
change.
4.3.2.
Industry incentive approach (Fiscal and financial Incentives)
Another approach, used often, is to provide fiscal and financial incentives to the industry for
upgrading, retooling, in order to meet a given target. The CFC phase out program under the
Montreal Protocol is a good example of this approach. This approach works well for issues
requiring a one-time solution. Energy efficiency programs require constant up gradation of
products at frequent intervals, and if the consumer demand for more efficient products does not
increase, then the fiscal/financial support has to be provided for every such upgrade. This is
unsustainable in the long run and the industry does not have any incentive to work on improving
the efficiency of the products.
Competition is necessary for innovations, and this approach alone does not induce research and
development in the industry as ready-made solutions are made available –a ready market
provided monopolizes the market and provides more lobbying power to industry.
4.3.3.
Market based approach (Creating market pull through consumer
demand, information dissemination, capacity building, etc)
Market pull based programs have the most cost effective impact in the long term. Studies in the
US show that energy-efficiency standards and labeling in the residential sector result in
cumulative present-valued dollar net savings of about $33 to $49 billion from 1990 to 2010, after
subtracting the additional cost of the more efficient equipment. The result in 2010 is a 5.1% to
6.1% reduction in residential energy use. Average cost-benefit ratios for these standards are
estimated to be about 3.5 to 4.4 for the U.S. as a whole.
Market based programs empower consumers to make informed choices about the products they
buy and to manage their energy bills. They tend to shift the distribution of energy-efficient models
upward by providing information that assists consumers in making rational decisions and
stimulating manufacturers to design products that achieve higher rating levels. The following
figure, for example, shows the dramatic improvement in the market share of energy efficient
refrigerators and freezers after the introduction of the labeling program in Germany.
Figure 5 Impact of labeling on market share of refrigerators and freezers in Germany.
The market based approach is the most resource intensive, and needs sustained effort in order to
have a significant impact. The labeling program for refrigeration projects has initiated the process
of creating the market pull, and comprehensive consumer awareness and industry support
programs are required to complement the effort.
4.4.
Integrated Market Transformation Approach
An integrated approach is being proposed which will involve all stakeholders and is a market
transformation process, which is a combination of all the three approaches, discussed in the
previous section. In this alternative scenario a long-term market demand will be for efficient
products would be created, and air conditioner, refrigerator, and component manufacturers will
respond by investing in the production of energy-efficient refrigerators. Energy labels, incentive
schemes and evaluation criteria (like life cycle cost assessment) would be promoted widely,
which would influence both supply and demand for energy-efficient equipment. This would mean
savings on electricity costs for consumers and reduced demand on the country’s energy
resources. The project will necessarily entail mitigation of the global warming phenomenon
through significantly reduced emissions of CO2 from power.
Looking at the US example of combining mandatory standards along with market based labeling
programs show that the total $2 per household federal expenditure for implementing the
standards and labeling program is estimated to induce investment in energy-saving features of
$130 to $140 per household. This would result in $450 to $620 gross savings per household in
fuel costs, and contribute $320 to $480 of net-present-value savings per household to the US
economy during the period 1990 to 2010.
The effectiveness of policy initiatives like labeling can be further extended by consumer
awareness program. Recent experience in Thailand has shown the potential for appliance energy
labeling programs to affect manufacturer production decisions. Thailand is one of the few Asian
countries to have implemented a successful nation-wide energy labeling program for household
appliances. The Electricity Generating Authority of Thailand (EGAT), the state-owned generating
utility, implemented labeling programs as part of its national demand-side management (DSM)
plan. The voluntary labeling of refrigerators and air conditioners started in 1995 and 1996,
respectively.
After six years of DSM implementation, EGAT commissioned an independent study to evaluate
the impact of its DSM programs in 1999. The results show that the Thai labeling programs are a
successful example of energy labeling effort in a developing country. The study confirms that
consumers are not especially active consumers of energy efficiency, they have to be exposed to
the benefits of energy efficiency, but there is little information and the available information is not
very relevant or is not easy to understand inmost cases. Policymakers rely on own experience or
anecdotal data, and there is an inconsistency between belief and policy. Whereas the US
program was informational in nature and had a cognitive goal, the Thai program was promotional
and had a behavioral goal. The lessons learned from Thailand can provide useful guidance to
policymakers in both developing and industrialized countries that are pursuing or revamping
energy labeling programs11. A summary of the study with program details and impacts is given in
the Table below.
Table 2: Impact of consumer awareness on appliance Energy Efficiency programs 12
United States
Thailand
Program Details
 Appliance energy labeling since 1980
 2 National energy efficiency programs
 Appliance energy labels since 1995
 Minimum efficiency standards
 No minimum efficiency standards
 No promotion
 Supported by massive consumer
awareness campaign
Impact on Consumers
 Energy efficiency NOT salient: 20% of
 Energy efficiency salient: 62% of
customers look at label
customers look at labels
 Efficiency low priority (<10% rank in top 3)  Efficiency 2nd priority (49% rank in top 3)
 Efficiency a selling point for 54%
 Efficiency a selling point for 80%
 Customers use efficiency as a tie breaker
 Customers use efficiency as a screening tool
 High consumer awareness but low
 Highly effective labels with high consumer
comprehension of labels
awareness
 Used by manufacturers as a marketing tool
11
How Energy Labeling affected Production Decisions of Appliance Manufacturers in Thailand, Paper by:
Na Phuket, S. R.; Prijyanonda, C, IIEC, September 2000
12
Evaluation of Labels, Presentation by Dr. Peter du Pont, IIEC, December 1998
4.5.
Key components of the proposed initiative
Figure 6: The purchase environment for EE products13
The proposed market transformation process will work at every level of the purchase environment
for refrigerators and air-conditioners in India, the extent of which is shown in the figure above.
4.5.1.
Full Project (main concepts)
The project is expected to have the following outcomes:

Standards and labels for cold appliances are agreed upon, utilized, and have the net
effect of maximizing the economically justifiable efficiency of electricity use of new
appliances produced and sold in India;

The demand from consumers, dealers and institutional buyers for energy-efficient
appliances is increased dramatically;

Industry adopts the standards; alters their production lines accordingly; and
adequately labels their product;

Labels and standards serve as the basis to implement various incentive schemes to
both pull and push the market;

Long-run energy savings for the consumers, in particular, and the economy, in
general, and reduction in GHG emissions result.
These will have a combined effect on consumers and manufacturers in their decision making to
transform the market to higher efficiency technology and products.
Consumer research has established that the retailer has the most influence in making a purchase
decision; the proposed program will include all stakeholders including the retailers. The existing
marketing and lobbying power of the industry will make it difficult for BEE to reach across the
supply chain and other stakeholders in an effective way.
The expected GEF contribution will be in the order of US $ 3-6 million on a total project size
estimated at US $ 15-24 million.
13
Evaluation of Labels, Presentation by Dr. Peter du Pont, IIEC, December 1998
4.5.2.
Full Project activities, outputs, and outcomes
The activities under this objective are intended to support large-scale uptake of energy-efficient
refrigeration products in India. It will educate consumers and provide them with information that
will make them both aware of the advantages of energy-efficient refrigeration products. The
program will support capacity building of the BEE, and develop institutional structure to sustain
energy efficiency programs in this sector even after the externally funded projects end. The
program will also develop fiscal, financial, and other incentives for the industry, manufacturers,
and retailers to support the energy efficiency objectives. The full project will focus on the following
activities:
1. Institutional capacity buildings (Govt., BEE, regulators, independent organizations):
Provide support to build an institutional framework and capacity to implement the
program in a sustained manner. This will also support development of incentives for the
industry to implement the market transformation activities.
2. Capacity building of the industry, financial institutions, consumers, retailer and
industry associations: Different sectors have varying levels of financial needs and
priorities with respect to the implementation of energy efficient standards in this sector.
a. Initiate a dialogue between manufacturers, financial institutions, consumer
organizations, and other stakeholders to develop comprehensive programs to
promote demand for energy efficient products.
b. Provide technical assistance for preparation of business plans and financing
proposals for upgrading designs and production technologies
3. Technological support for the industry on efficient product: The purpose of this
objective is to provide refrigerator manufacturers with the necessary technology and
training to design and produce high-efficiency refrigerators. These activities are designed
to overcome barriers dealing with manufacturer uncertainty about the cost-effectiveness
of high-efficiency models as well as the lack of expertise on the part of manufacturers to
produce these models. Some of the following activities have been proven to be effective
in supporting the industry:
a. Introduce refrigerator manufacturers to technology options available
internationally
b. Provide training in technology options and selection
c.
Provide technical assistance for upgrading designs and production technologies
4. Quality Control: This activity will involve two components. The first will focus on
establishing and maintaining a quality control system, according to internationally
accepted best practice. This may involve either working with a dedicated testing facility
or working with decentralized testing facilities run by industry or some combination of the
two.
5. Design of an Iterative Process to Keep S&L Updates: This activity will focus on the
design and implementation of a framework for the adoption of a dynamic process of
adoption, monitoring, review and revision of Standards and Labels in India. This step is
essential to the process of market transformation and ensuring that the latest
technological innovations are deployed. This process must include an evaluation of the
state of the art in other countries within the region as well as generally-accepted
international “best” practice around the world.
6. Consumer education and awareness: Some of the activities designed to overcome the
lack of consumer awareness and to promote evaluation of life cycle cost analysis for
more efficient refrigeration products are given below:
a. Disseminate through broadcast and print media material informing consumers of
the benefits of energy efficiency
b. Disseminate in-store points-of-sale materials allowing consumers to understand
the features, benefits, and savings of energy-efficient refrigerators and air
conditioners
c.
Public relations campaign to spread the core message of the benefits of energyefficient refrigerators and air conditioners
d. Training retail staff in communicating the benefits of energy-efficient refrigerators
e. Consumer attitude tracking survey.
7. Monitoring and Evaluation: The program will establish management capacity for the
project and to undertake ongoing monitoring and evaluation of project results during the
project period.
4.5.3.
Justification for GEF support
Experience of market-based programs in other countries has shown that significant changes can
be brought in the market with coordinated efforts involving both the government and the private
sectors. GEF has supported similar programs in other countries/regions with very positive results.
India being a signatory to the Montreal Protocol has carried out CFC phase out in the refrigerator
industry. The multilateral fund provides substantial financial and technological assistance to the
industries consuming ODS. In addition, the overall impact has been limited due to lag in
corresponding infrastructural change required to support technological turnaround. Besides ODS
phase out does not cover energy efficiency aspects per se.
GEF supported efforts in transforming the lighting market with ELI have been successful. Similar
efforts for CFC phase out and energy efficiency improvements for refrigerators in China have
produced impressive, yet not completely documented, results. The Indian consumer appliance
market is poised to expand rapidly: interventions at this stage provide a cost-effective opportunity
to maximize impact. BEE has been authorized to work on energy efficient standards and labels,
but to date, has accomplished relatively little. BEE has initiated several complementary activities
for increased energy efficiency in the industrial and building sectors. The current approach being
taken for energy efficiency program implementation has the following drawbacks:

Slow progress of adoption of standards (8-10 years update cycle);

The standards are liable to be all-inclusive, not driving toward greater efficiency;

The energy efficiency impact of labels is significantly lower than technically feasible
and economically justified;

Minimal consumer participation;

Indifferent industry response (experience with BIS standards) due to low market
demand for EE;

Slow technological upgrade/innovation taking place; and

No institutional linkages between consumers, manufacturers, and financiers.
With support from GEF all of the drawbacks above can be effectively managed by incremental
GEF activities. GEF support for this PDF will enable BEE to make detailed market assessment
studies and feasibility analysis, and will also help in preparing the application for the full-scale
GEF proposal. GEF support will catalyze the project development effort, and ensure timely
implementation of the program. In addition, GEF support will ensure that the approach adopted
ties in with the latest accepted international “best” practice.
Consumer awareness is a critical part of the overall energy efficiency program in India, but it
lacks coordinated effort and sufficient funding to make this effort fruitful. There are several
programs being coordinated by different agencies that have failed to have a significant impact.
The PDF funding will support BEE in establishing the scope of the consumer awareness
campaign for effective market transformation, determining the incremental cost based on the
scope of the project, arranging co-financing, and seeking implementation commitment from
project partners and stakeholders.
Replication Potential: Not only will this project have a dramatic impact upon the efficiency of
energy use in India, but it should also help improve the efficiency of energy use throughout south
Asia and the surrounding regions. As the Indian manufacturers export appliances to many
neighboring countries in South Asia, and exports to other countries globally are witnessing rapid
growth. Increased energy efficiency of Indian products will have an impact on these other markets
as well. Following the Indian example, other countries, especially those in South Asia, will follow
with higher energy efficiency standards, and consumer awareness programs. These programs
have already been initiated under the South Asian Regional Initiative on Energy.
5.
Implementation arrangements
The Bureau of Energy Efficiency under the Ministry of Power will take overall responsibility for the
execution and implementation of the project as per the UNDP guidelines, and the achievement of
its objectives. The proposed Organization structure of BEE is attached as Annexure (Section
12.4) A Steering Committee will be constituted by the Bureau of Energy Efficiency after its due
approval from the Ministry of Power to oversee the execution of the project. The steering
committee will be comprised of representatives from the MOP (Steering Committee Chair), BEE,
cross-sectoral ministries including the, Ministry of Environment and Forests, State Departments of
Power, public/private sector organizations, NGOs, prominent experts, and UNDP. The Steering
Committee will act as the coordinating mechanism for the preparation and finalization of the
project brief and full document, and as such will provide the necessary guidance and oversight to
the project implementation. Individual experts will be invited to provide inputs as appropriate to
specific meetings. The Steering Committee will facilitate cross-sectoral involvement from the
ministerial to the private sector , review outputs, and ensure that the project strategies meet
national goals and objectives.
A National Project Director (NPD) who would be the Director General of BEE will be
responsible for the overall supervision of the project. The NPD will be responsible for the review,
monitoring and clearance of the work plan, which forms the basis for project execution. The
Steering Committee will establish a Selection Sub-Committee, which will finalise the selection of
the project team as per the TORs. Day-to-day co-ordination will be the responsibility of the
Project Manager, contracted through this project. To this end, the NPD will facilitate the close coordination among the various line ministries, state governments, nodal departments, private
sector and the participating institutions.
A Project Management Cell (PMC) will be set up in BEE to carry out day to day working
of the project. The PMC will be headed by a Project Manager who will be appointed by BEE for
carrying out the PDF phase. He will be assisted by the project staff comprising of two full time
technical and support staff. The Project Manager will maintain close interaction with the
institutions associated with the line ministries. He will also facilitate the work of the collaborating
institutions and consultants both at national and international levels such as CLASP as may be
necessary in the preparation of the project brief and full proposal. The Project Manager will
report to the NPD and the Steering Committee for policy directions, work plan and budget
approvals.
6.
PDF-B Activities
The following gaps in information exist, which need to be filled before appliance energy efficiency
improvement programs can be undertaken, and an effective energy efficiency consumer
awareness program can be launched. The activities proposed under this PDF – B proposal
address these issues.
1. Gather and Refine Data on Existing information on Current Market and Technology
Conditions: Information about market penetration of appliances, consumer behavior, buying
preferences, and the role of the retailer are critical for a successful consumer awareness
campaign. There is little information on segmentation of the appliance market based on
household income, education, and distribution in terms of rural, urban, and peri-urban areas.
Although a preliminary study is in progress, the scope of the study is limited, therefore a
comprehensive consumer research needs to be undertaken to fill this information gap. The
energy used by most common household appliances in use and production is often not tested
and therefore it is very difficult to establish a baseline for program design and for evaluating
the impact of the campaign.
a. Refinement of Baseline Energy Consumption Data
b. In-depth Gap Analysis
c.
Refinement of Barriers and Objectives Analyses
All relevant data collection channels will be explored (end use metering, laboratory testing,
market surveys, consumers surveys, load data, etc. additional data collection activities needed
will be included in the full project
.
2. Program Design: The refined baseline data, gap analysis results, and the finalized priority
listing of objectives and interventions will serve as key inputs in the design of the program
framework and the specification of the various program components. Based on a multi
stakeholder consultation involving not only government institutions but also manufacturers
and consumer representatives, the program components and detailed budgeting will be
prepared. This includes the design and testing of the consumer awareness campaign.
a. Design of Program Framework as per GEF requirements
b. GHG impact assessment (defining system boundary)
c.
Program Scheduling
d. Detailed Design of Program Components
3. Coordination Mechanisms and Other Institutional Support Activities: The program will
be developed to coordinate activities with government efforts and to involve other donors,
and stakeholders. It will involve the development of effective coordination mechanisms that
will enable consultation and cooperation between government agencies, institutions, financial
institutions as well as donors, the private sector, NGOs, and community groups.
a. Coordination Mechanisms for Implementation
b. Identification of Suitable Partners for Financing (Leveraging GEF resources)
4. Preparation of Program Brief: The program will be designed in detail as per the
requirements of a GEF Program Brief including the co financing from industry, government
and other donors.
7.
PDF Block-B Output
Activity
1. Evaluation of alternative approaches
2. Refinement of existing information
a. Refinement of Baseline Energy
Consumption Data
b. In-depth Gap Analysis
c.
3.
Refinement of Barriers and Objectives
Analyses
Program Design
a. Design of Program Framework as per
GEF requirements
b. Program Scheduling
c. Detailed Design of Program
Components, Including consumer
awareness campaign design
4.
5.
8.
Coordination Mechanisms and Other
Institutional Support Activities
a. Coordination Mechanisms for
Implementation (WB, BEE, CII, etc)
b. Identification of Suitable Partners for
Financing (Leveraging GEF resources)
Preparation of Program Brief
Output
Report with detailed evaluation of alternative
approaches and refinement of the proposed
program components
Baseline energy consumption data by sector
and sub-sector
Detailed quantitative and qualitative analysis
for GEF impact
Revised assessment of problems and
objectives
Program design, budget and schedule
Consultation on the above for the elaboration
of project strategy and components as well
as project partners
\Program Framework and detailed
components including proposed program
sub-programs and components
Final list of prioritized program objectives and
interventions
Costing of each component and indicative
activities
Concept for consumer awareness campaign
Institutional setup for program
implementation
Structure and mechanisms for effective
coordination, consultation, and cooperation
between stakeholders
Survey of banks/financing institutions and
listing of financial organizations
GEF proposal incorporating outputs of above
activities and corresponding co financing
letters.
Eligibility
India is Party to the United Nations Framework Convention on Climate Change (UNFCCC). India
signed this multilateral treaty on 10 June 1992, and was the 38th country to ratify the Convention
on 1 November 1993. As a developing country, which has ratified the convention, India is eligible
under the country eligibility criteria for the proposed project.
9.
National Level Support
The necessary support will be available from the BEE, Ministry of Power, CEA, and MOI, through
budgetary allocations. Additional funding as appropriate will be identified as a part of the PDF
activity in conjunction with determination of incremental cost.
This proposal is fully consistent with the national priorities of the Government of India towards the
promotion and adoption of energy efficient technologies. A major thrust of the project would be to
facilitate effective implementation energy efficiency goals. This project is also consistent with the
UNDP's priorities in promoting sustainable environment and energy and in mainstreaming global
environmental issues into national policy agenda.
A special committee consisting of representatives of BEE, UNDP, Standards and Labeling
Stakeholders, and other relevant agencies will be set up under the PDF B initiative to be
responsible for overall coordination and implementation of project objectives.
10.
Justification for PDF-B Funding
This PDF Grant is necessary to undertake activities to ensure that the final proposal is fully
consistent with the GEF Operational Strategy for climate change. The PDF phase will identify
fully the barriers; analyse how they can best be removed; undertake assessments of parameters,
which contribute to the achievement of targeted goals; obtain the involvement of the private
sector and government; and determine financial sustainability and consumer acceptance. It will
also ensure that a large number of stakeholders are consulted and included in the project and
their feedback is incorporated into the project’s design. The institutional arrangements for the
larger project will need to be clarified through the PDF work. In other words, the development of
the full project will be guided and determined by the outcome of those activities.
Given its promotion of self-sustaining practices, this project has the potential to significantly assist
the Government of India assist in reducing its emissions of GHGs on a replicable basis. The PDF
B activities would serve to develop a program that will substantially improve energy efficiency and
utilization in India through removal of relevant barriers. The broad scope and large scale of the
program, as well as the synergistic benefits of the program approach, should result in substantial
reduction in future GHG emissions from India as compared to business as usual.
11.
Schedule
Starting Date: 01 June 2004
Completion Date: 31 May 2005
11.1.
Budget
Budget (US $)
GoI
Activity
GEF
Total
(In Kind)
(In cash)
1. Evaluation of alternative approaches
20,000
4000
15,000
45,000
2. Refinement of existing information
30,000
4000
25,000
65,000
3. Program Design
20,000
7000
60,000
100,000
4. Coordination Mechanisms and Other
Institutional Support Activities
15,000
6000
40,000
70,000
5. Preparation of Program Brief
10,000
4000
20,000
40,000
Total
95,000
25,000
160,000
280,000
12.
Annexure
12.1.
BEE Background and Action Plan details
A Director-General heads Bureau of Energy Efficiency. The general superintendence, direction
and management of the affairs of BEE is vested in the Governing Council having up to 26
members. Minister of Power heads the Governing Council and it consists of Secretaries of
various line Ministries, heads of various technical agencies under the Ministries, members
representing industry, equipment and appliance manufacturers, architects, and consumers, and
members from each of the five power regions representing the states of the region. The DirectorGeneral of the Bureau is the ex-officio member-secretary of the Governing Council.
BEE will be initially supported by the Central Government through central energy conservation
fund. It will, however, become self-sufficient in a period of 5-7 years. It is authorized to collect
appropriate fees in discharge of functions assigned to it and raise funds from other sources.
The functions of BEE can be classified as Regulatory functions being the recommendatory body
to the Central Government in implementing the provisions of the Energy Conservation Act and
Facilitation, Market Development and Market Transformation Functions such as:

arrange and organize training of personnel and specialists in the techniques for efficient
use of energy and its conservation.

develop testing and certification procedures and promote testing facilities.

strengthen consultancy services.

create awareness and disseminate information.

promote research and development.

formulate and facilitate implementation of pilot projects and demonstration projects.

promote use of energy efficient processes, equipment, devices and systems.

take steps to encourage preferential treatment for use of energy efficient equipment or
appliances.

promote innovative financing of energy efficiency projects.

give financial assistance to institutions for promoting efficient use of energy and its
conservation.

prepare educational curriculum on efficient use of energy and its conservation.

implement international co-operation programs relating to efficient use of energy and its
conservation.
The Bureau of Energy Efficiency (BEE) has now come through its inception stage. It is now
defining specific, achievable, targets and milestones. Energy audits of key government buildings
have been completed and baselines have been prepared. Guidelines and certification procedures
have been formulated for energy managers and auditors. Systems and procedures are being
worked out for performance testing of appliances and equipment and financing schemes are
being devised to make energy efficiency a profitable option.
Table 3: BEE Thrust Areas
Thrust Area 1:
Indian Industry Program for Energy Conservation
Thrust Area 2:
Demand Site Management
Thrust Area 3:
Standards and Labeling Program
Thrust Area 4:
Energy Efficiency in Buildings and Establishments
Thrust Area 5:
Energy Conservation Building Codes
Thrust Area 6:
Professional Certification and Accreditation
Thrust Area 7:
Manuals and Codes
Thrust Area 8:
Energy Efficiency Policy Research Program
Thrust Area 9:
School Education
Thrust Area 10:
Delivery Mechanisms for Energy Efficiency Services
The BEE has set up the following objectives for the successful implementation of the S&L
program over the next five years:
1. Increased manufacturing of energy-efficient equipment and appliances;
2. Increased availability of energy efficiency information enabling consumers to consider
energy consumption at the time of purchase;
3. Reduction in energy consumption in equipment and appliances of common use
(refrigerators, air-conditioners, storage water heaters, motors, agriculture pump sets,
lighting products, industrial blowers, fans, and air compressors);
According to BEE estimates, the expected savings for all the nine of the top products are 11,689
million kWh/year, equivalent to 1,962 MW of avoided capacity during the next five years. 14
12.2.
Refrigerator and AC S&L Program details
12.3.
Refrigerator and AC GHG reduction potential analysis
Summary
The Collaborative Labeling and Appliance Standards Program (CLASP), under the funding from
the United States Environmental Protection Agency worked in India to estimate of greenhouse
gases (GHG) emissions reduction scenarios for two products – refrigerators and air-conditioners.
Emission reduction potential was evolved by studying the emission factors and by using the same
as the multipliers to the sales growth and energy efficiency improvement potential. Emission
factors were arrived at by considering the national and grid-based electricity generation mix, plant
vintages and energy intensities, and losses in transmission and distribution. MBase, a software
tool developed by the Lawrence Berkeley National Laboratory, under the US EPA assistance and
a spreadsheet tool developed by CLASP team for India were used at the analysis stage. Data on
the current sales and potential over the next ten years was collected from industry associations
and the manufacturers. As the process of standards setting is still evolving in India, CLASP team
highlights the barriers and opportunities to strengthen these estimates in future. Based on the
assessment under this task, CLASP estimates a cumulative reduction of 4.03 Million Metric Tons
of CO2 for air-conditioners and 3.71 Million Metric Tons of CO 2 for refrigerators over a timeframe
of ten years (2002 to 2012). These figures correspond to a cumulative approximate (ten years)
reduction of 3450 GWh and 3180 GWh for air-conditioners and refrigerators respectively.
14
From BEE Action Plan 2002 (this is approximately 20% of the technical potential)
As the next step, CLASP is conducting a detailed consumer survey. Data from the consumer
survey will be used to estimate the impact of replacement of old stock with the new stock. CLASP
team also intends to generate the energy intensity and fuel use data from individual power
producers across the country, which will be used to strengthen the grid-based emission factors in
the next project phase.
12.4.
Key players in the refrigerator and air-conditioner standards and
labeling program
Government of India (GOI)
The Government of India is fully committed to the goal of providing adequate power so as to meet
the objectives of economic development and improving the quality of life of its citizens. The
passing of EC Act 2001 and creating the necessary infrastructure for the implementation of
reforms in the power sector is an example of this.
Ministry of Power (MOP)
Overall responsibility for implementing
Energy Conservation Act 2001
Bureau of Energy Efficiency (BEE)
International Funding Agencies
IIEC - Collaborative Labeling &
Appliance Standards Program
(CLASP)
Thrust area of BEE’s Action Plan
In partnership with BEE
Standards & Labeling Program
Ministry of Power (MOP)
Ministry of Power (MOP) has the primary responsibility of implementing reforms in power sector
under EC Act 2001. MOP with the help of Central and State level departments controls the
electricity generation, transmission, and distribution network. MOP has the overall responsibility
of implementing the programs notified under the EC Act 2001. Standards and labeling are one of
the major thrust areas identified by MOP for implementation.
Bureau of Energy Efficiency (BEE)
Under the provisions of the EC Act 2001, The Bureau of Energy Efficiency (BEE) was established
effective 1st March 2002 by integrating the staff of Energy Management Centre (EMC). BEE
works under the Ministry of Power, with a mandate to address issues related to energy efficiency
improvement. BEE has the mandate to implement the S&L program in India. It is getting initial
financial support from MOP through the central energy conservation fund. The MoP has
earmarked a sum of INR 500 million as central energy conservation fund. BEE is also getting
technical support from a number of international donors.
Organisation Structure of Bureau of Energy Efficiency
1.
2.
DIRECTOR
GENERAL
PS
Director –
Director- Designated
Designated
Consumer Program
Agency Relation
Deputy Director – Designated
Director – EM /EA
Certification and Relation
Programme
PA
Director – Buildings &
Establishments and EC
Building Codes
Director – Standards
Director – Monitoring &
& Labeling
Evaluation, Policy
Program and Outreach
Deputy Director – Energy
Consumer and Agencies
Manager & Energy Auditor
Deputy Director –
Standards & Labelling
Secretary (Overall Charge of
Administration and Finance)
Finance
Officer
Accountants
(2)
Accounts
Assistants (2)
&
Accounts
Assistants
Admn (2)
–
Stenos (5)
Dispatcher
Caretaker
Peons (2)
Driver
Safai
Karmachari
The following organizations are involved in refrigerator and air conditioner standards and labeling
program in India:
12.4.1.
Manufacturers:
1. Godrej & Boyce Manufacturing Co. Ltd.
2. M/s Voltas Limited
3. Whirlpool of India Limited
4. Electrolux Kelvinator Limited
5. B.S. Refrigerators Limited (BPL)
6. Applicomp India Limited (Videocon)
7. LG Electronics India Limited
8. Samsung India Ltd.
9. Blue Star Ltd.
10. Tecumseh Products India Ltd.
11. Carrier Aircon Ltd.
12. Daikin Shriram Air conditioning Pvt. Ltd.
13. Hitachi
14. UCPL
15. Kirloskar Copeland
16. Small Scale Manufacturers
12.4.2.
International Experts:
1. UL India Pvt. Ltd.
2. Intertek Testing Services
12.4.3.
Govt. Institutions & Autonomous Bodies:
1. Bureau of India Standards
2. Central Power Research Institute
3. Electronics Regional Test Laboratory
4. National accreditation Board for Laboratories
5. Electrical Research and Development Association
12.4.4.
NGOs and Consumer Organizations:
1. Consumer Education and Research Centre
2. Voluntary Organization in Interest of Consumer Education
12.4.5.
Manufacturing Associations:
1. Confederation of India Industries
2. All India Air conditioning and Refrigeration Association
12.4.6.
International Organizations
Collaborative Labelling and Appliance Standards Program (CLASP)
CLASP, a collaboration of Lawrence Berkeley National Laboratory (LBNL), the Alliance to Save
Energy (the Alliance), and the International Institute for Energy Conservation (IIEC) is facilitating
energy efficiency standards and labeling programs in developing countries. The Collaborative
Labeling and Appliance Standards Program (CLASP) assists with the design, implementation,
and enforcement of energy efficiency standards and labels for appliances, equipment, and
lighting products in developing and transitional countries around the world.
CLASP’s mission is to promote efficiency standards and labels through partnerships with
agencies, stakeholders, and relevant institutions in targeted countries. CLASP works with
representatives of countries that have successfully adopted standards to join the program in
reaching out to neighboring countries. CLASP also partners with a variety of policy and technical
specialists from around the world, including representatives from European organizations,
developing country non-governmental organizations (NGOs), testing laboratories, manufacturers,
research organizations, and universities.
In India, CLASP is providing technical support to Bureau of Energy Efficiency (BEE), Ministry of
Power and Bureau of Indian Standards (BIS) for implementing the standards and labeling
program. The present phase of CLASP work in India is funded by the United States Agency for
International Development (USAID) and the United States Environmental Protection Agency
(USEPA). The United Nations Foundation (UNF) is also extending its support to CLASP.
3-year Vision, Goals and Anticipated Outcomes:
Vision: To promote a regulatory-based, market-implemented mechanism that develops
institutional capabilities and practices for continually improving energy efficiency over decades.
Goal: To reduce greenhouse gas emissions through energy efficiency standards and labels that
improves the economic efficiency and makes energy-using products more affordable to the
general populace.
One-year Activity Description:
1. Support Government of India to develop at least one new minimum efficiency
standard
2. Support Government of India to develop at least one new information labeled product
Tasks:
1. Support to develop new efficiency standard
a. Provide technical assistance in the dialogue among consumers, manufacturers
and other stakeholders to review the draft, revised and final standards and
labeling criteria for target products.
b. Train BIS/BEE on engineering analysis of the product
c.
Prepare a draft standard
d. Develop the final standard for approval
2. Support to develop new information labeled product
a. Train BEE in development of a criteria-setting model
b. Establish new efficiency criteria for labeling of the selected product
c.
Identify stakeholders important to promotion of labels (consumer groups,
manufacturers, BIS, BEE) as well as consensus building around their roles in
implementation.
d. Assist BEE in deigning a process to test the proposed labels in various regions in
India, with help from a consumer marketing organization in India
e. Assist in the harmonization of labeling criteria with standards and testing work
underway.
12.4.7.
International Funding Agencies
The following international funding agencies are supporting the current standard and labelling
program in India
1. Indo German Energy Efficiency Program (IGEEP) is providing support to Standards and
labeling program for pumps, motors, fans, and lighting products
CLASP activities for standard and labeling for refrigerators and air conditioners are being
funded jointly by the following agencies:
2. United States Agency for International Development (USAID)
3. United States Environmental Protection Agency (USEPA)
4. United Nations Foundation (UNF) through United Nations Department of Economic and
Social Affairs (UNDESA)
Market Research Report
12.5.
Summary of market research report
12.5.1.
Executive Summary
Consumer Survey:

A mix of Focus Group Discussions (FGD’s) and Depth Interviews (DI’s) were conducted
with the target respondents. In all 16 FGD’s and 25 DI’s were conducted across 8 centers,
which were spread across the geography of India.

The FGD’s were conducted with the Recent Owners and Intending Buyers of the AC’s and
Refrigerators. The focus group discussion allowed for cross-fertilization of responses, and
ensured richer and wider reactions by the consumers.

The labels were exposed in the latter half of the FGD’s; post a discussion on perceptions and
attitudes vis-à-vis energy consumption. Each label was exposed in solus and a discussion
was carried out for each, where the spontaneous and processed reactions were taken. The
order of exposure of the labels was rotated across the Groups Discussions and the Depth
Interviews.

Couples were also interviewed in the Metro centers. This decision was taken keeping in
mind our experience in the category, where the woman were also involved in the decision
making process. Couples helped us in understanding the male and female aspect and the
nature of they complement each other in the decision making process.

Depth Interviews were conducted with the Manufacturers and Retailers, so as to explore
their views vis-à-vis energy consumption and efficiency. In each center, 2 Retailer interviews
were conducted, except Delhi and Mumbai, where 3 Retailer interviews were conducted.
These retailers were selected on the criteria that they stock AC’s and Refrigerators of various
competing brands of the market.
Key Consumer Insights:
A typical consumer of today comes from a context wherein the interaction with gadgets is high
and the consumer is interested in and inclined towards gadget use.

Perception about Gadgets: Most respondents expressed a high degree of comfort with the
gadgets and appliances. However, families across Metros and Small towns aspire to improve
their lives, seek comfort, reduce their domestic chores or at least streamline them. The role of
gadgets has become that of a catalyst, which helps a housewife fulfill her expectations.

Entry point for Refrigerators: Most of the consumers were upgraders or second time
purchasers of Refrigerators. They belonged to largely nuclear set-ups, with fewer and
demanding family members.
The final purchase of a refrigerator seemed to be a function of physical features, durability,
capacity, brand, usage, price, guarantee and warranty period. There was no prioritizing
amongst these aspects driving purchase, however, price and brand appeared to be the final
seal on the purchase process.

Entry point for Air Conditioners: The comfort and knowledge levels with the category were
relatively low in consumers and evaluation is driven essentially more by word of mouth or
hearsay than actual experience. The household buyer is at a nascent and evolving stage visà-vis the category.
The final purchase of an AC seems to be a function of- capacity & format, efficacy of cooling,
quality of compressor, power consumption, brand, and remote control and after sales service.
There was no specific ranking across these parameters, though price did seem to influence
the decisions
December, 2003
4
Market Research Report

Current Energy Practices: Most respondents seemed to practice energy conversation in the
realm of tube lights and bulbs –the nature of conservation is more centric on visible and time
bound consumption of electricity.
Consumers appeared to be driven by economizing on electricity consumption, which is overt
and obvious and recurrent in nature. Vis-à-vis refrigerators and other appliances, the
consumers had a perception that the consumption of electricity was more in the case of Air
Conditioners and thus the usage of AC’s was relatively low.
Energy conservation is a known and widespread fact and is practiced by a fairly large number
of consumers- however this is at an individual level or family level and is driven by the fear of
huge electricity bills.
Reaction to Labels

Spontaneous Level - Most respondents expressed a sense of curiosity at this level. The
respondents could associate the labels as being the indicators of electricity consumption.

Interest in the labels - It was a varying factor, while the consumers did seem to be
interested in the concept of labels the interest did not sustain and was overtaken by other
feelings such as curiosity, wonderment to the benefits of the label placement.
Some of the specific elements that evoked interest were – Fist bearing money, Stars, Units
per day.

Comprehension- The labels were comprehended as being a power saving guide or an
indicator of the electricity consumption across centers. Some also understood the labels as
indicating the power fluctuation in the appliances.
Overall, the labels were understood as the power saving manual/tools that would help in
consuming power more wisely. The labels were referred to as “Quality symbols” (implying a
high quality certification) depicting how to conserve energy and were further deemed to be
“credibility agents”.

Relevance of the labels – Both Recent Owners and Intending buyers found the labels to be
more relevant for the women, since they are the ones who deal more with the household
appliances.
At the same time, men would be interested and would show a level of involvement since they
have an upper hand as the decision-makers for purchasing high involvement gadgets like
Refrigerators and AC’s.
Also, these labels were considered to be more relevant for the common masses since they
are the ones who are more conscious about saving money and using the resources wisely.

Impact on Decision-Making – The labels generated positive reaction as far as final
decision-making was concerned. Respondents were concerned about saving on huge
electricity bills and hence evinced a desire to opt for the appliances with labels on them.
Yet, there was a concern about how much cost difference these labels would generate in the
actual cost of the appliance, and whether the deal is economical.
Quantitative Module:

On the basis of the consumer preferences from the qualitative survey phase of this research
project, 3 main designs were prepared. These were then tested in 2 sets of colour
combinations. Thus, we tested 2 panels with 3 label designs each.

When we tested the likeability and preference among the 3 labels we found that in both
panels, it was the label showing unit per day and hand holding money that was preferred over
the hand holding lightning. When tested between the 2 panels, the colour combination of
Yellow and Red was preferred over the White & Green colour combination. The two label
elements – hand holding money & the stars were the most noticed elements. Also the
consumers preferred that the label be authenticated by a government agency.
December, 2003
5
Market Research Report

It was found that in case of refrigerator consumers, the electricity consumption was the 2nd
most considered factor, after price. Though most consumers considered energy conservation
important, only 36% actually try to conserve energy. Their method of conserving energy is to
use it moderately. But almost all the consumers wanted to save energy as it helps save
money & power.

In case of AC consumers, it was found that electricity consumption was the most considered
factor, when deciding the AC brand for purchase. Though most consumers are conscious of
energy conservation, only 46% actually try to conserve energy. Their method of conserving
energy is to use it moderately. But almost all the consumers wanted to save energy as it
helps save money & power.

According to the AC and refrigerator retailers the 5 most important purchase factors are –
energy consumption, price, after sales service, warranty, the brand and the compressor
quality.
12.5.2.
CONCLUSIONS & RECOMMENDATION
Qualitative Phase:

There was an apprehension regarding the clarity of the message in the labels. However, the
respondents made suggestions for better and clearer presentation of the content.

There were concerns pertaining to the units of power consumed per appliance. Therefore, the
suggestion that it would be a better idea to mention hourly consumption.

Consumers also expected a detailed explanation of the symbols – stars, diamonds that are
used as indicators of the power consumption by the dealers and the salesmen to add more
reliability.

Also, there was a suggestion regarding the elaboration and the endorsement of the key
message by-


Celebrities or big names in related fields

Unique 3- D stickers

Multi colored labels, especially green as the it signifies the environment,
greenery…etc

Single line slogans
Thus, the final label has to be one, which is simplistic, easy to understand and catches the
attention of the consumer by symbols such as fist holding money.
Overall, it is absolutely critical to support the label placement with a strong marketing and public
education/implementation program, before, during and after its launch. Consumers must be
educated on the process and the systems of the labels, so that they can effectively derive
maximum benefits of the same.
Quantitative Phase:

In India, the market for both AC and refrigerators is growing at a 10% year on year growth.

Electricity consumption is one of the top factors considered while choosing an AC brand.
While choosing a refrigerator brand it is not one of the important factors considered; because
the electricity consumed by a refrigerator is much lower than an AC. Brand and Product
features are the key factors that are considered while purchasing both the appliances.

The consumers are conscious about energy conservation. They are definitely interested to
save energy as it affects their monthly bills as well as conserve the energy level of the
country.
December, 2003
6
Market Research Report

Consumers liked the idea of energy efficiency labels and prefer if it has a Government
backing. They would surely go in for products with energy labels. Retailers are also of largely
the same opinion; though their endorsement to the energy labels is significantly lower than
the consumers – possibly because of their apprehensions that the energy labels may become
the over-riding factor for brand choice by the consumers and thus can impinge on the role
they play in driving brand choice.

All the three labels shown got a high likeability scores by the consumers and retailers.

In terms of noticeability of the various elements on the labels, the box in the centers of the
Labels, depicting the units / rupees consumed per day/month was the most noticed element
followed by the “more stars more savings” caption and the graphic depicting hand holding
money/lightning.

Among the various elements shown on the Label, “Hand holding money” got the highest
likeability scores. The likeability scores were significantly higher than the likeability scores for
“More stars more savings” and “Hand holding lightning”

In terms of understanding, most respondents understood that the labels are trying to convey
savings in electricity consumption. However 10% of the respondents understood that more
stars means more electricity consumption – some education of the consumers will have to be
done to avoid this mis-comprehension when the labels are announced in the market place.

Among the 3 Labels, Label 1 (Hand holding money, More stars-more savings, Units
consumed, BEE Logo) got rank 1 by the highest proportion. The brighter colours of red
and yellow were preferred by the stakeholders as compared to the green and white
coloured Labels.

A government logo on the label alongwith with the government being the certifying
authority for the Labels will be preferred by the stakeholders

Based on the research findings, we recommend the final label design should be as
follows:

Refrigerator - Hand-holding money, units consumed per day and more stars – more
savings captions in a yellow and red background (or other brighter colours).

Air-conditioners - Hand-holding money, units consumed per hour and more stars – more
savings captions in a yellow and red background (or other brighter colours).
December, 2003
7
Major Energy Efficiency Programs in India
Appendix A: List of Major EE Projects in India
S.
N.
Project Name
Brief Description
Implementing
Agency
Funding
Organization
Duration
Cost
in
Million
USD
1.
Energy
Conservation
&
Commercialization
(ECO) Project
The
Energy
Conservation
and
Commercialization
(ECO) Project aimed at
promoting
the
widespread
commercialization
of
energy
efficiency
technologies
and
services in India, which
would have a direct
impact on the reduction
in growth of greenhouse
gas (GHG) emissions.
The project supports the
development of policy
and market interventions
that would enhance the
capabilities of the private,
financial,
and
government sectors for
deploying market-based
mechanisms for end-use
efficiency investments.
Nexant
Ministry
Power
USAID
20002004
25.0
2.
Collaborative
Labeling
&
Appliance
Standard Program
(CLASP)
CLASP working in India
to:
International
Institute
for
Energy
Conservation
(IIEC) & BEE
UNDESA,
USAID & USEPA
2002Ongoing
0.30
a. Provide tailored
technical
assistance
to
BEE
for
the
development of
standards
and
labels for select
home appliances
(primarily
refrigerators
&
air-conditioners)
&
of
b. Conduct market
analysis
and
research
for
baseline studies
as
well
as
monitoring and
evaluation
of
program
impacts;
December, 2003
8
Major Energy Efficiency Programs in India

Provide turn-key
educational and
outreach
tools
that explain the
common
elements
and
strategies
of
successful S&L
programs
worldwide; and

Create
forums
for
information
exchange such
as
workshops
and seminars.
3.
Energy Efficiency
Enhancement
Project
The project is to conduct
a study of the feasibility
of developing an active
market
for
energy
efficiency. The study will
(i) identify barriers in
establishing an energy
efficiency market, (ii)
recommend necessary
intervention to create an
enabling environment for
the establishment of an
energy efficiency market,
(iii)
identify
specific
energy
efficiency
investments to be made
under the subsequent
loan,
(iv)
identify
potential Energy Service
Companies (ESCOs) that
will provide services to
selected
energy
consumers, (v) develop
financial products that
can be made available to
ESCOs or the energy
consumers to finance
efficiency investments,
and (vi) identify specific
institutions that will offer
the
newly
created
financial products to
ESCOs.
Ministry
Power
4.
Renewable
Energy Project
The Renewable Energy
Project aims to 1)
IREDA
December, 2003
of
Asian
Development
Bank
2001Ongoing
0.60
World Bank
20002006
300.0
9
Major Energy Efficiency Programs in India
increase power supply;
2) mobilize private sector
investments in renewable
energy power projects;
and 3) promote energy
efficiency and demandside management (DSM)
investments. The project
has three components.
The first finances small
hydro investments by the
private sector in, for
example,
canal-based
and dam toe (sic)
schemes,
run-of-river
schemes, rehabilitation
and/or upgrading of old
plants, use of tail ends of
cooling water systems of
thermal power plants,
and stand-alone microhydro schemes. The
project designs rural
energy initiatives that
feature
partnerships
between
private
investors
and
user
communities.
The
second component helps
design, develop, and
implement
integrated
energy
management
services operated by
service companies and
end-users
on
a
performance guarantee
basis; purchases and
installs energy-efficient
and/or load management
devices and systems;
produces energy-efficient
equipment;
and
encourages
end-user
participation in the state
energy board and other
utility-sponsored
DSM
programs.
The
third
component finances preinvestment activities that
develop a sustainable
pipeline
of
energyefficient investments and
standard
bidding
document
preparation;
establish
in-house
capacity within IREDA
December, 2003
10
Major Energy Efficiency Programs in India
(the Indian Renewable
Energy
Development
Agency
Limited)
to
appraise, supervise, and
promote
energy
efficiency services and
schemes.
5.
Energy Efficiency
Project
The project aim to cover
the following areas:
Ministry
Power
of
World Bank
2000Ongoing
GTZ
1995Ongoing
a. Climate Change
b. Infrastructure
services
for
private
sector
develop
c.
Financial
and
private
sector
development
d. Pollution
management
and
environmental
health
6.
Energy Efficiency
&
Environment
Project
December, 2003
e. Regulation and
competition
policy
The project aim to:
a. Supporting
voluntary
compliance
of
the EC Act
b. Capacity building
of
energy
managers
and
auditors
c. Improving
markets
for
performance
contracting
of
energy service
companies
d. Improving data
collection
and
analysis
for
informed
decision making
on energy cost
reduction
e. Improving
transparency
and integrity of
impact of the
BEE, Ministry
of Power
11
7.0
Major Energy Efficiency Programs in India
Energy
Conservation Act
Table 4: Refrigerator sales a growth projection and impact of GEF program
2007
Baseline (nos.)
2008
2009
4.79
2010
2011
2012
2013
7.7
8.5
Refrigerator (Direct)
Energy Efficient w/o GEF (as
% of total sales)
25%
25%
25%
Energy Efficient w GEF
Other Appliances (Indirect)
Without GEF
With GEF
Other Countries
December, 2003
12