Eliminating Electricity Deficit through Energy Efficiency in India: An Evaluation of Aggregate Economic and Carbon Benefits

Electricity demand has consistently exceeded available supply in India. While the electricity deficit varies across states, nationally it was estimated to be of the order of 12percent on peak and 11percent for electricity during 2008-09. This paper explores a demand-side focused potential for energy efficiency improvement to eliminate the electricity deficit compared to a business as usual (BAU) supply-side focused scenario. The limited availability of finance and other legal and administrative barriers have constrained the construction of new power plant capacity in India. As a result, under the BAU scenario, India continues to face an electricity deficit beyond the end of the Twelfth Five Year Plan. The demand-side cost-effective potential achieved through replacement of new electricity-using products, however, is large enough to eliminate the deficit as early as 2013 and subsequently reduce the future construction of power plants and thus reduce air pollutant emissions. Moreover, energy efficiency improvements cost a fraction of the cost for new supply and can lead to a substantial increase in India's economic output or gross domestic product (GDP). Eliminating the deficit permits businesses that have experienced electricity cutbacks to restore production. We estimate the size of the cumulative production increase in terms of the contribution to GDP at a $505 billion between 2009 and 2017, the end of India's Twelfth Five Year Plan, which may be compared with India's 2007-08 GDP of $911 billion. The economic output is influenced by the size of the electricity savings and rate of penetration of energy efficient technologies, and that of self-generation equipment and inverters used by businesses faced with electricity cuts. Generation and inverters are estimated to service 23percent of these customers in 2009, which increase to 48percent by 2020. The reduction in the construction and operation of new power plants reduces the cumulative CO2 emissions by 65 Mt, and those of sulfur dioxide and nitrogen oxides by 0.4 Mt each, while also reducing India's imports of coal and natural gas. By 2020, the cumulative GDP benefit increases to $608 billion, the CO2 savings expand to 333 Mt and SO2 and NOx to 2.1 Mt