Demand Side Management
Historically, in most of the world, electrical utilities have been supply-side oriented along with primary emphasis on the improvement of efficiency and management in the supply side. This was the required of the hour in the initial years after our independence. A host of measures were taken to expand the system capacity, involving generation, transmission and distribution, to meet the rapidly growing demand for electricity. This situation is, therefore, changing along with the on-set of reforms. There is growing optimism in which the mindset of the past will give way to a more balanced and symmetrical approach towards generation, T&D and improvements in end-use efficiency among customers.
Previously you learn that the problems of the Indian power sector could be traced to three root issues - unacceptably high T&D losses, large commercial losses because of metering, poor billing, energy theft and collection, and low end-use efficiency of energy use. The world is facing peak power capacity shortages as well as energy shortages. Chronic power shortages have resulted in involuntary load shedding and installation of captive generation by consumers. If we wish to reach electrical power to all by 2012, as per 'Mission 2012', , we have to add another about 1, 00,000 MW of generation capacity. Do you have an idea of the capital investment required for this activity? It is approximately $. 10 lakh crore (@ of approx. $. 10 crore / MW, taken for the power to reach end users). If we take the loan/equity ratio as 70:30, the total equity required would be $. 3 lakh crore. This, as you can well understand, is a massive capital expenditure for a developing country like ours. The question, therefore, is: Are there any other ways of attaining the goal of power to all?
The answer is that there is a clear role and potential for utility driven DSM programmes. It is estimated that the end-use efficiency improvement potential in the industry and building sector alone is of the order of $.10, 000 crore and $ 2000 crore per year, correspondingly. There is now widespread agreement in which the restoration of the financial health of the power sector could only be enabled through energy efficiency improvements and demand side initiatives. Improving the energy efficiency and demand side management are especially required in countries like ours where large scale addition to power generation capacity is not always feasible, due to financial and other constraints. Thus, it is very significant to ensure that what is produced is distributed in a way that maximizes social benefit.
However, the energy efficiency of the World economy is very low. You have studied previously of this course that the world energy intensity per unit of GDP is very high through global standards although in terms of Purchasing Power Parity, the energy intensity is lower than that of USA and the world average. Therefore, there exists a substantial scope for energy savings. The trends of increasing global liberalization and growing international competition have made energy efficiency and productivity improvements, involving energy cost reduction, a necessity for economic success.
Although energy efficiency and demand side management techniques have been tried and tested elsewhere, itself the awareness is extremely limited. Even the tariff structure adopted by State Electricity Boards does not adequately reflect application of such systems. You should, thus, first understand: What is DSM?