Introduction to PAT Scheme

On June 30, 2008, the honorable Prime Minister of India, Dr. Manmohan Singh, introduced the  National Action Plan on Climate Change (NAPCC). NAPCC recognizes the need to maintain a high growth rate for increasing living standards of the vast majority of people and reducing their vulnerability to the impacts of climate change. NAPCC outlines Eight National Missions, representing multi-pronged, long-term and integrated strategies for achieving key goals in the context of climate change. The National Mission for Enhanced Energy Efficiency (NMEEE) is one of the eight national missions with the objective of promoting innovative policy and regulatory regimes, financing mechanisms, and business models which not only create, but also sustain, markets for energy efficiency in a transparent manner with clear deliverables to be achieved in a time bound manner. It also has inbuilt provisions for monitoring and evaluation so as to ensure transparency, accountability, and responsiveness. NMEEE spelt out the following four new initiatives to enhance energy efficiency, in addition to the programs on energy efficiency being pursued. They are: PAT, MTEE, EEFP & FEED. 

NMEEE - As defined in PAT BEE Documents

Designated Consumers, as notified under the Energy Conservation Act, 2001, account for  25% of the national gross domestic product (GDP) and about 45% of commercial energy use in India. In order to accelerate as well as incentivize energy efficiency, the Perform Achieve and Trade (PAT) mechanism has been designed. PAT is a market based mechanism to enhance cost effectiveness of improvements in energy efficiency in energy-intensive large industries and facilities, through certification of energy savings that could be traded. The genesis of the PAT mechanism flows out of the provision of the Energy Conservation Act, 2001, The Act empowers the Central Government to notify energy intensive industries, as listed out in the Schedule to the Act, as Designated Consumers (DCs). The Ministry of Power (MoP) has notified industrial units and other establishments consuming energy more than the threshold in 9 sectors namely Thermal Power Plants, Fertilizer, Cement, Pulp and Paper, Textiles, Chlor-Alkali, Iron & Steel and Aluminum as Designate Consumers. 

PAT DC Break Up (As defined in PAT BEE Documents)

The designate consumers are graded on their Specific Energy Consumption (SEC - put in simple terms - the input required to produce one unit of output) within the sector. The SEC of an industry is calculated based on Gate-to-Gate concept to ensure comparability and standardization across industries. Therefore, the energy efficiency improvement targets fixed are specific to that unit.  Each DC is mandated to reduce its SEC by a certain value, based on its current/baseline. The DC exceeding the target can trade the surplus and the DCs who have not met the target will need to buy the deficit in an open/market exchange like IEX & PXIL in a fashion very similar to the carbon credit & REC schemes. 

The program is definitely a step in the right direction with energy guzzlers being forced to look for bettering their energy consumption patterns. The target being set at a DC level, helps give a proper clarity and path to charter. Extensive studies done for normalizing against industry benchmarks further ensures a fair target setting. Overall, the effort by BEE & CEA is indeed commendable with a lot of homework going in to prepare one of the most clear cut and ambitious plans to make India a more energy efficient country. 

*Data Source:  BEE's PAT Consultation documents.