Energy management is becoming a key driver for India’s climate change policy. The country is proposing to impose a mandatory fuel efficiency cap by 2011, enforce an energy-efficient building code for all public buildings by 2012, and push the share of renewables up to 20% by 2020 to mitigate climate change.
Besides, the Energy Conservation Act, 2001, requires large energy-consuming industries to conduct energy audits and appoint energy managers. Energy-efficiency ratings are being made mandatory for four key appliancesrefrigerators, air conditioners, tube lights and transformersfrom January 2010. Ratings for other appliances are also in the pipeline. Most polluting industries like power, cement and steel may be also set emissions reduction targets by 2030.
The reasons are compelling. Explains Ryan Schuchard of Business for Social Responsibility (BSR), “The carbon cost of energy is growing. Energy drives nearly two- thirds of carbon (and it greenhouse gas equivalent) emissions globally, and 95%+ for most companies.” He adds, “Most energy that companies use (or produce) is carbon intensive. Climate policies are expected to create additional costs for carbon-intensive energy, which will amplify the already growing price of fossil-based energy.”
Its a little wonder, then, that corporate India has been already expressing concerns about energy management. While 94% companies attach importance to energy management, 47% lay more emphasis on energy efficiency, according to a recent survey, Energy Efficiency Indicator for Corporate India, conducted by Johnson Controls India.
Says Indresh Batra, managing director, Jindal Saw, “Both the external pressures and internal realisation underline the fact that corporate India should look for energy security not only to secure its sustainability but also ensure growth. As of now, most companies have strategies at the operational level. It is only a matter of time before energy becomes part of the management strategy.”
The challenge of energy efficiency is only going to move up the agenda because it has the potential to become a big business opportunity with the recent approval of the National Mission on Enhanced Energy Efficiency. The mission seeks to create an energy-efficiency trading market worth Rs 75,000-crore by 2012 and cut 5% of annual energy consumption by 2015. The mission envisages a Perform, Achieve and Trade (PAT) mechanism, which would run on energy-efficiency improvement targets set for energy-intensive industrial units. Companies that save more energy than their targets can sell their certificates to underperformers.
It’s not only energy efficiency that is a matter of concern for corporate India, but also the quality of energy services. According to a survey, The Changing Face of Infrastructure, conducted by KPMG and Economist Intelligence Unit, about two-third (62%) of the companies in India say that the state of energy and supply infrastructure add greatly to their operating costs.
According to another survey, The Return on Environment, conducted by global communications consultancy Hill & Knowlton, 77% respondents believe it’s time to have a new corporate job function, the chief energy officer or CNO in the C-suite, who would be responsible for return on investment in environment. The CNO would devise an energy management strategy and a roadmap for increasing returns.
Even the Global Business Network, which is a member of the Monitor Group, and the US Environmental Protection Agency, echoes similar views in the report, Energy Strategy for the Road Ahead. The report recommends having an empowered corporate energy director and team for measuring and tracking energy performance across all operations, and establishing accountability and recognition system.
Referring to the Indian scenario, E Balaji, chief executive officer, Ma Foi Management Consultants, says, “There is no specialised energy job function in most companies as of now. Energy is typically clubbed with health, safety or environment. Its not a burning issue for most companies in India. In fact, to begin with, it may interest only companies in energy intensive sectors.”
The reasons are obvious. The world primary energy demand is projected to go up by 1.6% per year on average between 2006 and 2030, which is an increase of 45%, in the absence of new government policies, according to the International Energy Agency.
Besides, there will be a continued dominance of fossil fuels in the energy mix; an increasing share of global energy consumption in emerging economies; their growing dependence on oil and gas imports; and rising global CO2 emissions. As a share of the world GDP, the agency projects, the oil spending to go up to 5% from a little over 1% in 1999. Since energy insecurity and costs are likely to affect the energy intensive sectors more than others, energy management may become part of corporate strategy in these sectors sooner than later.
Source: The Financial Express
Published on 29 September 2009