ASHWINI K SWAIN & OLIVIER CHARNOZ I ndia claims to be undertaking a thorough transition to low-carbon electricity as a response to a range of competing agendas and constraints. It seems the country has made a smart choice for energy policy by focusing on a two-way approach — stepping up renewable energy and energy efficiency initiatives. Enhanced energy efficiency is expected to partly avoid demand for additional generation capacity, while much of the remaining demand is expected to be met through renewable energy. Both approaches have equal potential to take Indian electricity on a low-carbon development pathway as well as ensure much needed energy security. Considering their equal poten- tial and complementarity, both the approaches merit equal and simultane- ous attention. But, has it happened? We do not believe so; we find two paradoxes that weigh upon India’s clean energy development. First, although energy efficiency initiatives offer high col- lective returns, at least as high as renewable energy at a much lower investment, it has received a lot less attention and priority. Second, within the energy efficiency domain, imple- mentation is lower and slower in sec- tors where the energy savings poten- tial is higher — especially agriculture and domestic sectors. For renewable energy, India has set an ambitious target of raising its capac- ity to 74,000 MW by 2022, including 22,000 MW solar energy. At the same time, the country also aims to generate 15 per cent of its consumable electricity from renewable sources by 2020. Considering past experiences in Indian electricity, and its failed attempts at reforms and big initiatives, there is every reason to doubt its capability to achieve this target. Renewable energy development in India has already been plagued by several governance issues — such as tariff setting, lack of trans- parency and civil society participation, inadequate monitoring, social reasons and lack of coordination, and conse- quent scepticism about future develop- ment. Yet, considering India’s vast renewable potential, aspiration of pri- vate sector, and bundling of renewables with other developmental agendas, there seems to be a ray of hope. India has set an equally ambitious target for energy efficiency – to save 10,000 MW by 2014-15 – which will avoid installation of 19,000-MW generation capacity. In practice, however, energy efficiency promotion is far from being on a par with the efforts devoted to renewable energy. While there are mandatory policy provisions regarding the latter, like renewable purchase obli- gations issued to utilities, energy effi- ciency lacks such policy endorsements. The electricity regulatory commissions have been very proactive in promoting new incentives in favour of renewable energy, whereas energy efficiency is treated as a “step child”. What drives this paradox? First, India’s renewable energy strategy, fol- lowing a top-down approach of grid- connected generation, is much easier to implement than the energy efficien- cy strategy that requires action on part of consumers. Second, presence of concentrated interests, including few manufacturers, project developers and generators, facil- itates expedited implementation in renewable sector as opposed to energy efficiency where the interests are dif- fused across utilities and large number of consumers. Entry of big business con- glomerates, such as Tatas and Reliance, into manufacturing has further strengthened the lobby for renewable energy. Third, institutional architecture for renewable energy, including an inde- pendent ministry at the Centre and ded- icated agencies at the state level, is much stronger than the institutional architec- ture for energy efficiency that includes a “bureau” at the Centre and state-level “designat- ed” agencies with other (primary and often com- peting) policy priorities. Fourth, India seems to perceive larger develop- mental benefit from renew- able energy, including employment opportuni- ties, regional economic growth and energy access for poor. Consequently, the political will to promote renewable energy is stronger than energy efficiency promotion. Finally, while there seems to be an emerging global governance framework for renewable energy, with several recent initiatives, including the International Renewable Energy Agency, energy efficiency lacks a global governance framework that could put political weight on the issue. While political will has been neither always strong nor always present, India has gained significant experience in designing and implementing energy effi- ciency policies. Since its formation, the Bureau of Energy Efficiency (BEE) has prepared an action plan, giving a thrust on almost all fronts of ener- gy efficiency, and taken sev- eral initiatives keeping with the Energy Conservation Act, 2001. However, not all initiatives were imple- mented with equal vigour and outcomes vary across consumer sectors. Standards and labelling scheme has arguably had the greatest success, result- ing in 2,100 million units of electricity saved in the year 2008-09, which is equivalent to an avoided generation capacity of 600 MW. Schemes aimed at energy-intensive industries and com- mercial buildings are being implement- ed rather adequately, bearing positive result. However, other schemes such as Bachat Lamp Yojana, municipal and agricultural demand-side management are still at pilot stage and yet to be imple- mented at a large scale. Although the initiatives taken by BEE are commendable, implementation is slower in sectors where energy saving potential is higher. Based on conserva- tive estimates, agriculture has a potential to save 30 per cent of sectoral consump- tion and contribute to 36 per cent to national potential, while domestic sector has a potential of 20 per cent savings on sectoral consumption, amounting to 32 per cent of national potential. Combining both the dimensions, agri- culture and domestic sector s offer high- er collective return in terms of energy savings and thus, need to be prioritised. Yet, BEE actions represent a different trend prioritising industrial sector and agricultural sector is almost ignored. What drives this trend? A credible explanation may be related to the rela- tively low incentives faced by individual consumers, despite the fact that overall collective return and incentive are high in these sectors. We find that imple- mentation is higher when individual incentives are higher. Second, in the absence of an effective incentive struc- ture, upfront investment for energy effi- ciency is often unaffordable for most agricultural and domestic consumers. Third, low level of public awareness about the benefits of energy efficiency has contributed to low willingness and acceptance. Fourth, while limited num- bers of industrial and large commercial consumers are easy to target, BEE finds it difficult to reach out to geographical- ly disperse large number of agricultural and domestic consumers. Finally, tech- nocratic orientation of Indian electrici- ty has led to overemphasis on technolo- gy based solutions. Yet, promotion of energy efficiency, particularly in agri- cultural and domestic sectors, requires governance innovations and behav- ioural changes, along with technology. Striking a new balance between ener- gy efficiency and renewable energy as complementary approaches is of cru- cial importance, if India is to achieve its energy security and climate mitigation goals. Ashwini K Swain is independent energy and climate policy analyst. Olivier Charnoz is research officer at Agence Française de Développement, where he leads a multi- country research programme entitled “Local Politics, Global Impacts: Climate Change, Biodiversity, and Health”. High-yielding energy efficiency initiatives lose out to a renewable energy thrust India’s clean energy paradox The electricity regulatory commissions have been very proactive in promoting new incentives in favour of renewable energy, whereas energy efficiency is treated as a “step child”