Utility-administered demand-side management (DSM) programs in India have been slow in achieving the shift to efficient appliances. This is due, in part, to utilities and regulatory commissions’ lack of expertise with DSM; utilities’ preoccupation with other issues, such as electricity shortages and high distribution losses; and the reluctance of most utilities to propose and design their own programs. In order to bring about rapid gains in the energy efficiency of appliances, an alternate path is necessary.
One promising approach is offered by national programs (NPs) focused on transforming the market through incentives to manufacturers for developing and selling super-efficient products. The design of NPs, the monitoring and evaluation plans, and much of the implementation will fall under the purview of a national agency. This considerably reduces the burden on utilities and state regulators and also bypasses many of the difficulties with utility-administered programs. The funding for the incentives can come from ratepayers or taxpayers.
NPs are expected to have several other benefits, such as reduced transaction costs based on limited interactions with a small number of manufacturers rather than millions of consumers; a rapid increase in efficiency standards; upstream incentives (to offset higher manufacturing costs) that are considerably smaller than customer rebates (to offset higher retail prices); streamlined monitoring and evaluation; and the opportunity to introduce products that are not only highly efficient, but also better suited to conditions in India.
NPs have received in-principle approvals from the relevant government agencies. The authors are working with these agencies to develop the institutional framework, financing mechanism, and monitoring and evaluation methods that are described in this paper. India’s experience with NPs may also be relevant for other developing countries that are striving to bring about a market transformation to more efficient appliances, but have limited access to energy efficiency program experts.