Renewable Energy Sources

LESSON 32. Energy Auditing and Management

Energy scarcity, along with the local and global environmental impacts of energy useemphasise the need to speedily address inefficiencies in the power sector. However,numerous barriers including financial, technical as well as institutional exist and whichimpede the achievement of this objective. Singh (2009) discusses  opportunities forefficiency improvements in the power sector and identifies the following three climate cobenefitpolicies; (i) adoption of efficient agricultural pump sets. (ii) modernization of thelow tension (LT) distribution network to High Voltage Distribution System (HVDS) and(iii) adoption of clean and efficient coal-based generation technology. In spite of theknown benefits of such policies, the progress thereof is rather limited, suggesting that theabove mentioned barriers are hampering policy implementation. This paper attempts toidentify the challenges in implementing a policy for nationwide programme to adoptefficient agricultural pump sets. Due to the presence of technical as well economicefficiencies associated with the policy, this exercise would offer a wider perspectiveamongst the three policies.India adopted a National Action Plan for Climate Change (NAPCC) last year. It proposedeight national missions with climate related benefits including a National Mission onEnhanced Energy Efficiency (NME3) which has recently been approved (in-principle) by

the Indian Prime Minister. Apart from this, the Bureau of Energy Efficiency (BEE) hasinitiated large pilot projects under the Agricultural Demand Side Management (AgDSM)programme. This aims to reduce electricity consumption for irrigation by enhancing theefficiency of pump sets. This is discussed further in the next section.The main objective of this paper is to assess stakeholders’ perspectives, through a survey, on implementing a nation-wide policy for adoption of efficient agriculture pumps. ThisFurther, the policy related to adoption of efficient agricultural pump sets also entails HVDSinvestment as a prerequisite. This is discussed further in the next section.

Policy for Adoption of Efficient Agricultural Pump Sets

The policy recommendation is to implement a joint programme for replacement ofinefficient agricultural pump sets (including motor/engine and pump assemblies, piping,foot valves etc.) along with mandatory electronic metering of their electrical connections.Such a program should be supplemented with feeder metering and system modernizationof the low tension (LT) distribution network with a High Voltage Distribution System

(HVDS). The distribution companies (discoms) should also undertake separation of ruralfeeders with partial support from Restructured Accelerated Power Development andReforms Programme (R-APDRP).Irrigation pumps used in the agriculture sector account for about 25% of electricityconsumption in India. This share is reported to be 48.89% in Gujarat, 43.39% in Haryana and 42.27 % in Karnataka. Due to subsidised tariffs, agricultural consumers contributeonly a little to the revenue of utilities. Farmers, who pay HP-based flat rates irrespectiveof their electricity use, perceive zero marginal cost for electricity use and, hence,disregard efficiency in consumption. This is reflected in purchase preference for cheap butinefficient pumps. Various pilot studies have revealed the poor level of energy efficiencyof these pumps. An energy audit of electrical pump sets at four field study locations inHaryana average pump set efficiency was found to be only 21-24% (World Bank, 2001).The study also found that only 2% of the pumps surveyed had efficiency levels above 40%.Phadke et al. (2005) find that a DSM program for replacing ineffieicnt agricultural pumpsin Maharashtra would be cost effective by lowering the short-run cost of electricitygeneration in the state. More recently, an energy audit of a sample of pump sets atDoddaballapur Taluk of Bangalore Rural District in Karnataka was conducted under theWater and Energy Nexus (WENEXA) Project of the USAID. The study revealed that 91per cent pumps were operating at the efficiency of less than 30 per cent (Oza, 2007).Subsidised tariffs for agriculture and domestic consumers are supported partly by budgetsubsidies from respective state governments. In 2007-08, this was estimated to be Rs.141.6 billion (GOI, 2008). Apart from this, the SERCs continue to rely on crosssubsidisationof tariffs by charging higher tariffs from industrial and commercialconsumers to support lower tariffs for agriculture and domestic consumers. Flat pricing ofelectricity and unmetered supply continues to shield inefficiency in consumption andobscures operational efficiency of utilities. A policy to enhance efficiency of pump sets, tometer such consumption and to price electricity efficiently would have wider implicationsfor the sector and beyond. A reduction in subsidy requirement for the power sector wouldallow state governments to channel the funds to other social sectors including education,primary health and rural infrastructure. In this context, Singh (2009) proposed anational programme for adoption of efficient pumps for agricultural use to moderate theimpact of above mentioned institutional inefficiencies.

INTERNATIONAL SUPPORT FOR DOMESTIC ACTION

We constructed alternate policy scenarios for varying degree of adoption of efficient pumpsets by farmers. It is assumed that number of agricultural pump sets would grow to 20million by 2011-12. In efficient scenarios, all new pump sets are expected to be efficientand hence require less number of hours of operation, and have 10% lower rated output.Similar is the case for all pump set replacements. The transmission and distribution (T &D) losses are expected to fall from 32.25% in 2007-08 to 25% by 2011-12. In a conservativescenario with little penetration of efficient pumps, it was estimated that about 5%reduction in carbon emissions can be achieved. In the case of an aggressive pumpreplacement scenario, a reduction in carbon emissions of up to 30% can be achieved.

There are multiple benefits for the power sector utilities as well. A lower demand forpower from the agriculture sector would improve consumption profile towards betterpaying customers and, hence, would improve revenue realization per unit of electricity.Agricultural loads are rather spread out and hence incur higher technical losses. Achange in consumption pattern away from agriculture could lower overall technical lossesfor the distribution utilities. It is often argued that due to the absence of metering, part ofT & D losses are often camouflaged as consumption in the agriculture sector. Bettermetering and energy accounting would certainly help in bringing more transparency inthe system. These are expected to improve operational as well as financial performance ofdistribution utilities. In the long-run, these changes would provide a conduciveenvironment for efficiently pricing the electricity in a manner which provides incentivefor energy conservation. A lower demand for electricity would necessitate lowerinvestment for generation capacity addition in the sector in the long-run.

Drivers and Key Stakeholders: Agricultural Pump SetReplacement

Identification of drivers a policy implementation empowers the policy makers as well asthe implementing agencies to commit resources. The importance of key drivers forimplementing a nation-wide policy for pump set replacement would also assist inidentifying benefits to various stakeholders and thus seek their cooperation andcommitment. It is often noted that a lack of institutional capacity has resulted in failureof various public programmes both within and outside the energy sector. The mostimportant drivers that support implementation of the suggested policy are identified as:

• Energy savings

• Reduced pressure on groundwater reservoirs

• Ability to manage tariff subsidy

• Enhanced transparency and accounting of energy consumption

• Facilitation of appropriate tariff design

It is important to note that benefits of the policy go beyond the power sector and hasother environmentally benign outcomes, like by easing pressure on groundwaterreservoirs. Due to lack of consumer metering and energy accounting, system losses havebeen camouflaged as high consumption in the agricultural sector (Singh, 2006). Improvedtransparency and energy accounting would not only plug revenue leakages, but may alsoreduce the tariff subsidies from state governments.The respondents to the survey identify the respective state governments as the mostimportant actors for the implementation of this policy. This was followed by thedistribution companies, central government and regulatory institutions. Furthermore,the respondents also identified a role for associated ESCOs / implementing agencies, whowould undertake projects for replacement of inefficient pump sets. Given the crucial roleto be played by stale level entities, a clear recommendation would be to strengtheninstitutional capacity with state-level agencies to successfully implement such a programme.

USDA’s Cooperative State Research, Education, Extension and Service (CSREES)

leverages the nationwide expertise housed at land grant universities. CSREES provides fundingfor about 60 projects that include an energy-related objective. The goals of these projectsinclude:

• Reducing costs associated with the conversion of biomass to energy and industrial products,

• Increasing biobased product inventories to replace petroleum based products,

• Developing technologies for effectively converting agricultural (including forestry) residuals into energy and products,

• Developing cost effective biocatalysts capable of converting lignocellulosic materials economically, effectively and with low environmental impact, and

• Identifying unique biomass feedstocks for the sustainable production of bioenergy and industrial products.

USDA’s Farm Service Agency (FSA) administers the Conservation Reserve Program (CRP)and the CCC Bio-Energy Program. The CRP was established by the Food Security Act of 1985to assist  owners and operators in conserving and improving soil, water, and wildlife resources ontheir farms and ranches by converting highly erodible and other environmentally sensitivecropland and marginal pasture to long-term resource conserving covers. Participants enrol cropland in the CRP for a period from 10 to 15 years in exchange for annual rental payments andcost-share assistance for installing certain conservation practices. Enrollment of up to 39.2million acres is authorized, and there are currently about 36 million acres under contract.

CRP lands sequester significant amounts of carbon dioxide in soils and vegetative cover andmany CRP lands have the potential to be used for the production of bioenergy crops, such asswitchgrass, willows, and poplars. A 2003 analysis, for example, estimated that 13 million acresof cropland enrolled in the CRP could produce an average of about 4 tons of biomass per acre(dry matter) or over 50 million tons of biomass annually. The 2002 Farm Bill specifies theconditions under which CRP enrolled acreage can be utilized for biomass production. First,harvesting must be consistent with conservation of soil, water quality, and wildlife habitat, andsecond, payments must be reduced commensurate with the economic value of the biomassproduced.Under CRP’s Biomass Pilot Program established in 2000, USDA approved the use of CRP landin 4 projects located in 4 States. The programs approved include one each in Minnesota (hybridpoplars), New York (willows), Iowa (switchgrass), and Pennsylvania (switchgrass). Projectswere also approved in Oklahoma and Illinois.

The CCC Bioenergy Program began on December 1, 2000, and ended on June 30, 2006. Underthe program, cash payments were made to bioenergy producers who increase their annualbioenergy production from eligible agricultural commodities. Eligible commodities includedbarley, corn, grain sorghum, oats, rice, wheat, soybeans, other oilseeds, cellulosic crops, andanimal fats and oils. From December 2000 through March 2006, the program reimbursedbioenergy producers $537 million for 2.5 billion gallons of increased ethanol production, 146.4million gallons of increased biodiesel production, and 26.7 million gallons of base biodieselproduction.

USDA’s Office of Energy Policy and New Usesadministers the Federal Biobased PreferredProducts Procurement Program (FB4P), the USDA Certified Biobased Product LabelingProgram and Biodiesel Education Program (BEP). All three programs were created by the 2002Farm Bill.Under the FB4P, Federal agencies will be required to give procurement preference to qualifiedbiobased products if the products are available, meet performance standards, and are available atcosts similar to their non-biobased counterparts. Biobased products are defined as commercial orindustrial products that are composed, in whole or in significant part, of biological products orrenewable domestic agricultural materials (including plant, animal, and marine materials) orrenewable forestry materials. The first in a series of rules to designate items for preferredprocurement was published as a final rule in March 2006. Six items were designated forpreferred procurement by this rule: mobile equipment hydraulic fluids, biobased roof coatings,water tank coatings, diesel fuel additives, penetrating lubricants and, bedding, bed linens andtowels. The 2002 Farm Bill also provides for a voluntary program authorizing producers ofqualified biobased products to use a “USDA Certified Biobased Product” label and logo toidentify qualified products.The 2002 Farm Bill authorized funding of $1 million per year from FY 2003-07 for educationgrants under the BEP. Under BEP, two competitive grants were awarded to the NationalBiodiesel Board and the University of Idaho to educate the public, and government and privateentities that operate vehicle fleets on the benefits of using biodiesel. Program funds have beenused for organizing national conferences, conducting technical workshops, and distributingeducational materials, including manuals on quality control. Many partnerships with othergroups and government agencies have been formed to share information, leverage resources,coordinate activities, and avoid program redundancies. In addition to ethanol and biodiesel, biomass and animal wastes can be used to producerenewable energy. Biomass is used to generate electric power by direct burning, usinggasification systems, or mixing biomass with coal in coal-fired electrical generation facilities.

The primary feedstocks include wood waste used by the pulp and paper industry for industrialheat and steam production. In addition, forest residues and municipal solid waste are used togenerate electricity. Another potentially large source of renewable energy is animal waste whichcan be turned into methane gas through anaerobic digestion. Anaerobic digesters are beingadopted by commercial livestock operations not only to produce energy, but also to meet newstate and Federal regulations for controlling animal waste. Currently, there are over 90 anaerobicdigester projects, either in operation or under construction, located throughout the United States.Nearly all the anaerobic digesters are associated with dairy operations, with a few associatedwith swine or poultry operations.Another emerging approach to reducing U.S. fossil energy use is to replace petroleum basedproducts with products made from biomass. There are many industrial and consumer productsthat have been traditionally made from biomass, including yarns and fabrics, soaps anddetergents, pulp and paper, lubricants and greases, and adhesives and paints. However,agricultural feedstocks can be used to produce non-traditional products such as chemicals,plastics, hydraulic fluids, and pharmaceuticals. There are many agricultural feedstocks that canbe used to make bioproducts, including a variety of crops, wood and plant oils, and agriculturaland forestry residues. Bioproducts often require less energy to produce than the fossil andinorganic products they replace. With the increasing costs of fossil fuels, U.S. industries have anincreased incentive to consider and produce alternative bioproducts. As examples of newbiobased technology, corn starch is being used to produce bioplastic products, and soybeans arebeing used to produce a polymer used to manufacture carpet backings. The chemical industrycould potentially offer a large market for numerous high-value biobased chemicals and othermaterials made from agriculture.

Progress is also being made in developing energy from solar, wind, and geothermal resourcesalthough the amount of energy from these sources is relatively small. Small-scale solarapplications are already commercially available that provide electricity for lighting, batterycharging, water pumping, and electric fences. There also has been an emergence of large-scalesolar technology that is being used in homes and in the industrial sector. Small-wind systems arecurrently being developed to generate electricity in remote areas and utility-size turbines havebeen increasing in numbers, especially on farms in areas with consistently high wind speeds.More geothermal resources are being tapped to produce electrical or thermal energy in localareas. There are many agricultural applications for geothermal energy, including heatinggreenhouses, providing warm water for aquaculture operations, and drying produce.Although ethanol growth has been impressive in recent years, ethanol accounts for about 3percent of total annual gasoline consumption. About 14 percent of the U.S. corn crop was usedfor ethanol in 2005/06 and USDA projects 20 percent of U.S. corn production will be convertedinto ethanol in 2006/07. Clearly, the supply of corn is relatively small compared to gasolinedemand, so other domestic sources of renewable energy must be developed to replace oil importsif the U.S. is to greatly reduce its dependence on imported oil. Biodiesel can extend the dieselfuel supply, but the supply of oil crops, animal fats, and other feedstocks are also relatively smallcompared to the diesel fuel market. Research may provide technological breakthroughs leadingto a significant expansion in ethanol production. In the near future, ethanol’s feedstock basecould expand significantly with the advancement of technology that could economically convertswitchgrass and other low-valued biomass into cellulosic ethanol.

USDA’s Forest Service (FS) also plays a major role in energy production and conservation.The FS is working to increase production of all energy sources in an environmentally soundmanner, capitalizing on the potential of woody biomass as a renewable energy resource, andcontributing to the improvement of infrastructure for transmitting energy across the country.Increasing domestic energy supply includes providing energy facility corridors, ensuring thatlands are available for energy mineral development and production, developing renewableenergy resources such as woody biomass, wind, solar power, and geothermal energy, and relicensinghydropower facilities.Nearly 50 percent of the nation’s geothermal energy production comes from Federal lands. Thereare currently 354 federal geothermal leases, 116 on National Forest lands, covering nearly360,000 acres. At the present time, there are 5 producing leases on National Forest landscontributing to a 12 mega-watt plant and a 45 mega-watt power plant that, combined, haveresulted in more than $12 million in royalties.

The FS actively participates in a government-wide initiative aimed at promoting developmentand use of biobased products and bioenergy. Programs include research on enhancingopportunities to use forest biomass to produce energy and other value-added products;developing economical, environmentally acceptable woody cropping systems to produce energyand other value-added products; exploring new processes to convert wood into ethanol; andidentifying ways to increase energy conservation through changes in manufacturingtechnologies, harvesting technologies, building construction practices, and designed landscapes.

The focus of the FS Biomass and Bioenergy efforts is woody materials that are not part of thecommercial forest product material flows. Woody biomass includes forest vegetation treatmentresiduals (tree limbs, tops, needles, leaves and other woody parts) that are by-products of forestmanagement and ecosystem restoration. Currently these materials are underutilized, commercialvalue is low, and markets are small to non-existent.

A recent joint USDA and DOE report, Biomass as Feedstock for a Bioenergy and BioproductsIndustry: The Technical Feasibility of a Billion-Ton Annual Supply, commonly known as the“Billion Ton Report,” projects that there are over 1.3 billion dry tons per year of biomasspotential, enough to produce biofuels sufficient to meet more than one-third of the nation’scurrent demand for transportation fuels by 2030. About one-quarter of that total, roughly 380million dry tons of biomass could be produced in a sustainable manner from residues fromprivate, State, Tribal and Federal forest lands and from forest wood wastes.

The Healthy Forest Restoration Act (HRRA) authorized the use of $5 million to help“establish small-scale business enterprises to make use of biomass and small-diametermaterial.” These funds were to be used to: (1) help reduce forest management costs on NationalForest System lands by increasing the value of biomass and other forest products generated fromhazardous fuel treatments; (2) create incentives and/or reduce business risk for increased use ofbiomass from or near national forestlands; (3) institute projects that target and help removeconomic and market barriers to using small-diameter trees and wood biomass.

Effects on Renewable Energy Production and Energy Efficiency

Federal and State governments have helped create markets for renewable energy through tax

incentives and mandates. Ethanol production has increased sharply since the late 1990s, to 4 billion gallons in 2005 up from 1.8 billion gallons in 2001. Biodiesel production has grown toover 90 million gallons in 2005, a nine-fold increase from 2001. The EPACT mandates that 7.5billion gallons of renewable energy be used in motor vehicles by 2012, guaranteeing a futuredemand for the renewable fuels. In addition to Federal and State programs, high oil prices andthe phase out of MTBE have contributed to the growth in renewable fuels production since 2001.While modest in size compared with tax incentives, USDA programs have contributed to thisgrowth.RD grants, loans, and loan guarantee programs supported the planning and construction of newproduction facilities and energy conservation projects, creating jobs and additional wealthenhancingopportunities in rural America. In total, 650 renewable energy and energy efficiencyprojects have been funded between FY 2001-05 at a Federal cost of $356 million. In addition,matching and funding by the private sector supporting these projects totaled another $1.3 billion.Included in these programs are 132 ethanol and biodiesel, 130 wind, 20 solar, 4 geothermal, 2hydrogen, and 11 hybrid projects; 92 anaerobic digesters and 7 landfill gas recover systems; 168energy efficiency projects; and other projects including solid fuel research.

In 2005, additional conservation practices applied with the assistance of USDA that improved energy efficiency on farms and ranches included:

• Residue management on 4.5 million acres,

• Irrigation water management on 1.2 million acres,

• Nutrient management on 4.1 million acres, and

• Pesticide management on 3.9 million acres.

There is a significant opportunity to realize immediate economic and environmental gainsthrough energy conservation activities. Preliminary estimates of the potential national savingsfrom implementing the following five conservation measures could be greater than $2 billion peryear. The measures include:

• Doubling of no-till acreage (from 62 to 124 million acres), saving 217 million gallons ofdiesel fuel and $500 million each year;

• Switching from high or medium pressure systems to low pressure systems, loweringelectricity use, and saving $100 million in pumping irrigation water costs;

• Increasing diesel irrigation pump efficiency by 10-percent, reducing diesel consumptionby almost 26 million gallons, and saving farmers and ranchers almost $60 million eachyear;

• Doubling manure-based nitrogen use to replace fertilizer produced from natural gasvalued at $825 million and 100 billion cubic feet of natural gas annually; and

• Using precision agriculture on more acres to reduce application overlap on 250 millionacres of cropland, saving up to $825 million in fertilizer and pesticide costs each year.

In addition to ethanol and biodiesel, biomass and animal wastes can be used to producerenewable energy. Biomass is used to generate electric power by direct burning, usinggasification systems, or mixing biomass with coal in coal-fired electrical generation facilities.The primary feedstocks include wood waste used by the pulp and paper industry for industrialheat and steam production. In addition, forest residues and municipal solid waste are used togenerate electricity. Another potentially large source of renewable energy is animal waste whichcan be turned into methane gas through anaerobic digestion. Anaerobic digesters are beingadopted by commercial livestock operations not only to produce energy, but also to meet newstate and Federal regulations for controlling animal waste. Currently, there are over 90 anaerobicdigester projects, either in operation or under construction, located throughout the United States.Nearly all the anaerobic digesters are associated with dairy operations, with a few associatedwith swine or poultry operations.Another emerging approach to reducing U.S. fossil energy use is to replace petroleum basedproducts with products made from biomass. There are many industrial and consumer productsthat have been traditionally made from biomass, including yarns and fabrics, soaps anddetergents, pulp and paper, lubricants and greases, and adhesives and paints. However,agricultural feedstocks can be used to produce non-traditional products such as chemicals,plastics, hydraulic fluids, and pharmaceuticals. There are many agricultural feedstocks that canbe used to make bioproducts, including a variety of crops, wood and plant oils, and agriculturaland forestry residues.

Meet expected new demands for rural electricgeneration and transmission.

Demand for new electricpower generation capacity is building, after many yearsof little or no new base load capacity being added.Substantial increases in loan guarantee demands areexpected. While USDA loan guarantees typically are for95-100 percent of the loan, consideration may be givento develop a more traditional loan guarantee program forprivate lenders and use partial loan guarantees or create amechanism for lenders to bid for the level of guaranteethey would require to provide financing. Loanguarantees and planning grants could be targeted tosupport the development of distributed generationfacilities using biobased fuel, wind, solar, or geothermalresources. Often the distribution grid must be augmentedto accommodate the renewable or distributed generationpower. Loan guarantee authority to support projects toupgrade the grid would help build renewable energycapacity. High voltage transmission capacity to moverenewable energy from its source to demand locations isa serious constraint to renewable power development.Clarifying access rights and pricing for high voltagetransmission could also be helpful in facilitating neededtransmission development.