Implementing Electricity Load Management: Lessons Learned from Efficient Lighting Programs

1. Implementing Electricity Load Management: Lessons Learned from Efficient Lighting Programs ESMAP Knowledge Exchange Series April 12, 2006 Ashok Sarkar ESMAP, Energy & Water Department, World Bank asarkar@worldbank.org

2. Power Crises: The Context • 1.6 billion people do not have access to modern energy resources • Per capita electricity consumption in developing countries continues to be low • Energy and peak shortages prevail resulting in high outage costs • Cost of supply capacity expansion is high and limited by capital constraints • Power delivery infrastructure is weak and loss-prone

3. Power Inequities 23 industrialized countries consume half of world’s total lighting energy use Source: NASA website http://antwrp.gsfc.nasa.gov/apod/ap001127.html Year: 2000

4. Strategies for Electricity Load Management • Broad Objectives: • Utility perspective: Reduce shortages or “crises” • Consumer perspective: Increase reliability, reduce costs • Array of Technology Options: Supply-side, T&D and Demand-side measures (Demand Side Management-DSM) • Menu of Approaches: • Public policy / Regulatory based: Appliance minimum energy performance standards and labeling systems, industry energy consumption norms, mandatory energy audits, utility demand side management, information campaigns, etc. • Market-driven: Energy efficiency performance contracting through ESCOs, etc. • Lighting options stand out in many ways: Clear economics, easy to understand, positive impact on the electric utility, Upstream benefits (avoided T&D losses), “visible” impact on quality of life • Many other lighting options exist – Fluorescent tube lights, LEDs, etc. • The focus of the presentation is limited to Compact Fluorescent Lamps (CFLs) applications

5. Lighting: A Global Priority A $230 billion Market • Global Lighting Electricity Use • Residential – 28% • Service/Commercial 48% • Industry – 16% • Street Lighting – 8% • Global Lighting Savings Potential • Savings Potential % of total savings • Residential: 40-60% 27% • Commercial 25-40% 31% • Industrial 15-25% 7% • Streetlighting 25-30% 6% • Residential 92-99% 29% • (Fuel-based) Source: Evan Mills, 2002

6. Source: Wikepedia website

7. The Economics of CFL • Case of a 15 W CFL replacing 60W incandescent • Using 20% T&D loss, usage of 5 hours/day and 0.5 power factor (to be on conservative side), the savings per CFL at power plant bus bar equals: • Energy: 50 kWh/year • Peak Load: 27 W • At CFL price of $2.75 and life of 8,000 hours (~4.4 yrs), the cost of savings: • Energy: $0.0125 / kWh • Peak Load: $102 / kW • Emissions reduction/ Carbon Credits (for grid emissions factor of 0.9kgCO2e/kWh) would result in additional revenues: • @ $5/tCO2 CER Price: $ 0.99 per CFL • @$10/tCO2 CER Price: $ 1.98 per CFL Compare! Generation Supply Options: $400-1500 / kW

8. Efficient Lighting Programs: Illustrative Case Studies and Examples • Sri Lanka • India • Vietnam • Indonesia • South Africa • Ghana • China Biax Globe Reflector Spiral

9. IFC: Efficient Lighting Initiative (ELI)

10. Sri Lanka • CEB Program: to address high cost barriers • 1st Pilot Phase (1995): 600 households • 2nd Demo Phase (1996): 100,000 CFLs [CFL cost of US$7!!] • 3rd Phase (19998-1999): 600,000 CFLs (through loan scheme and direct sales) • Up to 4 CFLs per customer • 12 month interest free loan • Payments through electricity bills or salary deductions • 2 year warranty on lamps from 5 suppliers • Reduction Impacts: 34 MW • Key Success Factors: CEB, Loan, Warranty

11. India: BELP Program • BESCOM (Bangalore City) Objective: to improve reliability, addresses high system losses, reduce evening peaks • Focused on residential customers, both CFLs and FTLs • 1st Demo Phase: ~300,000 lamps in Bangalore Urban District • 2nd Phase (ongoing): 2.6 million customers targeted; three lighting suppliers (Philips, Osram, Asian Electronics) selected through tender to provide lamps with 1 year warranty • CFL Purchase Options: • Direct Purchase: at discounted prices • Installment Scheme: payment through 9 monthly installments through electricity bills or salary (BESCOM staff) • Average savings per CFL > Average installment • Targeted Reduction: 13.5 MW (pilot), 117 MW (2nd Phase) • Key Success Factors: BESCOM, Program marketing

12. Vietnam • EVN Objective: to address rapid demand growth, reduce rural customers power bills • 1st Phase (2001-2002): Pilot • 2nd Phase (2004-2007): 1 milion CFLs targeted • 300,000 CFLs procured in Dec 2004 from Osram through international tender process - ELI certification), mainly targeted to rural residential customers, 4-6 months timeframe • CFLs price $1.07 with 15-month warranty • Lamps distributed through Provincial PCs and Commune Retailing Groups (~200 in Year 1) • Initially subsidy was to be provided by EVN (33% in Year 1 to 20% in Year 3)- assuming CFL cost of ~$2.50 • Targeted Reduction: 120 MW (2nd Phase) • Key Success Factors: Bulk procurement, Low Price

13. Vietnam: CFL Bulk Procurement Program Source: Peter du Pont, Right Light 6 Conference, May 2005

14. NPV of savings from subsidy reduction = USD 240 million Source: Peter du Pont/ Booz-Allen Hamilton (1999) Indonesia: Potential Targeted CFL Program REDUCING SUBSIDIES THROUGH CFL GIVE-AWAY PROGRAMS CURRENT TRADITIONAL MODEL: Incremental kWh Capital and operating costs = 5.2 cents/kWh Revenue received = 3.0 cents/kWh Cash contribution margin = 2.2 cents/kWh (SUBSIDY) STRATEGIC ENERGY EFFICIENCY THROUGH CFL Capital and operating costs = 4.4 cents/kWh Revenue received = 3.0 cents/kWh Cash contribution margin = 1.4 cents/kWh (SUBSIDY) A NET LOSS (SUBSIDY) REDUCTION OF 0.8 cents/kWh SOLD

15. South Africa • Eskom Objective: to address power shortages and reduce rolling black outs • 1st Phase: 300,000 CFLs for free distribution in Alexandria (north of Johannesburg) • 2nd Phase: 2.7 million CFLs for low cost housing areas • 3rd Phase (2006): 5 million CFLs (Western Cape Town) based on swap-out (through door-to-door campaign or at the supermarkets) • 2.5 million CFLs free distribution (to low income consumers) • 2.5 million to middle- and high-income consumers at subsidized retail price of US$0.80 (compared to normal retail prices of US$1.40) • Targeted Reduction: ~150 MW (3rd Phase)

16. Ghana • Electricity Company of Ghana (ECG) Objective: to address power shortages and affordability • High-quality CFLs (withstands voltage fluctuations 190-260 V) by Osram • Customer purchases up to 4 CFLs per household at the price of standard incandescent lamp • Incandescent lamps returned to ECG are destroyed • Approximately 4 millions CFLs per year on a sustainable basis. • Estimated Reduction: ~150 MW per year (@ 27% T&D losses, and 0.5 power factor) • Proposed as a CDM project: ~122,000 tCO2e annually

17. Ghana Efficient Lighting Project Source: CDM PDD for Ghana Efficient Lighting Project, UNFCCC website

18. China: Shijiazhuang Green Lighting Project • Hebei Province DSM center: to address power shortages by accelerating the penetration of CFls in open market • Follow-up of the “China Green Lights Project” (NDRC, UNDP, GEF) • High-quality CFLs (ISO 9001 standards, China Compulsory Certification, China Energy Conservation Certification) • Mainstreams CDM to increase the CFL penetration rate, with additional buyers • Incandescent lamps returned to Hebei DSM Center are destroyed • Approximately 600,000 CFLs per year on a sustainable basis. • Estimated Reduction: ~20 MW per year (@ 7.5% T&D losses) • Proposed as a CDM project: ~86,000 tCO2e annually

19. China: Shijiazhuang Green Lighting Project Source: CDM-PDD for Green Lighting in Shijiazhuang City (China), UNFCCC website

20. China – Shijiazhuang City (Hebei Province) Green Lighting Project Project Implementation Scheme (1) Selection of CFLs Manufacturers Project Implementer will invite only CFLs manufacturers which produce CFLs which meet the quality standards. (2) Distribution of CDM Exchange Cards to local residents Project Implementer will distribute CDM Exchange Cards to local residents either through residents’ committees or at streets (3-1) Selling of qualified CFLs at Hebei DSM center (3-2) Selling of qualified CFLs at some retail shops designated by Hebei DSM center (4-1) Provision of incentives at Hebei DSM center In order to receive incentives at Hebei DSM Center, interested local residents who intend to purchase CFLs have to bring their living ILs from home and fill in the CDM exchange cards. (4-2) Provision of incentives at mobile clearinghouses In order to receive incentives at mobile clearinghouses, interested local residents who intend to purchase CFLs have to bring their living ILs from home and fill in the CDM exchange cards. Mobile clearinghouses will move around housing estates periodically. (5) Generation of emission reductions by replacing ordinary ILs with purchased CFLs at buyers’ homes CDM cards which contained the questionnaire will be recovered and analyzed to calculate the expected emission reductions. Source: CDM-PDD for Green Lighting in Shijiazhuang City (China), UNFCCC website

21. Lessons Learned From CFL-based DSM Programs • Opportunities: • Cost-effective strategy for peak load management and increased reliability of power supply • Financially viable for service territories with commercial losses or subsidies • Economies of scale  bulk purchases  lowered costs (Virtuous Cycle) • Synergies with carbon finance instruments (CDM) • Challenges: • Managing the program delivery in a sustainable manner • High transaction/ delivery costs (esp. in countries with weaker markets and public / private sector institutions) • Measurement and verification (esp. for leveraging CDM) • Good quality (Voltages, induced low power factor, harmonics) • “Rebound” and “Free Rider” effects Efficient lighting technology and cost barriers are gradually disappearing … large-scale program implementation and delivery remains a challenge…best practice business models could be replicated

22. Our Energy Future…the Path is Clear... OR Electric incandescent lamp converted into a fuel oil lamp from Ghana marketplace (Source: Evan Mills, 2002 [Photo Credit: Rick Wilk])

23. THANK YOU Ashok Sarkar ESMAP, Energy & Water Department asarkar@worldbank.org