Demand-side energy efficiency brings benefits to four key stakeholders amid India’s low-carbon energy transition program.
Energy systems are becoming increasingly digitalized in the world. But high-tech power applications have so far largely bypassed rural areas in developing Asia, where electricity consumers continue to suffer intermittent supply, aging devices, poor maintenance and services, high system losses, and increasing power costs.
That’s why ADB decided to support a $200 million loan for Energy Efficiency Services Limited (EESL) to implement various demand-side energy efficiency projects in India. One of the pilot projects has recently been completed in Gangapur, a rural village in Varanasi, Uttar Pradesh, where EEESL installed smart meters with satellite communication technology in about 5,000 households and ADB is considering scaling up through a proposed second loan.
We have observed that smart meters bring benefits to four key stakeholders.
First, each rural consumer enjoys improved power quality, shorter outage durations, and flexible payment options (pre-paid or post-paid). Smart meters also provide real-time information about the electricity usage through a mobile app, so consumers can detect any wastage and optimize electricity consumption to save money.
Smart meters likewise prepare rural households ready for the distributed and decarbonized future of energy systems. When more rural households install distributed solar photovoltaic panels on their rooftops, smart meters can be used as “net metering”, i.e. surplus solar power is transferred to the grid, allowing customers to offset the electricity bills.
Finally, smart meters can also be used for time-of-use tariffs (different pricing periods during the day and night) so consumers perform “demand response” vs. the different tariff levels to reduce their energy usage when electricity prices are higher.
Second, smart meters ensure accurate billing (no human intervention and estimation to record the bills) with pre- or post-paid subscriptions for local distribution companies, and also remotely disconnect customers who fail to pay bills on time. This helps local distribution companies improve their billing and collection efficiency and thus reduce aggregate technical and commercial losses from around 30% to 15%.
With smart metering, distribution companies can predict power purchase requirements more accurately, and optimal usage means less power needs to be purchased during peak hours. Less commercial losses and more efficient power purchase improves the financial performance of distribution companies, allowing them to hold off on raising costs for consumers.
Moreover, data collected from smart meters helps distribution companies improve load forecasting, better locate and size substations and transformers, and curb technical losses.
Third, smart meters are affordable. Each one costs about $35 to buy and another $35 to deploy for five years. This is fully paid as an initial investment by EESL, which in turn gets Rs100 ($1.3) per meter per month from local distribution companies out of savings realized over the expected eight-year lifespan of each device, generating a 14% return on equity for EESL. This is an innovative business model (“invest-own-operate”) that can be replicated elsewhere in India and many other developing countries that suffer from high system losses, as it does not burden local distribution companies upfront.
Fourth, smart meters benefit the whole society through reduced carbon emissions and positive environmental impacts. In fact, EESL’s smart metering initiative is part of a larger low-carbon energy transition program by the Government of India. The program is promoting smart meters in 17 towns in Uttar Pradesh and Haryana and expanding to other parts of the country, where it is expected to create many local jobs.
India’s smart metering initiative shows how state-of-the-art digital power technology can be deployed in rural areas to benefit all stakeholders through innovative business models, an experience that is very valuable to other developing countries in the region. ADB continues to support these innovative projects with financial credits and by being a knowledge partner for a low-carbon energy transition in Asia and the Pacific.