The Path to Light: A case for LEDs

Earlier this year, Prime Minister Narendra Modi inaugurated the Bureau of Energy Efficiency’s (BEE) Demand Side Management Based Efficient Lighting Programme (DELP) in South Delhi, referring to light emitting diodes (LEDs) as prakash path (path to light). In October2014, Andhra Pradesh committed to retrofitting households and street lighting systems with LEDs across 110 municipalities. It has already managed to distribute 42 lakh LEDs to households. Himachal Pradesh has also launched its own LED promotion programme. More recently, the Uttar Pradesh government announced plans to distribute 13 lakh LEDs to nearly 2.3 lakh consumers and retrofit over 36,000 street lights in Varanasi. The Power and Coal Minister, Piyush Goyal, stated that this move will offset 45 MW of power demand and generate savings worth ₹68 crore for Varanasi. DELP is a successor to the Bachat Lamp Yojana (BLY) and uses its basic architecture of monetising energy savings from efficiency. It differs from BLY by mobilising investments domestically as opposed to relying on international carbon markets. In 2012, Energy Efficiency Services Limited (EESL), the implementing arm of BEE, estimated DELP’s market potential at ₹25,200 crore in end-user savings. This is equivalent to avoiding a cumulative investment of ₹5,500 crore in 22 new coal power plants of 500 MW each. The case for LEDs The household sector accounts for a quarter of India’s electricity consumption. Nearly a quarter of this demand is attributed to lighting. Over half of this lighting need is met by incandescent lamps (ICLs), which waste 90 percent of their electricity consumption through heat. LEDs offer significant advantages over other lighting technologies. They provide the same luminous flux for one-tenth of ICLs’ and half that of compact fluorescent lamps’ (CFLs) electricity consumption. It takes four CFLs and 33 ICLs to match one LED in terms of its average life of 20 years. Unlike CFLs, LEDs do not contain mercury, thereby making their disposal safer. LEDs are also available in a wide range of colours, offer adjustable luminosity, and start up instantly. LEDs can bring significant relief to utilities as well. About 80-90 percent of lighting demand is generated during peak hours, when the utilities either pay an extra ₹4-6 over household tariffs per kWh purchased from generators, or resort to load shedding. Most utilities are loss making and peak electricity deficits are at 9-10 percent. By reducing peak loads, LEDs can lead to approximately 3 GWh of peak purchase saving per utility per annum, translating to ₹120-180 lakh of annual cost savings. Future of the lighting market The demand for lighting is expected to grow significantly in the future. The latest census indicates that one-third of Indian households still use non-electricity sources for lighting – a gap that the government is committed to bridging in its current term. Moreover, the ‘Smart Cities’ and ‘Housing for All’ programmes will lead to a sharp increase in lighting demand from urban households, municipalities and commercial establishments. Based on these drivers, analysis by the Center for Study of Science, Technology and Policy (CSTEP) shows that household lighting points could increase from 500 million in 2012 to 1,200 million by 2030. Household lighting consumption in 2011 was 23.54 TWh. By 2030, if all lighting points use LED, we can potentially fulfil all the lighting needs by consuming only 38 percent of our 2011 consumption. The key barrier in the realisation of such a scenario is the high cost of LEDs. Currently, the price of one LED is 45 times the price of one ICL and 5 times that of a CFL. But there are reasons for optimism on this front. Between 2009 and 2014, LED prices fell by 90 percent. Due to the anticipated improvement in luminous efficiency, a 4-5 watt LED in 2021 could provide the same amount of lumens as an 8-9 watt LED in 2012. According to the US Energy Information Agency, LEDs will become cost-competitive with CFLs by 2021. Further, the Electrical Lamp and Component Manufacturers’ Association of India has indicated that they will phase out the production of ICLs by 2017, freeing up the lighting market for LEDs and enabling more rapid cost reductions. The way forward Policymakers have realised the advantages of LED lighting, and efforts are underway to increase their penetration as electricity access improves. In 2014, the Ministry of Power (MoP) had announced the procurement of almost 20 million LED bulbs for over 15 million below poverty line (BPL) households. Under the Ministry of New and Renewable Energy’s solar lantern programme, LEDs are being promoted for solar home-lighting systems. Lessons from BLY In this context, lessons from BLY will be useful. As the Expert Committee on Low Carbon Inclusive Growth notes, bulk procurement of CFLs helped increase penetration in the non-subsidised segments by lowering CFL prices by a quarter, thereby doubling their sales between 2009 and 2012. MoP’s Core Committee on Multi-State DSM Programmes notes how LEDs present an identical opportunity if demands can be aggregated to send clear market signals to LED manufacturers. This will fast-track productivity gains and reduce transaction costs, facilitating drastic price reduction. However, the failure rate of CFLs under BLY was much higher than the 6 percent stipulated limit, leading to scepticism about the quality of procured products. Therefore, quality assurance is the key to building a self-sustaining momentum. In this regard, MoP has approved ₹250 crore towards LED testing protocols and facilities. The budget must be increased, corresponding to the volume and diversity of products in the market. The Department of Science and Technology could be encouraged to extend its infrastructure for testing LED technologies. Strengthening the institutional mechanism The institutional aspect of DELP must be strengthened to include representatives from industry, consumer groups, implementing and regulatory bodies. The Central Institutional Mechanism proposed by the Core Committee should provide guidance in ensuring fair and open bidding, transparent framework for risk-sharing, plugging of leakages, dissemination of best practices, and engagement of private and multilateral finance. Better institutional coordination and programme management – from procurement to performance appraisal – is a must. This can be ensured by placing responsibility on specific institutions for each activity. For example, State-designated or regulatory agencies could oversee procurement and the National Productivity Council could appraise the project performance. Building a domestic manufacturing base Lastly, the market afforded to major manufacturers must be leveraged to enhance domestic manufacturing capabilities. This could help accelerate technology diffusion and cost reduction. A thorough study of India’s manufacturing potential of LED components will be a good starting point. Current import duties for LEDs contribute 20 percent to their prices, thereby providing a default incentive to domestic manufacturing. Moreover, India already produces all the LED lighting components, besides wafers. The ‘Make in India’ campaign and the underutilised Modified Special Incentive Package Scheme (M-SIPS) would provide ideal platforms to facilitate such an expansion. The government has made the right noises on LEDs. Policies and programmes have also been chalked out. The implementation of the schemes must now be done in an orderly and efficient manner. This must be geared toward building a self-sustaining market for LEDs, so that prakash path is not just a buzz-phrase, but a reality for the masses as well.