Overview

Inroduction: The Energy Conservation Act of 2001 was enacted to provide for the efficient use and conservation of energy. The Act establishes and incorporates the Bureau of Energy Efficiency (hereinafter to be referred to as “Bureau”) and grants certain powers to the Central and the State Governments, as also the Bureau, to enact measures for the efficient use and conservation of energy. These regulations apply to appliances, vehicles, industrial and commercial facilities, buildings etc., which consume energy on a day-to-day basis. Certain key instruments have been envisaged under the Act, for mitigation of climate change, conserve energy and gain efficiencies in its usage.

With time, and in the context of energy transition, with a special focus on the promotion of new and renewable energy and also the National Green Hydrogen Mission, the statement of objects and reasons to the amendment Bill, provided the following reasons for the proposed amendments :-The Energy Conservation Act of 2001 was enacted to provide for the efficient use and conservation of energy. The Act establishes and incorporates the Bureau of Energy Efficiency (hereinafter to be referred to as “Bureau”) and grants certain powers to the Central and the State Governments, as also the Bureau, to enact measures for the efficient use and conservation of energy. These regulations apply to appliances, vehicles, industrial and commercial facilities, buildings etc., which consume energy on a day-to-day basis. Certain key instruments have been envisaged under the Act, for mitigation of climate change, conserve energy and gain efficiencies in its usage.

With time, and in the context of energy transition, with a special focus on the promotion of new and renewable energy and also the National Green Hydrogen Mission, the statement of objects and reasons to the amendment Bill, provided the following reasons for the proposed amendments:-

(1) Mandate the use of non-fossil sources, including Green Hydrogen, Green Ammonia, Biomass, and Ethanol for energy and feedstock;

(2) Establish Carbon Market;

(3) Bring large residential buildings within the fold of the Energy Conservation regime;

(4) Enhance the scope of the Energy Conservation Building Code;

(5) Amend penalty provisions;

(6) Increase members in the Governing Council of the Bureau;

(7) Empower the State Electricity Regulatory Commission to make regulations for the smooth discharge of functions.

Important features of the Bill :

A. Carbon Credit Trading: The Bill empowers the Central Government to designate a carbon credit trading system. Carbon credit implies a tradeable permit to produce a specified amount of CO2 or other greenhouse emissions.  The Central Government or any authorized agency may issue carbon credit certificates to entities registered and compliant with the scheme.  The entities will be entitled to trade in the certificates. Any other person may also purchase a carbon credit certificate voluntarily

B. Obligation to use non-fossil sources of energy:  The Bill also states that the government may mandate that some consumers fulfill a certain percentage of their energy needs from non-fossil sources. Different non-fossil sources and consumer groups may have different consumption criteria established.  Designated consumers include:

a. industries such as mining, steel, cement, textile, chemicals, and petrochemicals,

b. transport sector including Railways, and

c. commercial buildings, as specified in the schedule.

Penalty in case of failure to meet this obligation:  A penalty of up to Rs. 10 lakhs and an additional penalty of up to twice the price of oil equivalent of energy consumed above the prescribed norm is proposed in case the covered entities do not fulfil their obligation to use non-fossil sources of energy.

C. Energy conservation code for buildings:  The Act empowers the Central Government to establish an Energy Conservation Code for buildings. The code specifies minimum requirements for area-based energy use. This is changed by the Bill, which establishes an “Energy Conservation and Sustainable Building Code”. The Act mandates that the commercial structures erected after the notification of the code, to adhere to the said energy conservation code. This is applicable to a minimum connected load of 100 KW or contract load of 120 KVA.

As per the Bill, office, residential structures that fulfill the aforementioned requirements will also be subject to the new Energy Conservation and Sustainable Building Code.

D. Vehicle and vessel standards: The Act allows for the specification of energy consumption norms for machinery and appliances that use, produce, transmit, or provide energy. The definitions of “vehicle” and “vessel” given under the Motor Vehicles Act, 1988 are included in the Bill’s expanded definition (which includes ships and boats).

Penalty: A fine of up to Rs.10 lakhs may be imposed for failing to adhere to the guidelines which will be issued under the Act, with respect to Motor Vehicles and Vessels. In the case of vessels, non-compliance will result in an additional fine of up to double the cost of the oil equivalent of the extra energy utilized. Vehicle makers who violate fuel efficiency standards will be subject to a fine of up to Rs 50,000 per sold unit.

E. Governing Council of Bureau of Energy Efficiency (Composition): The general superintendence, direction, and management of the affairs of the Bureau shall vest in the Governing Council which shall consist of not less than 37, but not exceeding 37, members to be appointed by the Central Government. The Governing Council shall consist of the following members on an ex-officio basis as also on the basis of deputation by the concerned regulatory authorities. These consist of:

(i) One Chairperson who would be the Minister in charge of the Ministry of Power;

(ii)One Member Secretary who will be the Director General of the Bureau;

(iii)Twenty ex officio members representing concerned ministries and regulatory bodies including the Central Electricity Authority;

(iv)Seven expert Members to be appointed by the Central Government to represent industry, equipment, appliance, manufacturers, architects, institutes, and consumers; and

(v)Two members nominated by the Governing Council

These amendments to the Energy Conservation Act are most necessary, timely, and also welcome. We have already tinkered with the natural order of our planet and have turned it into an unlivable ghetto. If we have to come out of this ghetto, we need to act fast and also with clarity and conviction to protect our environment and natural resources.

Introduced in Lok Sabha (03.08.2022)

Passed by Lok Sabha (08.08.2022)

Passed by Rajya Sabha (12.12.2022)