Abstract
India is a fast growing economy with a fast growing population. Estimations indicate that in the next few years, it will be the world’s most populous country, with China only second. These developments, together with high urbanization rates, are putting increasing pressure on the energy sector and driving the attention to energy efficiency. The issue is not only financial but also social and environmental. One of the schemes developed to promote energy efficiency in the residential housing sector is the Super Efficient Equipment Program (SEEP), which aims at reducing energy consumption in Indian households, by subsidizing the production of super efficient fans. Emphasis is put into increasing economies of scale and balancing possible losses in market power for producers. However, the scheme does not take into consideration consumers’ behavior in the market and their purchasing propensity toward energy efficient fans. In this article, we develop an econometric model that takes consumers’ preferences and behavior into consideration, by analyzing how these influence the success of the SEEP scheme. To do so, the price elasticity of energy efficient fans is calculated. We will then apply it to the SEEP subsidy scheme in order to assess how the quantity of super efficient fans sold varies with changes in the price. Using projected data on residential housing floor space in India, we will estimate the percentage of super efficient fans sold and calculate future energy savings. We are finally able to infer whether the SEEP scheme is capable of meeting its goals.
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Notes
Indian Ministry of Statistics and Programme Implementation, http://mospi.nic.in/Mospi_New/site/home.aspx
The Centred Moving Average is a method used to de-seasonalize time series. Analytically, it is of the form:
$$\begin{array}{@{}rcl@{}} CMA_{t}= \frac{y_{t-\frac{m}{2}}+2\left( y_{t-\frac{m}{2}+1} + {\dots} + y_{t}+\dots+y_{t-\frac{m}{2}-1}\right)+ y_{t-\frac{m}{2}}}{2m} \end{array} $$(2)where m = 10 years represents the length of the moving average and y t the observation at time t.
To be precise, in order to take inflation away from the time series, the minimum between the inflation rate and the Consumer Price Index for electric fans has been removed from the price.
As of end 2012, Government and Commercial Buildings accounted for about 800 million sq.m of floor space. Source: USAID ECO-III Project.
As an example, 81.8 % of urban households and 34.8 % of rural households have an electric fan, as of 2012 (Chaturvedi et al. 2014b).
As there is a cap to the maximum subsidy obtainable by a producer, there will be no incentive to bear extra production costs.
This assumption is also made by the SEEP Scheme.
Meaning that no fraction of the subsidy is used to reduce costs that are not related to the production of energy efficient fans
Ministry of Statistics of India, 2011
While being in line with our findings for what concerns the urban households.
1 W = 0.000001 MW
“The program is voluntary and manufacturers will bid for the amount of financial incentive as well as the total production quota through a reverse bidding mechanism with a pre-specified cap. The bidding mechanism is developed to allow multiple winners. The incentive will be paid per unit super-efficient fan to the manufacturer after the product leaves the factory for the market. A strict Monitoring and Verification (M &V) mechanism will check the quality and quantity of ceiling fans sold under the program” (Chunekar and Singh 2013).
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Acknowledgments
The author would like to thank Prof. Marc Chesney from the University of Zurich, Switzerland, for the unwavering support. Many thanks go to Magnus Bengtsson and Lewis Akenji from the Institute for Global Environmental Strategies (IGES), Japan, for their time and their precious comments.
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A: Test statistics
A: Test statistics
A.1 Dickey-fuller unit-Root and normality tests for regressions
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Troja, B. A quantitative and qualitative analysis of the super-efficient equipment program subsidy in India. Energy Efficiency 9, 1385–1404 (2016). https://doi.org/10.1007/s12053-016-9429-8
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DOI: https://doi.org/10.1007/s12053-016-9429-8