Workers check the glow of light bulbs at the Starlite Lighting Ltd. packing facility in Nasik, Maharashtra. (Photographer: Kuni Takahashi/Bloomberg)

Why You Shouldn’t Be Bedazzled By Modi’s LED Bulb Claims

BloombergQuintOpinion

Prime Minister Narendra Modi is proud of the government’s scheme to distribute millions of low-cost, energy efficient light-emitting diode (LED) bulbs. And why not: Modi told the Lok Sabha on February 7 that the distribution of 21 crore LED bulbs had helped households save Rs 11,000 crore in electricity bills. Even the name bears his unmistakable imprint: “Unnat Jeevan by Affordable LED for All”, whose acronym is UJALA, Hindi for illumination.

(Source: Government of India)
(Source: Government of India)
Unfortunately, these numbers are mostly fiction.

First, a brief history.  As with many other schemes that Modi has hogged the credit for, UJALA was designed and piloted by the United Progressive Alliance (UPA) under the much less catchy name DELP (standing for — I kid you not — “Demand Side Management-based Efficient Lighting Programme”). DELP followed in the footsteps of the semi-successful Bachat Lamp Yojana that had resulted in the sale of 2.9 crore compact fluorescent lamp (CFL) bulbs at a price of Rs 15 each and, the government contends, boosted demand nationwide by driving market prices down. In 2013, the UPA decided to apply this strategy to pricier but even more energy-efficient LED bulbs; while the first scheme was subsidised by carbon credits, DELP would be paid for by power distribution utilities out of the savings generated by shifting from incandescent to LED bulbs.

A November 2013 pilot project in Puducherry led to the distribution of 6.5 lakh LED bulbs to 2.5 lakh households at a subsidised price of Rs 10 each.

The government’s bulk order of 6 lakh LED bulbs caused the price to fall from Rs 800 per bulb in 2012 to Rs 310 in November 2013, proof that the concept worked.

As the chart below shows, successive orders caused bigger price drops, falling most recently (and controversially) to Rs 38.

Why You Shouldn’t Be Bedazzled By Modi’s LED Bulb Claims

There’s no question that the Modi government has taken UJALA forward, scaling it up with sales of 23 crore LED bulbs (as on April 21, 2017). But if you think this was in any way a brainchild of Modi’s, or that Power Minister Piyush Goyal did much more than implement a roadmap already laid out for him, think again.

Still, how does it matter who came up with the idea, as long as it benefits the nation, right?

The problem is that the claim of financial and energy savings is based on dodgy maths.

The government’s claims are based on a September 2015 PricewaterhouseCoopers (PwC) study that it sponsored, that looked at LED usage during pilot projects in Puducherry and in four Andhra Pradesh districts. The report stated that, once you factor in defective and unused bulbs, each LED bulb would produce an average saving of 134 kilowatt hours a year. Which translates into the savings Modi claimed in the Lok Sabha.

Multiply this by 77 crore LED bulbs, the planned total under UJALA, and you have a saving of 20,100 megawatts of peak load demand, equivalent to five ultra-mega power projects costing Rs 97,000-1,29,000 crore ($15-20 billion), for only Rs 3,000-4,000 crore. What’s not to like?

The issue is, the PwC study made overly strong assumptions to attain these savings.

It assumed that all 77 crore 7-watt LED bulbs would replace 60-watt incandescent bulbs – which is fine, and, more problematically, that each would be used for an average of 8 hours/day, 320 days in a year, equal to 2,560 hours/year.

Now this is perfectly reasonable if you live in Leh, India’s northernmost district, and every day is December 21 – the winter solstice – when you get 10 hours of proper daylight, and everyone sleeps only six hours; then you might conceivably leave all your LED lights on for 8 hours. But, seriously?

Indeed, a 2008 World Bank study calculated that a light bulb will be used 913 hours/year. Even the state-owned Energy Efficiency Services Ltd that actually runs UJALA assumes that a light bulb is used for 3.5 hours/day, 300 days/year, for a total of 1,050 hours. These more conservative figures translate into savings that are only 36-41 percent of what Modi claimed in the Lok Sabha.

More reason to take a dim view of the Modi government’s claims.

Amitabh Dubey is a consultant analysing Indian policy and politics for global fund managers. This article was originally published on his blog chunauti.org.

The views expressed here are those of the author’s and do not necessarily represent the views of BloombergQuint or its editorial team.

In response to this article, Energy Efficiency Services Limited has said:

We thank you for bringing to the fore the key subject of energy savings. However, we would like to bring to your notice the misrepresentation of facts. We are concerned that the arguments highlighted in the article by the author will downplay the benefits of the scheme.

While you acknowledge the merits of the UJALA programme and the significant benefits emanating from it, your article states that the documented savings are based on “dodgy maths”. We would like to apprise you of the procedure used for arriving at the documented savings.

The journey of UJALA

The UJALA programme has been designed to replace all the 77 crore incandescent bulbs with LEDs by 2019. The programme was started in February 2014 on the model of the earlier programme that was implemented by BEE named Bachat Lamp Yojana (BLY). BLY was a carbon finance based scheme that provided CFLs as replacement of incandescent at a price of Rs. 10 each, the balance being funded by carbon finance.

As per the industry statistics, the 60W incandescent bulb constituted 70% of the volume of bulbs sold and the balance was 100W and 40W having 20% and 10% share. The replacement wattage is as under:

(A) 100W - 9W LED

(B) 60W - 7W LED

(C) 40W - 5W LED

The weighted average wattage reduction will work out to 52.3W when all 77 crore incandescent bulbs are replaced. The reduction in peak demand will be 40,271 MW. However, the target has been kept at 50% of the above taking into the consideration that the peak incidence factor of bulbs is 50% - that is during peak time, only 50% of the bulbs are working. Therefore, the target for UJALA for peak demand reduction is 20,000 MW.

Calculation of energy savings

The energy savings calculations in BLY and the first set of LEDs programme in 2014 was based on the carbon finance methodology AMS-II. J where the CDM Executive Board of UNFCCC allowed 3.5 hours of usage in case a deemed savings approach was taken, without any monitoring.

The same could go as per actuals with metering. BLY and the LED programme in 2014, used the deemed savings approach for the purposes of monetisation of benefits and calculated the savings using 3.5 hours which was the approach followed internationally. It did not initially attempt at looking at actual usage.

EESL has taken up actual survey of usage of consumer appliances while preparing the DSM Action plan for 35 Utilities. In addition, it got an independent agency (PWC) to undertake the monitoring of project in AP and Puducherry and the Govt of AP asked two leading educational institutions to undertake the monitoring survey. The results are as under:

1. The DSM survey conducted in 35 DISCOMs indicated the usage of bulbs for more than 5- 6 hours

2. The PWC survey in AP indicated similar results

It is in this context that a conservative estimate of 5 hours has been taken for calculation which is borne out by detailed survey of usage not just in 1 state but across 35 DISCOMs.

We would like to highlight that the monitoring survey independently conducted by the AP Govt survey indicated a 30% higher usage. The clear outcomes of the study were:

• Usage hours and energy savings of the installed 7W LEDs that replace 60 W incandescent were recorded and monitored on real-time basis

• RFID/GSM tags are fixed on LEDs that in turn uses a computer chip and antennas to record and transmit real-time measurements to a web enabled system that is remotely accessible

• Original Estimated Operating hours: 3.5 Hrs Actual Operating Hours: 8 Hrs

• Original Estimated Annual savings: 227 MU Actual Annual Savings: 381 MU

Three times more savings achieved than the original estimation

Therefore, the assumption that programme translates into savings that are only 36-41 percent of what the government claims is false.

The Author’s Response To Energy Efficiency Services Limited’s Letter:

The state-owned Energy Efficiency Services Ltd. (EESL), which oversees LED bulb distribution, took issue with this analysis in a lengthy rebuttal that was carried on BloomergQuint on April 23, 2017. EESL disagreed that LED bulb usage should be taken as 3.5 hours/day rather than 8 hours/day, pointing out that the former figure was recommended by the United Nations Framework Convention on Climate Change for carbon credits when actual usage data are unavailable.

EESL stated that a nationwide survey of 35 DISCOMs, and a study by PricewaterhouseCoopers (PwC) in Andhra Pradesh, showed that LED bulbs are used for 5-6 hours/day, and that “a conservative estimate of 5 hours has been taken for calculation”. Furthermore, it said that an Andhra Pradesh government monitoring survey carried out by “two leading educational institutions” found that actual usage was even higher at 8 hours/day.

Since EESL has not provided copies of these reports, it is difficult to independently verify these claims. For one, it is erroneous for EESL to state that “5 hours has been taken for calculation” when the original PwC report cited, and available on the government’s UJALA website, clearly states on Table 24 that bulbs are assumed to be operating 8 hours/day, 320 days/year.

It was also widely reported on 21 Feb 2016 that the Andhra Pradesh government-sponsored study of the districts of Guntur, Anantapur, Srikakulam and West Godavari (the same ones covered by PwC), by Andhra University in Vishakhapatnam and the Hyderabad-based Engineering Staff College of India, found that the actual average energy saving per LED bulb was 73.7 kilowatt hours (kWh),considerably lower than the 133.6 kWh that PwC projected. Assuming that both reports used the same methodology, this suggests that the actual LED bulb savings are 55 percent of what the government claims.

After the original analysis was published, Twitter user Somnath Mukherjee pointed out that the PwC study assumed an electricity price of Rs 3.50/kWh, which may have further inflated the projected financial savings from LED adoption.

Consider the electricity tariffs offered by the Uttar Gujarat Vij Company Ltd in northern Gujarat. Depending on whether you are a rural, urban or “below poverty line” user, your first slab of 50 kWh/month of electricity costs somewhere between Rs 1.50 and 3.50 per kWh; with nighttime usage between 10 pm and 6 am attracting a charge of Rs 2.60/kWh. The true cost of the electricity used by LED bulbs, in northern Gujarat at least, is likely less than Rs 3/kWh for the first slab in which the bulk of households will fall, rather than the assumed Rs 3.50/kWh. This suggests that savings may in fact be inflated at two compounding levels: (1) the calculation of average use of a bulb and (2) the rupee savings per hour of usage.

To sum up, these inconsistencies need to be clarified, and I look forward to EESL releasing the methodology and findings of the various studies mentioned above. Until then, there is still reason to believe that the government’s projection of savings from LED bulb adoption is based on dodgy maths.