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Indian Journal of Science and Technology
Vol. 4 issue 3 (March 2011)
249
ISSN: 0974- 6846
Demand side management of electrical energy efficiency and environmental sustainability in India
C. Mayakrishnan
Department of Economics, Presidency College, Chennai–5, TN, India
[email protected]
Abstract
Electricity has a peculiar characteristic that it cannot be economically stored in large quantities. Electricity demand is
the fastest growing form of energy consumed worldwide and it is predicted that the world’s net electricity consumption
will double by 2030. Therefore its generation and consumption need to be matched at all times. Demand side
management (DSM) refers to the ability to alter end user electrical consumption in response to system conditions. It
aims at improving energy efficiency through reduction of Kilowatt hours of energy consumption for the same service or
activity. Other benefits of DSM could include higher end-use energy efficiency, improvement in quality and reduction in
cost of power. Energy-efficiency improvements can slow the growth in energy consumption, save consumers money
and reduce capital expenses for energy infrastructure. Innovative and efficiency improvements through DSM
programmes have been carried out in a more open energy market. At the same time, government intervention has also
been strengthened by the worsening of environmental situation and the need to significantly reduce emissions of
greenhouse gases. DSM programmes are used to eliminate or reduce the need for additional peak or base load
generating capacity and/or distribution facilities. Losing this opportunity to build efficiency into new economies would
have serious financial, environmental and social consequences in the future. India is the world’s sixth largest energy
consumer. The power generating capacity increased from 66086 MW to 97846 MW during 1990-91 to 1999-2000 at an
annual rate of 4.5%. The installed capacity of the power sector increased 60 fold between 1950 and 2000 at an annual
growth rate of 8.5%. The per capita electricity consumption in India increased from 354.75 kWh in 1999-2000 to nearly
704.00 kWh in 2007-2008. The CO2 production in India has been showing an increasing trend in the new millennium in
consonance with the rate of growth of Indian economy. Emissions per unit of electricity supplied from fossil fuels are
estimated at 167 tonnes of carbon per GWh in 2005. In India power plants burn mostly coal with approximately 10-30%
excess air. The national inventory of green house gases indicates that 55% of the total emissions in India come from
energy sector. While public is interested in using energy more efficiently, there are several market barriers that prevent
it from making rational investments in efficient technologies and practices. As the economy develops, households
switch over from traditional fuels to modern and cleaner energy. Hence it is certain that household consumption of
electricity is expected to increase rapidly with the increase in the growth of the economy and rise in per capita income.
Urbanisation and increased flow of income call for ever-expanding sets of diverse needs. If those appliances are used
efficiently, they will augment electric supply. Energy conservation potential for the economy as a whole has been
assessed as 23% with maximum potential in industrial and agricultural sectors. At present new rare-earth phosphors
have been developed to provide a warm light that is close in quality to the light of an incandescent. The new phosphors
improve the colour of fluorescents with the same efficiency. Electricity for lighting represents approximately 34% of
Indian peak power and roughly 17% of the electrical energy consumed. Incandescent lighting is estimated to constitute
at least 17% of the peak demand, and roughly 10% of the national electricity consumption (135 TWh in 1984-85).
Experts suggest that transferring subsidies from electricity to compact fluorescent lamps (CFLs) is a good proposition.
Energy labelling provides information in a form that is objective and easy to understand for customers. The specified
products are required to supply and declare energy data that has been determined when tested to the relevant
Standard. The operating cost is also known as the ‘second price tag,’ and can help customers choose between models.
Both energy labelling and standards stimulate technological change or innovation. This paper aims to examine
electricity production and consumption at the All-India level and analyse the social and environmental aspects of
electricity in the household sector.
Keywords: Electricity, energy-efficiency, green house gases, urbanization.
Introduction
Electricity has a peculiar characteristic that it cannot
be economically stored in large quantities. Electricity
demand is the fastest growing form of energy consumed
worldwide and it is predicted that the world’s net electricity
consumption will double by 2030. Therefore its generation
and consumption need to be matched at all times.
Conservation is the most economical, straightforward and
effective means of reducing reliance on fossil fuels.
Demand Side Management (DSM) refers to the ability to
alter end user electrical consumption in response to
system conditions. DSM activities are designed to
encourage customers to modify their patterns of electricity
usage and to use energy-efficient appliances so as to
match the level of electricity demand with availability.
DSM programs play an important role in mitigating
electrical system emergencies, avoiding blackouts and
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increasing system reliability, reducing dependency on
expensive imports, reducing high energy prices, providing
relief to the power grid and generation plants, avoiding
high investment in generation, transmission and
distribution network and leading to environmental
protection. DSM techniques are the cheapest, fastest and
cleanest way to solve the electricity problems. “DSM
programs are designed to save money for all consumers
besides protecting the environment”. It aims at improving
energy efficiency through reduction of Kilowatt hours of
energy consumption for the same service or activity.
Other benefits of DSM could include higher end-use
energy efficiency, improvement in quality and reduction in
cost of power. Energy-efficiency improvements can slow
the growth in energy consumption, save consumers
money and reduce capital expenses for energy
infrastructure. Additionally, energy efficiency reduces
local environmental impacts, such as water and air
pollution from power plants, and mitigates greenhouse
gas emissions. Energy efficiency standards and labelling
programmes provide enormous energy savings potential.
DSM is especially important to power planners in growing
economies where installation of an inefficient
infrastructure means many years of wasted power. DSM
has two main cost components–the cost of the new enduse technologies and practices and the administrative
and transaction costs of policy to encourage their use.
Future energy needs are based on two options:
increasing supply or decreasing the demand for energy,
and the latter implies demand-side management. The
restructuring of power in the late 1990s presented new
challenges. Innovative and efficiency improvements
through DSM programmes have been carried out in a
more open energy market. At the same time, government
intervention has also been strengthened by the worsening
of environmental situation and the need to significantly
reduce emissions of greenhouse gases.
In this background, the objectives of this study are: 1) To
study the production and consumption of electricity in
India. 2). To analyse the energy efficient household
equipments and environmental sustainability
Methodology and data sources of the study
The present study is exclusively based on the
secondary data collected from different published and
unpublished sources. The published sources are mainly
drawn from the Government of India publications such as
Economic Survey, National Sample Survey, Bureau of
Energy Efficiency and Tamil Nadu Electricity Board. The
objectives of the study have been verified using
secondary data.
Review of literature
Major area of interest to DSM programmes is the
residential sector where variety of electrical appliances is
used. DSM of electricity seeks to reduce electric loads
from the end-user or consumer through energy efficiency
Vol. 4 issue 3 (March 2011)
250
ISSN: 0974- 6846
(EE) and load-shaping measures. Successful demand
side management programs, stimulated by state
incentives, requirements, and financial structures, can
reduce the amount of electricity a utility must provide,
decreasing the need for new generation sources
(Williams et al., 2007). Reduction in electricity demand
generally translates to reduction in greenhouse gas
emissions produced by generation. Estimations of DSM
load reduction potential inform utility management
strategies and climate policy. The accuracy of such
estimates can affect plans for future programs, policies,
generation sources, etc. (Nadel, 2004). Energy-efficiency
improvement (including design that stimulates energyefficient use of equipment) had a considerable impact in
the early 1980s. Hence increasing the rate of efficiency
improvement seems to be the most straightforward
approach to limiting the growth of energy consumption
(Reddy 2003). If those appliances are used efficiently,
they will augment electric supply. As long as a utility's
cost to conserve is less than the cost of generating it, the
utility system opts for investing to conserve rather than
generate
electricity
for
meeting
the
demand
(Chitrarattananon et al., 1990).
The net benefits of energy efficient technologies are
calculated by comparing avoided generation expenditures
and avoided electricity subsidies with lost revenues from
reduced electricity sales and subsidies of the energyefficient technologies. In India, the benefits to utilities of
installing CFLs are large enough that subsidizing the
technology heavily is a remunerative proposition in almost
every case (Gadgil et al., 1990). DSM programmes are
used to eliminate or reduce the need for additional peak
or base load generating capacity and/or distribution
facilities (WCD, 2000). The real advantage in high growth
economies is that adding efficiency into new equipment is far
cheaper than improving existing equipment. Losing this
opportunity to build efficiency into new economies would
have serious financial, environmental and social
consequences in the future (World Bank, 1999).
Utility DSM strategies are regarded as resource
acquisition measures. In the classical sense, IRP aims at
balancing supply-side options and demand-side
measures at the macroeconomic level until marginal costs
of traditional or alternative energy supply-side options
equal marginal costs of demand-side options (Thomas,
2000). To reduce social costs, utility planners must
consider both supply and demand side options, and
sometimes take into account environmental externalities
(Didden, 2003).
Electricity production and consumption
India is the world’s sixth largest energy consumer,
relying on coal as the primary energy source for over half
of its total energy needs. Thermal power is more than
three quarters of India’s electricity, taking advantage of
India’s position as the third largest producer of coal in the
world. The power generating capacity increased from
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66086 MW to 97846 MW during 1990-91 to 1999-2000 at estimated at 1.1 Teragrams (Tg) per day or 397 Tg per
an annual rate of 4.5 per cent. The installed capacity of year. Average CO emission per unit of electricity is 1.04
the power sector increased 60 fold between 1950 and Giga grams (Gg). Technological improvements in efficient
2000 at an annual growth rate of 8.5 per cent. The growth combustion of coal can lead to greater production of
of electricity consumption in India since 1971 has been electricity per unit of coal that will effectively reduce CO
faster than that of other fuels. Per capita household emission per unit of electricity. The national inventory of
electricity use has grown rapidly than per capita income. greenhouse gases indicates that 55 percent of the total
Despite the tremendous growth, the per capita emissions in India come from energy sector. These
consumption of electricity in India remains one of the include emissions from road transport, burning of
lowest in the world (Government of India 1986). Table 1 traditional biomass fuels, coal mining, and fugitive
emissions from oil and natural gas. Emissions from the
gives production and per capita consumption of electricity
power sector reach 1180 Mt-CO2 in
in India. It shows that the per capita
Table 1. Total production & per
electricity consumption in India capita consumption of electricity in India. 2030, which is about three times the
increased from 354.75 kWh in 1999present emission level. Carbon
Total
Per capita
2000 to nearly 704.00 kWh in 2007emissions grow at a much faster rate
Year
production consumption of
(MU)
electricity (kWh) in the recent period due to the
2008. During the same period the
354.75
production of electricity from utilities 1999-2000 501.04
lowering share of coal in electricity
368.00
increased significantly from about 2000-2001 517.29
generation and substitution of coal by
2001-2002 533.80
373.00
501.04 MU to 1280.76 MU.
gas
and
other
carbon
free
2002-2003 560.90
390.00
technologies.
India's greenhouse gas emissions
560.20
India has experienced a dramatic 2003-2004 529.23
631.41
Social and environmental aspects of
growth in fossil fuel CO2 emissions, and 2004-2005 622.16
2005-2006 670.50
656.80
electricity in the household sector
the data compiled by various agencies
2006-2007 803.41
672.00
show an increase of nearly 5.9 percent 2007-2008 1280.76
Economic
& social dimension of
704.00
per annum since 1950. At present India
household
energy
use
Source: Central electricity authority
is rated as the 4th largest contributor of
India has been experiencing both
(DMLF division) – 2009.
CO2 emissions behind the USA, Russia
qualitative and quantitative changes in
and China. However, the per capita CO2 of 1.2 tonnes per its energy consumption pattern (CMIE, 2001). Household
annum is well below the world average of 3.87 tonnes per sector accounts for about 30 percent of final energy
annum. CO2 emission and economic growth rate is shown in consumption reflecting the importance of household sector
in total national energy scenario (Reddy, 2003). SEBs in
Table 2.
It is quite clear that the CO2 production in India has India evolved power policy in line with social security
been showing an increasing trend in the new millennium equations because it is a social and democratic country.
in consonance with the rate of growth of Indian economy. Though SEB function as autonomous service-cumFossil fuel emissions in India continue to result largely commercial bodies, they also function as the agents of
from coal burning. India cannot take the back seat the governments in executing various policies for the
because it is highly vulnerable to climate change as its state. The unaccountability feature of power consumption
led to gross inefficiency at
economy is heavily reliant on
institutional
and
climate sensitive sectors like Table 2. CO2 Emission and economic growth rate. technical,
Cumulative Economic
organizational
levels.
Cost
agriculture and forestry. The vast
CO2
growth rate escalation injected inefficiency
CO2
Year
(Tonnes)
low-lying and densely populated
(%)
(Tonnes)
into the system called for
coastline is susceptible to rise in 2000-2001 78055.80 78055.80
5.15
restructuring and reforms of
sea level.
2001-2002 80147.64 158203.44
4.10
power sector in India.
CO2 Emissions from electricity 2002-2003 83097.36 241300.80
8.60
End-use energy efficiency
generation
2003-2004 86739.47 328040.27
6.90
improvements
provide multiple
The amount of CO2 released 2004-2005 91535.21 419575.48
7.30
benefits;
higher
efficiency has
by the consumption of one unit of 2005-2006 96662.77 516238.25
7.70
direct and indirect financial
energy depends on the type of 2006-2007 104290.67 620528.92
8.10
benefits to consumers and society
7.50
fuel used for producing energy. 2007-2008 111223.17 731752.09
by reducing the need for
7.10
For instance, more CO2 are 2008-2009 119155.70 739684.60
Source: Economic survey, Government of India &
additional
supply
and/or
emitted from one unit of coal than
Bureau of energy efficiency.
distribution
facilities,
lowering
from one unit of gas. Emissions
energy
costs,
reducing
equipment
per unit of electricity supplied from fossil fuels are customer
estimated as 167 tonnes of carbon per GWh in 2005. In maintenance, creating opportunities for reducing
India power plants burn mostly coal with approximately equipment size, and mitigating risks from future price
10-30 percent excess air. Total carbon monoxide (CO) fluctuations. Efficiency investments can stimulate
emissions for 1997 from all the power plants in India are economic development and local job opportunities,
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improve energy security, and improve the quality of living
and working conditions. Higher efficiency reduces both
the direct emissions from onsite energy use, and the
environmental impacts resulting from fossil fuel and
electricity production and transmission. While public is
interested in using energy more efficiently, there are
several market barriers that prevent it from making
rational investments in efficient technologies and
practices.
Household consumption of electricity
The pattern of household consumption of electricity
represents the standard of living as well as the stage of
economic development of a society. As the economy
develops, households switch over from traditional fuels to
modern and cleaner energy. Hence it is certain that
household consumption of electricity is expected to
increase rapidly with the increase in the growth of the
economy and rise in per capita income. Urbanisation and
increased
flow
of
income
call
for
ever-expanding sets of diverse needs. Much of the
electricity is consumed for heating and cooling purposes
in higher income households. This in turn places
increased demand on scarce resources for capital
investment, material means and manpower. India in
general and Tamil Nadu in particular faces widening gaps
between electric supply and demand. Significant
proportion of their populations has yet to receive basic
electric services. In India, demand for power already
outstrips available supply despite the fact that more than
50 percent of residences remain unelectrified. Meeting
the projected increases in demand would involve
untenable capital drains, foreign exchange demands, and
environmental degradation.
Efficiency in electricity consumption
In this context, low-cost energy-efficient end-uses are
attractive options that can reduce demand. Moreover, this
could increase the energy services where living standards
of majority of the population are already low. If those
appliances are used efficiently, they will augment electric
supply. Historically, energy efficiency in India has
gradually emerged from being a subject of advocacy and
awareness building to narrow the widening gap between
supply-demand. As a potent tool to advance sustainable
development, energy efficiency has come into its own.
Power Ministry has developed initiative to make power
available to all by 2012 by promoting energy efficiency
and its conservation, which is the least cost option to
augment energy supply. Energy conservation potential for
the economy as a whole has been assessed as 23
percent with maximum potential in industrial and
agricultural sectors (Gupta, 2006).
Efficiency of household electrical appliances
Increasing international trade in household appliances
has meant that all countries are seeing a rapid
improvement in the quality and efficiency at very little
extra cost. For example, high efficiency, multi-stage,
multi-speed compressors are made by only a few large
Vol. 4 issue 3 (March 2011)
252
ISSN: 0974- 6846
companies. In the household and small commercial
sector, efficient room-size split systems will continue to
dominate the small air conditioner market. Compact and
small tube fluorescent lamps and electronic dimmable
ballasts are now sufficiently reliable to take over the
market from conventional incandescent and fluorescent
lamps. New lamp technologies such as sulphur lamps
and induction lamps are under development. The best
lighting technology is still less than 20 percent efficient in
turning electricity into light, so there is a lot of scope for
improvement. A wide variety of methods and fuels are
used for cooking. No major breakthroughs should be
expected in stove design, but there will be a transition to
safer, cleaner, fuels such as natural gas, propane and
electricity. The share of electricity will depend on the
availability of bottled gas distribution systems. The most
common fuels used for water heating are electricity,
natural gas or kerosene. Solar water heating is a mature
technology and can compete favourably with electricity.
Energy efficiency lamps
All fluorescent lamps operate by discharging an
electric arc through mercury plasma enclosed in a glass
tube. The ultraviolet (UV) photons emitted by the deexcitation of mercury atoms are converted to visible light
by a phosphor coating on the inside of the glass tube. At
present new rare-earth phosphors have been developed
to provide a warm light that is close in quality to the light
of an incandescent. The new phosphors improve the
colour of fluorescents with the same efficiency. They also
allow the diameter of the glass tube to be reduced to
approximately one centimetre, with little lumen
depreciation. The result is compact fluorescent lamps
(CFLs) that are nearly the same size as standard
incandescent and fit into the same sockets.
Power system expansion is often based on the
availability of capital resources for initial investments. The
cost of avoided peak installed capacity (CAPIC) can be
used to take such decisions. CAPIC refers to the net
present value of an energy-efficient technology to be
operated for the duration of the life of a power plant that
renders the installation of a kW of generating capacity
unnecessary. In India, the avoided peak demand at the
busbar (42.38 watts) divided by power plant availability at
peak hours (0.573) equals avoided installed capacity
(EIA, 1988).
Efficient lighting
Residential electricity is highly subsidized in Tamil
Nadu while industries pay higher price that are unable to
obtain sufficient power during the peak periods. Electricity
for lighting represents approximately 34 percent of Indian
peak power and roughly 17 percent of the electrical
energy consumed. Incandescent lighting is estimated to
constitute at least 17 percent of the peak demand, and
roughly 10 percent of the national electricity consumption
(135 TWh in 1984-85). Household electric demand is
expected to grow rapidly. As more homes become
electrified, the negative impact of inefficient appliance
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stock will increase, aggravating already serious shortages
in peak power.
253
ISSN: 0974- 6846
and technologies are cost effective and therefore
provide real cost savings to energy users.
Barriers to use efficient appliances
Energy efficient technology
The goal of achieving ‘efficiency’ is inhibited by many
market barriers including subsidising electricity. Experts
suggest that transferring subsidies from electricity to
compact fluorescent lamps (CFLs) is a good proposition
(Gadgil and Jannuzzi, 1990). Generally in economies
producing and conserving electricity through cost-benefit
analyses of power plants and manufacturing plants and
energy-efficient CFLs and windows are made to take
optimal policy decisions. Despite the potential economic
and environmental benefits of CFLs and windows
worldwide, consumers may avoid adopting such
technologies for any or many of the following reasons.
1. Energy-efficient technologies' annualised societal
costs may be much lower than those of inefficient
counterparts. Consumers with less income are
unwilling to invest in an initial costly technology even
though it is profitable in the long run.
2. Residential consumers benefit from subsidized
electricity; their electricity bills do not reflect the full
social costs of inefficient electric appliances. Where
residential electricity is subsidized, consumers have
little or no incentive to purchase and install relatively
expensive, highly efficient appliances (Meyers et al.,
1990).
3. Energy-efficient technologies are often unfamiliar.
Purchasing an expensive, locally unproven appliance
represents a financial risk that many households
refuse to accept.
India’s energy intensity per unit of GDP is higher
compared to Japan, U.S.A. and Asia as a whole by 3.7,
1.6 and 1.5 times respectively. It is because of the fact
that India being in a transition from an agricultural to an
industrialized society increased urbanization and
consumerism (McNeil et al., 2005). The cost effectiveness
of an energy efficient technology may be estimated by
calculating its cost of conserved energy (CCE). The cost
of conserving a kWh by replacing a series of
incandescent with a long-lasting CFL can be compared to
the cost of energy. The CCE is the annualized net cost of
investing in the technology divided by the annual energy
savings it achieves: CCE = ((investment) (capital recovery
rate) + (net annual increase in operation and
maintenance costs minus avoided annual cost of
incandescent))/ (Annual energy saved in kWh)
The CCE provides a measure that is directly comparable
to the cost or price of energy supply (Government of India,
2005). It is a generally accepted that the cost of conserved
energy is lower than the cost of supply for a majority of the
energy efficient technologies. Table 3 shows an example of
the cost-effective energy efficiency potential for four products
in India. It shows that among these products refrigerators
and distribution transformers exhibit the highest potential
for improving energy efficiency. Industrial sector, in
addition to efficient motors, lighting and air conditioning
systems, and variable speed drives are increasingly being
utilized. These are cost effective in many applications.
The annual benefit derived from a CFL to a consumer is
the difference between the annual savings from avoided
energy consumption and the annualized cost of the CFL.
The net benefits of energy- efficient technologies are
calculated by comparing avoided generation expenditures
and avoided electricity subsidies with lost revenues from
reduced electricity sales and subsidies of the energyefficient technologies. In India, the benefits to utilities of
installing CFLs are large enough that subsidizing the
technology heavily is a remunerative proposition in almost
every case (Gadgil et al., 1990).
Table 3. Cost effective energy efficiency
improvement potential, India.
Product
Base
Efficiency
Percentage
case
case
improvement
(kWh/Year) (KWh /Year)
Refrigerator
Direct–cool
381
Frost–free
930
Room air conditioner
Window
1191
Motors
Agricultural – 5 HP
992
Industrial – 15 HP
4079
Industrial – 20 HP
5562
Distribution transformers
25 KVA
1036
63 KVA
1834
100 KVA
2619
160 KVA
3757
200 KVA
4989
208
508
45
45
1056
11
875
3264
3387
12
20
39
441
797
1068
1653
1880
57
57
59
56
62
Source: McNeil et al., 2005.
4. Energy-efficient appliances are costly. The resulting
high prices can make such appliances uneconomical
from any viewpoint within the energy sector.
By managing electrical loads and maximizing the use of
efficient electrical technologies, demand for electricity
can be tempered. Many of these efficiency measures
Energy labelling, energy efficiency & standards &
programme
Energy labelling provides information in a form that is
objective and easy to understand for customers. The
specified products are required to supply and declare
energy data that has been determined when tested to the
relevant Standard. Most of the goods in the market are
with incomplete information of energy. All the users of
goods, particularly the residential category, are not aware
of the secondary costs of operating them. Some of the
appliances currently available in the market are quite
efficient. There are many other where the efficiency could
be substantially improved. Energy labelling aims at
creating a market full for efficient products through the
provision of clear and objective information on energy
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efficiency. People compare the size, features and price of
the appliance while purchasing. The check list may not
include energy efficiency in the first instance. However,
once they establish the amount they would like to pay for
appliance then energy consumption efficiency is a fair
comparison between products. The operating cost is also
known as the ‘second price tag,’ and can help customers
choose between models. Both energy labelling and
standards stimulate technological change or innovation.
Some manufacturers seek to differentiate from
competitors on energy efficiency attribute. Without energy
labelling, customers have no way to determine appliance
operating costs. Energy operating costs over an
appliance's life are typically greater than the appliance
purchase cost. So a lack of information on energy
consumption can mean that there is a significant potential
market failure - the inability of customer to estimate more
than half of the total appliance costs.
Standards and labelling (S&L) programme is one of
the key activities for energy efficiency improvements. This
would ensure that only energy efficient equipment and
appliance would be made available to the consumers.
Initially the equipment to be covered under S&L
programme are household refrigerators, air-conditioners,
water heater, electric motors, agriculture pump sets,
electric lamps and fixtures, industrial fans and blowers
and air-compressors.
Conclusion
The demand for electricity has been growing at rapid
rate. The heavy reliance on fossil fuel for our energy
requirement leads to the emission of various pollutants.
Therefore conservation of our ecology and environment
must be given prime importance while fulfilling our energy
requirement. The DSM of energy consumption through
energy efficient electrical household appliances will prove
to be a cheap and efficient way of conserving our
environment. Further, the energy standards and labels
which are aimed to reduce various pollutants by the
government of India and the respective state
governments will pave the way for sustainable
environment. The study concludes that the higher income
and middle income people have preference over energy
efficient electrical appliance but majority of the poor
people uses the energy inefficient household products,
due to high cost of energy efficient appliances. Therefore
it is suggested that energy efficient electrical appliances
must be subsidised heavily in order to provide opportunity
to the poor people to use those appliances for sustainable
environment.
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