The Perform, Achieve and Trade (PAT) Scheme, launched in 2012, is one of Bureau of Energy Efficiency (BEE)'s flagship programs. It sets energy efficiency improvement targets for selected high-energy-consuming industrial units, known as Designated Consumers (DCs). The energy savings achieved by these consumers over and above their individual targets are converted into tradable Energy Saving Certificates (ESCerts), which can be bought and sold on energy exchange platforms. Underperforming consumers can purchase ESCerts to meet their PAT compliance requirements. We conducted a detailed analysis of the PAT program and trading data for PAT Cycle II which can be found in our article “Not a PAT on the back, yet”. In this article, we look at the ESCerts trading data from PAT Cycle III and highlight a few issues that PAT continues to face.

1. What happened in PAT III?

PAT Cycle III was notified on March 30, 2017, and, like the previous cycles, followed a three-year duration. It used 2015-16 as the baseline year and 2019-20 as the target year. Starting with PAT Cycle III, the new cycles now get announced annually, where Designated Consumers (DCs) in that cycle receive energy efficiency targets for their respective three-year periods.

Figure 1: PAT cycles and PAT as rolling scheme since 2016

Source: BEE Report on Outcome of PAT II, Not a PAT on the back, yet by Prayas (Energy Group)

PAT III included 116 DCs spread across 5 demand sectors namely Aluminium, Cement, Iron & Steel, Pulp & Paper, Textile and 1 supply sector, Thermal Power Plants. As per the data available in public domain, the total saving target for PAT III was 1.059 million tonnes of oil equivalent (Mtoe), while the Monitoring & Verification (M&V) audits, conducted on 95 DCs out of 116, showed an achieved saving of 1.594 Mtoe. All sectors under PAT III achieved more than their sector-level targets. A large proportion of saving (45%) was from the single supply sector: Thermal Power Plants.

Figure 2: Sector-wise energy saving target & saving achieved by DCs under M&V Audit for PAT III

Source: BEE Report on Impact of Energy Efficiency Measures for the Year 2022-23

Although the targets were surpassed at the sector level, some DCs did not achieve their targets. After the M&V audits, about 7.44 lakh ESCerts were issued to 75 DCs and 20 DCs were directed to purchase 1.13 lakh ESCerts under PAT III (Refer Annual Report of the Ministry of Power 2023-24). We could not find a detailed notification in the public domain with a DC-wise list of ESCerts issued and directed to be purchased under PAT III. Such a notification was published for PAT II and was useful in analysing individual DC performance.

The trading of ESCerts for PAT III started on 9th April 2024 and continued over 13 sessions till 2nd July 2024. Around 1.8 lakh ESCerts were traded, all at the floor price of Rs 2165/ESCert, issued by the Ministry of Power (MoP). On 8th July, 2024 BEE issued a notification stating that the trading would stop from 9th July 2024.

Figure 3: Trading Volume in the Trading Sessions of PAT III

Source: Prayas (Energy Group) compilation from ESCerts trading data from IEX, PXIL, HPX

2. Increasing pool of unsold ESCerts
Under PAT, DCs who overachieve their targets are issued ESCerts based on their energy savings, and these are to be purchased by DCs who do not meet their targets. However, in all the three PAT cycles (I, II, III), the number of ESCerts issued hugely exceeds those to be purchased. Overall, around 103 lakh ESCerts have been issued till now, and 52 lakh are mandated to be purchased, thus guaranteeing that nearly half the ESCerts will remain unsold. Further out of the mandated 52 lakh EScerts, only 34 lakh have been actually purchased.

Figure 4: ESCerts issued, mandated for purchase and actually purchased (PAT I, II, III cumulative)

Source: Prayas (Energy Group) compilation from Power Ministry Annual Report 2013-24, Notification for PAT II, Report titled “Lessons Learnt in ESCerts trading under PAT Scheme” by BEE, Trade Reports from IEX, PXIL and HPX

A notification by BEE grants a perpetual validity to the ESCerts until they are sold and hence this large pool of nearly 69 lakh ESCerts will be carried forward and added to the newly issued ESCerts in the further PAT cycles.

The trading of EScerts was initially envisaged to be through market price discovery. However, a large supply of certificates with limited takers has resulted in the entire trade for PAT III and PAT II happening at floor price ever since such a price was set for trading by BEE.

Figure 5: Status of ESCerts under PAT I, II, III trading cycles

Source: Prayas (Energy Group) compilation from BEE report on outcomes of PAT II, ESCerts trading data from IEX, PXIL, HPX, Notification issued by BEE, Annual Report of the Ministry of Power 2023-24, Sector-Wise Trade Data Report by BEE

3. Need for better compliance

PAT rules impose significant penalties for those who do not purchase the equivalent ESCerts to account for their deficit from the targets, and this is expected to be a major driving factor for the ESCert trading. 

Non-compliance in PAT I was 9% while that in PAT II was about 56%. This non-compliance should have been penalized as per the provisions of EC Act and PAT rules to act as deterrence. However, a Notification issued by the BEE allowed non-complying DCs from PAT I and PAT II to participate in the PAT III Trading Sessions in 2024 as a one-time provision, although trading under PAT I and PAT II cycles was completed long ago in January 2018 and October 2023 respectively. This also makes estimation of non-compliance in PAT III difficult, since the PAT III trading data does not reflect the volume of ESCerts purchased towards compliance with mandatory purchases set under PAT III. 

DISCOMS and Thermal Power Plants account for about 89% of the total ESCerts mandated to be purchased in PAT III trading. These are regulated sectors working in a mostly non-competitive environment and receiving substantial central and state funds for efficiency improvement. Hence it is extremely important to ensure that there is strict action against non-compliance to ensure accountability.

Figure 6: Sectoral Share (%) of ESCerts mandated to be purchased during PAT III trading

Source: Sector-Wise Trade Data Report by BEE

Furthermore, DCs responsible for 86% of total ESCerts mandated to be purchased under PAT III trading have not even registered for trading which is reflective of the casual approach of the DCs towards the compliance. Sectoral shares again indicate that the largest share of unregistered ESCerts comes from the DISCOM and Thermal Power Plants.

Figure 7: Sectoral shares of ESCerts under PAT III: Purchased, Remaining to be purchased, Unregistered

Source: Sector-Wise Trade Data Report by BEE

4. PAT Timelines
The PAT Rules 2012 and the subsequent amendments set timelines for specific tasks in the PAT process and as highlighted in our previous article, there have been significant delays in this process. As per the Rules, the ESCerts for PAT VI should have been issued by February 2025, but only PAT III ESCerts issuance and trading has happened till now. Timely evaluation of performance, issuance of ESCerts, and their trading is critical for maintaining the credibility of the program and achieving desired results. 

Table 1: Delays in the PAT process (As of February 2025)

Source: Prayas (Energy Group) compilation from PAT Rules 2012 and Amendments, Quarterly Progress Report FY 2022-23 by BEE

5. The way forward
PAT has been one of BEE's flagship programs for the last 13 years. A significant amount of effort has been undertaken in establishing methodologies, technology manuals, and setting targets. Quite a few DCs have also taken initiatives to invest in energy efficiency technologies. However, the core issues continue to remain: oversupply of ESCerts, lax compliance, and delay in the stipulated timelines.  PAT is envisaged to play an important role in the upcoming Indian Carbon market since it already includes a market-based compliance mechanism. This is indicated in the National Budget Speech for the FY 2024-25 which mentions that a transition of the hard to abate industries from PAT mode to the Indian Carbon Market mode, as well as a shift from energy efficiency targets to emission targets, are planned. Hence, lessons learnt from the PAT Scheme shall prove vital for the Indian Carbon Market.