Environmental, Social and Governance (ESG) - Principles and Practice · Green Initiatives

Energy Efficiency and Renewable Energy: Notes for CS Professional

Updated 11 October 2026 · Fact-checked

Energy efficiency means doing the same work with less energy. Renewable energy means using sources that replenish naturally, such as solar and wind. In an answer, define both, cite the Energy Conservation Act, 2001, the PAT scheme and energy audits, apply them to the facts, and give a company-level conclusion.

Understand Energy Efficiency and Renewable Energy

Energy is a major source of a company's costs and of its greenhouse gas emissions. Companies therefore work on two levers. The first is to use less energy for the same output. The second is to get the energy they do use from cleaner sources.

Energy efficiency (or energy conservation) means reducing energy used per unit of output, for example by upgrading motors, boilers and lighting, recovering waste heat, and monitoring consumption. Renewable energy comes from sources that replenish naturally, such as solar, wind, hydro and biomass. Using it lowers Scope 2 emissions (those from purchased electricity).

In India, the Energy Conservation Act, 2001 is the main law on efficiency. It created the Bureau of Energy Efficiency (BEE), which develops programmes and standards. The Act lets the Central Government notify energy-intensive industries as designated consumers. Designated consumers have duties such as appointing or designating an energy manager, getting periodic energy audits by accredited energy auditors, and reporting energy consumption. The Act has been amended, including to link with carbon markets, so check the latest text in your study material.

The PAT scheme (Perform, Achieve and Trade) is a market-based mechanism run by BEE under the National Mission for Enhanced Energy Efficiency. Each designated consumer in a notified sector gets a target to cut its specific energy consumption (energy per unit of product) over a cycle. A unit that beats its target earns energy saving certificates (ESCerts). A unit that misses can buy ESCerts to comply. So the scheme rewards over-achievement and makes under-achievement cost money.

On the renewable side, companies sign power purchase agreements, install rooftop or captive solar, buy renewable energy certificates, or set renewable purchase goals. These steps feed ESG disclosures, for example energy intensity and share of renewable energy in the BRSR. The company secretary helps by checking applicability of the law, tracking compliance, and ensuring accurate reporting to the board and stakeholders.

Key rules to remember

Specific Energy Consumption (SEC): SEC = Total energy consumed ÷ Total quantity of output; PAT targets are set on SEC, not on total energy. Output can grow while SEC falls.
PAT outcome rule: Actual SEC < Target SEC → ESCerts earned; Actual SEC > Target SEC → ESCerts must be bought or penalty risk; Lower SEC is better. Students often reverse the direction.
Energy intensity: Energy intensity = Total energy consumed ÷ Turnover (₹); A common ESG disclosure metric; compare year on year.
Renewable share: Renewable share (%) = Energy from renewable sources ÷ Total energy consumed × 100; Use the same unit (for example kWh or GJ) for both figures.

How to solve Energy Efficiency and Renewable Energy questions

Use this order for any question on energy efficiency or renewable energy, whether it is theory or a case.

1Define the key term asked: energy efficiency, renewable energy, energy audit, PAT or designated consumer.
2State the legal or policy source: Energy Conservation Act, 2001, BEE, PAT, or relevant ESG disclosure.
3Pick out the facts: type of industry, energy use, current sources, targets, any shortfall.
4Apply the rule to the facts: is the entity a designated consumer, what duties follow, what does PAT mean for it.
5Recommend practical measures: audit, efficiency upgrades, renewable sourcing, monitoring, ESCert trading where relevant.
6Link to ESG reporting and the board: metrics disclosed, committee oversight, company secretary's role.
7Conclude in one or two lines that answer the question asked.

Quickest way: Define, Law, Apply, Act

When to use it: Use this for short-answer and 5 to 8 mark questions when time is tight.

Write a one-line definition.
Name the Act or scheme and the body (BEE).
Add two or three facts from the question and tie them to a duty or mechanism.
List three practical actions, one each on efficiency, renewables and reporting.
End with the company secretary's or board's role.

Common mistakes in Energy Efficiency and Renewable Energy

Treating energy efficiency and renewable energy as the same thing.
Both are filed under 'green' and appear together in the topic title.
Fix: Say efficiency reduces consumption; renewables change the source. A firm can do one without the other.
Reversing the PAT logic, thinking a higher SEC earns certificates.
Students think of 'more' as achievement.
Fix: Remember the target is a reduction. Actual SEC below target earns ESCerts; above target means buying.
Saying PAT applies to all companies.
The word 'scheme' sounds general.
Fix: It applies to designated consumers in notified energy-intensive sectors only.
Confusing the Energy Conservation Act, 2001 with environment laws such as the Environment (Protection) Act, 1986.
Both deal with environmental protection.
Fix: Energy Conservation Act is about efficient use of energy and BEE. Keep pollution control law separate.
Giving generic points without applying the facts.
Students memorise notes and skip analysis.
Fix: Use the numbers and the industry in the question, and show the provision-analysis-conclusion flow.
Quoting section numbers or schemes from memory with no certainty.
Fear of looking vague.
Fix: Name the Act and the mechanism correctly. Cite a section only when you are sure.

Worked examples

Example 1

A cement company, notified as a designated consumer under PAT, has a target SEC of 0.80 GJ per tonne of cement. In the cycle it consumed 1,52,000 GJ and produced 2,00,000 tonnes. Did it meet the target? What follows under PAT?

Show the solution

Compute actual SEC = 1,52,000 ÷ 2,00,000 = 0.76 GJ per tonne.
Compare with target: 0.76 is lower than 0.80, so the company beat its target.
Savings per tonne = 0.80 − 0.76 = 0.04 GJ per tonne.
Under PAT, over-achievement earns energy saving certificates (ESCerts), which the company can sell to designated consumers that missed their targets.
Practical note: the company should keep audit-verified records, since certificates depend on verified energy data.

Answer: Actual SEC is 0.76 GJ per tonne against a target of 0.80, so the target is met. The company is entitled to ESCerts for the over-achievement and can trade them.

Example 2

Sunrise Textiles Ltd, a listed company in Surat, wants to cut energy costs and emissions. Advise the board on how it can implement energy efficiency and renewable energy, and on the company secretary's role.

Show the solution

Provision: the Energy Conservation Act, 2001 sets duties for designated consumers, including energy managers, energy audits by accredited auditors and reporting to BEE. First confirm whether the company is notified as one.
Analysis of efficiency: commission an energy audit to find losses in boilers, motors and dyeing processes. Replace inefficient equipment, recover waste heat, install metering and set an SEC target.
Analysis of renewables: install rooftop or captive solar, enter into a renewable power purchase agreement, or buy renewable energy certificates to raise the renewable share.
Governance: the board or its ESG or sustainability committee should approve targets, review progress and allocate capital.
Reporting: track energy consumption, energy intensity and renewable share, and disclose them in the BRSR with supportable data.
Company secretary's role: check legal applicability, track filings and audit deadlines, brief the board, and make sure disclosures are accurate and consistent.

Answer: Sunrise Textiles should confirm its status under the Energy Conservation Act, 2001, conduct an energy audit, invest in efficiency upgrades, raise its renewable share through captive or purchased sources, set board-approved targets, and report the metrics in the BRSR. The company secretary ensures compliance and disclosure quality.

Exam tips

Always name the Energy Conservation Act, 2001 and BEE in theory answers; examiners look for them.
For PAT, show the logic in three words: target, achieve, trade. Mention SEC and ESCerts.
When numbers are given, compute SEC or renewable share first, then conclude.
Close case answers with a governance link: board oversight, BRSR disclosure and the company secretary's role.
Do not quote section numbers unless you are sure; a correct Act and mechanism earn more than a wrong section.

Practice questions from Green Initiatives

Energy Efficiency and Renewable Energy: frequently asked questions

What is the Energy Conservation Act, 2001?

It is the central law for efficient use of energy in India. It set up the Bureau of Energy Efficiency and allows notification of designated consumers who must follow duties such as energy audits and reporting. It has been amended since, so read the current text.

What does PAT stand for and how does it work?

PAT stands for Perform, Achieve and Trade. Notified energy-intensive units get targets to reduce specific energy consumption. Those that beat the target earn ESCerts, and those that miss can buy certificates to comply.

What is an energy audit?

It is a systematic review of how and where a facility uses energy, to find losses and savings options. For designated consumers it is carried out by accredited energy auditors at the intervals the law sets.

How do companies in India adopt renewable energy?

Common routes are rooftop or captive solar, long-term power purchase agreements for solar or wind, and buying renewable energy certificates. Companies then report the renewable share in ESG disclosures such as the BRSR.