The Energy Conservation Act, 2001 defines Energy Audit as “the verification, monitoring and analysis of use of energy including submission of technical report containing recommendations for improving energy efficiency with cost benefit analysis and an action plan to reduce energy consumption”. Energy (thermal and electrical) is one of the top three expenses in most of the industry, along with labour and material. The potential cost saving makes energy management function a strategic area of cost reduction. Energy Audit helps to understand more about the ways energy and fuel are used in any industry, and help in identifying the areas where waste can occur and where scope for improvement exists.
The Energy Conservation Act provides for a biennial energy audit of Designated Consumers in various industrial sectors consuming more energy per year than the threshold defined by Bureau of Energy Efficiency (BEE), Ministry of Power, and Government of India.
Several State Governments (Gujarat, Maharashtra, Orissa etc.) have enacted laws making Energy Audit to be mandatorily conducted once in three years for all consumers of electrical power exceeding the defined threshold.