Energy efficiency: a clear path to a green future

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From an industry perspective, it is difficult to understand the widespread reluctance in Europe to adopt the Energy Efficiency Directive that can generate thousands of jobs and save private households millions of euros, says Lars Clausen.

Lars Clausen is Executive Vice President at DONG Energy.

 

The European Union has adopted the ambitious target of increasing energy efficiency by 20% by 2020. The Energy Efficiency Directive plays an important role in fulfilling this objective, and the Danish EU Presidency has made landing this directive a top priority; aiming for political agreement before the end of June, when their term runs out. However, widespread opposition exists around the efficiency proposition.

 

Lars Clausen is Executive Vice President at DONG Energy.

The European Union has adopted the ambitious target of increasing energy efficiency by 20% by 2020. The Energy Efficiency Directive plays an important role in fulfilling this objective, and the Danish EU Presidency has made landing this directive a top priority; aiming for political agreement before the end of June, when their term runs out. However, widespread opposition exists around the efficiency proposition.

From an industry perspective it can be hard to understand the reluctance to adopt a new law that has the potential to kick-start industrial activity throughout the clean tech and energy sectors, generate hundred thousands of jobs, save industry and private households millions of euros on their energy bills, strengthen businesses’ competitiveness, and help ensure that a kilowatt hour lasts much longer than today.

The widespread reluctance of the energy sector seems more understandable, at least at first glance. Why should energy companies endorse measures that oblige them to do less of what they do well – sell energy? But we believe that they too have much to gain from adopting the Energy Efficiency Directive.

Why? First and foremost, energy savings are inevitable. They need to happen to reach long-term CO2 targets. They need to happen to ease pressure on the grids. They need to happen to strengthen European competitiveness and to minimize European import dependencies. And it is less than clever for energy companies to fail to acknowledge that  energy efficiency savings will happen, and that they need to be part of the solution than leave it entirely to others.

In DONG Energy, we engage in energy efficiency solutions and find energy savings for our end  customers in accordance with the Danish energy savings obligation scheme. This way we are able to explore novel business areas as a service provider engaging more in knowledge-based client relationships than the mere distribution of electrons.

A key measure, on which an energy efficiency deal is likely to centre, but which is causing stir between the EU institutions, is a requirement for energy companies to deliver 1.5% energy savings per year from their customers (ref. Article 6 in the EED, proposed by the European Commission). We are a great supporter both of setting ambitious energy efficiency targets and letting suppliers deliver most of those savings through energy savings obligations despite the seeming paradox of an energy company support a measure to reduce its customers’ use of the very product it is selling them.

Having taken energy efficiency to heart, we have worked successfully with large institutions, businesses and private customers to reduce their energy usage. In return, some have invested the savings in renewable energy, mainly offshore wind power (via purchase of Renewables Energy Certificates). This business concept is called Climate Partnerships and encompasses more than 130 climate partners, such as the Danish branches of Novo Nordisk, Mærsk, Rockwool, Novozymes, Nokia, CSC, Peugeot, Toms etc. Energy-intensive industries in particular have proved keen to save energy, and the energy companies have become their natural partner in this process. Energy saved means money saved, and that can make them more competitive.

Since 2006, our energy efficiency results have thus increased 400%. In 2010 more than 340GWh was saved by our industrial and other customers as a result of our energy saving programmes. Last year we reduced customer’s electricity consumption by the equivalent of the fourth largest Danish city.

Today, we have an entire new business offering energy counselling, together with a wide portfolio of energy saving programmes, enabling customers and partners to use less energy. In some cases, our industrial customers have cut energy consumption by as much as 30 per cent by, for example, changing heating and ventilation systems, making simple heating and ventilation adjustments and basic habitual changes. Companies have saved millions on their energy bills. Novo Nordisk saved  more than 50 million Danish crowns (6.73 million euros).

The Danish experience proves that it can be done; that the solutions are there and, with the right incentives and a willingness to adapt it is possible to deliver remarkable results. We’ve seen that industry has been able to deliver enormous energy savings benefiting customers, their competitiveness, their financial bottom lines and the environment. They show it’s not hard to do and, always important, there’s money to be made in doing it right (both in terms of savings and investment), along with the small matters of job creation and savings in energy and CO2.

Acknowledging the fact that savings obligations account for half of the foreseen impact of the energy efficiency directive, Europe will lose a valuable instrument in the fight for increased efficiency if the obligation schemes get sacrificed in the energy efficiency negotiation end-game.

If European energy companies have similar savings obligations to those that exist in Denmark, a new directive could deliver massive consumption reductions in energy usage across Europe. The proposed directive could save Europe 150 Mtoe by 2020, lead to an increase in Europe’s GDP of €34 billion, an additional 400,000 net jobs and an annual average reduction in overall spending on energy of about €20 billion.  Now that’s something worth committing to.

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