Asked how confident he was that the target could be achieved, Philip Lowe, the European Commission’s director general for energy replied: “On present progress, 60%!”
Before the EU’s present policies were announced, Europe was only half way to meeting the target, Lowe said. Consequently, EU legislation proposed recently did not consider that the 20% target would be met, measured against 2005 levels.
An impact assessment accompanying the Energy Roadmap for 2050, which EurActiv has seen, says that the EU “is far from reaching its 20% objective” on energy efficiency.
The document says that while slow economic growth contributed to a decrease in energy consumption, "it has also negatively impacted energy efficiency investment decisions at all levels - public, commercial and private.”
Split incentives
The report also pinpoints "split incentives" or "principal agent market failures", where energy decision-makers are detached from price signals, as a problem.
For example, landlords can decide whether to renovate buildings, but since tenants pay the energy bills, owners have little incentive to invest in energy-saving measures.
As a cumulative result, in the assessment’s ‘reference scenario’ for business as usual, “the indicative 20% energy savings objective for 2020 would not be achieved under current policies – not even by 2050.”
“The fact we didn’t take this [20% figure] into account in our scenarios was precisely because we wanted to establish the level of ambition necessary in order to meet the 2050 objectives as well as the 2020 objectives,” Lowe said.
“In practice, we see in all scenarios the need for at least 30% if not 40% improvement in energy efficiency compared with the 2005 and 2007 bubbles and not simply 20%.”
But an analysis of the impact assessment by the Coalition for Energy Savings argues that the 20% savings target for 2020 is well-achievable, only with a new energy efficiency directive.
Uncertainty over the EU's will and ability to reach the 20% target has left fund-holders complaining that it is risky to gamble on efficiency targets in volatile economic times.
“We cannot invest in companies that are waiting around for governments to do the right thing,” one venture capitalist said.
Large companies disappointed
Several leading European energy companies – including Phillips Lighting, Siemens and Schneider Electric - have voiced their disappointment with the draft roadmap in a letter sent today (8 November) by the European Alliance to Save Energy (EUASE) to cabinets across the Commission.
“It's important that we show policy-makers that businesses feel just as strongly as environmentalists on this issue,” Monica Frassoni, the president of EUASE, told EurActiv.
“Energy efficiency is a massive win-win for growth in many business sectors,” she said.
EUASE was formed as an energy savings alliance of business and policy-makers in December 2010 at the UN climate change summit in Cancun.
The alliance’s letter complains that the 2050 Roadmap sends “a very confusing message” to member states and the European Parliament about the commission’s confidence in the 2020 targets.
“If the European Commission is serious about delivering growth, jobs and sustainable development, then energy efficiency must be a central part of any scenario for 2050,” Frassoni said. “That means sticking to its political commitment of a 20% target.”
Nature of energy efficiency debated
But with member states currently locked into a trench war over modest savings measures for energy companies and buildings proposed in the energy efficiency directive, the nature of what constitutes energy efficiency is itself now being debated.
The UK has long questioned the PRIMES model of measuring efficiency gains, but France has now submitted comments on the energy efficiency directive to the Polish presidency, seen by EurActiv, proposing an end to the efficiency concept altogether for buildings.
“For such sites, energy intensity indicators (by work units: number of takeoffs, refits, vessels berthed, number of days/workshops, tests completed, etc.) are in fact a better way of measuring energy-reduction efforts,” the French submission says.
‘Energy intensity’ is a measurement for industrial CO2 abatement, based on the amount of power consumed for every dollar of economic output, a method favoured by China and the United States.
“The debates we’re having with the member states are very interesting, because they didn’t like binding targets so we gave them binding measures,” Lowe said. “They don’t like binding measures and say ‘we need more flexibility’. Are they [now] going to reject this as well?”
Earlier this year, the EU’s director of renewables and energy efficiency innovation, Marie Donnelly, estimated that the EU had so far only achieved energy consumption reductions of between 9% and 11%.
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