Energy end-use efficiency and energy services

A directive on energy end-use efficiency and energy services was adopted in December 2005. The directive requires member states to draw up national action plans to achieve 1% yearly energy savings in the retail, supply and distribution of electricity, natural gas, urban heating, and other energy products including transport fuels. The 1% target is only indicative but the national action plans will need approval from the Commission and will be reviewed every three years. The process will be spread over nine years, starting in January 2008.

The liberalisation of the EU energy sector started in the nineties with the 1996 directive setting up the internal market for electricity. In parallel, a variety of measures have been launched to reduce energy consumption as part of global climate change efforts and to improve the EU's security of energy supply.

The directive on energy end-use efficiency and energy services was tabled by the Prodi Commission in December 2003. It aims to tackle one of the remaining challenges: increasing energy savings when energy is sold to end-users - whether they are private consumers, companies or part of the public sector.

Increasing energy savings has since moved up the agenda of the new Commission headed by José Manuel Barroso. It has been identified as the chief political objective of Energy Commissioner Andris Piebalgs, who launched a wide-ranging policy debate on energy efficiency in June 2005 (EURACTIV, 23 June 2005).

The directive seeks to increase energy efficiency all along the supply chain right up to the retail stage when energy is sold to the end-user. It covers the retail, supply and distribution of electricity and natural gas, as well as other major energy services including urban heating, heating fuel, coal and lignite, forestry, agricultural energy products and transport fuels.

The issue of targets for energy savings has remained central to discussions on the directive. Member states have repeatedly stated their preference for non-binding targets and a flexible approach while Parliament had supported higher, legally binding targets. The Parliament and Council reached a compromise agreement on 6 December 2005. The agreed text provides for:

  • member states to draw up national action plans to achieve 1% yearly energy savings over nine years, starting from 2008 until 2017. Sectors covered are households, agriculture commercial and public sectors. The target is only indicative but the national action plans will have to be submitted to the Commission for approval and will be reviewed every three years. 
  • public sector obligation to take energy efficiency into account in public procurements related to the purchase of vehicles, buildings and other equipment 
  • supply-side obligation for energy distributors and retailers to offer efficiency improvement measures to their customers
  • a harmonised measurement system for energy savings will be put in place so that energy savings can be compared from one member state to the other. The calculation method allows member states to take into account measures initiated as early as 1991 
  • the directive also sets up a harmonised framework for common definitions, consumer information, certification schemes for energy services providers, as well as dedicated contractual, financial and legal instruments aimed at creating a single EU market for energy efficiency

According to the Commission, the directive will also serve as an 'umbrella' to complement and improve the implementation of existing EU energy efficiency legislation (Energy Performance of Buildings Directive, Combined Heat & Power Directive and the directives on the energy labelling of appliances).

EU Energy Commissioner Andris Piebalgs said that the directive's main point is that member states will have to take measures and that those will be reviewed regularly. "We have indicative targets but mandatory measures," Piebalgs underlined. He said that the focus should now lie on implementation measures at member state level and insisted on the Commission's responsibility in reviewing them.

"It will be up to each member state to decide which sectors should be addressed and how much each sector should contribute in reaching the national target, although all eligible customers should be offered some form of energy service, energy efficiency programme or measures," the Commission said in a statement. 

EuroAce, the association representing the energy efficiency industry, welcomed the deal as "excellent news". "Of course we regret that the final text contains no absolutely binding national efficiency targets. But we believe that purposeful implementation of its main requirements can still deliver substantial benefits". These, says EuroAce, include stricter requirements on energy performance on public procurement as well as a new role for electricity and gas companies.

Eurelectric, the union of the European electricity industry, fears that the directive will place disproportionate burdens on the electricity industry, thereby giving an advantage to competitors in other energy sectors such as gas. Eurelectric argues that "the responsibility for delivering energy efficiency measures should not fall exclusively on energy supply companies", but that other sectors, such as transport, should be equally affected. Instead of forcing electricity companies to sell energy services "that customers might not wish to buy", Eurelectric says the directive should instead create conditions to stimulate an energy-savings culture and foster a market-based approach to encourage development and implementation of energy efficiency measures.

COGEN Europe - the European association for combined heat and power (CHP) generation - supported the Commission's approach as it said that it would shift companies' attention away from selling kilowatt hours to selling the benefits derived from kilowatt hours, such as light, hot water and comfort. This, according to COGEN, should create the conditions for the creation of a genuine energy services market and the creation of new energy services companies. 

Euroheat & Power, the European association for CHP and district heating, believes that for the directive to be effective, it will need to be complemented by tools to quantify and compare the energy savings potential of different options. According to the association, a comprehensive approach to end-user efficiency calls for a framework that defines final savings as those that are carried out along the whole energy supply chain. These should encompass all savings, from primary energy savings occurring during conversion processes (i.e. using high-efficient CHP and/or renewable energies) to the point of delivery of the final product to the customers.

CECED, the association representing European domestic equipment manufacturers, is supportive of binding energy savings targets and  sees the proposed directive as a good opportunity for consumers to replace old energy-thirsty products with eco-friendly ones.

ELC, the European Lamp Companies Federation, argues that the public sector should lead the way in reducing energy consumption by switching to energy efficient lighting technology. It says that the savings potential in street lighting is so big that the issue deserves to be raised as a matter of public interest and integrated into public procurements and purchases at national, regional and local levels.

The WWF criticised the compromise for being too weak on energy efficiency targets. The 1% non-binding yearly target was described by WWF as "an ignominious result, considering that the EU has the potential to save at least 2.5% a year". ""EU member states recognise that energy efficiency provides a win-win solution for the environment and the economy. But the EU has once again refused to undertake serious commitments to achieve this goal," the WWF said.

  • 6 December 2005: Council and Parliament reach a compromise agreement on the directive (EURACTIV, 7 Dec. 2005). The agreement was sealed by a Parliament vote on 14 December.
  • 14 March 2006: Council formally adopts the directive.
  • 30 June 2007: deadline for member states to submit their first energy efficiency action plans. 
  • 30 June 2011: deadline for second round of national action plans. 
  • 30 June 2014: deadline for third round of national action plans.

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