The idea of “Efficiency First” is on the line in ongoing EU talks. Member states must realise that this is no mere slogan but a real necessity, write Jan Rosenow, Richard Cowart and Edith Bayer.
Jan Rosenow, Richard Cowart and Edith Bayer are energy efficiency experts with the Regulatory Assistance Project (RAP).
According to a leaked document from the Council of the European Union, some members of the Council are resisting the decisions of the Commission and Parliament to include an “Efficiency First” principle as a pillar of the Clean Energy for All Europeans package, in the mistaken belief that the principle is a mere “slogan,” or, if it’s not just a slogan, that it would require member states to take actions that are not cost-effective.
We assure Council members that Efficiency First is not only a stated goal of the Energy Union, it is a proven solution and a necessary discipline.
Efficiency First is a powerful approach to energy policy that can save families and businesses billions of euros in energy costs annually, improve energy security, and accelerate progress toward Europe’s goals for carbon reduction and a clean energy economy.
What exactly is Efficiency First?
Efficiency First means developing the discipline to evaluate policy proposals and investment decisions against a simple background:
Could we deliver to consumers equivalent energy benefits and reliability, at lower cost and lower environmental impact, by helping them save energy instead of simply paying more to use more?
Efficiency First does not elevate energy savings above all other energy investments. But it does require considering efficiency first—explicitly, before committing to investments in costly fuels and supply-side infrastructure—and then prioritising efficiency when the hard look at options reveals that customer-side resources are a better value.
It is indispensable in ensuring clean energy for all Europeans. Efficiency harnesses the powerful potential of citizens to contribute to, and benefit from, the clean energy transition. And consumers are demanding to be part of the transition.
At first glance, this is purely common sense. Surely public policy should promote end-use efficiency whenever saving energy or shifting the timing of energy use provides greater value than conventional supply-side options.
Unfortunately, this doesn’t happen automatically. On the demand side, numerous market barriers impede investments in efficient solutions. On the supply side, industry traditions, business models, and regulatory practices have always favoured, and continue to favour, fossil fuel-based energy infrastructure and sales over lower sales and energy-saving technologies.
Energy efficiency is pivotal in achieving the ambitious carbon reduction goals in the Paris Agreement. According to the International Energy Agency (IEA), half of the global emissions reductions in addition to those stated in the Intended Nationally Determined Contributions can be achieved at least cost through energy efficiency measures.
The Intergovernmental Panel on Climate Change (IPCC) and other respected institutions have come to the same conclusion.
In Europe, the IEA estimates that 76% of the additional emissions reductions by 2030 can be achieved most cost-effectively by increasing energy efficiency.
It is easy to see the reasons for avoiding wasteful consumption of fossil fuels, with their unwelcome emissions and energy security costs. But it is also important to maximise the efficient use of renewable resources as we seek rapid, cost-effective decarbonisation of the European economy. Wasting valuable renewable resources on inefficient end-use consumption makes little economic sense and slows the pace of decarbonisation.
Even if cost were irrelevant, we still can’t afford to waste good wind and solar sites. We can’t replace fossil power plants, charge a growing fleet of electric vehicles, and provide low-carbon heat while wasting energy across the landscape.
A system with a high share of renewables simply cannot be achieved without extensive progress on energy efficiency and demand response resources.
The International Renewable Energy Agency (IRENA) recently published a study systematically assessing the synergistic effects of energy efficiency and renewable energy. The conclusion is that higher penetrations of renewable energy are attainable when coupled with efficiency, leading to significantly lower energy system costs and faster decarbonisation. Efficiency First aims to make the most of these interactions.
There are already good examples of demand-side solutions that have been deployed to avoid or defer costly supply-side investment. In many cases, this became possible through regulatory changes.
Appropriate regulations would require network operators to consistently evaluate all cost-effective resources on the demand, as well as the supply, side. Furthermore, their revenues should be linked to specific performance criteria, not energy sales.
The most relevant EU legislative proposals on efficiency negotiated this year are the Market Design Initiative (MDI) framework, the Energy Efficiency Directive, and the future governance instrument. For the greatest impact:
- The MDI proposals should integrate Efficiency First as a fundamental principle governing decision-making by the Commission, Member States, national regulatory authorities, the Agency for the Cooperation of European Regulators (ACER), and the European Network of Transmission System Operators for Energy and Gas (ENTSO-E and ENTSO-G) on planning, investment, and regulation within the internal energy market;
- To drive the uptake of energy efficiency and ensure it is available as a resource to the energy system, Article 7 of the Energy Efficiency Directive has provided a key driver for introducing energy efficiency obligations in Europe. It needs to be maintained and strengthened beyond 2020;
- Efficiency First could and should play a much bigger role in all national plans and reporting on the Energy Union. These plans should include projections of energy demand out to 2030 and 2050, in line with energy efficiency targets. National governments should perform a transparent, comparative assessment of potential supply- and demand-side investments. To support this effort, the Governance Regulation needs to provide a clear framework for how national energy and climate plans should follow the Efficiency First principle.
Delivering on Efficiency First is a process, not a slogan. For this reason we recommend the development of an official process to identify the policies and practices where efficiency is ignored or undervalued, and to address areas where more needs to be done.
The discipline of Efficiency First is the key to unlocking that potential and delivering deep savings to families and businesses across Europe.