Energy Efficiency: The ‘First Fuel’ and a Source of Energy in its Own Right

on April 08, 2015 at 2:00 PM

Energy Consumption In EuropeIn the final EU Energy Union document “A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy”, the European Commission recognized the importance of improving overall energy efficiency – “Member States [should] give energy efficiency primary consideration in their policies.” Miguel Arias Cañete, the EU Commissioner for Climate Action and Energy, called energy efficiency the “invisible powerhouse of Europe” and “one of the most cost effective means to improve energy security and economic competitiveness, reduce greenhouse gas emissions, and make energy more affordable for consumers.”

Commissioner Cañete regards energy efficiency as a crucial element of the Energy Union strategy in terms of achieving a higher degree of energy independence from external energy suppliers thereby strengthening the EU’s internal energy market. He cites studies, which indicate “that for every 1% improvement in energy efficiency, EU gas imports fall by 2.6%.” “It is really difficult to find an alternative energy source that is more environmentally friendly, free from geopolitical risks and that pays off more than energy efficiency,” Commissioner Cañete concludes.

Besides EU energy efficiency policies addressing considerations much broader in scope – i.e. energy security – aforementioned policies can also bring ‘immediate’ benefits for both society and individuals. The Energy Union final document identifies as the largest single source of energy demand in Europe “heating and cooling” and the EU Commission zeros in on two sectors with the most room and, above all, need for improvement:

“While all economic sectors must take steps to increase the efficiency of their energy consumption, the Commission will pay special attention to those sectors with a huge energy efficiency potential, in particular the transport and buildings sector.”

Given the significant waste of energy in buildings because they are not necessarily designed to optimize overall energy performance, this is a prudent move. A distinction has to be made in terms of the existing building stock between public and private (residential as well as commercial) buildings. Moreover, to incentivize building retrofits and/or indispensable building renovation projects, public funding – the only way to achieve the set national energy efficiency targets – has to be made available, while at the same time a public information campaign that explains the benefits of energy efficiency should be launched. Importantly, return on investment and payback periods for building retrofits should be highlighted. Interestingly, poor energy efficiency in buildings is an even bigger problem in the US because relevant regulations are less stringent.

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Source: EEFIG

Recently, the Energy Efficiency Financial Institutions Group (‘EEFIG’), a specialist expert working group by the European Commission and United Nations Environment Programme Finance Initiative (‘UNEP FI’), released a report titled “Energy Efficiency – The First Fuel for the EU Economy; How to drive new finance for energy efficiency investments” that identifies the strategic importance of energy efficiency investment for the EU. “Energy efficiency investment is the most cost effective manner to reduce the EU’s reliance, and expenditure, on energy imports costing over €400 billion a year,” the report said.

While energy efficiency is “the first fuel because it is competitive, cost effective to produce and widely available” – the report adds – a “historic level of public-private collaboration is [still] required to deliver multiples of existing energy efficiency investment flows by 2030.” The report explicitly warned that insufficient public and private investments in energy efficiency in buildings put EU Member States “at risk of missing their 2020 and longer-term energy efficiency targets and their economies will be deprived from the boost energy efficiency investment can provide.”

According to EEFIG, “a five-fold increase in private energy efficiency investments in European buildings is required by 2030 [with a] scale-up of smart financial instruments (…) tailored, by sub-sector, to encourage a long-term and cost effective reduction of energy use in Europe’s buildings, industry and SMEs.” Again, these insights should not be viewed as applicable only to the EU. US regulations that mandate energy efficiency standards for federal buildings, light bulbs or home appliances should expand to an area where a real dent in energy savings can be made; namely, residential and commercial buildings.

What’s clear from the above is that energy efficiency’s benefits exceed the energy savings for consumers themselves. However, favorable payback periods of initial costs and the potential for annual energy cost savings – if made aware of them – are things that will eventually win over the public. Jesse Row, an energy efficiency programs expert for the Canadian Pembina Institute, authored a very instructive guide, which outlines ways to save money and energy in buildings using condominiums as an example.

He writes that “[p]ayments for gas, electricity and water can account for 40 per cent or more of a condo’s ongoing operating costs”. The “Green Condo Guide” highlights such energy efficiency improvements as the retrofitting or upgrading with condensing boilers for space heating as well as the installation of higher standard windows, and better insulation of roofs and walls. In this context, Søren Hermansen, Director of the Samsø Energy Academy, is right on by stating: “The payback time for energy efficiency upgrades is maybe two to five years, so it is incredible that people didn’t do it before. But that’s just down to lack of knowledge. So when we had the opportunity to go into people’s houses and tell them what needed to be done, they could then just go to the bank, get the money and get the job done.”

Check out the entire guide and the two graphics below from Jesse Row’s “Green Condo Guide” published for the Pembina Institute illustrating a variety of sensible energy efficiency improvements:

Energy Efficiency Improvements, Facts and Figures

roman efficiency 2 roman efficiency 3

Source: Pembina Institute