PowerPointPrsentation

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Defining and Monitoring the proposed Energy
Savings TargetsHow would it work? Expert
Seminar on Measurement and Verification in the
Draft Directive on Energy End-Use Efficiency and
Energy Services 21 September 2004,
Brussels Stefan Thomas Wuppertal Institute for
Climate, Environment and Energy
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Its a three-step process

• Define the national 1 per year target
• Allocate the target to energy efficiency
  programmes, energy services and other energy
  efficiency measures
• Monitor and evaluate the savings from each of
  these programmes, services etc.,and add up to
  the total savings

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Step 1 Define the target
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Step 2 Allocate the Target to Energy Efficiency
Policy Instruments Packages

• Incentives and supports
• Motivation, Information, Analyses, Labelling,
  Training
• Product and Production Standards
  (mandatory/voluntary)
• (Public) Procurement
• A stimulating framework for energy efficiency
  programmes and services

This Directive

• I n t e g r a t e d m a r k e t t r a n s f o
  r m a t i o n p r o g r a m m e s

Energy (service) companies
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Step 3 Monitor and evaluate the savings

• Programmes and other measures25 years of
  experience with bottom-up evaluatione.g. UK,
  DK pragmatic approach, start with pilot
  evaluations, evaluation costs less than 1 of
  programme costs
• Energy services the seller must prove to the
  buyer the energy savedgt just collect these
  data, confidential but with checks through
  associations, trustees etc.

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• Thank you for your attention!
• Further information can be found at
• www.wupperinst.org/energy-efficiency
• (for public sector energy efficiency also
• www.eceee.org/library_links/prost.lasso)

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What are ADDITIONAL SAVINGS compared to the
baseline?Those that would not have happened
without the energy efficiency programme or
service!

• (1) if new equipment is bought or renovation is
  done anywaySavings from NEW, EFFICIENT vs.
  NEW, INEFFICIENT(NOT from NEW, EFFICIENT vs.
  OLD, VERY INEFFICIENT!)
• (2) if no new equipment purchase or renovation
  was planned Savings from NEW, EFFICIENT vs.
  OLD, INEFFICIENT
• gt Clarify at least in ANNEX IV

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Appendix Overview

• Why this Directive is important now
• What is good in the proposal for a Directive on
  Energy End-Use Efficiency and Energy Services
• What should be improved in the proposal
• Conclusions
• Appendix to Appendix further thoughts and
  information

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Role of Energy Efficiency in the European Climate
Change Programmesufficient to fill the gap for
reaching the Kyoto target (ca. 350 million tonnes
CO2 / year) at a net gain or low cost
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The win-win-win - potential of energy efficiency

• Around 30 cost-effective savings compared to
  baseline
• I.e., ca. 2/year additional savings possible in
  total
• Experiences in EU show Of this, energy
  efficiency programmes and services of energy
  companies and other market actors can achieve
  1/year
• Net economic gain around 6 billion Euros per
  year after 6 years of implementation

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What is good in the proposal for a Directive on
Energy End-Use Efficiency and Energy Services
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What is good in the proposal (1)

• Harmonisation in targets (to Member States),
  subsidiarity in methods (for implementation)
• 1 target (and 1.5 for public sector) is
  ACHIEVABLE through energy efficiency programmes,
  energy services and similar measures
• Target sufficient if ADDITIONAL to
  technology-specific baseline (incl. autonomous
  energy efficiency gains and other policy
  instruments)!
• Developing a market for energy services, AND
• for energy companies and others to deliver energy
  efficiency programmes

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What is good in the proposal (2)

• Definition of targets as amount of ENERGY SAVED
  (Annex I)
• Verification of savings by Member States through
  BOTTOM-UP methods (Annex IV) and independent
  agencies (Art. 4(5) )
• Option for Member States to create energy
  efficiency FUNDS (Art. 11)
• Allowance for COST RECOVERY of energy efficiency
  programmes by distribution network companies
  (Art. 10(b) )
• REMOVAL of incentives to increase the volume of
  transmitted or sold energy embedded in price
  regulation schemes of monopoly segments (Art. 10
  (a) )

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What is good in the proposal (3)

• Additional requirements to MS for supportive
  measures, i.e.
• Promoting ACTIVE INVOLVEMENT of energy companies
  (ART. 6) in provision of energy services
• Ensuring AVAILABILITY to all customers and
  INVOLVEMENT of all potential providers (Art. 7)
• Qualification, certification, and accreditation
  of energy service providers (Art. 8)
• REMOVAL of legal barriers for energy services,
  and publication of model contracts (Art. 9)
• AVAILABILITY of high quality energy audit schemes
  (Art. 12)
• Individual metering and informative billing (Art.
  13)

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What should be improved in the proposal for a
Directive on Energy End-Use Efficiency and
Energy Services
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What should be improved in the proposal (1)

• Are 1 / year ADDITIONAL SAVINGS compared to the
  baseline, or after vs. before the measure (may be
  including baseline)?
• Meant to be ADDITIONAL SAVINGS by Commission
• Example in chapter 3.2 of explanatory memorandum
• But wording in Art. 4 and 5, and Annex I and IV
  should mention what is meant ADDITIONAL SAVINGS
  compared to the baseline (which includes
  autonomous energy efficiency improvements!)
• See Appendix for possible definition of
  additional savings

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What should be improved in the proposal (2)

• Include ADDITIONAL savings generated after entry
  into force of Directive from existing energy
  efficiency programmes, energy services etc., but
• NO DISCOUNT FOR EARLY ACTION SINCE 1991!
• Annex 1, para 3. can be misinterpreted to say,
  e.g. a programme generated 200 GWh / year
  savings in 1999, the technical measures are still
  in place in 2007, so count towards the target
• In that case, Denmark would not need to save a
  single additional kWh of electricity between 2006
  and 2012 UK, Italy ca. 2 for domestic
  customers if current targets up to 2006 are met
• gt Amend text to ADDITIONAL energy savings in a
  particular year AFTER ENTRY INTOFORCE OF THIS
  DIRECTIVE that ...

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What should be improved in the proposal (3)

• Make multiplication factor of at least 2.5 for
  electricity (ANNEX II) mandatory in calculating
  national savings target, by including this into
  Annex I (para 2.)WHY? Electricity supply causes
  by such a factor higher primary energy use, and
  costs. Counting all end-use energies equal would
  discourage the substitution of electricity by
  other forms of energy
• Replace wording (ART 4(1) ) target for
  cumulative annual energy savings by a
  mandatory AND ACCUMULATING target for ADDITIONAL
  annual energy savingsWHY? Avoid
  misunderstanding target is accumulating to 6 /
  year until 2012 it is not meant to accumulate
  savings from a measure installed in 2007, which
  are still there each year until 2012. Instead,
  new measures each year shall provide additional
  savings until 6 / year are reached in 2012

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Accumulating targets and annual savings
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What should be improved in the proposal (4)

• Strengthen wording in Directive text when Member
  States apply energy efficiency mechanisms,
  measures and programmes, gt ensure comparable
  application to competing fuels, to avoid price
  distortions
• Why deny energy-intensive industries (subject to
  Emission Trading or IPPC) the benefits of this
  Directive?Electricity and transport fuel use not
  covered by Emission Trading!
• Clarify use of STRINGENT building codes and
  general energy taxation ABOVE minimum levels in
  taxation Directive mention energy taxation as a
  way to generate income for energy efficiency
  funds (Art. 11)
• ANNEX IV Install working group or committee to
  develop converging methods for measurement and
  evaluation of savings

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Some open questions

• How to achieve target in transportation fuel
  sector? Little experience with energy services
  there Feebates rebates for efficient cars,
  and additional fees for inefficient ones?
• Authority must verify savings (Art 4(5) ) by
  bottom-up methods and, if feasible, third parties
  (Annex IV) But do they get the necessary
  information from the operators of energy
  efficiency programmes and energy services? gt
  Member States must ensure this. Add to
  information requirement in Art. 6(c) ?
• Is the energy audit requirement and 5 threshold
  in Art. 6(1) useful? Alternative Targets for the
  share of energy services in turnover?

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Conclusions

• A timely and important instrument for security of
  supply, economic energy savings, and CO2
  reduction!
• Completing the internal markets for electricity
  and gas, but also other fuels, by adding energy
  END-USE efficiency
• Some improvements to proposal needed (important
  examples presented, some more detailed
  suggestions in Appendix)
• If properly implemented by Member States, will be
  able to achieve the target and demonstrate the
  EUs success in saving energy

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Appendix further thoughts and information
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Appendix part A further thoughts on the proposal
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Further potential improvements (1)

• Art. 2 Why completely exclude historic and
  similar buildings? Their electricity use and
  heating system can be improved without affecting
  their facade.
• Art. 10 (b) clarify what due regard for the
  need to ensure equal competition and a level
  playing field for other providers of energy
  services means in practice
• Art. 13 (1) clarify meaning of competitive
  pricing of meters and actual time of use
• Art. 13 (3) How to compare the individual
  customer with an average normalised or
  benchmarked user of energy?
• ANNEX III cost effective not defined. Either
  define (suggestion as cost effective from
  perspective of society) or remove!

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Further potential improvements (2)

• Art. 11 Why should funds only target higher
  transaction cost or risk sectors? Could also
  fund energy efficiency programmes and development
  of energy services for all sectors
• Art. 7 What are eligible customers in this
  Article/Directive?
• ANNEX IV should be improved. E.g., methods in
  point 2.2 can also improve evaluation results for
  finalised programmes/servicesEnergy product
  sales data alone not sufficient for
  evaluationetc.

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Appendix Part B further information
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Energy Efficiency - a win-win-win - option

• Increasing energy-efficiency contributes to
  reaching several energy and social policy goals
• Competitiveness of the economy
• Security of supply
• Protection of the environment
• Employment
• Welfare (lower energy bills)

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Barriers for energy efficiency

• Energy efficiency many small to medium
  technical improvements
• lack of oversight (where to start?),
• lack of information (both consumers and
  technology providers!),
• sometimes small financial gains from an
  improvement
• gt lack of priority
• sometimes lack of funds
• split incentives between investors and users or
  between technology/building providers and buyers
• gt more information, practical guidance,
  regulation, and financing support needed (the
  sticks, the carrots, and the tambourines)

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Example - the policy package for appliances
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Market reforms should not be limited to just one
part of the market by stopping at end-use energy
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Liberalisation and Energy Efficiency I
Liberalisation has hardly touched any of the
existing barriers on the demand side for a more
efficient use of energy

• Lack of knowledge among end-users and providers
  of end-use technology
• Split incentives
• High implicit rate of returns
• Lack of funding
• ...
• A professional intermediary role is needed
  between providers and customers of
  energy-efficient end-use solutions

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Liberalisation and Energy Efficiency I I

• Incentives for energy companies have changed
  economics is the main rationale for most
  activities
• Some market situations in which economic
  incentives exist
• Avoidance of new installation or upgrade of
  generation, transmission or distribution capacity
• Energy efficiency services to larger customers as
  profitable business
• Increased customer loyalty, Improved corporate
  image
• Fuel-switching towards the energy type offered
• Market inherent incentives too weak for taking
  full advantage of the existing energy efficiency
  potentials

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Why energy companies should play a prominent
role I

• From energy markets to markets for genuine energy
  services
• Co-operation with energy companies is easier than
  implementation against them
• Energy efficiency activities provide additional
  turnover and profit
• Energy companies have direct contacts with
  customers (making use of personal confidence)
• Use of existing infrastructure (e.g. customer
  information centres)

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Why energy companies should play a prominent
role I I

• Increasing the variety of actors and ideas
• Synergies to many instruments such as incentives,
  standards, labels, co-operative procurement and
  other market transformation programmes
• Accelerating the potential economic and
  ecological benefits
• Larger contributions to climate protection
• Faster realisation of advantages for the national
  economy
• More employment
• Avoidance of external costs / Polluter pays
  principle

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Current (2003) national frameworks for energy
services
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Types of technical measures supported by energy
efficiency programmes in different EU Member
States

• Insulation / building fabric
• Domestic / Non-domestic lighting
• Refrigeration
• Washing machines, dishwashers, dryers
• Boilers, heating systems
• Variable speed drives
• Electric motors
• Others, multiple technologies

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Example High efficiency Factor 4 circulation
pump

• Uses 5 to 20 W instead of 40 to 80 W for current
  technology circulators
• Product on Swiss and German market since November
  2000
• Potential for saving electricity in the EU at
  least 20 TWh/yeargt up to 1 of all electricity
  in the EU
• Market penetration programmes needed

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Present trends in energy efficiency programme
development in the different EU-Member States

• better planning
• Increased professionalism in running the
  activities
• Increased attention to the business economics
  perspective
• incentives for delivery through energy efficiency
  services
• better monitoring, standardised measurement and
  verification
• Sound methodologies for the evaluation of
  programmes
• improved co-ordination of all the
  energy-efficiency activities which address a
  specific target group but are run by different
  actors
• Connection to / preparing the integration into
  the implementation of Kyoto mechanisms,
  particularly emissions trading schemes

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Energy Performance Contracting in TurinEnergy
Performance Contracting for operation and
maintenance covering a pool of 700 public
buildings and for energy efficiency investments
(ca. 22 million ) Duration of the contract
1995 - 2014
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From audits to implementation in Finland
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United Kingdom Energy Efficiency Commitment (EEC)
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Energy Efficiency Commitment 2002-2005

• Focus on lower income consumers, including those
  in receipt of income and disability benefits
• Typical measures
• Cavity wall insulation, tank insulation, draught
  proofing
• A and B-rated boilers, boiler replacement
• Heating controls
• Loft insulation
• A-rated appliances
• CFLs
• Lifetime of measures between 8 and 40 years

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Expected Results of the EEC in the UK

• Domestic energy savings after implementation of
  measures11.492 GWh/aof which are 2.573 GWh/a
  electricity savings, 7.358 GWh/a gas
  savings,1.536 GWh/a oil and coal savings
• Energy cost reduction of private households after
  implementation of measures598 million Euro/year
• Increase in energy prices caused by these
  programmes ca. 1,2 over 3 years
• Net benefit from saved energy costs ca. 1,6 of
  bills by 2005, lasting for the lifetime of the
  relevant measures
• Benefit to cost ratio around 4 to 1

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Obligations in Denmark

• Energy efficiency obligations for distribution
  network companies partly also for supply
  companies
• Until now only electricity companies, in future
  gas and district heat companies, too
• Recovery of programme costs Decoupling of
  profits from sales
• Reporting requirements evaluation guidelines and
  criteria ex ante/ex post -gt aggregated plan of
  the 74 distribution network companies
• Average planned investment by the energy
  companies 0,06 Cent/kWh for all customers (in
  total 20 million Euro in the year 2000)
• Energy savings 0,5 of total consumption each
  year
• Extending these activities to the whole EU-15
  over 10 years 120 TWh/a electricity savings

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Denmark 0.5 electricity savings per year,
involving all customer groups
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Denmark Electricity Savings Trust
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Benefits and Costs of the Danish Electricity
Saving Trust

• Focus on energy-efficient fuel switching from
  electricity to gas/district heating 17.000
  apartments and homes between 1998 and 2001, i.e.
  34 of the target group electricity savings 248
  GWh/a
• Overall electricity savings target 0,75 TWh/a
  (1998-2008)Budget 12 million Euro/year
• Transferring this target to the EU-15 over 10
  years
• Total electricity savings 56 TWh/year Budget 900
  million Euro/y
• Of which would be 46 TWh/year electricity savings
  by fuel switching activities

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Some results of the Dutch Rebate Scheme

• Rebates for efficient appliances, thermal
  insulation and other measures (15 of energy tax
  income)
• More than doubling of the market share of A-rated
  white goods within two years, up to 88 (washing
  machines EU-average 45) in the year 2001
• Refrigerators and freezers rebates now only for
  A and A (save 45 compared to A label)

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PYME-Energia - a good example from Spain

• Electronic control of motors and efficient
  lighting for small an medium companies, in
  1997/98
• Rebates 30 of investment costs
• Energy companies full recovery of rebates given,
  plus lump sum for management, promotion,
  diffusion costs
• Iberdrola and ENDESA 20 MW of savings
• Costs for saving one kWh 0.8 Cent/kWh for
  Iberdrola, 2.0 Cent/kWh for ENDESA
• For whole EU-15 in 10 years 20 TWh/year, over
  500 MW costs 115 million Euro/year savings 1000
  million Euro/year

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Synchronous Load Management in Hannover

• 600,000 inhabitants
• Load reduction 12 MW
• Electricity savings ca. 10.534 MWh/a for only
  1.1 Cent/kWh

• Source Stadtwerke Hannover AG

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Boutre - Carros DSM to defer new transmission
line
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Boutre - Carros potential peak load savings
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Conclusions

• Implementation of energy efficiency is possible
• Proper implementation will lead to economic net
  benefits for consumers and society
• Favourable policy framework needed for energy
  companies and others
• Experiences from other EU Member States in
  implementing and monitoring of framework,
  programmes and services can be used
• But stimulate innovation and adaptation to the
  National situation

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Recommendations for National Policy Design

• Energy efficiency activities have been most
  effective where a combination has been created of
• An agreed or mandated, quantified target for
  energy savings,
• A channel or an allowance for raising funding and
  for avoiding net economic losses in a way not
  discriminating between companies, and
• A standardised and mandatory scheme for
  cost-benefit evaluation of the energy efficiency
  activities.

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Useful combinations for policy mechanisms