Energy efficiency in the EU

May 29, 2013

Short overview on legislation and implementation with a focus on the Energy Efficiency Directive

Monique Voogt

M.Voogt@SQConsult.com, +31-6-175.00.196

Agenda

Energy efficiency development in Europe

EU Policy Package Energy & Climate

Legislative framework on EE in EU - timeframe,

choices and the decision making process

Zoom-in on product labelling and the EED

Implementation (selected examples)

Strengths and Weaknesses

Conclusions

EE development in Europe

On a global scale the EU energy intensity is relatively low.

Source: IEA, world energy outlook 2012

But recent developments have been slow

Source: European Environment Agency,

January 2013

And there is quite some variation across EU Member States

Average EU

All new MS! Variation of final energy intensity in EU and EEA countries, 1990-2010

Source: European Environment Agency, January 2013

Energy & Climate Policy Package

Overarching EU framework on energy and climate objectives “20-20-20”

20% reduction in EU greenhouse

gas emissions from 1990 levels

Increase of renewable energy to

20% (share of total consumption)

20% improvement in the EU's

energy efficiency

Emissions trading with obligatory

targets at installation level (a.o)

Directive with obligatory targets at

country level

Set of Directives with guidance,

policy directions and soft targets

Longer term policy framework includes a road map towards 2050 and a green

paper on 2030 objectives

EU Heads of State: “EE measures can make a significant contribution to

reversing current trends in energy prices and costs” (Council Conclusions,

22/05/2013)

Legislative framework EE in EU

Household Appliances

• Labeling and standard product information – 1992 & 2010 Directives

• Minimum energy performance standards (Eco-design) – 2005 & 2009 Directives

• 2009 Legislation on banning

incandescent bulbs

Office equipment

• 2001 and 2008 Energy Star regulation

Overall

• 2000 Action Plan to Improve EE • 2006 Energy Efficiency Action Plan • 2011 Energy Efficiency Plan

Buildings

• 2002 & 2010 Energy Performance of Buildings Directive

• 2012 Supplement with methodology framework to determine EPBD cost-optimal levels

Supply-side efficiency

• 2004 CHP Directive

Demand-side efficiency

• 1993 Save Directive • 2006 Energy Services Directive

Tyres

• 2012 Labelling of tyres

Financing energy efficiency

• Wide set of financing measures incl. 265M€ EE fund and research funds

2012 EED 2012 EED

Product labeling

• Household dishwashers

• Household washing machines

• Household refrigeration appliances

• Televisions

• Refrigerators, freezers and their combinations

• Washing machines, dryers and their combinations

• Dishwashers

• Ovens

• Lighting sources

• Air-conditioning appliances

• Tyres

The framework Directive on product labeling is

complemented by a large set of implementing

regulations for a range of products

Energy Efficiency Directive (EED)

The final part of the overall EU

Climate & Energy policy package

“The last piece of the puzzle”

As for any new Directive adoption

required acceptance from

• The European Parliament

• The European Council

Relatively fast process:

• Proposal dated June 2011

• Directive adopted October 2012

But the route to adoption was

difficult and compromises had to be

made

Main elements of the EED

Obligation for Member States

• Obligatory renovation of 3% of the public buildings => “Setting an example”

• Draw up a roadmap to make entire buildings sector more EE by 2050;

• Report each year to the EC on the progress towards meeting the national EE

target (first report deadline 30 April 2013);

Obligation for energy companies

• Energy savings target of 1.5% per year (of annual energy sales);

• Requirement of energy audits and management plans for large companies.

Key weakness: Member States may choose a minimalistic approach

towards achieving EE targets

Key opportunity: the framework is adopted; EC will review the Directive

in 2014 and in 2016 with the possibility to strengthen the requirements

The challenging route to the EED

Various complexities arose while aiming to find agreement

• Combining demand-side and supply-side matters

• Wish for more stringent target setting (Parliament) versus wish for some

leniency and following “own measures” (Council)

• Consumer protection versus individual (smart) meters

• Economic crisis making parties reluctant to “lead the way” (governments),

accepting e-saving targets (energy companies) and investing in energy

services (all)

• EC aiming to support ESCO activities following Danish successes but many

parties fear loosing market share while the crisis already hits the sector hard

Many compromises had to be made, reducing the likely impact but

establishing a framework that allows strengthening over time

Implementation: energy obligation (1)

Costs in Denmark (2006-2009) 0.04 DKK/kWh (~ 0.01 USD/kWh)

This is quite low, but comparable to first-period results in other countries

• Main European systems in the UK,

Denmark, France, Italy and Belgium

• Poland decided on system, but not

fully operational yet

• Most savings achieved to date were

in the built environment

• The systems led to a growth of

commercial ESCOs on the European

market

Design features of obligation systems differ largely

1. Obligation: obligation on distribution companies in Denmark and Italy; other

countries have put the obligation on energy suppliers

2. Obligation: electricity and gas companies (most), electricity only in Belgium

3. Target/period/unit: very diverse. Period from 3-year to 7-year; primary or final

energy consumption; cumulated over life-time or annual savings; ….

4. Sector coverage: differs widely, from only residential (UK) to all (Italy)

5. Trading: target trading in UK; certificate market in Italy and France; no trade in

Belgium and Denmark

6. MRV: most countries mainly use an ex-ante deemed savings approach;

Denmark mainly uses ex-post engineering approach

7. Type of projects: mostly savings in the built environment and mostly one-off

repetitive actions (lighting, heating). In Denmark larger saving projects with

multiple components (e.g. renovation of multiple buildings)

Implementation: energy obligation (2)

Implementation: ESCOs in the EU (1)

Europe has a wide variation in ESCOs, which originated from various

drivers:

• As a response to legislation such as mandatory audits and energy

obligation systems

• As a mechanism to boost own product sales, mainly by control equipment

manufacturers and retailers (f.ex. Siemens, Honeywell)

• As an add-on to energy supply services to retain/win customers

• Initiated by grants from EU (such as TACIS programme) or national

governments (f.ex. Set-up of FEDESCO in Belgium)

• Set up with sovereign loans (f.ex. EBRD loan for Ukraine)

Implementation: ESCOs in the EU (2)

The majority of ESCO services is offered through one of the three main

types of offers:

• Energy Performance Contracting – ESCO invests in an energy saving

activity. This investment is repaid by the savings from a contractually agreed

level of energy efficiency improvement at the beneficiary

• Delivery contracting - Outsourcing of energy supply with guaranteed

services; payment based on existing energy bill minus % of savings

• Build-Own-Operate-Transfer (BOOT) contracts – ESCO designs, builds,

funds and operates an energy system for a beneficiary for a certain period. The

ownership of the energy system is transferred after a certain period of time

Strengths and weaknesses of EE framework & conclusions

The framework is quite complete and detailed.

What is needed and expected is a further strengthening within a stable

framework that provides clear market signals and facilitates achieving

the targets set

Key strengths

The set of Directives covers a very large part of what EE entails

Addresses all players in energy chain

And addresses all main areas with saving potential

Offers a framework of regular strenghtening of requirements

Main weaknesses

No legally binding objectives/targets and no penalty on non-achievement

Imposes only soft measures

Large variation in Member State commit-ment (to set targets and measures)

Consequently high uncertainty for market players

Thank you for your attention!

For questions or suggestions please contact:

Monique Voogt

M.Voogt@SQConsult.com

+31-6-175.00.196

Details on the speaker

SQ Consult B.V. Monique Voogt

• Founded in 2009 • International scope • Focus on energy &

climate

• Co-founder SQ Consult • European energy and

climate policy • Market mechanisms • Project management

• Mostly senior experts with 15-35 years of

experience in our core areas

• Current presence in 9 countries in Europe

and the Americas. Some previously based in

Asia.

• Projects around the world

• Clients include multinationals (esp. energy

sector), European Commission, World Bank,

Development Banks, UN bodies and NGOs.

• Renewable energy target achievement and

choice of support mechanism (Dutch Ministry

of Economic Affairs)

• NIMs – evaluating all 3rd phase allocation

plans for the EU-ETS (European Comm.)

• Strategy design, insights in policy development

and CSR reporting for international utilities

• Project mananagement impact assessment of

the Energy Efficiency Directive (Eur. Comm.)