RAP Lees ExperiencesintheEuropeanUnion ERIMarketMechanismsWorkshop Beijing 2011-05-25

8/12/2019 RAP Lees ExperiencesintheEuropeanUnion ERIMarketMechanismsWorkshop Beijing 2011-05-25

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The Regulatory Assistance ProjectChinaEuropean Union

United States

www.raponline.org

Experiences in the European Union

Workshop on Market Mechanisms to Support

Chinas Energy and Climate GoalsBeijing - 25 & 26 May 2011

2011525&26

Eoin LeesEoin Lees


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Contents

What are energy efficiency

obligations and white

certificates?

European Union existing

energy efficiency

obligations and white

certificates

Experience from European

Union

Lessons learned from

European Union

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Why We Need Energy Efficiency

Obligations

Because of marketbarriers, energy efficiencydoes not happen to the

extent that the rationaleconomist would predict

EU Emission TradingScheme tackles energyintensive users

Buildings in Europeaccount for 40% of finalenergy use

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How do EE Obligations Work? 1

1

Government places an

obligation on energy

retailers/distributors to

save energy in

customers premises orhomes

Target related to volume

of energy supplied or

distributed or residentialcustomer numbers

/

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2

For small energy users, need

simple approach to keep

monitoring and verification

costs down use approved

measures for which there arewell established energy

saving values (deemed

savings)

Monitoring and verification

then is a count of the energyefficiency measures +

random audit + checks on

the quality of measures

+ +

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3

For larger energy users

scaled engineering

estimates or actual

measured savings for the

bigger projects

Financial penalties if

energy company misses

target

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What Costs are Involved & Who Pays?

Cost of energy efficiencymeasures paid by energycompanies (subsidies)with contributions from

end customers,landlords, charities,manufacturers etc

Cost of energy companymarketing, sales,reporting, planning etc (inBritain estimate ~18% oftheir direct costs)

18%

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How are they delivered?

Mainly by bilateral contractsbetween obligated companyand an energy efficiencymarket actor e.g. insulationcompany, retailer of energy

efficient appliances,manufacturers of energyefficient equipment, heatinginstallers

Only in Italy has there been

significant trading of whitecertificates generated by nonobligated parties

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EE Obligations in European Union

Energy efficiencyobligations varytremendously in detail fromcountry to country

Spain & Portugal have

energy efficiency levy onenergy distributors &(open) regional auctions forenergy saving projects

Ireland & Poland starting

levy on energy retailers Netherlands considering

obligation on energyretailers

&

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EE Obligations in the EU (2008)

2008

10

Country

Obligated Company

Eligible Customers

Administ rator

Belgium

Flanders

Electricity distributors

Residential and non energy

intensive industry and service

Flemish Government

France

All retailers of energy

All (including transport)

except EU ETS

EU ETS

Government

Italy

Electricity & gas

distributors

All including transport

Energy Regulator (AEEG)

AEEG

United Kingdom

Electricity & gas

retailers

Residential only

Energy Regulator (Ofgem)

Denmark

Electricity, gas & heat

distributors

All except transport

or covered by EU ETS

EU ETS

Danish Energy Authority


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EE Obligations in the EU (2008)

2008

11

Country

Nature of saving target

Estimated annual spend bycompanies

(M)

Belgium Flanders

1st year primary energy

26

France

Lifetime delivered energy

180

Italy

Cumulative 5 year

primary energy

5

196

United Kingdom

Lifetime delivered CO2

900

Denmark

1st year delivered energy

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Most Activity is in Residential Sector

Country

Period

% energy savings fromresidential sector

%

Belgium Flanders

2008

58% (mandated)

58%

Denmark

2008 42%

France

2006-9 87%

Italy

2005-8 83%

United Kingdom

2005-8

100% (mandated)

100%

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EU Residential Energy Savings by End-use

13

2005-7

2006-9

2008

2005-8


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2005-8 British Evaluation Headlines

2005-8

Over 120 million measuresinstalled in 3 years;

appliances and lighting

dominate in numbers but

insulation dominates the

energy savings (75%) Target met 23% cheaper than

Government estimate (3.6% of

annual fuel bills)

Cost of saving a unit of

electricity is 2.4 cents/kWh;for gas 0.7 cents/kWh; cf

residential prices of 11 & 2.9

cents/kWh respectively

1.2

75%

23%

3.6%

2.4/kWh

0.7/kWh

11

&2.9/kWh

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General Observations from European Union

Schemes vary a lot reflects

local energy market status,

history of energy efficiency &

utilities, culture, climate etc.

Schemes work in both

liberalised energy markets

and where they target

monopolistic segments

Core element is the energy

efficiency obligation -

voluntary markets not

expected to emerge in

foreseeable future

&

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Do Energy Efficiency Obligations Work?

Use British Government dataon residential energy

consumption and as the

United Kingdom has the

longest running and largest

energy efficiency obligation In United Kingdom natural gas

is main (non transport) fuel in

residential sector >70% of

final energy demand in

households Prior to 2005 residential gas

demand increasing at

between 1 and 2% per year

70%

2005

1%

2%

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Factors Reducing Gas Demand 2004-9

2004-2009

Energy efficiency obligation

doubled (75% energy savings

come from insulation

measures)

New regulations on boiler

replacement meant high

efficiency (condensing) boilers

quickly moved from 36% of

the replacement market to

>97%

Price rises for residentialcustomers reduced household

demand

75%

36%

97%

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Other Factors Affecting Gas Demand 2004-9

2004 2009

From 2004 to 2009, gas

customers increased by

~1.6 million (7%) to 22

million thus increasing

demand

More Degree Days in

2008 & 2009 than in the

earlier period, so

warmer winters not anissue

20042009

1607%2200

20082009

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Reduction in British Residential Gas Demand

19

300

325

350

375

400

2004 2005 2006 2007 2008 2009

TWh

British Residential Gas Demand


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Conclusions on Turning Down Demand

Gas demand in the UnitedKingdom has been dropping

(15% in five years)

Reduction due to more

insulation, better boilers and

increased energy prices none on their own can

account for actual reduction

British Gas claims most of the

22% reduction per household

is due to energy efficiency Government analysis

underway (complicated)

515%

British Gas

22%

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Documents

RAP Lees ExperiencesintheEuropeanUnion ERIMarketMechanismsWorkshop Beijing 2011-05-25