Making “Step changes” in energy efficiency Building on experienced success.

1. Making “Step changes” in energy efficiencyBuilding on experienced success. Hans Nilsson Chairman of the IEA DSM-Programme FourFact AB www.fourfact.com

2. Energy-use in the IEA-11 160 Hypothetical energy use without savings 140 Additional energy use with 1973 intensity = Energy saving 49% 120 100 20% Exajoules AUS DEK FIN FRA GER ITA JAP NOR SWE UK US 80 60 40 Actualenergy use 20 1975 1973 1980 1985 1990 1995 1998 Source: 30 years of energy use in IEA countries

3. The rise in welfare depends more on energy efficiency improvements than on growth in energy use!

4. Energy efficiency – The most important means to reduce GHG 5 1 2 3 4 Source: The IEA Energy Technology Perspectives, 2006

5. The best way to satisfy a growing need for energy services System capacity Demand + 1 kWh B A - 1 kWh Should be the cheaper of the two options: More supply or less demand Time

6. Difference in Electricity Investment in the Alternative vs. Reference Scenario 2003-2030 1 000 500 Efficiency measures Avoided supply-side investment Difference 0 Generation Additional demand-side billion dollars (2000) investment Transmis- sion - 500 -1 000 Distribu- tion -1 500 -2 000 Additional investments on the demand side are more than offset by lower investment on the supply side Source WEO 2004

7. Energy Efficiency is the cheapest resource Negative Costs!

8. The curse of the Energy Efficiency • Energy Efficiency is invisible • Energy Efficiency is not a Product, but a characteristic (with products in comparison) • Energy Efficiency is delivered in many small packages • …..and on different occasions

9. But there are several means LARGE-SCALE ENERGY EFFICIENCY “Mandating” Market Acceptance “Commoditise” for Non Price- responsive Delegated Price- responsive customers Standards e.g. MEPS; Top-runner; Energy Star Agreed actions e.g. ESCO; Labels, Branding e.g. Taxes; DR (elasticity) e.g. Voluntary Agreements; Technology Procurements Actions Commitments e.g. Muni- cipalities Planning; FEMP e.g. White Certificates

11. Market Transformation Market Penetration Preferred Case Base case MORE NEW LESS Product Performance

12. Market Transformation Market Penetration Preferred Case Aggregated proc. (AP) & Labels Base case Technology Procurement (TP) Standards & Directives Product Performance

13. Means for accelerated diffusion Diffusion curve Joint Research on Technologies Market response (Result = Potential * Acceptance) Labelling, Training Comprehensive adaptable strategies Feed-in tariffs, Certificates, Campaigns Technology Procurements, Demonstration Time after introduction

14. The (textbook) market SUPPLIER Flow of goods Price Relation Actor Quantity Influent User

15. The (real) market SUPPLIER Subsupplier Wholesale Flow of goods Retailer Authority Relation IInstaller Actor Owner Influent User Consultant Service

16. Employment Industrial development Poverty alleviation Holds back prices in supply Reduces pressure on supply reserves Energy Efficiency has multiple dividends • Cost • Environment/Climate

17. Energy Efficiency is the first step on the road to sustainability

18. Thank you!

19. EXTRA MATERIAL

20. 1. The learning investments have to be covered and recovered • Learning investments are not subsidies IF they can be anticipated to yield future profit • Someone has to start the process • It takes TIME to reach break even • The investments might be HUGE Challenging New Technology Price A Learning investments …and ditto profit B C Cumulative Sales

21. 4. There is always someone to share the bill • (I) Government and companies that have a “first-mover” interest • (II) Private sector (users) who have a worse alternative • (III) Private sector (users) who have an interest in showing leadership Challenging New Technology Price I Willingness to pay on niche markets II III Cumulative Sales

22. INDIA 150 GW Break-even 1$/W

23. General Market Segmentation • Innovators (Enthusiasts) • Early Adopters (Visionaries) • THE CHASM • Early Majority (Pragmatists) • Late Majority (Conservatives) • Laggards (Sceptics)

24. General Market Segmentation Diffusion curve Laggards (16%) Late majority (34%) Adoption of iinovation Early Majority (34%) "Take-off" in the region Early adpoters (13.5%) 5%-15% of the market Time after introduction Innovators (2.5 %)

25. Accelerated diffusion

26. Government and industry (R&D) Positioning companies (capitalising) Challenger A A’ Willingness-to-pay in Price Challenger Niche Markets Incumbent B C Technology D Customers with High alternative Costs (incumbent+) Lead users (capitalising) “Chasm-crossers” Cumulative Sales

27. New paradigms – Distributed Generation Reduce losses Bypass congestion Stimulates competition Enables use Source: Distributed Generation In Liberalised Electricity Markets. OECD/IEA 2002

28. Result (Efficiency) = Potentialtechn.;time. * Acceptancetime; exposure Potential Technical potential 4. Improve technology Economic Potential ( societal) 3. Improve Suppliers learning Economic Potential ( individual) 2. Improve Credibility, Organise Market 1. Reduce potential Transac- tion costs Time

29. TO MEASURE SUCCES

30. Electricity in Finland