Getting the most out of short supply: optimising energy efficiency measures at national level

1. Getting the most out of short supply: optimising energy efficiency measures at national level Csutora Mária, PhD, BCE

2. Framework • “Sustainable production, consumption and communication” project of five research institutions and universitties, financed by the Norway grants. • Methodology: • cost benefit analysis • a former study, Economics of GHG Mitigation, UNEP RISO project, 1997

3. Energy saving options are crucial: • In reducing the import dependency of energy supply, especially natural gas • In reducing GHG emission and other pollution • In supporting sustainability of consumption

4. Questions to be asked • What is a relistic and feasible potential for energy savings options in the residential and communal sectors in Hungary? • How high are social costs of implementation?Should we invest in energy savings or in expanded energy production? • Can energy savings options be regarded as real alternatives to expanded energy production (new power stations)? How much energy could we save at what cost? • How should we allocate limited financial resouces in order to achieve the highest level of energy reduction at national level? Which options should we subsidize?

5. Private costs vs social costs • Price corrections are applied • Social costs include externalities • Subsidies are social costs • Indirect taxes are not included in social costs • We use social discount rate (STPR) instead of private one

6. Total social cost of energy saving options Unit cost HUF/PJ MAC social Total social costs of energy savings options Energy saved (PJ)

7. Cost curve for discrete options Cost, HUF/energy saved Social cost of option No.7 energy savings from option No.7

8. Energy savings options Marginal social cost of energy savings options Most promising options Energy saved

9. MAC changes with time MAC0 social Unit cost HUF/PJ The effect of increasing energy prices MAC1 social Energy saved (PJ)

10. Private and social marginal cost curve Implementation is less likely Unit cost Implementation assumes subsidies Implementation is likely ΣMAC private MAC social Energy saved

11. Options to be analysed • Residential and communal options: • Changes of windows • Supplementary insulation of basements, roofsand walls (by building categories) • Programozható termosztát • More efficient boilers • Using high tech appliances in an efficient way • Bioethanol and biodiesel? • CFL bulbs, luminaires • napkollektor

12. Supplementary materials

13. Assumptions • Energy prices • Penetration level • Realistic options • Projects with synergic effects • Social and private discount rates • External costs

14. Ellátás biztonság köre Hatótényezők Fogyasztás növekedése Fosszilis energiahordozókra való támaszkodás Magas árak hiány, politikaiproblémák Terhelés: ÜHG kibocsátás,szennyezés Válaszok Környezet-tudatosság Megújuló energiaforrások Helyi erőforrások Energiahatékonyság Energiamegtakarítás Ellátás-biztonsági problémák Válaszok Közös energia piac, Készletezés Kapacitásbővítés Állapot: Magas ÜHG koncentráció Klímaváltozás Hatótényezők: -Fogyasztás növekedése Fosszilis energiahordozók Magas és növekvő importfüggőség Alacsony diverzifikáció Magasenergiaintenzitás Hatás: Aszályok, árvíz, stb. Az ellátásbiztonság és a fenntarthatóság DPSIR köre Fenntarthatóság köre

15. External costs of electricity production in EU-25, 1990 and 2004 - low estimate (European Environmental Agency) http://themes.eea.europa.eu/Sectors_and_activities/energy/indicators/EN35%2C2007.04/fig1a.gif/view

17. The external costs in the above two figures are based upon the sum of three components associated with the production of electricity: climate change damage costs associated with emissions of CO2; damage costs (such as impacts on health, crops etc) associated with other air pollutants (NOx, SO2, NMVOCs, PM10, NH3), and other non-environmental social costs for non-fossil electricity-generating technologies. The external costs from nuclear have to be treated with caution, as only parts of the externalities are included. The costs reflect to a large extent the small amount of emissions of CO2 and air pollutants, and the low risk of accidents.

18. Market price and lifecycle costs

19. Theoretical background • Mely esetekben szolgálja az energiahatékonyság növelése a környezeti hatások csökkenését? • Rebound és backfire effects: az energiahatékonyságból származó jövedelmi hatás erősebb, mint a hatékonyság javulásának hatása: nő az energiaigény • A hatékonyság javítása csak az energiakínálat korlátozása mellett vezet a környezeti hatások csökkentéséhez • Az energiahatékonyság javításának célja a jóllét megőrzése a környezeti hatások csökkentése mellett (nem pedig a „fenntartható növekedés”)

20. Dealing with backfire effect • Limited supply of energy • Integrated regulation efforts (regulation encourages energy efficiency options and increased use of energy at the same time) • Fighting against “silly” solutions