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Defining and Monitoring the proposed Energy Savings Targets: How would it work?

Defining and Monitoring the proposed Energy Savings Targets: How 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

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Defining and Monitoring the proposed Energy Savings Targets: How would it work?

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  1. Defining and Monitoring the proposed Energy Savings Targets:How 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

  2. It‘s 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 Stefan Thomas

  3. Step 1: Define the target Stefan Thomas

  4. Emission Trading Energy/CO2 Tax Subsidy reform Planners,Installers,Retailers Building/Equip-ment owners, Final users Manufacturers 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 Stefan Thomas

  5. Step 3: Monitor and evaluate the savings • Programmes and other measures:25 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 saved=> just collect these data, confidential but with checks through associations, trustees etc. Stefan Thomas

  6. 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)

  7. 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 anyway:Savings 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 • => Clarify at least in ANNEX IV Stefan Thomas

  8. 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 Stefan Thomas

  9. Role of Energy Efficiency in the European Climate Change Programme:sufficient to fill the gap for reaching the Kyoto target (ca. 350 million tonnes CO2 / year) at a net gain or low cost Stefan Thomas

  10. 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 Stefan Thomas

  11. What is good in the proposal for a Directive on Energy End-Use Efficiency and Energy Services Stefan Thomas

  12. 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 Stefan Thomas

  13. 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) ) Stefan Thomas

  14. 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) Stefan Thomas

  15. What should be improved in the proposal for a Directive on Energy End-Use Efficiency and Energy Services Stefan Thomas

  16. 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“ Stefan Thomas

  17. 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 • => Amend text to: „ADDITIONAL energy savings in a particular year AFTER ENTRY INTOFORCE OF THIS DIRECTIVE that ...“ Stefan Thomas

  18. 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 savings“WHY? 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 Stefan Thomas

  19. Accumulating targets and annual savings: Stefan Thomas

  20. What should be improved in the proposal (4) • Strengthen wording in Directive text: when Member States apply energy efficiency mechanisms, measures and programmes, => 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 Stefan Thomas

  21. 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? => 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? Stefan Thomas

  22. 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 EU‘s success in saving energy Stefan Thomas

  23. Appendix: further thoughts and information Stefan Thomas

  24. Appendix part A: further thoughts on the proposal Stefan Thomas

  25. 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! Stefan Thomas

  26. 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/services;Energy product sales data alone not sufficient for evaluation;etc. Stefan Thomas

  27. Appendix Part B: further information Stefan Thomas

  28. 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) Stefan Thomas

  29. 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 • => lack of priority • sometimes lack of funds • split incentives between investors and users or between technology/building providers and buyers • => more information, practical guidance, regulation, and financing support needed („the sticks, the carrots, and the tambourines“) Stefan Thomas

  30. Example - the policy package for appliances Stefan Thomas

  31. Market reforms should not be limited to just one part of the market by stopping at end-use energy Stefan Thomas

  32. 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 Stefan Thomas

  33. 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 Stefan Thomas

  34. 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) Stefan Thomas

  35. 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‘ Stefan Thomas

  36. Current (2003) national frameworks for energy services Stefan Thomas

  37. 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 Stefan Thomas

  38. 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/year=> up to 1 % of all electricity in the EU • Market penetration programmes needed Stefan Thomas

  39. 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 Stefan Thomas

  40. 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 Stefan Thomas

  41. From audits to implementation in Finland Stefan Thomas

  42. United Kingdom: Energy Efficiency Commitment (EEC) Stefan Thomas

  43. 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 Stefan Thomas

  44. Expected Results of the EEC in the UK • Domestic energy savings after implementation of measures:11.492 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 measures:598 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 Stefan Thomas

  45. 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 -> 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 Stefan Thomas

  46. Denmark: 0.5 % electricity savings per year, involving all customer groups Stefan Thomas

  47. Denmark: Electricity Savings Trust Stefan Thomas

  48. 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 Stefan Thomas

  49. 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) Stefan Thomas

  50. 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 Stefan Thomas

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