Energy efficiency is one of the key policy dossiers in our undertaking to achieve a carbon neutral power generation by 2050. If we can be more efficient in the way we produce, transform and consume our energy we will meet our greenhouse gas reduction targets, empower our customers and reduce Europe’s dependence on imported fossil fuels. The key sectors with the most energy efficiency potential to be reaped are currently ‘downstream’ – in our buildings and transport methods. While unlocking this potential is challenging, the electricity sector has endorsed its central role here and continues to develop new products and services close to the customer.
Energy Efficiency Policy: Ambitious, market based and cost-efficient
EURELECTRIC remains a strong supporter of an ambitious energy efficiency policy, but has also always advocated for a balanced cost-benefit analysis when it comes to target setting for our energy policy goals. For the 2030 Climate and Energy Package, the European ambition level for energy efficiency must therefore be based on cost-efficiency and market based approaches, which will ensure that key policy tools such as the ETS are not undermined and decarbonisation slowed down, while striving to unlock the vast potential in efficiency improvements which are economic.
For power producers (the supply side), increasing the efficiency with which they produce electricity has historically been a core business priority from the start as energy is the main cost factor for the business. It has been a driving force for major advancements in technology and resource use in the sector. In the EU, the ETS has also contributed to this process as it directly rewards efficiency and punishes inefficiency.
On the supply side, the ETS is the best policy tool to foster energy efficiency.
To activate energy efficiency on the consumer side a price signal alone, even if realistic and not blurred by charges as is currently the case, will not always deliver the most cost-effective measure for increased energy efficiency. The existence of market failures in energy efficiency requires more top down approaches in order to make the most of the vast potential to be reaped on the demand side. When picking the future policy tools for downstream energy efficiency EURELECTRIC is convinced that instruments which do not lead to additional charges on the electricity bill are best used.
Power generators are now efficiency providers
The power sector transformation continues and energy efficiency is a critical part of this. Internal and external factors have initiated rapid and profound change in a traditionally largely asset-based industry. The electricity value chain continues to shift from a linear supply-demand model to a new system paradigm in which consumers have become producers, information and electricity flows in both directions and the system is rapidly becoming more complex. The power sector is taking on this challenge, continuously innovating with new ‘downstream’ business models based around energy efficiency, growing decentralised generation, and new products and services. Much of the development is closely related to the increasing penetration of smarter networks, more active customer engagement and new technologies.
Uncovering the real value of decarbonised power generation
The biggest potential for energy efficiency at this moment lies in our buildings (heating and cooling) as well as in our transport systems (road & rail). Much of the energy we consume in these areas currently employ technologies which burn fossil fuels. While these technologies have become a lot more efficient than in the past, as long as we continue to burn fossil fuels in our cars and buildings, there is little prospect of making them fully sustainable. This is where electricity can show its full potential.
Already six years ago, the European power sector made a pledge to achieve carbon neutral electricity supply by 2050 – and we’ve also shown how to do it most cost effectively1. Decarbonising electricity as an energy carrier will make a major contribution to meeting Europe’s climate change targets – but it will also open the door for doing more. Using electricity from carbon neutral sources in heating cooling and transport
- Removes emissions from local heating in our buildings
- Strongly reduces emissions from road and rail transport
- Improves air quality, especially in our cities
- Allows us to use electric vehicle batteries or electric appliances (e.g. water heaters) as a source of flexible demand and as decentralised energy storage.
This can also mean increased energy efficiency. There used to be a widespread perception that energy efficiency implies reducing electricity consumption. But newer technologies have changed the comparative efficiency of electricity use versus the use of other energy carriers. Today, equipping a new one family house with an electric heat pump instead of an oil burner can save on average almost 50% of annual primary energy consumption. And since an ever-increasing share of the electricity is being generated by renewables, the need to import fuel for heating declines as well.
1 EURELECTRIC report: Power Choices 2013 – A lost decade