Why energy efficiency? What challenges and policies for its increased market uptake?  Dr. Gergana Miladinova Unit C.3 (Energy efficiency) DG Energy. European Commission 29 November 2011 1

 GAP MIND THE GAP! 20% Objective business as usual Status today 1900 * Gross inland consumption minus non-energy uses Primary energy consumption*, Mtoe Projections from 2007 Projections from 2009 20% Energy saving objective 1842 Mtoe 1850 1800 1750 Status today 1700 1678 Mtoe GAP 1650 1600 1550 1474 Mtoe 20% Objective 1500 1450 1400 2005 2010 2015 2020 Source: IA EEP, SEC(2011) 277 2

Why European energy efficiency policy?  Why European energy efficiency policy? Reduce EU’s energy bill Create new business opportunities Boost R&D & markets for EU global leadership Security of supply Competitiveness Sustainability Main messages The benefits from energy efficiency improvements are threefold, as there contribute to improve Europe security of supply, Europe’s competitiveness and Europe’s sustainability. Background on the energy bill: 20% reduction in primary energy consumption means 20% less import needs (368 Mtoe at an average price of X EUR=200 bn EUR) GERGANA Reduce EU’s energy dependence Reduce investments in energy infrastructures Improve the energy trade balance Reduce CO2 emissions Limit environmental degradation

Why this focus on buildings? Buildings are responsible for about: 40% of EU final energy use 36% CO2 emissions 210 M households, conditioned floor area: 15000km2 – residential, 6000km2 - commercial Construction sector: 9% of EU GDP, 8% of EU-workforce, € 2 trillion annual turnover - hardest hit by the crisis Benefits: Considerable savings possibilities Positive employment impact: up to 2 million jobs created/retained Lower energy bills + better living conditions Investments in energy efficiency trigger economic activity EU 27 total Energy use CO2-emmissions EU- Buildings sector 40% 36% and €2 trillion annual turnover Source: IA recast EPBD, SEC(2008) 2864, Annex 5; IA for Ecodesign/Energy Labeling; Ecorys 2010; Eurostat 4

SIGNIFICANT COST-COST EFFECTIVE SAVINGS  SIGNIFICANT COST-COST EFFECTIVE SAVINGS Savings expected to be achieved with already existing measures Remaining saving potential to be addressed with new measures 2% 5% 16% 11% 29% Source: IA EED, SEC(2011) 779, based on Fraunhofer ISI et al. 2009, PRIMES 2007 and 2009 and expert estimations

 Many challenges Energy market prices do not reflect all costs to society plus low price elasticity Asymmetric information on the benefits and costs. Principal-agent market failure Missing or incomplete markets and low mobilisation of funds (e.g. low demand, low number of trained professionals, lack of suppliers) High transaction costs, decentralised/ local projects Low replacement rates: 92% of building stock today will be there in 2020, and 75% in 2050 Suboptimal renovations – lock-in effect Lack of a comprehensive policy framework =► Low energy related renovation rates of buildings and low replacement rates of energy-using products =► Need of coordinated intervention at all levels and with comprehensive policy mix

 Stepping stones 1: current policies (EPBD, Ecodesign and Energy Labelling) Minimum energy performance requirements (MEPR): Member States to set MEPR for all new and existing buildings (undergoing major renovation) Member States to set MEPR for technical building systems and elements when installed, replaced/upgraded Member States to ensure that after 2020 all new buildings are nearly zero energy Ecodesign minimum requirements set in implementing measures to be used by industry when developing products to be placed on the EU market and/or put into service Information tools: Energy Performance certificate for buildings or apartments (for newly-built, on sale, newly rented) Inspection report for HVAC Energy Label (for energy-using products)

EPBD makes energy efficiency visible  EPBD makes energy efficiency visible Concrete example of the EPBD implementation: energy performance certificates from various Member States

 Example ecodesign/labelling: Interaction between minimum requirements and information The Ecodesign Directive addresses the supply side while the Energy Labelling Directive addresses the demand side. It is the combined effect of both measures leads to market transformation. Source: IEA, P. Waide, International use of policy instruments, Copenhagen, 05 April 2006

Stepping stones 2: proposal for a new EE Directive  Stepping stones 2: proposal for a new EE Directive Public sector to lead the market transformation (renovation target, energy efficiency criteria in public purchase) Energy efficiency obligation schemes or alternative approaches to be set by MS to ensure measures are realised Encouragement of energy performance contracting Accurate and frequent individual metering and billing to inform consumers Mandatory energy audits for large companies and promotion of audits for households and SMEs Heat and cooling demand plans Strong obligations for uptake of cogeneration and promotion of district heating and cooling

ILLUSTRATON OF FACTORS ASSESSED (Energy efficiency obligation, IA EED)

 Stepping stones 3: financing and capacity Example: Technical assistance facilities under the IEE ELENA-EIB Large scale investments Direct contracts with EIB Open call, no deadline Leverage 20 All IEE MS >Є50m MLEI Small-scale investments Direct contracts with EACI IEE call, standard deadline Leverage 15 IEE MS > Є6m ELENA-KfW Mid-size programmes Intermediated via PFIs Open call, no deadline Leverage 20 All IEE MS < Є50m TA for Project Development Services ELENA-EBRD Mid-size investments Direct contracts with EBRD Open call, no deadline Leverage 20 IEE/EBRD MS < Є50m ELENA-CEB Mid-size programmes Direct contracts with CEB or Intermediated via PFIs Open call, no deadline Leverage 20 IEE/CEB MS < Є50m 07/04/2019

Example of a successful technical assistance: ELENA  Example of a successful technical assistance: ELENA ELENA EIB projects as of 31/10/2011: 12 signed, 3 approved Huge leverage: ELENA contribution: EUR 27,341,336 Expected investment: up to EUR 1.9bn Significant savings: 1009,13 GWh during ELENA funding period Direct and indirect jobs estimated at 32,500 person-years

ELENA EIB projects as of 31/10/2011 – 12 signed,+3 approved ELENA contribution: EUR 27,341,336 – Expected investment: up to EUR 1.9bn

 Conclusion The 20% EE target is achievable, modelling shows: Primary energy reduction of 19.7% and 20.9% Slightly positive impact on the GDP and employment Insignificant positive impact on household income, some small distributional effects possible in very limited cases Significant remaining potential and social and economic benefits, especially in buildings, as well as challenges Current and forthcoming legislation would facilitate the uptake Still, financing and capacity remains a curtail driver for faster progress Main challenge and opportunity is to develop coordinated package of measures Systematic approach required + bundling of small projects + avoidance of lock-in effect

Thank you. For further information: http://ec. europa  16 16