Energy efficiency is now a fuel
By Siddharth Singh, 15th March, 2015
The European Commission has launched an initiative to establish an Energy Union which would set the course to be adopted by the EU on energy and climate change. This Energy Union would work towards the EU’s energy security by planning out and coordinating policies among member nations. It would try to wean the continent away from fossil fuels and would work towards the diversification of imports to enhance the security of energy supplies.
Most interestingly, the documents pertaining to the proposed union treat energy efficiency as a fuel. The European Commission observed,
“It is (…) necessary to fundamentally rethink energy efficiency and treat it as an energy source in its own right, representing the value of energy saved. As part of the market design review, the Commission will ensure that energy efficiency and demand side response can compete on equal terms with generation capacity.”
The idea is that improvements in energy efficiency of consuming sectors lead to significant decreases in energy demand. Therefore, apart from ensuring greater energy supply from renewable sources and low greenhouse gas emission sources, governments should pursue energy efficiency in buildings, transport and industries to moderate demand and ensure greater energy security.
They note that oil prices are currently low not only due to high production, but a fall in demand due to greater energy efficiency.
Notions about energy security have so far focused on the supply side (read this article for more). With the thrust on energy efficiency, the demand side finally gets the importance it deserves. The EU in October 2014 set a target of 27% improvement in energy security by 2030. Efficiency improvements across sectors is already leading to a fall in energy demand in the EU.
For instance, the graph below (from the IEA Mid Term Oil Market Report 2014) shows that average vehicle efficiency has been improving, contributing to a fall in gasoline (petrol) demand growth (note that the red line represents a fall in the growth rate of the consumption, not the overall consumption itself. The growth rate has been negative through the entire period represented on the graph, and is estimated to remain negative in the future).
Further, BP’s Statistical Review of World Energy 2014 shows that consumption of oil and coal in the EU has been declining. This fall has been enabled largely due to energy efficiency improvements:
Clearly, energy efficiency plays a major role in demand reduction, and the classification of it as a fuel in itself is a very interesting way to put across its importance in the pursuit of energy security.
Postscript: The European Commission adopted the following strategy framework:
“A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy. This sets out, in five interrelated policy dimensions, the goals of an energy union (…) including new legislation to redesign and overhaul the electricity market, ensuring more transparency in gas contracts, substantially developing regional cooperation as an important step towards an integrated market, with a stronger regulated framework, new legislation to ensure the supply for electricity and gas, increased EU funding for energy efficiency or a new renewables energy package, focusing European R&I energy strategy, reporting annually on the ‘State of the Energy Union’, just to name a few.”
Energy efficiency would therefore receive increased EU funding, if the Energy Union materialises.
Further, the roadmap of the Energy Union is available here.
And here is an article that brings to light serious obstacles in the way of such a union.
