Energy efficiency first

Energy efficiency is one of the key principles for ensuring a secure, sustainable, competitive and affordable energy supply while reducing greenhouse gas (GHG) emissions. The European Union, through the Green New Deal, has set itself the following targets for 2030:

• Reducing GHG emissions by 55%, compared to 1990 levels, to become the first climate neutral continent by 2050.
• A share of at least 32% of energy from renewable sources.
• Reduction of primary energy consumption by at least 32.5%.

The level of energy intensity has been improving steadily over the last decade, but is not yet in line with the sustainable development goals set by the international community.

Energy efficiency was one of the three main objectives and a key tool of the Clean Energy for all Europeans package, prepared following the ratification of the Paris Agreement in late 2016. Energy efficiency continued to be the main focus in summer 2021 through the ‘Fit for 55’ package of proposals, which aims to enable the EU to achieve a 55% reduction in emissions and to bring about sustainable change in the economic, social and industrial spheres. Among the many instruments coordinated in this package, the main proposals related to energy efficiency are:

•  A more robust emissions trading scheme, extended also to the aviation sector, to maritime and road transport, and finally to the buildings sector.
• The introduction of a carbon adjustment mechanism at borders, putting a price on the carbon of imported products.
• Updating the Energy Efficiency Directive.

In order to reduce overall energy consumption and thus emissions, the proposed revision of the Energy Efficiency Directive contains a binding and more ambitious annual target for reducing energy consumption. In the light of this target, national contributions will be set, virtually doubling the annual energy savings obligation for Member States. One of the most focused sectors will be the public sector, which will have to renovate, both centrally and locally, part of its buildings every year in order to stimulate the so-called ‘wave’ of renovations, create jobs and reduce energy consumption.

So much focus on energy efficiency is due to the fact that it is one of the easiest ways to: reduce greenhouse gas emissions, improve air quality, achieve financial savings and many other benefits depending on the application. In any sector, from large industries to individual homes, energy efficiency actions can be undertaken. Each field of application has a series of specific actions. For example, in the domestic field, actions such as: replacing boilers with new generation ones or heat pumps, installing renewable energy production systems (photovoltaic and solar thermal), choosing more efficient household appliances, reducing dispersion from the building envelope and waste in general, for example by providing an advanced system to regulate the room temperature in the various zones, respecting the legal limits. In the industrial sector there are many solutions, more or less complex, for increasing energy efficiency. 

One common aspect to all efficiency measures in any context is the reduction of energy costs. In this respect, it can be said that energy efficiency is one of the most cost-effective ways to reduce one’s environmental impact and decarbonise one’s processes (“scope 1” emissions); in most cases, investments can be identified that pay for themselves within a short period of time. In addition, the economic benefits and payback time of various energy efficiency measures can become even more attractive thanks to the possibility of using a range of support tools to promote such measures: tax deductions, white certificates, thermal accounts, and other aid programmes.

A key aspect when discussing energy efficiency is the multiple benefits question, which if monetised can also significantly improve the economic indicators (e.g. payback time) used to evaluate energy efficiency investments. Some of the multiple benefits can address issues that are particularly important to decision-makers (e.g. product/service quality, safety, resilience), making the intervention attractive regardless of the energy benefits. Multiple benefits may also extend beyond the size of the organisation, with positive local and/or global impacts. The non-energy benefits that can be obtained from an intervention are varied and depend on both the type of intervention and the context of the intervention and the context in which it operates. In most cases, it is possible to achieve: increased competitiveness, reduced maintenance downtime, greater reliability in production or service provision, improved product or service quality, reduced waste (water, waste, etc.), improved corporate image. In addition, if efficiency is integrated into the organisation’s activities, it can lead to improved product and value creation.

In Europe, one of the key instruments to stimulate the reduction of greenhouse gas emissions in the main industrial sectors and in the aviation sector is the European Emissions Trading Scheme (EU ETS). This scheme is being proposed in the “Fit for 55%” package of proposals to extend to emissions from buildings and transport, both sea and road. The EU ETS operates on the principle of cap and trade. A cap is set to determine the maximum amount of greenhouse gases that can be emitted by installations covered by the mechanism. Owners of ETS installations that emit less than their allocated quantity can sell their surplus allowances to those who fail to comply with the cap and therefore have to compensate by buying allowances on the market. In such a context, energy efficiency can play a key role, as a more efficient use of energy leads to lower greenhouse gas emissions for the same output.

Apart from ETS entities, a growing number of companies have decided to reduce or offset their emissions voluntarily (according to ISO 14064), either because they are forced/pressured to do so by their customers or because they have realised how important the ability to decarbonise their operations will be in the future in order to remain competitive and access adequate sources of finance to support their growth. For these players, energy efficiency is also one of the key ways to achieve their goals in a sustainable way.

The focus on emissions and avoiding the relocation of more carbon-intensive production is behind the proposal to introduce a new carbon border adjustment mechanism (CBAM3 ), through which a carbon price will be set for imports of certain products. This mechanism aims to ensure that European actions do not lead to carbon leakage and to encourage non-EU industry and international partners to take steps in the same direction.

The proposed revision of the Energy Taxation Directive (ETD) envisages streamlining exemptions and reductions and among the different options for setting rates, energy content and/or emissions are taken into account. The ETS, CBAM and ETD proposals affect energy and product prices, which will have an effect on both business and energy efficiency choices. The different mechanisms through which the EED operates are integrated and complementary to the above-mentioned proposals and others in the Fit for 55 package, so as to maximise benefits and reduce costs.

Energy efficiency alone is not enough to meet the challenging 2030 and 2050 climate change reduction targets. Combining renewable energy and efficiency also means that users can optimise their consumption and costs. In order to do this, it is necessary to have advanced energy monitoring systems capable not only of keeping consumption under control, but as well of managing, where possible or thanks to storage, demand in relation to production. Renewable energy communities, set up by a group of self-consumers, have been introduced with this in mind; these systems aim to optimise self-consumption by providing an incentive, based on shared energy, to stimulate its implementation. Energy communities are one of the tools, together with PPAs (power purchase agreements) designed to encourage the adoption of renewable sources, overcoming the barriers of space availability, producibility and investment capacity of individual companies.

Lastly, among the many other tools relied on to reduce emissions and increase the sustainability of products and services, there is the transition to a circular economy, as an alternative to the current linear economic model (extract, produce, use and dispose), rethinking products and processes and all phases of their entire life cycle from cradle to grave, so that they can be repaired, reused, regenerated and recycled, turning waste and residues into resources. The Ecodesign Directive is a tool to guide the market for consumer products, combining sustainability and efficiency requirements for dozens of product families, from light bulbs to electric motors, by imposing through its regulations the requirements for products to be placed on the market.

In conclusion, energy efficiency is transversal, cost-effective, allows synergies and brings benefits related to the reduction of bills, consumption and emissions, as well as other benefits that may concern the improvement of the product or service, competitiveness, image, comfort, working environment, safety, resilience, etc. To support the implementation of successful energy efficiency measures in the private sector it is possible to use the GoSafe with ESI approach, developed with the help of the European Horizon 2020 programme. GoSafe with ESI includes a standardised turnkey installation contract with guaranteed results, third-party validation and savings insurance. On the way to the 2030 and 2050 targets, Europe has identified and coordinated a wide range of supporting and constraining instruments, from buildings to transport, from research to finance. It is clear that major changes lie ahead in countless aspects of our private and collective lives, as well as a range of opportunities to be seized.