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Energy efficiency technologies are cheapest energy but investment slows

More investments in existing energy efficiency technologies, coupled with stronger policy measures, would boost progress toward the goals of the Paris climate deal, the International Energy Agency (IEA) said this week.

But unfortunately, this is not happening. In fact, the IEA warns that progress in energy efficiency is slowing. And, global energy demand rose by 1.9 per cent in 2017 – the fastest annual increase since 2010.

Its 2018 report lays out an “efficient world scenario” that enables gains in buildings, transportation, industry and buildings to help energy-related emissions peak in 2020 and then fall significantly.

The scenario envisions global investment of $584 billion a year up to 2025, rising to $1.3 trillion annually in 2026-2040.

This contrasts with the reality today where previous expansion of energy efficiency policies – such as incentives and efficiency standards – has slowed, with worldwide energy efficiency investment growing by just 3 per cent to $236 billion last year, far below the levels in the “efficient world scenario”.

As a result, global energy intensity – energy used per unit of GDP – fell by its smallest amount last year since 2010, the IEA said.

Yet the report says that efficiency gains could allow the world to extract twice as much economic value from the energy it uses compared to today.

“Our study shows that the right efficiency policies could alone enable the world to achieve more than 40 per cent of the emissions cuts needed to reach its climate goals without requiring new technology,” said Fatih Birol, IEA executive director, in a statement.

Its vision for 2040 includes 60 per cent more building space and 20 per cent more people, and double global GDP, while using only marginally more energy than today and cutting greenhouse gas emissions by 12 per cent.

But making this happen requires an immediate step up in policy action. For example, countries would need to continue to push up the efficiency of both cars and trucks, building on the progress made in recent years.

And air conditioners, as highlighted in the IEA’s recent report The Future of Cooling, need to become twice as efficient as they are today, because their use is rising exponentially.

“While various countries are endowed with different energy resources – whether it’s oil, gas, wind, solar or hydropower – every single country has energy efficiency potential,” Dr Birol continued. “Efficiency can enable economic growth, reduce emissions and improve energy security.”

The report shows where the efficiency opportunities exist, and the policies required to capture them. It offers a blueprint to governments to improve their economies and lower their emissions, and maps out how to meet key elements of the UN’s Sustainable Development Goals related to energy.

Dr Birol added, “We know there is an appetite for focused solutions, and this is what the Efficient World Strategy offers. We look forward to working with countries to deliver the benefits of energy efficiency.”

Opportunities

The IEA report only considers investment opportunities that are “highly cost-effective and would bring significant economic benefits” but adds that new financing mechanisms are necessary to deliver them with a racking up of the level of investment.

Some of these things, it says, are already happening, with the ESCO market increasing by 8 per cent to nearly US$29 billion (AU$41 billion) in 2017 and green bonds issued primarily for energy efficiency tripling.

ISO 50001 is the global energy management standard, which was introduced 10 years ago. By the end of last year the number of certifications had reached nearly 23,000, but the rate of increase has slowed down and most of them were in Germany and the rest of Europe.

Companies and organisations which adopt the standard and introduce and energy management system not only secure easy win energy and cost savings, but in Europe often obtain tax benefits as an incentive to adopt the standard. The IAEA would like to see this approach rolled out universally. Countries which do so see their economies become much more competitive.

Another requirement of the IEA’s optimistic scenario is an increase in the strength of mandatory energy efficiency policies. These increased only marginally in 2017, particularly in the transport sector, whereas increases in policy strength in the construction and industry sectors were minimal.

It says the opportunities for successful investments are particularly strong in emerging economies. These economies could more than double in size with just a 24 per cent increase in primary energy demand if the energy efficiency opportunities it identifies were embraced. China is leading the way in this regard.

Efficiency and buildings

In the buildings sector, the report says that the opportunity exists to improve the efficiency per unit of floor area by nearly 40 per cent compared with current levels using existing technology. By 2040, this could deliver deliver 60 per cent more floor area around the world for no increase in overall energy demand.

Among the challenges preventing this happening at present are that two out of every three countries lack mandatory building codes, and appliances are not subject to standards that apply in Europe, for example.

Moreover, without new sources of finance to build more efficient new buildings and upgrade the existing stock, little progress can be made.

But in the industry sector, there are huge opportunities, especially for replacing motor-driven systems and electric heat pumps for low-temperature process heat with more efficient systems.

Most potential energy savings in industry can be found in the less energy intensive manufacturing sectors, where policies that can engage a larger number of energy users are required, and the adoption of energy management systems, which can be encouraged by the use of incentives.

Some praise is handed out for Australia for ratcheting up standards for improving the minimum energy performance of refrigeration and the demand response capability for air conditioners.

The IEA has been publishing these reports and advocating similar measures with a very persuasive and rational arguments for many years. One can sense the disappointment that they have not had more effect in this particular edition.

The IEA conducts a huge amount of research and development into improving the efficiency and innovation in new and emerging technologies. Hundreds of reports containing thousands of recommendations have been published for scores of very specific sectors.

Yet one wonders how many of these actually secure the attention of decision-makers and policymakers, and what this organisation could do to improve its performance in this respect. Because it is clearly not so much new knowledge that is required, as the dissemination of knowledge and its application into widespread practice.

David Thorpe is the author of Energy Management in Buildings and Energy Management in Industry.

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