Doubling The Rate Of Energy Efficiency Improvements: The Role Of The Private Sector In Europe
Doubling the rate of energy efficiency improvement economywide has become an important global policy goal. For some, it is critical to improve economic productivity, for others, it slows the rate of carbon emissions, and for countries without enough power to meet growing populations, it frees resources to help ensure access to energy. Sustainable Energy for All,1 an initiative launched by the United Nations, also recognizes that government policy alone cannot achieve this goal – corporations, individual homeowners and commercial businesses must invest today to see the benefits for years to come. The private sector, through public private partnerships and innovative efficiency business models can deliver the needed investment and the technical skills.
Yet the private sector, non-governmental organizations and policymakers need to understand and act to address market barriers that lock in current construction and finance practices which do not value efficiency. On November 8, before the 2012 Euro-Mediterranean Energy Efficiency Forum2 in Monaco, the Johnson Controls Institute for Building Efficiency (IBE) hosted a Round Table discussion to explore how the private sector can contribute to the goal of doubling the rate of energy efficiency improvement. The discussion followed a similar event organized by the IBE in Washington, D.C., and the publication of the second edition of the Driving Transformation to Energy Efficient Buildings3 report released at Rio+20, which seeks to raise awareness for the role that building energy efficiency can play supporting sustainable development and climate action.
A United Nations Foundation report states that doubling the rate of energy efficiency improvement would:
- Allow the world to hold CO2 concentrations below 550 ppmv
- Avoid $3 trillion worth of new generation
- Save consumers $500 billion per year by 2030
- Eliminate the same amount of energy supplied by 2,000 coal-fired power plants
- Return the globe to 2004 energy consumption levels
- Drive business productivity improvements and new employment opportunities4
The challenge unites countries from the developed and developing world – and creates opportunity for shared learning. The Driving Transformation report offers examples of policy innovation and a unique multistakeholder workshop tool to prioritize policy in a national or local context and bring market voices into the policy dialogue.
The Round Table in Monaco explored the private-sector’s role and priorities around building energy efficiency, in particular its role in emerging economies, projects and financing. The 50 participants included business leaders and sustainability officers from building equipment and material manufacturers, information technology companies and banks, plus representatives from national governments, city councils, trade
associations, energy agencies, and several NGOs.
When asked about factors that influence decisions to invest in emerging economies, the Round Table participants named four preconditions for energy efficiency investments:
- A regulatory regime that enables a market for products and services
- A stable investment framework
- Government willingness to support public-private partnerships for training and capacity building
- Availability of a skilled workforce
As shown in Figure 1, European business leaders consider a strong regulatory regime as the key condition for energy efficiency investments, while the public sector and NGO representatives favored a stable investment framework. The two preferences go hand in hand as policies that can enable the market to overcome barriers to energy efficiency. There is generally good alignment between European private sector and NGO/public-sector representatives in the top four market conditions. In one area, integrity of the business community, the European private-sector placed a higher priority than did the other stakeholders. And interestingly, the public and nonprofit participants rated stable investment environment as a greater challenge than did the businesses present.
When comparing results from the European Round Table with those from the U.S., the significant priority placed by the U.S. private sector on the size of the market stands out. The private sector priorities of a supportive regulatory regime and stable investment framework are in line with European results. In the U.S., the NGO/public sector representatives placed significantly higher priority on government willingness to enter into public-private partnerships and on public funding and incentives (Figure 2). The private sector participants in the U.S. Forum saw those as positive, but the absence of active government participation did not emerge as an issue to the U.S. business community.
The Round Table participants in Europe were also questioned about their perspectives on the priority policies that could boost energy efficiency investments in Europe. Common policy priorities included:
- Tax incentives, grants or rebate programs
- Mandatory building retrofits
- Building efficiency targets
- Government leadership programs
In this sense, the successful implementation of the new Energy Efficiency Directive5 and the Recast of The Energy Performance of Buildings Directive6 play a crucial role in creating the right supporting market conditions for investment in energy efficient buildings in the EU. The World Energy Outlook 2012, released just a few days after the Monaco event, reinforced the message of the European business leaders at the Round Table. Referring to the building sector, the report highlights the fact that 80 percent of the economic potential of energy efficiency in buildings remains untapped, largely due to non-technical barriers.7
Besides incentives, targets and government leadership toward energy efficiency, the Round Table participants also highlighted the importance of technical capacity-building programs, performance training, education and awareness actions, R&D, and energy performance contracting enablers (Figure 3). The large contribution expected from the building sector in order to meet the 2020 EU energy objectives8 is a challenge for the construction sector, which needs to be ready to deliver renovations that offer high levels of energy performance and enable new nearly zero-energy buildings.
Observations and recommendations
During the European Round Table dialogue, it was observed that E.U. policies and approach tended to be more mandatory and top-down in structure, while U.S. priorities tended to be more voluntary and bottom-up – clearly a difference in the cultural and historical approaches between the two regions. Additional research and analysis were suggested on how this may influence U.S. and E.U. policy priorities and differences in implementation. There was also considerable discussion about creating market demand for efficiency by focusing on market segmentation and detailing the co-benefits and macro-economic impacts of energy efficiency.
1 Sustainable Energy for All website 2012: http://www.sustainableenergyforall.org/
2 The Euro-Mediterranean Energy Efficiency Forum is organized each year by Johnson Controls, the Prince Albert II of Monaco Foundation and The Climate Group: https://www.ee-forum.eu/
3 Published by IBE in June 2012 about how policies can help the market overcome barriers to energy efficiency:
4 Realizing the Potential of Energy Efficiency:Targets, Policies and Measures for G8 Countries, United Nations Foundation Expert Report,
5 The new Energy Efficiency Directive: http://ec.europa.eu/energy/efficiency/eed/eed_en.htm
6 The Recast of the Energy Performance of Buildings Directive:
7 World Energy Outlook 2012 findings available here http://www.worldenergyoutlook.org/
8 The EU climate and energy package: http://ec.europa.eu/clima/policies/package/index_en.htm