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Input to the EP Own Initiative Report on the EU Energy Efficiency Action Plan (EEAP)

Input til EU-parlamentets initiativbetænkning om energibesparelser fra Det Økologiske Råd, Rockwool og Pöyry

Friday, July 30th, 2010

Intro
We find it very positive that the European Parliament has decided to write an OIR on energy efficiency. We, the writers, come from three different stake-holders in the energy sector and have decided to give this common input to the report. We hope that it will be useful.

The current policies will not enable us to reach the non-binding 20% energy-saving target by 2020. According to the Commission’s own projections last year, current policies will only deliver 11 % reduction by 2020. It is therefore imperative that new and ambitious actions are taken in a clear and effective manner.

Energy efficiency is crucial to reduce the worlds and the EU's carbon emissions.



Figure 1: McKenzie

Economic mitigation potentials by sector in 2030 estimated from bottom-up studies

The costs of different carbon-reduction technologies vary a lot. Many energy-efficiency initiatives are cheap or even profitable, see figure 1 by McKenzie. It should be noted that the McKenzie figure is based on global data, and not all costs fit into a European context. For instance, solar PV (photo voltaic) and nuclear energy would have higher costs in Europe. To achieve the EU’s short-term as well as long-term goal, it is important that the different cost-effective energy-saving measures are implemented on a large scale. This will allow the thus achieved savings to contribute to the investment costs of the more expensive carbon-combating measures in the future.


Figure 2: Estimated economic mitigation potential by sector and region using technologies and practices expected to be available in 2030. The potentials do not include non-technical options such as lifestyle changes. From IPCC, WGIII Figure SPM.6
EIT: Economies in Transition (former Soviet Union)
http://www.ipcc.ch/pdf/assessment-report/ar4/syr/ar4_syr.pdf


Figure 2 shows that the building sector has the largest potential for cost-effective CO2-reduction. This applies for reduction costs below 20 US $/t CO2, as well as below 50 and 100 US $/t CO2.

Energy efficiency/saving is crucial because:

•    It is the cheapest and most direct way to reduce CO2-emissions.
•    It strengthens the economy of the EU-countries
•    It strengthens the economy of many companies, thus making them more competitive and efficient on the global market.
•    It makes the transition from fossil fuels to renewable energy less difficult and more affordable.
•    It creates thousands of new local jobs due to new large investments. Renovation of residential buildings also has the potential to create jobs in more remote and rural areas of Europe.
•    It increases the EU's energy security and reduces the dependence on energy supplies from Russia and the Middle East.


Proposals for the OIR

In the following we mainly consider 2020 goals, but we also include measures that will only reach a substantial effect later – in 2030 or 2050. It is very important that our efforts until 2020 aim towards the long term goals – especially the goal of a fossil-free future in rich countries by 2050. This will not be possible unless we take effective and widespread action on energy efficiency now.

Below we have grouped our points in sectors and general goals. It is important to address energy efficiency in all sectors, including the transport sector, which has the fastest growing consumption of fossil fuels and CO2 emissions. We can predict that only a minor part of  energy consumption in the transport sector will be based on renewables by 2020. It is therefore very important to take energy efficiency measures in the transport sector also.
We include measures in the ETS (Emission Trading Scheme) as well as in the non-ETS sector. It is often claimed by different stake-holders that the use of economic and other measures in the ETS-sector is neither necessary nor effective. But in practice this has shown not to be the case; especially at the moment with a low price on CO2-permits and access to buy cheap permits outside the EU. And most importantly, one cannot apply a static view on the limits in the ETS-sector. Successful reduction measures in the ETS-sector will enable the EU to set stricter limits for permits for the coming ETS-terms.

We suggest the following points to be addressed in the OIR:

Goal setting
1.    An overall binding energy-saving target of 20 % by 2020, supplemented by sector-specific targets, including the ETS. To ensure that the target is reached, it is necessary to have binding targets, remembering that this is the cheapest way of reducing CO2-emissions, and is an overall economic benefit for the EU and its member countries.
2.    Introducing a clear, coherent and comprehensive policy package, including innovative, targeted finance and investment sources and initiatives that will put the EU on track to meet the energy-saving target.
3.    It is important that the efforts for energy savings do not undermine the CO2-emission trading scheme. Efficient energy savings can free many quotas and thereby reduce the price of quotas, minimizing the effect of the trading scheme. For that reason action should be taken to ensure that the trading scheme does promote CO2-reducing competition, e.g. by withholding quotas equivalent to the target energy savings from year 2013 and onwards.
4.    Transforming the EU into a very energy-efficient region also needs driving forces to promote and ensure quick implementation of the newest technology. The public sector needs to take the lead in this transformation with clear aims and obligations. Green Public Procurement policy should be strengthened on EU-level with ambitious binding targets for energy efficiency.
5.    The Energy Services Directive should be revised to reflect the lacking development in energy-efficiency and extended until 2020.
6.    An overall target for energy savings should be included in the Ecodesign and the Energy Labeling Directives.

Energy supply

7.    The EU should set up schemes to promote the introduction or expansion of district heating and district cooling systems in the member states, in order to utilize surplus heat from power plants, industry and incineration plants. But district heating will often not be profitable for new low-energy buildings. It must be assessed in which cases it will be profitable to establish district heating for existing city and town areas – in relation to the level of energy renovation that can be predicted for the coming decades. In many cities district heating can be established in synergy with district cooling, see below. Introduction of district heating based on incineration must take into account future goals of reducing waste amounts and utilize part of it for e.g. recycling or biogas.
8.    The demand for cooling is growing rapidly, especially in Southern Europe, and is presently very electricity-demanding. But you can produce cold water for cooling based on hot water. If a large demand for cooling is concentrated within a geographical area, a district cooling system can be established by utilizing hot water from cogeneration plants or thermal solar plants.
9.    Development of smart grid systems with smart prices must be promoted in order to move consumption to those hours of the day where consumption is low. This will allow a higher proportion of wind power in the electricity production. Smart grid will provide incentives, e.g. charging electric cars when electricity consumption is low or installation of heat pumps with water storage, so they can be temporarily disconnected. Smart grid will probably have little impact before 2020, but it is important to introduce it as soon as possible, as it can play an important role in future 2030 and 2050 goals.

Building sector

10.    Increasing the renovation rate for existing buildings to 3 %. All existing buildings should be energy renovated before 2050. This amounts to 2,5% per year – but 3 % might be a realistic goal until 2020. Older buildings with large potentials for energy savings should undergo deep renovation. On average, the energy performance of these buildings should be improved by 84% (a factor 6 improvement).
11.    Introducing a program for 50 million buildings in the EU to be deeply renovated by 2020.
12.    Removing barriers for energy renovation. The EU should in cooperation with its member states screen existing legislation in order to find those elements that work against energy renovation of buildings. New and easier ways of financing should be provided, e.g. ESCOs directed towards house owners – today ESCOs apply only to companies in most countries. In some countries, e.g. Denmark, investments in energy renovation are inhibited by the economic distribution of energy savings between landlords and tenants. Tenders for construction and renovation projects must focus on total economy including running costs – not only the cost of construction.
13.    The public sector must take the lead in energy renovation of its buildings. It is important that e.g. municipalities have free access to loans for energy renovation, so  they can make long term investments – also those with long pay-back times.
14.    Energy renovation of buildings should not merely be assessed on the basis of pay-back times in terms of saved energy costs. The so-called non-energy benefits (NEBs) should also be calculated. These can have substantial positive benefits for health, learning ability, work productivity, indoor climate and comfort in those buildings that are energy renovated correctly. The economic benefits of these NEBs might easily be higher than the actual savings in terms of reduced costs for energy purchase.
15.    Taking initiatives to provide the required education and training of construction workers and architects, in order to make sure that sufficient workforce will be available to carry out this ambitious renovation program for buildings all over Europe.  A substantial number of jobs will thus also be created.

Transport sector

16.    Cars run by fossil fuels have become more energy efficient – but much more can be achieved. The CO2-targets of the EU-regulation for cars from 2008 are already not ambitious enough. There is a target of 130 g CO2 per km in 2015 and 95 g per km in 2020. The latter can be revised in 2013. This goal should be tightened to around 80 g/km in 2020.
17.    The ongoing negotiations in Council and Parliament on CO2 -emissions from vans must lead to an ambitious result, at least to the one proposed by the Commission: 175 g CO2 per km in 2012, 160 in 2015 and 125 in 2020. The EU should also issue limits for CO2 from heavy vehicles soon.
18.    Introduction of electric cars must be promoted. They are on the verge of a breakthrough, demanding a smart charging system that prevents charging in peak hours and rewards charging when there is a surplus of electricity in the grid system.
19.    Biogas driven cars must be promoted – especially for heavy vehicles where electricity today is most often not an option. Biogas could have a much larger share. An EU program to support biogas in heavy vehicles should be established.
20.    Second generation bioethanol must be promoted, especially for ships, where few non-fossil alternatives are available today – and for airplanes, if technically feasible.
21.    EU programs supporting high-speed trains between European cities and train-based transnational freight transport should be strengthened.

Financing

22.    Creating national energy-efficiency funds with the aim to support and promote the above mentioned deep renovation of buildings. Money for the funds could be generated by adding a charge on fossil fuels or a wire-charge obligation on energy providers. These funds need to be managed by independent third parties. A high-quality investments grade audit needs to be developed to simplify the allocation of money from the funds. By using the model of revolving funds, the available funds can  get a much wider and longer coverage (several good examples already exist like e.g. the German KfW scheme).  
23.    Ensuring that the ETS will improve energy efficiency, which it only does to a very limited extent today, due to the low price of CO2-permits. If the EU decides on at least a 30 % reduction scheme for 2020 soon (a 40 % reduction by 2020 would be appropriate according to climate researchers), it will help to increase the price of permits. But 30 % will not be enough to raise the price, if there is access to large amounts of quotas from outside the EU – via CDM in developing countries and AAUs from former Soviet states. It could also be considered to introduce a minimum price for AAU’s emission allowances in the EU-ETS from 2013. The minimum price could be at a level of 150-200 € per ton CO2. The increased revenue should go directly to a national energy-efficiency and renewables fund. If the EU does not decide on the 30% reduction goal for 2020, it will be necessary to introduce a minimum price on permits.
24.    Financial incentives should only be allowed in case current minimum requirements are exceeded, and incentives should be graduated to encourage the most ambitious energy saving measures.
25.    Revision of the Energy Tax Directive with sufficient minimum rates to reduce emissions and energy use.
26.    Phasing out fossil fuel subsidies and redirecting the money to national energy efficiency and renewable funds.

Consumers

27.    Introducing innovative energy management methods, to help consumers become more energy-aware and to build an energy-smart Europe.
28.    Smart metering and smart pricing for energy. Adding flexibility to consumption patterns will be crucial in a future European energy situation with reduced energy consumption and a much larger share produced by renewables - in order to increase energy consumption when surplus is available and reduce energy consumption in scarce times.
29.    Energy saving obligations should be introduced. Some countries have already placed energy saving obligations on end-users through energy companies- with partial success, but the results are not good enough. It could be mandatory to have energy saving obligations throughout the EU in combination with a binding energy efficiency goal for each member state. [remark: Rockwool does not support placing this obligation on energy companies, since they are not impartial.]

Christian Ege, director, The Danish Ecological Council
Susanne Dyrbøl, public affairs manager, Rockwool International a/s
Jørgen Abildgaard, director, Pöyry


     

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