Energy efficiency first principle: put energy efficiency first!


Runaway energy prices, gas crisis, energy security, energy market and energy mix are just some of the keywords that are the focus of this series of opinion pieces. Most of the topics are about energy supply and production, with little attention to energy efficiency and reducing energy consumption.

Although there is hardly any article or paper on energy policy today that does not mention energy efficiency as one of the most important tasks, in many cases it is still low on the priority list. At the domestic level, too, the decarbonisation of energy production and the replacement of fossil energy sources with renewables are the most frequently discussed topics, even at the strategic level, although the objectives set out in the strategies – energy sovereignty, security of supply, reducing rationing, decarbonisation – are all

could be addressed by increasing energy efficiency.

This would be coupled with co-benefits that would bring concrete benefits to the country in terms of national economy, labour market, health and environment.

“Energy efficiency first” principle

The Energy Efficiency First Principle was formulated by the European Commission in 2015 as one of the guiding principles of the Energy Union and has since been reflected in a number of resolutions, proposals and directives. Not without reason: increasing energy efficiency is seen as a strategic tool for sustainable energy management, emission reduction, security of supply and, last but not least, competitiveness.

The principle of “energy efficiency first” means that cost-effective energy efficiency measures should be taken into account as far as possible in energy policy making and in the relevant investment decisions. It is a broad guiding principle that should complement other objectives.

The International Energy Agency (IEA) reports

The potential of energy efficiency to boost competitiveness was recently highlighted by the International Energy Agency (IEA) in its 2019 Energy Efficiency Market Report. The IEA calculates that global energy intensity, or the amount of primary energy needed per unit of goods and services produced, fell by just 1.2 percent in 2018. But this is the lowest since 2010, outlining a trend,

that could have serious consequences for global climate and energy goals.

This should not be the case: in its 2018 edition of the Energy Efficiency Market Report series, the IEA published its Efficient World Strategy, which shows that it calculates that existing cost-effective solutions could achieve an energy efficiency improvement of 3 percent per year for different technologies and processes – more than double the current level.

After the worst year of the last decade, 2020, when the Covid-19 pandemic shifted the centre of economic activity from services to industry, the rate of improvement in global energy intensity rose to 1.9 percent in 2021. This is in line with the average annual rate of improvement over the past 10 years, but well below the 4 percent needed between 2020 and 2030 to meet the IEA’s path to net zero emissions by 2050.

It is no coincidence that the IEA concludes that promoting energy efficiency needs to be made a central element of energy strategy planning.

European plans – the Fit for 55 package

In December 2020, the European Council agreed that EU emissions should be reduced by at least 55% by 2030 compared to 1990 levels. The increase in the target (from 40 percent) was necessary because Member States recognised that without it, the 2015 Paris Agreement target of keeping global warming within 1.5-2 degrees Celsius could not be met.

A package of legislative proposals, Fit for 55, to be presented by the European Commission in 2021, will set out how the EU can meet the targets agreed by Member State governments. Under the proposal, a number of directives and laws would be amended or new ones created.

Buildings account for 40 percent of all energy consumption in Europe, making them the largest emitting sector and inevitably requiring significant emission reductions. The 55% target and the climate neutrality target for 2050

cannot be achieved without reducing emissions from the building stock.

The regulatory measures that most affect buildings (the Energy Efficiency Directive, the Energy Performance of Buildings Directive, the extension of the Emissions Trading Scheme to buildings), which are addressed in these proposals, require a strong commitment from Member States to boost the stubbornly low rate and depth of energy renovation across the EU.

The European Commission has proposed a clearer priority for the ‘energy efficiency first’ principle in the recast Energy Efficiency Directive, accompanied by a formal Recommendation to EU countries and detailed guidelines on its application. The introduction of new minimum energy performance requirements for energy efficient buildings is a central element of the revised Energy Performance of Buildings Directive (EPBD). This regulatory instrument, together with a strong technical assistance and financing component, makes the EPBD a central element of the Fit for 55 package.

The European Commission’s proposed approach to improve the energy performance of all the EU’s worst performing buildings by 2030 at the latest (or 2033 depending on the building’s intended use) is the starting point for systemic change. However, much remains to be done to ensure that ambitious energy renovations are implemented in a timely and strategic manner across the building stock.

What should Hungary do?

When it comes to energy efficiency, the biggest potential for savings in Hungary is also in buildings. Around 40 percent of the country’s primary energy consumption is related to buildings and one third to household energy consumption. Nearly two thirds of residential buildings are considered to be energy obsolete, with 72-74% of final household energy consumption in Hungary going to heating, one of the highest in the EU-28 at around 64%.

Hungary’s energy intensity in 2018 was 1.8 times the EU-28 average.

While an average European home consumed 1.63 tonnes of oil equivalent energy in 2000, falling to 1.36 tonnes in 2017, the above-average domestic consumption of 1.61 tonnes per dwelling increased to 1.68 tonnes between 2000 and 2017 (1.82 tonnes per dwelling adjusted for the average European climate).

This makes it essential to increase the number and depth of building renovations in Hungary,

In terms of residential buildings alone, an energy efficiency deep renovation of the order of 100,000 residential buildings per year would be needed.

Promotion, technical assistance, funding

To make this happen, a number of supporting measures are needed to increase the depth and rate of building renovation. Thus, in line with current European efforts, the creation and targeting of the necessary regulatory conditions and implementation tools should be a priority at national level.

Among other things, technical assistance facilities to support the development of building renovation projects, such as one-stop shops, are an essential part of this support framework. The latter help to address the lack of information and the uncertainties and fears associated with renovation by providing a wide range of information in one place, from planning to financing to the choice of contractors. Such a service can play a particularly important role in eliminating the lock-in effect (i.e. the ‘lock-in’ of smaller savings into the building due to under-utilisation of energy efficiency potential), which is a major problem today in terms of reducing energy consumption.

Financing is a key issue for energy efficiency investments. Costs can be high on the one hand, but it is clear that large-scale renovation of the building stock can bring the Hungarian economy

economic and social, energy and non-energy benefits that exceed the costs of investment.

MEHI research: energy efficiency is not yet the first priority for domestic renovators

MEHI’s 2021 Domestic Renovation Wave research shows that a large residential energy efficiency market appears to be emerging over the next five years, with significant investment value that is particularly noteworthy. It is very important to channel this demand for retrofitting in a way that maximises the potential for savings.

The research has also shown that, although a significant number of energy upgrades have been carried out in the past and are planned for the future – and there is a marked increase in the willingness to renovate compared to the past – these are mainly individual/partial measures, not primarily energy efficiency measures, and are not aimed at reducing energy consumption, which does not result in significant energy savings.

In addition to meeting climate targets, it is essential to assess and quantify the broad impacts of energy efficiency at the domestic level. These co-benefits would bring tangible benefits to the country in terms of the national economy, labour market, health and the environment. Ignoring them would undermine the cost-effectiveness of energy efficiency measures and limit the necessary investments. The identification and quantification of broad social and economic benefits will help to bring energy efficiency investments closer to the socially optimal level and thus to their rightful place in the national climate and energy strategy.

Zsuzsanna Koritár’s original article with the above content appeared in G7.

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