Friday, June 15, 2012

Watered down Energy Efficiency Directive still represents a "step change"

Martin Lidegaard, Denmark's energy and climate minister, a keen cyclist.
Martin Lidegaard, Denmark's energy and climate minister, a keen cyclist, says: "It’s only 17% because that was possible to get"

Britain helped to water down the final text of the Energy Efficiency Directive being finalised today, which will set a new legal target of 17% reductions in energy use by 2020.

Martin Lidegaard, Denmark's energy and climate minister, will today present the final text of the Energy Efficiency Directive (EED), to the Energy Council meeting for ratification.

The European Parliament, the Council and the EU Commission reached a political agreement on the Energy Efficiency Directive yesterday. Today, the Permanent Representatives Committee or Coreper approved it. The European Parliament and the Council still need to give their approval.

If it does, it will be the first time ever that Europe has had a mandatory energy efficiency target.

Securing this has been the Danish Presidency's flagship project during its six-month term, which concludes at the end of this month, and it is pleased to get a resolution. However it is disappointed that the target for reducing Europe's energy consumption will be set at 17% rather than 20% as originally hoped.

In a statement, the European Commission said: “The cheapest energy is the one we do not consume. The countdown to achieve Europe's 20% energy efficiency target for 2020 has started. Without the Energy Efficiency Directive, Europe would only achieve approximately 10% out of 2020. With the legally binding measures introduced by the energy efficiency directive, it is estimated that the EU could reach approximately 17%."

"There have been tough negotiations," commented Lidegaard. “It’s only 17% because that was possible to get. We fought like lions. We started at 13%, and now we have 17%, and that is actually something we are proud of,” Lidegaard said. Since it is a minimum directive, member states can actually go further than 17%.

What the Directive says

The main core of the compromise final Directive is an obligation on energy companies to help their customers save energy. The industry and the energy sector will have a shared responsibility to deliver concrete savings in, for example, energy production, particularly through co-generation and district heating, through building insulation and using energy efficient appliances.

The Directive also requires the public sector to take the lead in the form of requirements for the renovation of state buildings and the promotion of green public procurement.

Under the Directive, Member States must also develop long term renovation strategies for the whole building stock, including policies to stimulate deep renovations.

Its opponents have charged that it could impede growth and that there is no money during the economic crisis to invest in the technology required to save money in the longer term.

Climate Commissioner Connie Hedegaard was today putting a brave face on the deal: "Although the Commission wanted to go much further with our proposal, this deal is an important step forward in our climate efforts," she said.

"The directive will help reduce our dependence on imported fossil fuels, for which the EU paid EUR 573 billion last year, and also create hundreds of thousands of local jobs in Europe. Now it is up to Member States to deliver, and bridge the gap between what was agreed yesterday and our 20% energy efficiency objective."

If all foreseen energy efficiency measures can be implemented within the next decade, every household in Europe could save up to € 1,000 every year.

"This is a big step ahead," Energy Commissioner Günther Oettinger affirmed. "For the very first time we have legally binding energy efficiency measures. Europe is now much better placed to achieve its 20% energy efficiency target for 2020."

But commentators said that instead it is likely to lead to energy savings of 15%.

Britain weakened the Directive

EU sources said it was Britain, not Poland, which was the final obstacle to an improved deal, as it tried at the last moment to weaken a core target.

In the original proposal, utilities were to deliver energy savings equivalent to 1.5% of annual sales from 2014 to 2020. But even after member states had reduced this closer to 1%, British negotiators demanded an amendment that would mean savings from four years before and three years afterwards could be taken into account, which has the effect of exempting it from taking any further action.

WWF-UK criticised the government for "cynically undermining" the Directive, saying that it had "effectively scuppered" the potential for energy savings across Europe.

Friends of the Earth energy campaigner Dave Timms said this was achieved "by opposing an overall binding energy saving target and, at the last minute, insisting on loopholes so it could claim credit for old policies as a way of meeting its future obligation.

"Undermining European efforts to promote energy efficiency while proclaiming the benefits at home is both dishonest and damaging, especially from a self-proclaimed 'greenest government ever'."

The British representation in Brussels declined to comment, but the UK energy secretary, Ed Davey was yesterday claiming credit for the UK in taking a "central role in not only brokering a deal but also increasing its ambition".

"It signals a step change in energy efficiency and for the first time sets legally binding energy saving targets," he said.

"Our experience of our own energy efficiency policies has helped ensure that the Directive promotes practical and cost-effective action that will deliver real savings – and that it strikes the right balance between prescription and the flexibility necessary to allow for national circumstances and for innovative policy approaches.

"The UK supported the move to ambitious, binding, energy saving targets throughout the negotiations and played a crucial role in defining this target so that progress can be clearly and effectively demonstrated."

But Erica Hope from Climate Action Network Europe, said: "Governments have let energy companies off the hook by forcing through a number of exemptions. The Commission must follow-up on this to ensure efficiency measures remain as effective as possible and to prevent abuse of exemptions".

Where the Directive will fail

Paolo Di Stefano of the Coalition for Energy Savings Coalition for Energy Savings (CES) said "The coalition's Gapometer shows that the deal for a Directive would only close half of the gap to the EU’s 20% energy savings target for 2020, as many efficiency measures proposed by Parliament have been watered down significantly".

This half is around 190 Mtoe [mega-tonnes of oil equivalent] of the EU energy saving target of 368 Mtoe by 2020. The coalition calculates that the text agreed would realise around 15% savings by 2020 as follows:
  • Most savings result from the annual savings under the efficiency obligations schemes; these will be reduced by up to 25% if actions be for 2014 are taken into account

  • Requirements for renovating public buildings and procurement have been limited to central, rather than local, government, which significantly reduces their impact

  • Auditing is mandatory, but metering and billing information is now largely voluntary.

"The restriction of public building renovation and procurement obligations to central government reduces them to mere symbolism," commented Jan te Bos, director general of Eurima and Chair of the CES.

New EU efficiency measures in the pipeline, like improved eco-design for boilers and water heaters, or planned, like new CO2 standards for cars, can help to further reduce the gap.

Opportunities for a new business model

Claude Turmes, a Green member of the European Parliament, who has led the parliamentary contribution to the legislation, nevertheless said it represented progress: "We are changing the business model. The future business model of energy companies would also be energy efficiency service business. This is about a cultural business model change and that is why the fight is so brutal."

The cogeneration sector sees opportunities: "With this deal [member states] will not only have to reassess the economic potential for CHP [combined heat and power plants] but will also have to put forward measures to trigger investment decisions," said Fiona Riddoch, Managing Director of COGEN Europe.

The requirements for CHP and improving the efficiency of the energy system are slightly improved over existing rules.

"A competitive market is much better than a regulated market, it is faster and cheaper,” Claus Fest of RWE Effizienz GmbH in Germany told a workshop organised by industry group Eurelectric. “We don’t need anyone to tell us to do energy efficiency, we are doing it right now."

Yet, “the only problem is that we have tried this approach before with the Energy Services Directive, but it didn't work,” countered Brook Riley of Friends of the Earth Europe.

The Prince of Wales's EU Corporate Leaders Group on Climate Change (EU CLG), which represents companies including Alstom, Tesco, Unilever, Philips, Kingfisher and United Technologies, said: “The Energy Efficiency Directive strikes the right balance: it does not place unnecessary or burdensome regulations on businesses, especially where those measures already exist at the national level. Those countries that question the rationale for the Energy Efficiency Directive should think about the impact of doing nothing."

Fatih Birol, the chief economist of the International Energy Agency, repeated his call to EU countries to cease the "absurd" strategies they use to subsidise fossil fuels and adopt the Directive. “Not to push the energy efficiency measures is another way of asking for higher emissions, higher energy import bills and higher energy insecurity," Birol said.

"We all have to push the energy efficiency measures throughout the energy supply chain,” he said. “Europe being a champion of climate change [policies], it needs also to be a champion of energy efficiency.”

"I think member states still have their heads in the sand. The [European] Parliament is doing what it can to oblige member states to face reality and recognise the benefits. But I think the Council will move,” Riley said.

In 2014, the Commission will assess national targets and there will be further measures. In 2016 there will be a review of progress towards the 2020 obligations.

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