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HEC Presentation about IPEEC and EE


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HEC Presentation about IPEEC and EE

  1. 1. An Introduction to EnergyEfficiency Amit Bando & Thibaud Voïta, IPEEC October 2012 HEC, Paris
  2. 2. 1. The World Today 1
  3. 3. of World Temperature (18892009) Source: NASA
  4. 4. Worldwide Final Energy Consumption 1990-2008 9.0 Mining and construction Agriculture, forestr y, fishing Commercial and public services Energy sector 8.0 Energy consumption (Gtoe) 7.0 6.0 5.0 Residential 4.0 Transport sector 3.0 Industry sector 2.0 1.0 0.0 1990 Source: IEA 2010c. 1995 2000 2005
  5. 5. Developing Countries‟ Final Energy Consumption 1990-2008 5.0 Mining and construction Agriculture, forestr y, fishing Commercial and public services Energy sector Energy consumption (Gtoe) 4.5 4.0 3.5 3.0 Residential 2.5 2.0 Transport sector 1.5 Industry sector 1.0 0.5 0.0 1990 Source: IEA 2010 1995 2000 2005 4
  6. 6. OtherWorrying Trends  Population growth: 9.2 billion by 2050,  2 billion new consumers in emergingeconomies by 2050;  Natural resourcesdepletion:  1.1 billion people lackaccess to safedrinking water in 2012,  Deforestation: 80,000 square km everyyear,  Food security:  Food prices x 2 by 2030,  1.5 bilion people with no access to electricty in 2012,  5
  7. 7. Geopolitical Changes in the Energy Sector  80% of the current oil reserves have been discovered before 1979,  75% of these oil reserves will need to be replaced by 2035, it represents:  50 million barrels of oil per day,  4 time Saudi Arabia‟s current production.  But shale gas can flood the market, thanks to fields located in:  The USA,  Argentina,  China,  Canada,  France,  Israel.  Today, Europe pays USD 14/1000 cubic feet of gas from Russia, the USA produces shale gas at USD 2/ 1000 cubic feet. 6
  8. 8. 2. WhatisEnergyEffici ency? 7
  9. 9. “Something is more energy efficient if it delivers more services for the same energy input, or the same services for less energy input.” 8
  10. 10. WhatEnergyEfficiency (EE) Relates to Agriculture Industry Utilities Buildings &Appliance s Transportation Cities 9
  11. 11. Definitions of EnergyEfficiencyPotential Technical Potential Technical feasibility Economical Potential Achievable Potential Program Potential Cost Effectiveness Market & Adoption Barriers Program design, budget, staffing& time constraints  National Action Plan for Energy Efficiency (2007). Guide to Resource Planning with Energy Efficiency. Prepared by Snuller, Price et al., Energy and Environmental Economics, Inc. p. 2-2. <> 10
  12. 12. 3. Whatis IPEEC? 11
  13. 13. IPEEC is a high level international forum  Provides global leadership on energy efficiency by identifying and facilitating government implementation of policies and programs that yield high energy-efficiency gains.  Aims to promote information exchange on best practices and facilitate initiatives to improve energy efficiency.  Formally established in 2009 at the G8 summit in L'Aquila, Italy and resulting from the Heiligendamm Dialogue Process. 12
  14. 14. 13
  15. 15. IPEEC is an Autonomous Entity Members account for over 75% of world GDP and energy use. EU Germany United Kingdom France Italy Russia Canada Japan USA Republic of Korea China Mexico India Brazil Australia The IPEEC Secretariatis located in Paris, France 14
  16. 16. IPEEC - guiding principles  Improving energy saving and energy efficiency is one of the quickest, greenest, and most cost-effective ways to address energy security and climate change as well as to ensure sustainable economic growth  All countries, both developed and developing, share common interests in improving their energy efficiency performance  There is abundant potential for international cooperation among them  Will contribute to improvement of energy efficiency at the global level  Developed countries need to play an important role in cooperation with developing countries  Accelerating dissemination and transfer of best practices, efficient technologies and capacity building in developing countries 15
  17. 17. and Services FollowParallelJourneys Basic research Applied research Individual innovators Demonstration & sample distribution General regulation Early demonstration Full demonstration Marketed product Warranted product Small group: start-up/ unit in a company Medium-size operation Large scale operation Early adopters & niches Rational economic purchase Technology & market evaluation General regulation Specific regulation General regulation General regulation 16
  18. 18. Case studie s Examples of EnergyEfficiencyP olicies 17
  19. 19. USA‟sRefrigerator Program • Standards, labels & incentives led to EE improvement without interrupting long-term decline in real purchase price: from $1,000 to $600 (2009$) • Government action has led to savings of about $20 billion/year in 2010 and $300 billion cumulative since 1978 AnnualEnergyU sed a by a refrigerator X 4 1945 Introduction of refrigerators standards AnnualEnergyU seddeclines: reaches 1945 levels by 2010 1978 2010 Promoting a lowcarboneconomy 18
  20. 20. China 11th - Five-Year Plan (2006 – 2011) Results: Government sets policies& objectives to promote a lowcarbonec onomy 2006 Top 1000 enterprises Energyintensi - 19.1% Closure of ty inefficient Chemicaloxyg - 12.45% plants endemand SO2 - 14.29% Tenkeyproje emissions cts 2011
  21. 21. Japan‟s Top Runner Program  EE standards for appliances/vehicles  Standards - set higher than the best performance value of each product currently on sale in the market  Standard takes into account technological development  21 products are included, low technology products are phased out Passenger vehicle Air conditioners standards In 1999, target: By 2010, fuel economy improvement would be 22.8% Target reached in 2005 EE improvement of 67.4% (1999-2004) Companies used technologies that they may otherwise have waited to commercialize Improved consumer and retailer awareness accelerated pace of market penetration 20
  22. 22. 4. What Can EnergyEfficiencyBring? 21
  23. 23. EnergySavings: Less GHG Emissions  Mitigation potential of energy efficiency can be substantial since:    Building account 40% of energy use, 25% of water use & 1/3 of all GHG emissions (UN estimates) industry accounts for 25% of all GHG emissions manufacturing and construction directly and indirectly account for 37% of CO2 emissions (developing countries 47%)  Industrial energy efficiency can help reach CO2 reductions of around 1.3 Gtoe equivalent to global emissions reductions of 4% from 2006 levels  Chemical and petrochemical, aluminum, iron and steel, cement and paper and pulp alone would reduce 12% of CO2 emissions 22
  24. 24. Financial Savings McKinsey estimates:  USD 250 – 325 billion annualfinancialsavings or avoidedenergycosts (2009 – 2030)  USD 900 billion annualsavings: investing USD 170 billion annually in EE worldwidecouldgenerate an average rate of return of 17% and produceenergysavings up to USD 900 billion per year. ACEEE estimates:  In the US alone, USD 12 - 16 trillion of possible energysavings (2012 – 2050) 23
  25. 25. Green Jobs  General estimates: EUR 1 million spent in EE generates 17 to 19 jobs (as compared to 9 jobs in the renewableindustry)  The leverage of public & private funding varies from 5 to 1 to sometimes 10 to 1, meaning EUR 1 million of public money can lead to investments of between EUR 5 and 10 million. That means between 85 to 190 jobs for EUR 1 million of public money.  According to ACEEE, if the US chooses to cut energy consumption, it can create 2 million jobs in 2012 - 2050 24
  26. 26. Enhanced Distribution: Energy Access  About 1.5 billion people worldwide, more than one in five, lack electricity,  The UN Secretary-General Ban Ki-Moon has called to double the global rate of improvement in EE by 2030 in order to provide energy for all. 25
  27. 27. EnhancedEnergy Use: Energy Security  Enhancedenergysecurity in order to: Relyless on foreign supplies fromunstableregions of the world  Decrease the influence of energyprices on the economy  Address national security issues (embargo, war, etc.)  By reducing the energy use, EE helpsimprovingenergysecurity  26
  28. 28. Water &EnergyEfficiency According to the UN:  By 2030: almost 50% of the population willbe living in regionswithhigh water-stress, Water and EE:  Between 2 & 3 % of the world's energy consumption is used to pump and treat water for urban residents & industry.  Energy consumption in most water systems worldwide could be reduced by at least 25 percent through costeffective efficiency actions. 27
  29. 29. OtherBenefits Source: IEA 28
  30. 30. 5. Opportunities in Key Sectors 29
  31. 31. Global CO2 Emissions by Sector (MtCO2) Source: Lawrence Berkeley National Lab 30
  32. 32. Industry: Global Energy Intensity Trends 1990-2008 Energy 200 MVA EI Manufacturing valued added, 2008 7.35 trillion $ 180 Index (1990=100%) 160 140 120 Industrial energy consumption, 2008 2.54 gigatonnes of oil equivalent 100 80 Industrial energy intensity, 2008 0.35 tonnes of oil equivalent per US$1,000 60 40 20 0 1990 1995 Note: Industrial energy intensity in 2000 US dollars. 2000 2005 Source: UNIDO 2010; IEA 2010. 31
  33. 33. CombinedHeat& Power (CHP) •Thermal power emits heat that can be recycled, •CHP consists the use of a heat engine or a power station to generate both electricity & useful heat. • These applications produce energy where it is needed, avoid wasted heat, and reduce T&D network and other energy losses. Other benefits cited by policy makers and industry include: • Cost savings for the energy consumer; • Lower CO2 emissions; • Reduced reliance on imported fossil fuels; • Reduced investment in energy system infrastructure; • Enhanced electricity network stability through reduction in congestion and „peak-shaving‟; and • Beneficial use of local & surplus energy resources (particularly through the use of waste, biomass, & geothermal resources in district heating/cooling systems). •CHP is one of the most cost-efficient EE measures 32
  34. 34. Motors  Account for 60% of industrial electricity consumption and about 15% of final energy use in industry worldwide (IEA 2007).  By 2030, if BAU, energy consumption will rise to 13 360 TWh per year and CO2 emissions to 8 570 Mt per year.  End‐users now spend USD 565 billion per year on electricity used in motors; by 2030, that could rise to almost USD 900 billion.*  Electronic motor controls that allow for variable speed drives (VSD) have good market potential.  Using the best available motors will typically save about 4% to 5% of all electric motor energy consumption. Linking these motors with electromechanical solutions that are cost‐optimised for the end‐user will typically save another 15% to 25%.  The potential exists to cost‐effectively improve energy efficiency of motor systems by roughly 20% to 30%, which would reduce total global electricity demand by about 10%.
  35. 35. Smart Meters  In 2008, less than 4% of the global installed base of 1.5 billion electricity meters could be considered “smart” but 4 years later this penetration has grown to over 18%, and is expected to exceed 55% by 2020.  The North American market has already peaked  European market has begun its growth period.  The Asia Pacific region will continue to outpace all other regions driven by major deployments in China, utilizing a different breed of smart meter technology.
  36. 36. EnhancedEnergy Use: Buildings  Energy use in « buildings » meansenergy use of the building themselves and of the electricappliances. Togethertheyaccount for 40% of the world GHG emissions,  Measures to enhance EE in buildings canmean:  Improving EE of appliances,  Refurbishing:   Commercial buildings, or Residential buildings; Building new EE houses.  Buildings situation change depending on the climate zone,  EE in buildings is a sensitive topicwith social implications.35 
  37. 37. Zero Energy Building  Zero energy buildings market remains a small fraction of the overall building construction industry.  Technologies required to make zero energy buildings possible, add significant upfront cost.  Worldwide revenue from zero energy buildings will grow rapidly over the next two decades, reaching almost $690 billion by 2020 and nearly $1.3 trillion by 2035 (Annual growth rate of 43% - mostly in the EU). EU‟s Energy Performance of Buildings Directive (EPBD) will require nearly zero energy construction in public buildings by 2019 and in all new construction by 2021.
  38. 38. EnergyConsumption in the US Source: DOE (2008)/Center for Climate&Energy Solutions 37
  39. 39. Energy End Use in the US (2006) Source: DOE (2008)/Center for Climate&Energy Solutions 38
  40. 40. Buildings Energy End Use in the US (2006) Source: DOE (2008)/Center for Climate&Energy Solutions 39
  41. 41. Improving EE in Buildings: Cool Roofs A cool roof has a white or special cool color that absorbs less sunlight, staying cooler in the sun and transmitting less heat into a building. Substituting a cool roof for a conventional roof can: • Reduce the annual air-conditioning energy use of a singlestory building by up to 15% • Cool interior spaces in buildings that do not have air conditioning, • Reduce carbon emissions, • Reduce peak demand for electricity, • Potentially slow global warming. (Source: DOE) 40
  42. 42. Enhanced Energy Use: At Home Whatcanenhancedenergyefficienc ybring to households?  Reducedenergy bill,  Enhancedcomfort An example of energysavings: Compact Fluorescent Lamps (CFL) consume 1/5 to 1/3 lesselectricitythan the traditional incandescent lamp&lasts 8 to 15 times longer. 41
  43. 43. Lighting  Energy-efficient products are still for Asia Pacific customers  Sales of LED lighting systems will increase rapidly over the next 10 years, accelerating sharply after 2015.  Unit shipments (lamps, luminaires) will rise from 66 million in 2011 to 542 million in 2021 – a 700% increase.  Translating into cumulative revenues of $11 billion from 2011 through 2021 for LED lighting in Asia Pacific Japan‟s 21st Century Light Project; China‟s commitment to LED is enormous – ex: Shenzhen plans to install LED‟s in more than 90% of public lighting applications, street lighting, and commercial spaces in the next decade
  44. 44. Other Areas  Energyefficiency in transportation; Fuel efficiency, Urban planning.  Energyefficiency in agriculture:  Equipment,  Water use.  43
  45. 45. 6. Government, the Motivator 44
  46. 46. Organisation Need to Coordinate EE Policies  Governmentsneed to exchange: Theirresources (technologies, know-how, finance),  Theirexperiences& best practices, Theyneed to establish:  Standards (see the International Standard Organisation),  EE Indicators,  Monitoring &VerificationProcess… Multilateral institutions implementvarious type of projects (training, capacity building, technical support): World Bank, regionalbanks, UN organisations; IPEEC promotes international cooperation; NGOsimplementsimilarkind of projects on a largerscale (ClimateWorks network, International Copper Association, Alliance to Save Energy).      45
  47. 47. GovernmentsNeed to PromoteEnergyEfficiency EE investments are costly and involve long-paybackperiods. Government EE policies: - subsidies, -incentives, - standards, -outreach… Banks, Households, Industry, Local governments. •Loans to promote EE •Investments in EE equipment, • Adoption of best practices, • New projects. 46
  48. 48. … but a Top-Down Processis not Enough To be effective, EE measuresneed to bewidelyadopted. Households, Industries Investments in EE products Market Transformation EE measuressucceedwhengovernment action iscombinedwithmarketincentives 47
  49. 49. Case Study SustainableHousin g Policies in Mexico 48
  50. 50. SustainableHousing in Mexico Sustaina bility Social Sustainability REGIONAL PLANNING URBAN DEVELOPMENT Environment Economic Sustainability Strategydirected at strengthening Municipal and Statelegislation in ordertopromote “Smartcitygrowth”. • Optimum use of existinginfrastructure • Reclaiming of urbanvoids • Densityincrease URBAN DESIGN SUSTAINABLE HOUSING Source: CONAVI 49
  51. 51. Climate Finance Strategy POA DUIS 8 certified , 18 in process: 800,000 new units in 15 states GenerateCER’s from Green Mortages Housing NAMA PenetrationFoviss ste, SHF and upscale DURBAN / COP 17 Negotiation with Annex I countries and multilateral organisms “Ésta es tu casa” 258,329 subsidies Urban NAMA (midterm) Investment in efficientinfrastructu re Green Mortgage 725,740 greencredits Source: CONAVI 50
  52. 52. Penetration&Scaling-Up Housing NAMA Penetration and Scaling up PENETRATI ON & Green Mortgage FOVISSSTE • Pilot 2012 in hand Green MortgagePenetration Aguascalientes Pilot Project SCALING UP Source: CONAVI 51
  53. 53. The Role of Local Governments Local governmentscan:  Implementinnovative EE measures,  Reach people at the local level,  Generatecompetition in terms of EE policieswithotherregions. 52
  54. 54. 7. PrivateSector, the Key Innovator 53
  55. 55. Utility Companies& EE: an Ambiguious Relation  Utility &energydeliverycompanies are the best-positioned in the energymarketplace,  Contact with power generationindustry&customers (individual& industries)  Key actors in EE  But: theyearn money by deliveringenergy: by promoting EE, they are beingasked to sellless of theirproduct! 54
  56. 56. EnergyEfficiency Obligations (EEO) for Energy Providers  All EEOs exhibit three core elements: A multi-year energy savings target, shared between the parties; 2. Penalties for noncompliance; and 3. A measurement, verification and quality assurance system.  The popularity of EEOs stems from their flexibility.  Tradable EEOs are usually called White Certificates 1. EEO in Europe Country Belgium Flanders France Italy Great Britain Denmark ObligatedEntities Electricity distributors Retailers incl.transport Electricity & gas distributors Electricity & gas retailers Electricity, gas & heat distributors Eligible Sectors Residential,non energyintensive industry Administrator 2011 Spending (€ millions) 26 Flemish Government 300 All except large industry Government 200 All incl. transport Regulator (AEEG) 1,200 Residential only All except transport Regulator (Ofgem) Danish Energy Authority 40 55
  57. 57. Appliance Manufacturers  Residentialenergy use: 14% of world deliveredenergyconsumption (2008),  Likely to increase middle classes grow&adopt new types of consumption in emerging countries  Appliance manufacturers are nowexpected to produce EE products  Standards & labelling is a keytool to reduceappliancesenergyconsumption 56
  58. 58. Financial Institutions  The role of financial institutions iscritical to promoteloans for EE investments.  Some international &bilateral organisations organise training on EE loans for banks: International Finance Corp., Agence France Developpement,  Some countries have developedspecificschemesthatfacilitate EE investments:  KfW in Germany on EE in buildings,  SIDBI in India for SMEs. 57
  59. 59. Heavy Industry &Others  Industrialprocesses are most of the time energy intensive (iron&steel, cement, aluminium, petrochemical, textile, paper&pulp),  Most of the companies are committed to significantlyreducetheirenergy Lafarge as a WWF ClimateSavers An example of a succesful EE plan: use. Lafarge’s objectives: • Reduce its GHG emissions to 33 % per t. of cement below 1990 levels by 2020, • Develop sustainable construction initiatives by 2015 to achieve a lower carbon footprint and greater EE, • Contribute to the design of 500 sustainable buildings (2015), • Advocate for ambitious climate change policies, through trade associations and international organisations as well as for post-2020 climate policies. Between 1990 & 2010, reduction of: • 21.7% of its net CO2 emissions/t of cement, • 36.5% of its absolute CO2 gross emissions in industrialized countries. 58
  60. 60. Energy Service Companies (ESCOs) Energy Performance Contracting Loan&interestp ayments Financial Institution Remuneration Customer Contractor Loan(s) Service: -financing, - planning & installation of energysavingmeasures -energysavingsguarantee Source: Berlin EnergyAgency 59
  61. 61. Case Study The en.lighten initiative 60
  62. 62. Light Bulb &Energy Use  Electricity for lighting accounts for almost 20% of global power consumption and close to 6% of worldwide GHG emissions.  If a global transition to efficient lighting occurred, these emissions could be reduced by half.  Few actions could reduce carbon emissions as cheaply and easily as the phase-out of inefficient lighting, making it one of the most effective and economically advantageous ways to combat climate change. 61
  63. 63. The En.lighten Initiative  The en.lighten initiative has been established by Philips, Osram, the China National Lighting Test Center, UNEP & the Global Environment Facility  en.lighten assists countries in accelerating market transformation with environmentally sustainable, efficient lighting technologies by:  Promoting high performance, efficient technologies in developing countries.  Developing a global policy strategy to phase-out inefficient and obsolete lighting products.  Substituting traditional fuel-based lighting with modern, efficient alternatives. 62
  64. 64. 8. Challenges for EnergyEfficiency 63
  65. 65. Assessment of Potential Strengths Weaknesses • • • • • Cost of investments • Lack of skilled people • Lack of awareness of need of EE amongst consumers • Weak in-country R & D Increased sustainability Increased energy security Creation of market leader Increased energy access Opportunities Threats • • • • • • Rebound effect (effort does not reduce energy consumption as planned) • Fall in energy prices leading to “expensive” conservation Increased value and lifespan Investment relief (tax) Market for new innovations Socio-economic influence Competitive advantage
  66. 66. Moving Forward Governments need to commit and also provide the following:  Overarching policy framework combining mandatory and voluntary policies and strengthening enforcement;  Promote greater awareness of EE  Play an essential role as integrator of the value chain  Establish funding mechanisms to jump-start EE financing, particularly in the short term.  Institutionalize standard-selling and enhance professionalism within the industry by creating proper accreditation and certification standards,  Publicizing more accurate information about EE product suppliers and ESCOs.  Remove other barriers that distort markets such as energy subsidies 65
  67. 67. Moving Forward - 2 And Business needs to  Move towards an integrated value chain approach where suppliers extend their service portfolio to offer complete solutions (auditing, installation, maintenance and financing solutions).  Develop innovative financing vehicles for EE projects by collaborating with financial institutions and by developing expertise in EE project financing.  Increase awareness of EE and enhance professionalism of the industry from within.  EE suppliers and ESCOs should adopt a more active role in promoting EE and in professionalizing the industry from within by setting standards and benchmarks.  Multinationals should act as catalysts by bringing in the best practices from their experiences in other countries. 66
  68. 68. The Political Challenge  EE needsstronggovernment support,  EE requires a long-term vision: how governments in place for only 4–5 yearscan impose it?  In a time of economicslowdown, how to enhance the EE position in the political agenda? 67
  69. 69. Technical&Know-How Challenges  To beimplemented, EE measuresrequire: Access to technology,  Know-how.  How canemerging and developingeconomies have access to thisknowledge?  Example: the massive need for energyauditors in countries such as China &Russia • How to select them? • How to train new auditors? •Whichtechnologyshouldthey use? 68
  70. 70. The Finance Challenge  EE requires long-terminvestmentswithuncertainpayback  How to finance energyefficiency in the context of global crisis?  How to limit the social impact of enhanced EE standards? 69
  71. 71. The International Cooperation Challenge  Differentresources in different parts of the world : TechnicalKnowledge Money to implementit Developed Economies Yes No (crisis!) Emergingcrisis Not yet Yes Developingeconomies No No  Lack of standard measures for energyefficiency  e.g.: EE indicators, standards. Need for enhanced international cooperation in order to: •Address global issues, •Sharelessonslearnt, best practices & technologies, •Enhance the measurement of EE. 70
  72. 72. The Social Challenge  Implementing EE measurescanbecostly,  Whendesigningpolicies, governmentsneed to takeintoaccount the potential social impact of:  Refurbishingrequirements in the building sector,  New equipment standards,  The price of energy. 71
  73. 73. The Communication Challenge  EE is not trendy: It requires long-terminvestment,  It istechnical,  It does not result in visible results (as compared to windmills in the renewablesector).  At the same time, climate change &energy issues are not priorities on the political agenda anymorebecause of the economiccrisis.  72
  74. 74. The ReboundEffect Challenge (?)  Whatis the reboundeffect? When an energy-usingtechnology or processbecomes more efficient, the user cantakeadvantage of the increased service delivered, ratherthanaccepting the same service at a lowerenergy or financialcost.  Is the reboundeffect an issue?  Not an issue in the long term?  It exists but seems to belimited,  Reinvestment of energysavingscan act as a driver for achievements of Otherpolicy goals (source: IEA)  73
  75. 75. Questions? 74