Article 7 is a key provision of the European Energy Efficiency Directive which established a set of binding measures to help the EU reach its 20% energy efficiency target by 2020. Each member state has to calculate its own savings target, and demonstrate how it will deliver the target between 2014 and 2020. This webinar introduces the main features of Article 7, shows how member states have implemented it, and discusses the challenge of evaluating its impact given the heterogeneity of policy responses. The webinar will conclude with a number of options how a revised Article 7 can be simplified and streamlined, how transparency of implementation can be improved and how member states could be supported to deliver energy efficiency more effectively.

1. The Regulatory Assistance Project (RAP)®
Can Europe deliver on energy
efficiency?
Investigating the effectiveness of Article 7 of the Energy
Efficiency Directive
Dr Jan Rosenow, RAP
Dr Tina Fawcett, Oxford University
June 22, 2016

2. The Big Picture
COP21, Paris – agreement on long-term climate
objectives
2
The agreement’s main aim is to keep a
global temperature rise this century
well below 2 degrees Celsius and to
drive efforts to limit the temperature
increase even further to 1.5 degrees
Celsius above pre-industrial levels
Energy efficiency is a key component of Europe’s
climate change response.

3. Evidence base of our presentation
3

4. Presentation Outline
1. What is Article 7?
2. How have Member States responded?
3. Critical evaluation
4. Spotlight on Energy Efficiency
Obligations
5. Conclusions
6. Further reading
4

5. 1. What is Article 7?
5

6. What is Article 7?
6
Target: 1.5% of final energy sales
after exclusions and exemptions: ~0.75%
Policy instruments: choice between Energy Efficiency
Obligations (EEOs) and alternative measures or a
combination
Monitoring & Verification: detailed requirements including
statistically representative sample, audit protocols,
independence etc. (Annex V)
Calculation method: detailed requirements to account for
additionality, materiality, double counting etc. (Annex V)

7. Future developments
• ongoing: major review of Article 7,
amendments to be published in early
October 2016
• at the same time review of Energy
Performance in Buildings Directive
(EPBD) which drives building codes in
Europe
7

8. 2. How have Member States responded?
8

9. How have Member States responded?
9
>7,000 pages of plans submitted
to the European Commission
479 policy instruments
planned

10. Number of policy instruments
10
Source: Commission Services (2016)

11. Share of expected savings by policy
instrument type [ktoe]
11
Source: Commission Services (2016)

12. Share of savings by sector
12
Source: Commission Services (2016)

13. 3. Critical evaluation
13

14. Expected savings compared to expectations
14
Source: Commission Services (2016)

15. Credibility of savings – only 14% of all
savings fully compliant
15
Source: Commission Services (2016)

16. Selected suggestions for policy reform
16
Problem area Current issues Potential solutions
Additionality difficult to calculate and
prove, particularly with
regard to EPBD
simplify rules e.g. allow all
renovations to count fully
but none of the savings
from new buildings
M&V inconsistent approach to
M&V leads to considerable
uncertainties
Improve guidance and
Annex V, develop high level
principles at EU level
Reporting Significant differences in
quality and quantity of
reporting
Develop reporting
template

17. 4. Spotlight on Energy Efficiency Obligations
17

18. What is an Energy Efficiency Obligation?
• An Energy Efficiency Obligation (EEO) is a regulatory
mechanism that requires obligated parties to meet
quantitative energy savings targets through delivering
energy efficiency to end users.
• The unique features of EEO as a policy are its method of
raising funding – from energy customers – and the role
of energy distributors / retailers in operating the scheme.
• Its role could be replaced with other subsidy schemes,
funded by the taxpayer.
18

19. Worldwide experience of EEOs
• More than 50 EEOs in the world, half of the in US of which all on
regulated utilities whereas in EU mixture of retail and distribution
companies
• Every scheme is different – this policy is adaptable to national
circumstances. Many different designs can be successful.
• EEOs have delivered large improvements in energy efficiency,
contributing a large fraction of energy efficiency improvement.
• EEOs have delivered very cost effective savings and targets have,
with rare exceptions, been met.
• Standardized actions and deemed savings can be very effective.
• Most savings have come from relatively low cost energy measures in
the buildings sector (Italy and Denmark excepted).
• Impacts on ESCO development have been mixed.
• Having a focus on low income groups spreads benefits.
19

20. Variations across EU EEOs (1)
There are 16 planned and existing and EEOs in the EU. They differ with respect
to number and type of obliged parties (distributors or retailers); fuels covered,
eligible sectors, eligible projects, monitoring, funding, target metrics
Obligated parties
Can be distribution companies rather than energy retailers. Can include
heating oil suppliers, district heating companies, transport fuel suppliers.
Numbers range from less than ten up to thousands.
UK probably has smallest number of obligated parties in existing EEOs.
Sectors
Only UK and Malta restrict their EEO to the residential sector.
Most schemes cover all sectors.
20

21. Key choices in design
21
AT, BG, HR, DK, EE, FR (excl EU ETS sector),
IE, IT, LV, LT, LU, PL, SL, ES
MT, UK
DK
AT, BG, FR, IE, LU, PL, SL, ES, UK
HR, DK, EE, IT, MT
LV, LT
Sectors
Obligated parties

22. Variations across EU EEOs (2)
Distribution of benefits
Most existing and proposed EEOs make no special allowance for low
income / fuel poor households. UK is unique in linking its EEO
strongly to low income and vulnerable households. France is including
more focus on these households.
Trading / relevant parties
Variety of degrees of trading / white certificates within schemes. In the
French scheme local authorities have been able to generate and raise
income from ‘energy saving certificates’. The design of the scheme can
bring new players into the market (e.g. ESCOs in Italy).
22

23. Challenges for new EEOs: Time scales
New EEOs in the EU are planning to deliver savings,
sometimes a significant proportion of Article 7
requirements, within a short period.
This goes against existing experience of successful EEOs,
which have had a learning and revision period of several
years, during which they had low targets – e.g. the UK,
France, Denmark.
The learning period can be shortened by running a
voluntary scheme (e.g. Ireland, Austria) or adopting a
scheme from elsewhere (e.g. Luxembourg).
23

24. Example of staged approach to EEOs - UK
24
Source: Rosenow 2012
1994-1998 1998-2000 2002-20052000-2002 2005-2008 2008-2012

25. New and planned EEOS
25
Country Contribution to
Article 7 target
Date started
Austria 42% 2009 (voluntary)
2015 (mandatory)
Bulgaria 100% 2014
Croatia 41% expected to start in 2016
Estonia 5% expected to start in 2018
Ireland 48% Voluntary programme 2011 - 2013
Mandatory from 2014
Latvia 65% Unclear
Lithuania 77% 2015 (expected)
Luxembourg 100% January 2015 (learning from Denmark)
Malta 17% 2009 smart meter roll out + behavioural change from
2016; 2014 for progressive tariffs
Slovenia 33% 2015
Spain 44% July 2014

26. Challenges for all EEOs
• The challenge is adapting as the low-cost opportunities reduce
(because they have been delivered already, particularly in the
residential sector).
• The ‘additionality’ requirement is reducing the number of measures
which can be supported under EEOs for Article 7 compliance.
• It is difficult to see how EEOs could support deep and complex
refurbishment, technical innovation or behavioural change.
• One option is to move the focus towards industry and transport.
• In some countries, EEOs are not understood or recognised as a
source of benefits by end users. Without public / political support,
the ambition of EEOs may be reduced – as per recent experience in
the UK.
26

27. 4. Conclusions
27

28. Conclusions: general
28
1) Article 7 is a complex and ambitious piece of legislation.
2) Policy evaluation is very challenging, due to: heterogeneity of
policies, amount of documentation (over 7,000 pages to date, and
rising), and lack of standard reporting formats.
3) Member States should be on course to deliver savings close to those
envisaged, if the ‘paper’ savings materialise in real life.
4) Current legal framework led in some cases to unintended
interpretations.
5) There are considerable uncertainties around the reliability of
energy savings estimates. Lack of additionality and the risk of non-
delivery are key concerns.
6) M&V major challenge going forward.

29. Conclusions: EEOs
29
1) EEOs provide more savings than any other policy instrument.
2) EEOs in the EU vary in scale, scope and design.
3) Most EEOs in the EU are new schemes.
4) The majority of planned EU EEOs are probably overly optimistic
about how quickly substantial savings can be delivered.
5) A lot of work needs to be done to make the new EEOs a success by
learning lessons from established schemes.

30. Can Europe deliver on energy efficiency?
In theory, YES but...
1. Doubts that anticipated Article 7 savings will be
delivered in practice unless problems rectified.
2. Current savings targets are considerably below those
needed for 2030 onwards to help reduce GHG
emissions consistent with remaining within 2C rise.
3. More ambition and better estimation of savings,
monitoring and evaluation, and delivery needed.
4. Further knowledge exchange and learning between
Member States would help deliver energy efficiency.
30

31. 6. Further reading
31

32. Further reading
• Rosenow, J., Fawcett, T., Leguijt, C., Pató, Z. (2016): Evaluating
the Implementation of Article 7 of the Energy Efficiency
Directive. IEPPEC conference, Amsterdam, 7-9 June 2016
• ENSPOL (2015): Report on existing and planned EEOs in the EU
– Part I: Evaluation of existing schemes
• Fawcett, T., Rosenow, J. (2016): The Member States’ plans and
achievements towards the implementation of Article 7 of the
Energy Efficiency Directive. Report for European Parliament
• Rosenow, J., Forster, D., Kampman, B., Leguijt, C., Pato, Z., Kaar,
A.-L., Eyre, N. (2015): Study evaluating the national policy
measures and methodologies to implement Article 7 of the
Energy Efficiency Directive. Study for the European Commission
32

33. About RAP
The Regulatory Assistance Project (RAP) is a global, non-profit team of experts that
focuses on the long-term economic and environmental sustainability of the power
sector. RAP has deep expertise in regulatory and market policies that:
 Promote economic efficiency
 Protect the environment
 Ensure system reliability
 Allocate system benefits fairly among all consumers
Learn more about RAP at www.raponline.org
Dr Jan Rosenow, jrosenow@raponlie.org
Dr Tina Fawcett, tina.Fawcett@ouce.ox.ac.uk

34. About ENSPOL
34
ENSPOL is an EU-funded project which aims to increase knowledge on
Article 7. It is delivered by a 13 member consortium of universities,
energy agencies and NGOs. Project ends August 2016
• Project website www.enspol.eu
– Reports – including on existing and planned EEOs in the EU, EEOs
outside the EU, alternative measures, country context, policy mix
– Policy briefs
– Subscribe to newsletter
• Interactive web platform: www.article7eed.eu
– Allows searching by country & by policy type.
– Summary reports on technical issues, including additionality, materiality,
cost-effectiveness, social issues

35. 35
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
3. Alternatives
2. EEOs No White
Certificates
1. EEOs White
Certificates
<65% EEO
contribution
>40%
Less than
<40% EEO
share
Note: some of these figures may have been updated in later plans
Significant policy heterogeneity across Member
States – EEOs vs alternative measures

36. Significant policy heterogeneity across
Member States – alternative measures
36
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2 2
1 1 1 2
1
4
2
1 1 2
3
1
4
4
8
2
5
8
6
14
1 11
14
16
7
21
14
4
2
2
3
1
1
0
6
19 4
1
2
3
5
2
4
4
7
1
5
3
3
3
2
3
3
1
1
1
4
1
3
1
1 1
3
2
1
1
4
2
1
1
1
1
1
1
1
1
1 1
1
44
14
6
8. Other measures
7. National Energy
Efficiency Funds
6. Training and education
programmes
5. Energy labelling schemes
4. Standards and norms for
efficiency products (beyond
existing EU legislation)
3. Regulations or voluntary
agreements
2. Financing/ fiscal
schemes
1. Energy/CO2 taxes
*Lack of information about certain measures
** Lack of information about the majority of the measures for those countries