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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE The energy efficiency potential for cost-effective GHG reductions worldwide: issues and barriers Paul Waide, PhD Energy Efficiency & Environment Division International Energy Agency CDM Methodologies and Technical Issues Associated with Power Generation and Power Saving Project Activities

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE Whats Energy Efficiency Done for Greenhouse Gas Abatement?

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE Sector Intensities and Total Economy Effect, IEA-11 Energy intensity declines have slowed in all sectors since the late 1980s

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE Changes in energy/GDP decomposed into changes in energy service/GDP and intensity effect, 1973-1998

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE Actual Energy Use and Hypothetical Energy Use Without Intensity Reductions, IEA-11 Without 25 years of energy savings, energy consumption would have been almost 50% higher

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE Is it real? Macro to mezzo evidence

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE Impacts pre-2001 programmes in CA Public Interest Energy Strategies CEC #100-03-12F 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 19751976197719781979198019811982198319841985198619871988198919901991199219931994199519961997199819992000 GWH Utility Programs: at a cost of ~1% of Electric Bill Building Standards Appliance Standards ~ 14% of Annual Use in California in 2001

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE Impacts: US vs. CA electricity use

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE Denmark: gross energy demand by fuel: 35% GDP growth but energy use is slightly lower

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE Is it real? Mezzo to micro end-use evidence

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE United States Refrigerator Use (Actual) and Estimated Household Standby Use v. Time 0 200 400 600 800 1000 1200 1400 1600 1800 2000 19471949195119531955195719591961196319651967196919711973197519771979198119831985198719891991199319951997199920012003200520072009 Average Energy Use per Unit Sold (kWh per year) Refrigerator Use per Unit 1978 Cal Standard 1990 Federal Standard 1987 Cal Standard 1980 Cal Standard 1993 Federal Standard 2001 Federal Standard Estimated Standby Power (per house)

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE Energy 350 More efficient Less efficient A B C D E F G A Manufacturer Model Logo ABC 123 Energy consumption kWh/year (Based on standard test results for 24h) Actual consumption will depend on how the appliance is used and where it is located Further information is contained in product brochures Fresh food volume I Frozen food volume I 200 80 40 (dB(A)re 1 pW) Noise Norm EN 153 May 1990 Refrigerator Label Directive 94/2/EC

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE Can produce major market transformation: e.g. refrigerators in EU

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE From random to order: products are now designed to meet discrete efficiency bands

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE Much more can be saved

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE Global CO2 Emissions in the IEA 2004 World Energy Outlook Scenarios CO 2 emissions are 16% less in the Alternative scenario in 2030, a reduction of about 6 Gt of CO 2 Source: WEO 2004

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE Contributory Factors in CO 2 Reduction, 2002-2030 Improvements in end-use efficiency contribute for more than half of decrease in emissions, and renewables use for 20% 0% 20% 40% 60% 80% 100% 49% 10% 8% 12% 21% OECD 63% 1% 21% 15% Transition economies 67% 7% 17% 4% 5% Developing countries 58% World End-use efficiency gains 7% Fuel switching in end uses 5% Changes in the fossil-fuel mix in power generation 10% Increased nuclear in power generation 20% Increased renewables in power generation

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE Difference in global electricity investment in the Alternative vs. Reference Scenario 2003-2030 Additional investments on the demand side are more than offset by lower investment on the supply side -2 000 -1 500 -1 000 - 500 0 500 1 000 billion dollars (2000) Difference Additional demand-side investment Efficiency measures Avoided supply-side investment Generation Transmission Distribution

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE Consider a refrigerator: simple technical solutions exist

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Example: Tunisian 1-door refrigerator with a 2-star frozen food compartment Example: Tunisian 1-door refrigerator with a 2-star frozen food compartment (useful volume = 220 litres, electricity consumption = 299 kWh/year)

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE Residential electricity consumption scenarios in IEA countries 1990-2030 -35%

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE Global lighting electricity use: no-policies, current-policies and LLCC-scenarios

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE Benefits from least life cycle cost compared to current policies Implementing the LLCC scenarios would: reduce OECD residential electricity demand by 35% and avoid 525 Mt-CO 2 emissions in 2020 at a net cost of: -$66/Tonne-CO 2 in OECD-North America -$66/Tonne-CO 2 in OECD-North America -169 Euro/Tonne-CO 2 in OECD-Europe -169 Euro/Tonne-CO 2 in OECD-Europe reduce global lighting electricity demand by US$156 billion and 971 Mt CO 2 in 2030 at a net cost of: -US$158/Tonne-CO 2 globally

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE So why doesnt the market deliver cost-effective savings autonomously? Missing or partial information on EE performance and lack of common metrics Missing or partial information on EE performance and lack of common metrics Lack of awareness re cost-effective savings potentials Lack of awareness re cost-effective savings potentials Split incentives: Landlord-Tenant issue Split incentives: Landlord-Tenant issue EE often a minor determinant of capital- acquisition decisions EE often a minor determinant of capital- acquisition decisions EE is bundled-in with more important capital decision factors EE is bundled-in with more important capital decision factors All result in emphasis on 1 st not Life-cycle costs All result in emphasis on 1 st not Life-cycle costs

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE But what about free-riders? But what about free-drivers? Waides 2 nd Law of Energy Efficiency: Waides 2 nd Law of Energy Efficiency: for every free-rider there is an at least as equal, but opposite free-driver (spillover) And the rebound effect? And the rebound effect? It exists but is rarely large (energy service expenditure is not hypothecated and is a small proportion of GDP) treat by applying some simple adjustment factor (e.g. say 5% for refrigerators and 50% for space conditioning)

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE Low first cost rules! Mercury Vapour Vs. High Pressure Sodium Street Lamps Lamp costs = 2.5 Euro to 12.5 Euro (product price from 750 Euro to 815 Euro) Note: lifetime HPL=3yr and HPS=4yr Energy consumption from 548 kWh to 328 kWh = 40% less CO2 emissions Life cycle costs from 2861 Euro to 2266 Euro Benefit to cost ratio = 9.2 Simple payback less than 3 years BUT Mercury Vapour outsell High Pressure Sodium!!! Switch HPL 125W HPS 70W

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE Could CDM finance high efficacy street lights? How do we know they wouldnt have installed HPS anyway? Be conservative: only allow 50% of savings benefits to be counted First year incremental cost is 75 Euro per lamp (110 Euro/20yr) CO2 savings of from 2.5 to 5 tonnes per lamp (depend on fuel mix) but only credit 1.25 to 2.5 tonnes in calculation 100% abatement cost = 40 to 80 Euros/tonne (at 50% CER) Energy bill savings = 250 to 750 Euro per lamp (depends on tariff) If CER cost too high let CDM pay the first cost increment, but then be repaid through the bill savings CDM loans 75 Euro per HPS lamp. Energy bill savings used to pay back loan within from 2 to 7 years (depending on tariff) Municipality has a net benefit of from 154 to 682 Euro per lamp

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE ConclusionsConclusions Energy efficiency presents a huge under- exploited cost-effective GHG saving opportunity Energy efficiency presents a huge under- exploited cost-effective GHG saving opportunity It merits being the single greatest focus of GHG abatement strategies in near-term It merits being the single greatest focus of GHG abatement strategies in near-term If mined effectively it allows economic growth with net reductions in GHG emissions in developed economies and much slower growth in GHG emissions in rapidly developing economies If mined effectively it allows economic growth with net reductions in GHG emissions in developed economies and much slower growth in GHG emissions in rapidly developing economies CDM has to make EE projects a major focus CDM has to make EE projects a major focus

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE How can the CDM manage EE? Purity vs. action? the potentials are so big, the costs are so low and the needs so high that action must be the near term priority CDM needs a fast track to EE project approval Purity vs. action? the potentials are so big, the costs are so low and the needs so high that action must be the near term priority CDM needs a fast track to EE project approval How could this be done? How could this be done? Compartmentalise identify narrower groups of clear win-win categories of EE projects, set rules and invite project submissions on a fast track (guidance, speed and certainty are paramount for would be applicants) Simultaneously, work on widening the project categories and developing the appraisal methodologies Allow project submissions outside the above framework on a slower track

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE EE, CDM and Policy Environment Recognise that EE works best if the measures are supported by an unambiguous and comprehensive policy framework Recognise that EE works best if the measures are supported by an unambiguous and comprehensive policy framework E.g. effective energy labels give market visibility and a common performance benchmark to efficient products, this creates the environment where a CDM project might support the manufacture of such products and the benefits can be both leveraged and more easily determined (the base-case is clearer) E.g. effective energy labels give market visibility and a common performance benchmark to efficient products, this creates the environment where a CDM project might support the manufacture of such products and the benefits can be both leveraged and more easily determined (the base-case is clearer) The same can be said of buildings, vehicles, industrial processes etc. The same can be said of buildings, vehicles, industrial processes etc. This implies a need for coordinated work between CDM and other UNFCCC programmes and instruments to support development of a favourable international policy environment for EE This implies a need for coordinated work between CDM and other UNFCCC programmes and instruments to support development of a favourable international policy environment for EE

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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE Contacts and more information www.iea.orgwww.iea.org (e.g. for IEA publications on energy efficiency) www.iea.org Or contact: Paul.Waide@iea.org