The Regulatory Assistance Project

China
European Union
United States
www.raponline.org
Experiences in the European Union

Workshop on Market Mechanisms to Support

Chinas Energy and Climate Goals
Beijing - 25 & 26 May 2011

2011525&26
Eoin Lees
Eoin Lees
Contents

What are energy efficiency

obligations and white
certificates?
European Union existing
energy efficiency
obligations and white
certificates
Experience from European
Union
Lessons learned from
European Union
2

Why We Need Energy Efficiency

Obligations

Because of market
barriers, energy efficiency
does not happen to the
extent that the rational
economist would predict
EU Emission Trading
Scheme tackles energy
intensive users
Buildings in Europe
account for 40% of final
energy use

3
How do EE Obligations Work? 1
1
Government places an
obligation on energy
retailers/distributors to
save energy in
customers premises or
homes
Target related to volume
of energy supplied or
distributed or residential
customer numbers
/

4
How do EE Obligations Work? 2
2
For small energy users, need
simple approach to keep
monitoring and verification
costs down use approved
measures for which there are
well established energy
saving values (deemed
savings)
Monitoring and verification
then is a count of the energy
efficiency measures +
random audit + checks on
the quality of measures

+ +

5
How do EE Obligations Work? 3
3
For larger energy users
scaled engineering
estimates or actual
measured savings for the
bigger projects
Financial penalties if
energy company misses
target

6
What Costs are Involved & Who Pays?

Cost of energy efficiency

measures paid by energy
companies (subsidies)
with contributions from
end customers,
landlords, charities,
manufacturers etc
Cost of energy company
marketing, sales,
reporting, planning etc (in
Britain estimate ~18% of
their direct costs)

18%
7
How are they delivered?

Mainly by bilateral contracts

between obligated company
and an energy efficiency
market actor e.g. insulation
company, retailer of energy
efficient appliances,
manufacturers of energy
efficient equipment, heating
installers
Only in Italy has there been
significant trading of white
certificates generated by non
obligated parties

8
EE Obligations in European Union

Energy efficiency
obligations vary
tremendously in detail from
country to country
Spain & Portugal have
energy efficiency levy on
energy distributors &
(open) regional auctions for
energy saving projects
Ireland & Poland starting
levy on energy retailers
Netherlands considering
obligation on energy
retailers

&

9
EE Obligations in the EU (2008)
2008
10
Country

Obligated Company

Eligible Customers

Administrator

Belgium
Flanders

Electricity distributors

Residential and non energy

intensive industry and service

Flemish Government

France

All retailers of energy

All (including transport)

except EU ETS
EU ETS

Government

Italy

Electricity & gas

distributors

All including transport

Energy Regulator (AEEG)

AEEG
United Kingdom

Electricity & gas

retailers

Residential only

Energy Regulator (Ofgem)

Denmark

Electricity, gas & heat

distributors

All except transport

or covered by EU ETS
EU ETS

Danish Energy Authority

EE Obligations in the EU (2008)

2008
11
Country

Nature of saving target

Estimated annual spend by

companies
(M)
Belgium Flanders

1
st
year primary energy

26
France

Lifetime delivered energy

180
Italy

Cumulative 5 year
primary energy
5
196
United Kingdom

Lifetime delivered CO2

900
Denmark

1st year delivered energy

25
Most Activity is in Residential Sector

Country

Period

% energy savings from

residential sector
%
Belgium Flanders

2008
58% (mandated)
58%
Denmark

2008 42%
France

2006-9 87%
Italy

2005-8 83%
United Kingdom

2005-8
100% (mandated)
100%
12
EU Residential Energy Savings by End-use

13

2005-7
2006-9
2008
2005-8
2005-8 British Evaluation Headlines
2005-8
Over 120 million measures
installed in 3 years;
appliances and lighting
dominate in numbers but
insulation dominates the
energy savings (75%)
Target met 23% cheaper than
Government estimate (3.6% of
annual fuel bills)
Cost of saving a unit of
electricity is 2.4 cents/kWh;
for gas 0.7 cents/kWh; cf
residential prices of 11 & 2.9
cents/kWh respectively
1.2

75%

23%
3.6%

2.4/kWh
0.7/kWh
11
&2.9/kWh
14
General Observations from European Union

Schemes vary a lot reflects

local energy market status,
history of energy efficiency &
utilities, culture, climate etc.
Schemes work in both
liberalised energy markets
and where they target
monopolistic segments
Core element is the energy
efficiency obligation -
voluntary markets not
expected to emerge in
foreseeable future

&

15
Do Energy Efficiency Obligations Work?

Use British Government data

on residential energy
consumption and as the
United Kingdom has the
longest running and largest
energy efficiency obligation
In United Kingdom natural gas
is main (non transport) fuel in
residential sector >70% of
final energy demand in
households
Prior to 2005 residential gas
demand increasing at
between 1 and 2% per year

70%
2005
1%2%

16
Factors Reducing Gas Demand 2004-9
2004-2009
Energy efficiency obligation
doubled (75% energy savings
come from insulation
measures)
New regulations on boiler
replacement meant high
efficiency (condensing) boilers
quickly moved from 36% of
the replacement market to
>97%
Price rises for residential
customers reduced household
demand
75%

36%
97%

17
Other Factors Affecting Gas Demand 2004-9
2004 2009
From 2004 to 2009, gas
customers increased by
~1.6 million (7%) to 22
million thus increasing
demand
More Degree Days in
2008 & 2009 than in the
earlier period, so
warmer winters not an
issue
20042009

1607%2200

2008
2009

18
Reduction in British Residential Gas Demand

19
300
325
350
375
400
2004 2005 2006 2007 2008 2009
T
W
h
British Residential Gas Demand

Conclusions on Turning Down Demand

Gas demand in the United

Kingdom has been dropping
(15% in five years)
Reduction due to more
insulation, better boilers and
increased energy prices
none on their own can
account for actual reduction
British Gas claims most of the
22% reduction per household
is due to energy efficiency
Government analysis
underway (complicated)

515%

British Gas

22%

20