Efficiency: an energy transition lever

We meet
Mechthild Wörsdörfer / Patrick Labat / Renaud Mazy

Everyone is in favor of energy efficiency. On the ground, however, all sorts of obstacles arise, slowing down its indispensable deployment. Three frontline players offer their perspectives on the many stumbling blocks and how to overcome them.

Mechthild Wörsdörfer, Director of Energy Policy in DG Energy – European Commission

“By achieving a 30% energy improvement, we will be in transition to a low-carbon competitive energy system.”

How would you define energy efficiency?

Patrick Labat :Increasing energy efficiency means being able to spend less energy and resources for the same service provided – for instance, carrying out the same industrial production or reaching the same level of comfort in a building. If we stay with the example of buildings, these gains can be obtained in three ways: by constructing new housing, but this will take time; by renovating the existing buildings, which is very expensive with extremely long returns on investment; by modernizing the interior of buildings with automatic regulation systems and optimized energy production, especially via cogeneration. The energy mix can also be improved by implementing the best locally available energy sources. The latter kind of investment can be more quickly amortized, particularly when it is combined with raising the occupants’ awareness about the impact of their behavior on consumption.

Mechthild Wörsdörfer : Indeed the building sector is absolutely key on the issue of energy efficiency, and one of our main focuses, as it represents almost half of the energy consumed in Europe. Other important factors are products (for instance, refrigerators, computers or cars, which can be more or less efficient), industry, transportation, etc. Within the framework of our Energy 2020 strategy, we set a now well-known target for energy efficiency, which is 20% progress by 2020, and we issued a directive in 2012 to help us get there. Though there was some skepticism – including within our member states – when we came up with those objectives, we are now quite confident that we will reach that goal. A revision of this directive is now underway, which would set a further objective of a 30% improvement by 2030.

Renaud Mazy : Reducing wastage is a real challenge! Of course, in huge institutions such as hospitals, even small operating optimizations in areas such as ventilation or lighting allow significant savings to be achieved in terms of energy and money. However, in the medium and long term, making real energy savings requires investment whose profitability is far from immediate: these are choices that are complex to make and then implement, especially as they have to be made in a context of major financial restrictions for hospitals. That’s why we asked Veolia to assist us in conducting various studies across all of our activities to identify avenues for savings that we could work on together.

Patrick Labat, Senior Executive Vice President

“Increasing energy efficiency means being able to spend less energy and resources for the same service provided”

Many experts believe that progress is too slow (see boxed text p.15). What is your point of view on the main obstacles at play?

M. W. :There have been a series of market and regulatory failures that have led to insufficient investment, and I think mobilizing investment is the main issue here. We have calculated that we will need more than 150 billion euros per year between 2020 and 2030 in energy efficiency investments if we want to reach our targets. Of course, we have some public money, as member states and regions do, but it is essential that private money get invested here, which is not happening enough, for a variety of reasons. In some cases the banks are not readily providing the money; there are also issues between who is paying and who is benefiting, for example between tenants and landlords. In addition, a lot of this is small scale; there are huge numbers of actors, who probably need to be aggregated in some way, but this raises many problems. In any case, this means that 75% of European buildings are still energetically inefficient.
P. L. : The main obstacle is the lack of individual and collective awareness of the need to rapidly invest in energy efficiency: the “greenest” energy is the energy that you don’t consume. The public authorities must create conditions that are both incentivizing and coercive to encourage this investment on a large scale by improving its profitability. In order to be efficient, you must have the clear-sightedness and humility to turn to the experts. Not all of those involved are energy and efficiency specialists. Turning to companies who are experts in the field and offer contracts with a performance commitment, coconstruction or co-design is often the best way of making fast and significant gains.
R. M. : In Belgium, many large hospitals date from the late seventies, a time when energy savings were not a concern… This liability is a real obstacle! We are also working in a very financially constrained environment: the 2008 crisis hit many sectors and the hospital sector is continuing to experience clear cuts. As a director, I am absolutely convinced that certain environmental choices must be made within the framework of our future construction projects. But, at the same time, I have to explain to my teams that some things are going to be more expensive and that a collective effort will therefore be more important..

Which levers in your field of activity could be used to speed things up?

Renaud Mazy, Managing Director of Saint-Luc University Hospital - Brussels

“Making real energy savings requires investment whose profitability is far from immediate.”
R. M. : The public authorities must invest in the long term. I would therefore emphasize the importance of clear and consistent political choices that make it possible to define an energy vision for our society and above all create predictability. For instance, I’m disappointed about the procrastination that we’re seeing in Belgium in terms of incentive measures to develop solar power. Or the fact that the debate between wind power and fossil fuels has not been completely settled, which leaves energy suppliers themselves waiting for more clarity. Luckily, certain players on the market are getting technically and financially involved with companies to accelerate and ensure this transition – that’s what Veolia did with us.
P. L. : You have to implement a policy that is both incentivizing and restrictive. In this case, grants or investment aid on the one hand, along with measures penalizing emissions on the other. It is particularly essential that we put a price on carbon, either by taxing it or putting in place a system of payable quotas to promote innovation and the adoption of suitable technologies, especially collective heating systems, which deliver much greater performance and efficiency than individual boilers. It is also important to help people precisely measure their consumption, which plays a role in raising awareness, as previously mentioned. In the buildings or factories where we are involved, the people who live or work there take the information we provide on the weather, temperature and consumption into account, which helps to make their behavior more energyefficient.
M. W. : The EU’s main contribution is to set strategies and frameworks, which are a powerful lever: it has been proven that our 2020 energy efficiency directive has triggered a lot of activity by providing visibility and predictability. For example, the EU members have committed to rolling out 200 million smart meters for electricity by 2020, and 45 million meters for gas. We have also calculated that our energy efficiency labeling directive has saved Europe 100 billion euros, equivalent to €450 per household! So we are confident that the 2030 targets we are working on will trigger a lot of investment and change.

Which levers in your field of activity could be used to speed things up?

P. L. : Achieving the European goals would already be a first success. But for now, the movement is too slow. The energy transition will be successful when individual behaviors – and, through a knockon effect, collective behaviors – help in and of themselves, i.e. without incentives, to generate savings or encourage people to turn to more high-performance solutions. However, at present, low energy costs are doing nothing to foster this necessary awareness of the need to reduce our consumption. We must therefore put in place mechanisms, especially in the building sector, to direct behavior so that energy efficiency becomes a priority.
R. M. :It will be a success when energy consumption has decreased on a like-for-like basis, along with the carbon footprint in turn. At this point, the search for energy efficiency will have become well and truly ingrained in our minds – and it will no longer be a question of adding isolated measures, as is sometimes still the case today, but a global approach supported as much by the public authorities as the players on the ground.

M. W. : We have set a 30% target by 2030 and, though some may think this is not enough, it seems to us the most cost-effective way to move forward efficiently. At 40% there would be a lot of existing infrastructure too costly to renovate, and it would also imply an enormous buildings renovation across all of Europe, which we think is unrealistic. If we achieve this 30% target, we will be in transition to a low-carbon competitive energy system, which will be more digitalized, more flexible, with consumers that have a bigger role. This will not only be good for the climate, but it will increase GDP in member states, and strengthen us geopolitically as we will depend less on oil and gas.

A genuine but insufficient energy evolution

The European Union’s greenhouse gas emissions fell from 5,735 to 4,419 million tCO2e between 1990 and 2014, a significant 23% drop. However, many people doubt that it is possible, at the current pace, to reach the official goal of a 40% reduction by 2030, not to mention an 80% reduction by 2050. The carbon quota system is not working, as one metric ton of CO2 emitted is currently priced at the derisory sum of €5. Exiting coal therefore seems a far-off prospect, with an annual consumption of 270 million metric tons that is showing little sign of dropping. The transport sector is lagging the furthest behind, reducing its CO2 emissions at an annual rate of 0.7%, whereas a 2% rate is required.

Source :IDDRI report, November 2016