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Lessons Learned and Best Practices for Energy Efficiency


... Practices for Energy Efficiency. Julia Weller. jweller_at_pierceatwood.com ... Energy efficiency is the step-child of energy sector reforms money is devoted to ... – PowerPoint PPT presentation

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Title: Lessons Learned and Best Practices for Energy Efficiency

Lessons Learned and Best Practices for Energy
  • Julia Weller
  • jweller_at_pierceatwood.com
  • 12 July 2008
  • Batumi, Georgia

  • Reasons to Introduce Energy Efficiency Measures
  • Best Practices in EE Laws Around the World
  • Initial Steps
  • Quantative Targets
  • EE Standards for New Buildings
  • Labeling for electric Appliances
  • Financial Incentives
  • EE audits
  • Energy services companies
  • Other regulations
  • How to Deal with the Rebound Effect
  • Barriers to Implementation of EE in Transition
  • Conclusion Lessons Learned for Successful EE Law

1. Reasons for EE Measures
  • Energy efficiency is the step-child of energy
    sector reformsmoney is devoted to liberalisation
    and infrastructure investment but little
    attention is paid to EE
  • Negawatts can save money and reduce the need to
    import electricity or build new capacity without
    reducing living standardsEE is the fifth fuel
  • EE can save jobs at high intensity factories by
    reducing operating costs

Reasons for EE Measures
  • EE can also create jobs in energy services
  • Cost of energy as of households much higher in
    CEE and Caucasus than in Western Europe (10-15
    vs. 3-5) because of lower income so EE has
    greatest impact on poorest households
  • EE can help limit use of fossil-fueled plants and
    reduce global warming
  • Help to target best projects for EE investment

Reasons for EE Measures
  • Provides access to capital from sources such as
    the World Bank/UNDEPs Global Environment
    Facility, EBRDs Energy Efficiency Unit, and the
    IFCs Renewable Energy and Energy Efficiency Fund
  • Fulfills obligations of Government under Energy
    Charter Protocol (PEEREA)
  • Citizens of Georgia will know Government is
    serious about EE and its international
    commitments if it takes lead in applying EE
    standards to government buildings

2. Best Practices in EE Laws Around the World
  • World Energy Council did review of EE measures in
    76 countries representative of all world regions,
    including emerging markets
  • Represented 83 of worlds energy consumption
  • Published in January 2008 after three year study
  • Results available on website www.worldenergy.org
  • Conclusions on successes and failures useful for

(1) Initial Steps
  • First step of EE policy is to establish adequate
    energy pricing (i.e. long-term marginal cost)
    tariffs that cover costs important to give
    consumers correct price signals
  • Second step is establishing a government body
    devoted to EE--two-thirds of countries surveyed
    had EE agency dedicated to implementing EE policy
    and over 90 had Ministry department dedicated to

(2) Quantative Targets
  • Almost half of countries surveyed have
    established quantitative targets with yearly
    monitoring requirements
  • Types of target used varies
  • Most popular is rate of energy savings or
    efficiency improvement
  • Achieve specified energy target expressed (in Gwh
    or Mtoe) second most popular
  • Achieve specified rate of decrease in energy
    intensity( per year or over set period)chosen
    by Bulgaria, Czech Republic and Russia)
  • Rate of reduction in energy consumption

Quantative Targets and Methods
(3) EE Standards for New Buildings
  • All EU countries have mandatory efficiency
    standards for new buildings and service sector
    buildings to comply with Directive
  • Half of other OECD countries and some non-OECD
    countries have mandatory EE standards for
    buildings, other half of OECD countries have
    voluntary standards
  • Total of 50 of countries surveyed had either
    mandatory or voluntary standards

EE Standards for New Buildings
  • In Africa and Asia, standards apply only to
    non-residential buildings because commercial
    buildings account for largest share of energy
  • Most standards performance based sometimes
    combined with specific standards for individual
    components (e.g. thermal windows)
  • In EU, cumulative energy savings is 60 when
    compared to dwellings built before oil embargo
    additional cost a few

EE Standards for New Buildings
Successful EE Measures for EE Standards for New
  • Push-Pull Packages
  • Push consumers away from energy intensive
    practices and pull them toward energy efficient
  • Alternatives Package
  • Offer choice between incentives and penalties
  • Conditional Packages
  • Voluntary measures first
  • If they dont succeed in meeting target,
    mandatory measures

Push-Pull Package in Finland
  • Finland has adopted a package of push-pull
    measures for commercial buildings based on the
    following components
  • a subsidy scheme for energy audits since 1994,
    with subsidies up to 50
  • subsidies for investments (between 10 and 25)
  • voluntary agreements to save heat and

Alternatives Package in Denmark
  • Denmarks Green Tax Package for industry
  • One alternative is set of fiscal measures
    (energy, CO2 and SO 2 taxes)
  • Other alternative is tax reduction and voluntary
    agreement to submit to Danish Energy Authority an
    implementation plan comprising an audit, EE
    action plan and precise EE targets if fail to
    meet targets, have to repay tax reduction
  • In 2001, 300 enterprises (60 of total industry
    energy consumption) signed agreements
  • Customers can choose

Conditional Package
  • Step-wise EE measures for existing buildings
  • Step One Energy labels for building sales
  • Step Two Tax linked to average yearly
  • Step Three Mandatory thermal retrofitting

(4) Labeling for Electric Appliances
  • EU has mandatory EE labeling for all major
    household electric appliances
  • In OECD Asia and America, 70 of non-EU countries
    require labeling for refrigerators
  • In Africa, Middle East and non-OECD Asia,
    labeling not wide-spread because second-hand
    appliances account for most appliances sold in
    emerging markets and labeling limited to new

Labeling for Electric Appliances
  • Studies showed that labeling did not increase
    costs as manufacturers benefited from increased
  • Labeling resulted in rapid increase in market
    share of most efficient appliances
  • To be successful, standards need constant
  • In emerging markets, labels used modeled on OECD
    labels that have been shown to be successful

Examples of Energy Efficiency Labels (Thailand,
Brazil and Iran)
(5) Financial Incentives
  • Economic Incentives
  • Investment subsidies to reduce investment costs
    for consumers
  • Used energy funds with financing mechanisms
    depending on banking system rather than budget
  • Drawbacks
  • Free-riders most likely to take advantage
  • Low-income consumers who were targets did not
    take advantage of subsidies because unaware of
  • Bureaucracy, delays and transaction costs
  • Lessons learned
  • More targeted subsidies (low-income beneficiaries
    and specified list of equipment with long payback
    but high efficiency gains)

Financial Incentives
  • Soft loans
  • Subsidized interest rates for EE measures
  • Easily implemented by banking institutions
  • Less popular than subsidies

Energy Efficiency Funds
  • Bulgaria, Romania and Macedonia all have funds
    for energy efficiency loans and guarantees
  • All launched with GEF grants (10 MM Bulgaria and
    Romania, 5.5 MM Macedonia)
  • Co-financed in Bulgaria by governments of
    Bulgaria and Austria and private companies, by
    commercial banks in Romania and development bank
    in Macedonia
  • Private fund managers with performance incentives
  • Bulgaria has approved projects for over EUR7
    million, Romania has leveraged over 30 million
    Macedonia fund launched Sept. 2007 after two
    years preparation
  • Funds provide guarantees as well as loans
  • Minimal bureaucracy in decision making

Fiscal Incentives
  • Reduce taxes and eliminate import duties to
    consumers who invest in EE equipment
  • Tax reductions and accelerated depreciation
    considered better than subsidies because less
  • Incentives work well if tax collection rate is
    high but work poorly in countries in transition
  • Applied most frequently to compact fluorescent
    lamps outside OECD

(6) Energy Audits
  • Mandatory audits most frequent in building sector
  • Most effective if coupled with capacity building
  • Need training programs in high school and
    university to have cadre of certified auditors
  • Government agency needs to be staffed to respond
    to data collected in audit
  • Voluntary audits exist in every sector
  • Mandatory audits in industrial sector most
    prevalent in emerging markets
  • Data to date shows energy savings of 5-10 in
    companies when followed with implementing measures

Energy Audits
  • Mandatory audit approaches vary from soft (e.g.
    Australia which focuses on changing business
    culture) to hard (e.g. Taiwan, India and
    Bulgaria, which established industrial processes
  • Can be walk-through or detailed
  • Threshold for required participation
    varies--ranges from 260 toe (3000 Mwh) in
    Bulgaria to 30,000 toe in India
  • Typical period for new audit is 3-5 years but
    also shorter (2 years in Romania and one time in
    Czech Republic)
  • Sanctions for compliance, usually fines, foreseen
    in most cases but cooperation preferred to

(7) Energy Services Companies
  • Energy services companies offer guaranteed energy
    savings from EE improvements
  • Payment comes from cost savings, without risk to
    customers, or financed by third party loan
    secured by cost savings another model is shared
  • Performance-based contracts help overcome
    financial barriers
  • Services provided include development and design
    of EE projects installation and maintenance of
    EE equipment involved and measurement,
    monitoring and verification of the project's
    energy savings
  • ESCos started in US, spread to EU and now in
    industrial sector of developing and transition

(8) Other EE Regulations
  • Energy consumption reporting for large energy
  • Imposed in 30 of countries
  • Mandatory energy managers for companies above a
    certain size
  • Required in about 20 of countries
  • Mandatory energy savings plans for certain
  • 20 OECD countries, 10 non-OECD countries
  • Maintenance of heating boilers
  • Mostly EU

3. How to Deal with Rebound Effect
  • Rebound effect means that as EE measures kick
    in, people use their savings to turn up
  • Counteract rebound effect by packaging
  • together complementary measures
  • Example combination of insulation standards and
    an energy tax for space heating or
    cooling--insulation standards result in new
    buildings which consume less
  • energy per m² for the same indoor temperature
    the energy tax prevents people from is

4. Barriers to EE Implementation in Transition
  • Studies of EE implementation in emerging and
    developed market economies show that barriers are
    greatest in transitional economies because of
    enormous investment needs, corruption and
    disorganization in government
  • Financial and economic barriershigh in
    transition economies
  • Commercial lenders unwilling to provide loans
    without obvious revenue stream for repayment
  • Micro-loans not available to home owners for EE

Barriers to EE Implementation in Transition
  • Social and institutional barrierslow acceptance
    by public and resistance to behavioural change
  • Requires education campaign about long-term cost
    savings and environmental benefits of EE
  • Requires training of public officials
  • Need Information Centers located in buildings
    where citizens have to go (e.g. Tax Authority)
  • Barriers to performance contracting for ESCos in
    public sectorbudgets and credit lines made for
    capital costs, not reduction of operating
  • Requires change in public procurement systems and
    operating improvement incentives for officials
  • Energy Fund for financing ESCos critical because
    of banks unfamiliarity with energy savings

Barriers to EE Implementation by Municipalities
  • Local authorities play important role in
    implementing EE
  • MUNEE study on implementation of EE measures in
    Bulgarian municipalities is one example
  • www.munee.org/files/Shortened_Final_Barriers.doc
  • Limited authority on allocation of municipal
  • Local self-governments had no independent
    financing source, relied on state subsidies
  • Subsidies reduced if municipality reduced
    expenses through EEdisincentive to investments
  • Until law changed in 2001, municipalities could
    only spend budgets as directed by central
    government or faced severe penalties
  • Limits on borrowing and pay back period

4. Conclusion Best Practices for Successful EE
  • Survey performed by the Alliance to Save Energy
    of 22 countries in two regionsS.E. Europe and
    the CISshowed that no EE improvements would have
    been possible without a framework law
  • Type of law doesnt matter
  • Can be stand-alone law or combined with RE or
    part of Energy Law that includes electricity,
    oil, natural gas, heat and RE

Conclusion Best Practices for Successful EE Law
  • Need to formalize EE as a separate sphere of
  • Conceptualize state policy principles for EE
  • Prioritize the sectors with the highest energy
    savings potential (electric generation,
    industrial production, housing)
  • Define development of short and long-term EE
    programs as a national priority
  • Assign responsibility for promotion of EE to
    officials at national, regional and local levels

Conclusion Best Practices for Successful EE Law
  • Champions within the Government
  • Successful EE programs and results have been the
    result of individual champions at the highest
    level of Government
  • Ministries have small staffs and short memories
  • Without an understanding of the benefits to the
    economy of EE, the law will not be implemented or
  • Reason for independent agency or department
    within a Ministry is to try to insulate programs
    from changes in Government

Thank You!
  • Julia Weller
  • jweller_at_pierceatwood.com
  • Batumi, Georgia
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