A timely report released this week by OpenExp provides evidence that all the arguments against 40% energy savings target are irrelevant!
The report entitled “Clean Energy for All Europeans – Do the Commission’s Impact Assessments Assign the Right Role to Energy Efficiency?” is based on the Commission’s modelling results included in the EED and the EPBD impact assessments. The report highlights the complexity of the exercise undertaken by the Commission and acknowledges the progress made by the Executive in assessing the impact of energy efficiency on reducing the size of the EU energy trilemma (energy security, energy affordability and environmental impacts).
Importantly, in line with the Energy Union Strategy Framework and its Efficiency First Principle (1), each of the policy scenarios modelled by the Commission projects energy savings to be the first fuel of Europe in 2030. However, the scenario aiming at 40% energy savings is the only where the sum of renewables and energy savings overtake the sum of nuclear and fossil fuels altogether. This may lead in the long run to EU energy independence. The 40% energy savings scenario is also the only one which gives a chance to Europe to meet its obligations under the Paris Climate Agreement as shown by OpenExp analyses.
From a citizen perspective, the Commission’s modelling results show a positive correlation between health impacts and the increased stringency of energy savings target. Compared to the EUCO27 scenario (which is based on the current target, agreed back in 2014), the number of life years gained due to less PM2.5 would reach 16.9 million in the scenario aiming at 40% energy savings target (EUCO40) against 2.5 million in the EUCO30 (which is based on the proposed 30% energy savings target by the Commission). Similarly, the number of avoided premature deaths per year from low-level ozone would reach 662 in the EUCO40 against 114 in the EUCO30. Really, it is hard to imagine policy-makers in the Parliament and the at the Council arguing for an energy efficiency target which would increase the number of premature deaths and reduce the number of life years due to air pollution resulting from energy consumption.
It is also hard for the industry to argue against 40% energy savings target. In fact, the Commission’s modelling results project energy related costs of energy intensive industries to stay almost constant with increased levels of energy savings ambition. OpenExp explains this result by the combined decrease of electricity and ETS carbon prices, which would reduce energy purchases costs and auction payments, thereby outweighing the increase of capital costs necessary for investments. Consequently, this would ensure a slight decrease of the overall energy related costs of energy intensive industries, in all scenarios compared to the EUCO27 scenario (current agreed target), and energy intensity of the industry sector improves considerably.
Furthermore, those who argue that low ETS carbon price estimated by the Commission’s modelling in the scenario aiming at 40% energy savings at €14/tCO2 (which is higher than the current ETS carbon price) will increase the use of solid fuels and consequently GHG emissions are also wrong. OpenExp analyses of the Commission’s modelling results show that GHG emissions reduction goes hand in hand with the increased energy savings ambition and the increased share of renewables despite the decrease of ETS carbon prices. One may question the role of ETS. But this is another story.
OpenExp analyses show that the argument of high investment expenditures and energy system costs which may occur in the scenario aiming at 40% energy savings target is irrelevant. In fact, the Commission’s modelling results provide an overall investments and costs which includes those related to energy services (especially in the case of the transport sector) and uses a private discount of 10% which is irrelevant to address a societal issue such as the energy transition. A 10% discount rate is also consistent with the current rates used for efficiency projects, which are in some Member States at zero. The Parliament and the Council should, therefore, not be discouraged by the investment challenge and the overall cost of higher ambition simply because these investments go beyond the implementation of energy efficiency measures.
The author, Yamina Saheb, concludes her report by suggesting another run of the modelling exercise which would assess efficiency scenarios from a societal perspective and take into account the already existing good practices in some Member States such as full transparency on the assumptions and involvement of stakeholders in the validation of the assumptions and the interpretation of the results. This would allow for an evidence based efficiency target for 2030.
Let’s make sure the recommendations of this timely report will be considered by EU policy-makers.
(1) Efficiency First Principle is a guiding principle introduced by the Energy Union Strategy Framework which states that energy efficiency should be considered as an energy source in its own right. It aims to prioritise investments in energy savings (energy efficiency and demand-response). More information on the Efficiency First Principle is available here.