Louise Sunderland and Rod Janssen provide the following blog on Article 7 of the EU Energy Efficiency Directive.
Since the launch of the Clean Energy for All Europeans package, we have been trying to better understand Europe’s renovation strategy.
For building renovation one of the main (only) concrete measures proposed is the continuation to 2030 of the requirement in Article 7 of the Energy Efficiency Directive for 1.5% energy savings to be delivered annually.
But is too much being expected of this single measure? Are inflated expectations for this measure preventing us from looking at the other parts of the EPBD and EED for improvement?
Can, and more importantly, will Article 7 deliver the market transformation and the renovation revolution that we need to meet our Paris obligations and decarbonise the building stock?
These are questions that we have been batting between us for most of the year. Our attempts to come up with something more informed than gut feeling responses to the many questions have been hugely helped recently by the publication of a number of evaluations and studies on Article 7, Energy Efficiency Obligations (EEOs) and, to give them their genus name, Market Based Instruments.
We have learned that if your interest is the buildings sector, then it looks like good news. In Member State notifications on measures to meet their Article 7 target, 42% of savings target the buildings sector.
And how will these savings be achieved? Well, around 40% of the savings are to be as a result of Energy Efficiency Obligations on energy companies. Experience tells us that EEOs are good at delivering low cost energy savings efficiently. Part of the way this is achieved in the design of Article 7 is by allowing flexibility for the obligated parties to deliver savings wherever they find cost effective opportunities – from within any sector and end user group.
There is nothing to dislike about low cost energy savings, and if the buildings sector is likely to be a major beneficiary of the investment we should be pleased. But there is a big jump from delivering the sort of low cost, mass market energy savings measures that have been delivered by existing European obligations to delivering deep retrofit. The ENSPOL project cautioned policy designers against setting up barriers and lock-ins for longer term solutions by focussing on the low-hanging fruits. But isn’t focussing on the cost effective savings – the low hanging fruits – what we have designed Article 7 and therefore charged the obligated parties with doing?
Rather than take the big jump from cost effective measures in the buildings sector to delivering deep complex renovations, might the obligated parties rather look outside the sector to industry or transport to find the next tranche of cost effective mass market rollout? Where does that leave the buildings sector?
Aside from the delivery of energy saving measures, the other benefit of the EEO as heralded by the Commission is the ‘strong emphasis [placed by EEOs] on developing new business models for suppliers’. There clearly is the potential for energy companies obligated to deliver not just kWh but saved kWh (negawatts) to see the opportunities to move from a generation and supply model to an energy services model. And this could provide the much needed kick start to the energy services industry, which could then start to put saved energy on a par with supplied energy and drive an energy efficiency revolution.
But, experience is telling us that although this is a logical road to travel it is not a frequently travelled one. After over 20 years of experience in the UK with an obligation on energy supply companies, our relationships as consumers with our energy suppliers are largely unchanged. They supply us with energy and we pay for it. Unfortunately, we have yet to see convincing evidence of market transformation on a mass scale in the European context.
It is at this point in our conversation that we ask ourselves, ‘but what about the other 60% of the savings under Article 7?’ These are savings that member states have committed to deliver through a dizzying array of other policy measures. What is striking about these policies is that 75% of the measures are based on policies that pre-existed the introduction of Article 7.
So, however valuable it is to have a regulatory driver to maintain policies and initiatives already in place (and from bitter experience with British policy, having seen level of ambition wax and wane with changes in political ‘leadership’, we know it is) the niggling question remains: ‘does the 1.5% annual energy savings target do anything that the now binding 30% economy wide target doesn’t?’
As a subsidiary target to have value it needs to do something the economy-wide target does not. Delivered as an EEO the obligation uses energy company funds, not taxpayer money, so there is an additionality there. But delivered through a re-presentation of policies and measures which have largely already been seen in NEEAPs and renovation strategies, is it additional? With no sectoral, energy end user or technology focus, is it additional?
We have nothing against the proposed roll out of EEOs across Europe. All the evidence we have says that they are good at delivering low cost measures on a large scale cost effectively, paid for outside of the public purse – what is not to like? But it can’t be all things to all people. And when the presence of Article 7 is used to argue away the failings of the rest of the Clean Energy for All package to deliver anything promising for the renovation of buildings, we really must protest.