How European Climate Policy Can Bolster Energy Efficiency Measures

Major cities under water. Unprecedented heat waves. Terrifying storms. These are just a few of the nightmare scenarios evoked by UN Secretary General António Guterres following the publication in April of the latest Intergovernmental Panel on Climate Change (IPCC) report on climate science.

The findings could scarcely be starker. We’re on a pathway to global warming of more than double the 1.5°C target set out under the Paris Agreement in 2015. To avoid this, carbon emissions must peak within just three years from now, and decline rapidly thereafter.

EU regulators are responding to this challenge. Under the Green Deal, the bloc is committed to achieving carbon neutrality by 2050. This ambition will provide the EU with the world’s most encompassing set of regulations and laws driving the green transition.

But more needs to be done – and fast. This imperative has only sharpened in the context of soaring fossil fuel prices.

The world of energy is changing.  A traditional focus on centralized, top-down distribution is being displaced and superseded by a much more end-user-oriented approach. Energy systems are, consequently, becoming more decentralized, digitized and decarbonized.

This transformation presents an important opportunity for the EU, which spends around €1 billion on energy imports each day. EU policymakers must devote greater attention to the way energy is consumed – not just how it’s generated, transmitted, and distributed. That means better incentivizing end-users to consume their energy as efficiently as possible, minimizing unnecessary waste.

Energy efficiency is a key driver in the transition to lower emissions

Decarbonizing the global economy means lessening our dependence on fossil fuels and increasing dramatically our use of renewable energy sources like solar, wind, biomass, and hydropower. Also, because electricity is a cleaner and more efficient form of energy than oil and gas, we must continue to electrify everything – from how we power cars to how we heat buildings.

Already in Europe these profound, positive shifts in energy production and distribution are underway. However, renewables and electrification alone can’t realize the EU’s net-zero ambition.

The International Renewable Energy Association (IRENA), for instance, calculates that such measures can contribute just 45% of the emissions reductions required to limit global warming to 1.5°C above pre-industrial levels.

So, how can policymakers ensure we use those cleaner forms of energy as efficiently as possible?

Digitization and demand-side regulation as a way to boost energy efficiency

Digital technologies render energy waste visible. For example, by providing real-time information on complex transformation and distribution processes, such tools have recently helped to significantly reduce European energy waste. These improvements owe in part to the regulatory stimulus provided to network operators under the 2012 Energy Efficiency Directive (EED).

But to accelerate decarbonization in line with the Green Deal, EU policymakers must more actively stimulate untapped efficiency improvements on the demand side. That means encouraging consumers, companies, building operators and others to invest in tools that help save energy.

Doing so will also enable end-users to reduce their costs. For example, smart meter technologies digitally optimize processes such as lighting and temperature control, significantly reducing energy bills in factories, homes, hospitals, office blocks and other buildings.

Similarly, improvements in distributed energy generation and smart-grid technologies increasingly enable end-users to also become producers of energy, or “prosumers”. In many parts of the EU, for example, excess energy generated by rooftop solar panels can now be straightforwardly sold back to the grid.

Regulatory stimulus required

More can be done to encourage uptake of such innovations. When fully deployed, an ambitious transposition of the Building Management Systems (or BACs)-related measures included in the revised Energy Performance in Building Directive (EPBD 2018/844) could lead to savings equivalent to 14% of total building final energy consumption. Concretely, by 2038, the EU would save the equivalent of 46 billion cubic meters (bcm) of fossil gas, 64 billion cubic meters (bcm) of CO2 and €36 billion.

Likewise, a recent study by the Schneider Sustainability Research Institute (SRI) estimated that, under current conditions, rooftop solar panels could supply up to 20% of Europe’s overall electricity demand. Nevertheless, the continent’s rooftops remain chronically underutilized.

“Fit for 55” and the path forward to greater energy efficiency

In a significant step towards realizing the ambition of the Green Deal, the European Commission last July published a suite of policies intended to reduce the bloc’s net greenhouse gas emissions by at least 55% by 2030​.

Titled “Fit for 55”, the package incorporated revised regulations, proposing that member states almost double their annual energy savings obligations, deploy electric vehicle (EV) charging stations, introduce minimum energy performance standards for buildings, and deploy energy management systems in industry, among other measures. This makes “Fit for 55” one of the most complex and ambitious legislative projects ever undertaken by the EU, a subject discussed in our recent whitepaper on the proposals.

However, further opportunities remain to catalyze systemic, bottom-up change in EU energy policy. Consumers are driving the transition to a new world of energy that is sustainable, digital and electrified; what we call “Electricity 4.0”.

Key technologies are significantly transforming energy demand and providing new services to consumers. Investing now in a smart and decentralized energy system can affect structural change long before 2030. A timely and ambitious recasting of the “Fit for 55” package can prove crucial in this process.

About the co-author

Morten Petersen serves as a member of the European Parliament, elected as a member of the Danish Social Liberals, Vice-Chair of the Committee on Industry, Research and Energy (ITRE), and Substitute member of the Committee on Civil Liberties, Justice and Home Affairs (LIBE).