Accelerating energy efficiency: What governments can do now to deliver energy savings

Energy efficiency rewards action. Countries that really pushed on energy efficiency over the last few decades now see lower consumer costs, lower fuel imports, and lower emissions. But today, the imperative to act quickly on energy efficiency has never been stronger.

Russia's invasion of Ukraine has put the spotlight on energy demand for both governments and the public, not least in Europe. In the IEA’s 10-Point Plan to Reduce the European Union’s Reliance on Russian Natural Gas, demand reduction through efficiency and behaviour change plays a key role. The European Commission has proposed a set of measures to make Europe independent from Russian fossil fuels well before 2030, in line with its longer-term decarbonisation strategies.

Existing efficiency policy frameworks can be the launch pad for fast action, especially because plenty of efficiency potential is ready to be captured. In some EU countries, the average dwelling consumes almost twice as much energy to heat per square metre than in other countries, even with similar climates. The annual rate of improvement of home efficiency has also varied over the past five years – some countries have not improved at all, while others have lowered energy consumption per square metre by up to 4% per year.

It is now very clear that energy efficiency can reduce fuel import dependence, lessen exposure to energy price volatility, and contribute to climate change mitigation, while making systems and societies more resilient. While Europe is on the front line, these issues are inherently global, as we see from the widespread interest in our 10-Point Plan. So what are the key actions for lowering energy demand quickly?

The key measures identified in the 10-Point Plan relate to upgrading the efficiency of homes and other buildings. This involves upgrading insulation, accelerating the installation of heat pumps, installing digital thermostats and helping small businesses become more efficient. It also includes encouraging people to take action by reducing the temperature of their heating thermostat. The average temperature for buildings’ heating across the EU at present is above 22°C. Adjusting the thermostat for buildings heating by one degree could save as much as 10 bcm of annual gas demand, equivalent to the annual gas demand of Austria. These are actions of relevance to countries and citizens around the world.

While the case for accelerating sustainable building renovation is not up for a debate, putting it into practice has been more challenging.

For consumers, renovation can seem complex, time-consuming and expensive. Homeowners rarely have time to become experts in all aspects of renovation; they are looking for a trusted party to provide advice and map out a step-by-step process, ideally fast and online. Even when they know what they want, skilled labour and materials can often be hard to find.

Cities and regions can play the role of a trusted partner in supporting their citizens throughout the renovation journey, while paving the way by renovating public buildings. Examples include Hauts-de-France Pass Rénovation in France, Sharing Cities in Milan, Opengela in the Basque Country, SuperHomes in Ireland, FIPATERM in Mexico, or a public-private initiative Barcelona Sustainable Energy Mechanism in Spain.

National governments can support effective renovation programmes as part of their long-term climate plans. For instance, under its recovery and resilience plan, Spain intends to invest EUR 3.4 billion in half a million energy renovation actions through tax incentives and the creation of ``one-stop’’ renovation offices. Many countries have made similar announcements recently.

We looked at efforts to scale up sustainable building renovation in the context of economic recovery from Covid-19, and found a few lessons to be learned and secrets to success:

• Leverage existing renovation offices or “one-stop-shops”. Home renovation programmes combining advice in selecting energy-saving measures, help with applications for permits and incentives, referrals to skilled, reliable professionals, and affordable financing result in a higher uptake of projects.
• Avoid poor materials and equipment. Renovations are rare opportunities, and if done improperly will simply use scarce resources to lock in poor performance. Oversight and quality control are critical.
• Free audits for homes and buildings to identify efficiency measures and digital solutions that can be implemented in the coming 6 months.
• Focusing on a set of defined interventions. Selecting key measures such as heat pumps, insulation or heating controls is key to scale

These actions can go a long way to stimulate the market and result in an uptick of sustainable renovation projects.

Behaviour change can save energy quickly when people and businesses understand what to do and why.

One aspect of the IEA’s 10-Point Plan that received a lot of attention was turning down thermostats by one degree. For most people it really is a very small sacrifice in the context of the current situation, when so many are asking what they can do to help. This message has resonated widely.

Finding ways to encourage energy users to change their behaviour is not always easy, but it can be done. Our analysis points to the importance of good design, working with behavioural scientists and specialists to deliver well targeted messages that will lead to sustained impacts.

Simple actions can often be effective. In India, for example, regulations for air conditioners require manufacturers to set the default temperature of a new device to 24°C. This means when someone buys an air conditioner, it will cool to 24°C by default, rather than say 22 or 20°C. Consumers are free to adjust it, but many don’t and thereby save energy without even realising it.

Now is the perfect moment to consider behaviour, and there are some successful precedents when communities and business have acted together in the face of emergency.

One important case is Japan in 2011 when an earthquake and tsunami led to the removal of nuclear power plants form the electricity system, creating a significant shortfall in electricity supply. All of society acted in response to this crisis. Short term demand reduction was central to the response - electricity consumption dropped by 12% in industry, 10% in households and 4% in services in 2014 compared to 2010.

This was achieved through government actions such as rationing of energy for large industry, technical energy‐saving assistance, and wide ranging information campaigns. Large industry and SMEs reacted in solidarity by shifting work hours. Five years later, demand side actions had replaced almost half of the supply drop from the nuclear plant closures. The efficiency gains have been largely sustained and the benefits continue to accrue today.

In 2007 and 2008, Chile experienced an electricity shortage due to drought. Chile was able to avoid electricity interruptions by implementing a package of measures including public information campaigns and a programme to distribute efficient lights. The government put in place long‐term financing for energy‐efficiency investments, implemented rationing, extended daylight‐saving time and offered financial incentives for conservation – actions that built on the information campaigns to stimulate sustained energy savings.

These examples show what can happen when an emergency drives a large scale, society-wide response. After the first oil crisis in 1973, Denmark reduced its vulnerability by massively decreasing reliance on imported oil, diversifying the energy mix and developing an ambitious and broad portfolio of energy efficiency policies. Prior to the crisis, nearly all buildings were heated with oil; and most electricity was generated using oil. Through subsidies and other measures, the percentage of electricity generated from oil declined from 64% to 37%, and was further reduced to 5% by 1983. Denmark’s active energy policy is now focused on energy efficiency in buildings, district heating systems, and industry, coupled with an ambitious use of renewables. Denmark today is one of the most energy-efficient countries - energy use to heat one square metre in residential buildings has been reduced by almost 50% since 1975. It has also become a global leader in many clean energy technologies and services.

These examples demonstrate that with a pressing need and with guidance from the government, citizens and businesses can come together to achieve measurable changes in energy demand. The current crisis presents a unique moment – high prices are focusing minds on the importance of efficiency, and strong feelings of solidarity with the Ukrainian people are stimulating behaviour changes, such as volunteering to use less energy in various ways that would not normally be possible.

Alongside communications campaigns and incentives, digitalisation enables the use of data and analytical tools to identify where energy efficiency interventions can produce the biggest gains. Smart meter data can allow policymakers to better understand how people use energy, and can help consumers understand their energy usage, and how to reduce their costs.

Access to real-time data can also help reduce peak time electricity demand, which reduces overall costs and emissions from the electricity system.

Digitalisation can also provide real-time information on the impact of energy use, which can influence user behaviour. There are many tools to help people understand the efficiency of their appliances or heating systems, and to help them easily find more efficient alternatives.

Automation technologies also support efficiency, for instance using sensors to turn off lighting when no one is in the room or setting energy saving modes when no one is at home.

It is important to fit short term actions into longer-term goals such as net zero targets, enhanced energy security and resilience, and lower consumer costs. This aspect was examined in detail by the IEA’s Global Commission for Urgent Action on Energy Efficiency, whose recommendations can help inform policy action now.

The Commission took an action-oriented approach to deliver energy efficiency gains quickly. It focused on questions of finance, innovation, and public involvement, among others.

A key point from this Commission was the importance of a whole-of-government response, essential to align the intergovernmental response and eliminate barriers. Efficiency success relies on the actions not just of ministries responsible for energy, but also housing, industry, transport, finance and more, not to mention the importance of city level and subnational government actions.

It is not easy to deliver such unified approaches, although we have already seen signs of much more coherent policy approaches from governments in their climate and net zero goals. The current crisis, with its widely recognised energy challenges, has reinforced the need to work together and implement co-ordinated responses.

Governments have shown tremendous potential to mobilise, co-ordinate and react swiftly when faced with emergencies, taking actions that would not be easy to deliver at other times.

For example, in response to the Covid pandemic, many cities around the world have quickly scaled up the creation of cycling paths and lanes to encourage more cycling.

An obvious challenge is increasing funding, even though we know that spending on efficiency reduces pressures on consumers and cuts dependence on energy imports. Today’s challenges make the case for funding stronger than ever. Italy provides an example with its Super Ecobonus, a tax credit of 110% provided for energy efficient renovation of residential buildings. The measure, launched in 2020, has already resulted in more than EUR 20 billion in eligible investment and generated thousands of jobs. There are many other ways of injecting additional funding into efficiency, such as grant programmes currently being scaled up in countries such as Ireland, Canada and the Netherlands.

Now is also a time to consider how to cut through red tape to deliver faster efficiency action. For example, the availability of labour and contractors to carry out home upgrades varies widely across Europe. In some countries, waiting times for upgrades are just a few weeks, in other cases years. And yet, companies face obstacles when working in different countries even where there is plenty of demand, due to a range of local certification rules and hurdles to labour mobility. Quality, safety and other considerations are essential, but surely now is a good moment to consider how rules could be harmonised to simplify movement. There is also a strong case for strengthening training, for example for energy auditors and advisors, and mobilising more people to join the energy efficiency work force.

Short term actions should not come at the expense of longer term goals. One crucial area is customer experience and the general perception of energy efficiency interventions. Bad experiences in home upgrades, disappointing results, poor communications or low quality technologies could turn people off energy efficiency for years to come. It is essential that government do not compromise as they scale up. Actions we take now to accelerate short term progress should build to even larger and more successful future actions. Programmes that are well run, easy to access and genuinely improve people’s lives, will build a lasting positive reputation for energy efficiency and clean energy more broadly. Whether it is bringing affordable lighting to rural households in India, refrigeration upgrade programmes in Colombia, or lowering householders energy bills in Canada, there are many examples of successful and popular efficiency actions that deliver short term and longer term gains.

We face a pivotal moment. Energy efficiency is central to reaching net zero targets and is increasingly crucial for energy security and affordability. And never has global awareness of this fact been higher, driven by market volatility and deep concern about energy security, as well as where our energy comes from. Citizens are ready to make changes, whether motivated by higher prices or solidarity with Ukraine, or both, and governments see clearer than ever the case for action. 

Energy efficiency can deliver immediate results by lowering demand, while also putting us on the journey to longer-term deeper gains. The IEA is drawing lessons from global experience and working directly with governments around the world to make this happen.

The upcoming IEA 7th Annual Global Conference on Energy Efficiency will bring together ministers and many key decision-makers from government, industry and civil society to focus on how international ambition on energy efficiency can be translated into faster and stronger real-world progress. A special session will allow ministers to discuss what measures can be replicated and scaled up and what policy innovations could be leveraged to ramp up energy efficiency, not in theory but in practice.