The world needs to double its progress on energy efficiency between now and 2030 to get on track to net-zero emissions by 2050 and stand a good chance of limiting global warming to 1.5°C, according to a new report from the International Energy Agency (IEA). Ramping up annual energy efficiency progress from 2.2% today to more than 4% by 2030 would lower global energy demand by 190 exajoules and CO₂ emissions from fuel combustion by almost 11 gigatonnes by 2030, almost one-third of current global energy consumption and emissions, found the report.
At the IEA's 8th Global Conference on Energy Efficiency in Versailles, France, this month, 45 governments endorsed this goal. On the margins of the conference, Energy Monitor caught up with leading figures in the IEA’s energy efficiency division to find out more.
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According to your new report, global energy efficiency progress reached 2.2% in 2022. Can you explain what that figure means and how you calculate it?
Brian Motherway, head of the IEA’s energy efficiency division: We measure it on how much energy it takes to generate a unit of GDP; so how energy efficient the whole economy is in terms of the value we get from the energy. In 2022, we extracted 2.2% more value from every unit of energy we used globally, and that means our buildings and cars and so on are a bit more efficient. That was after a couple of slow years in 2020 and 2021. So it's encouraging to see a step up, but it needs to double again. If you look at our net-zero pathway, energy efficiency has to improve by 4% per year by the end of this decade.
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We think it can be done and that's why we brought people together at our conference (in Versailles, France): to get that excitement going but also to get people learning from each other about exactly what policies you need to put in place, and what technologies are available, so that the whole world can accelerate its efficiency progress.
Global energy demand grew by 1% in 2022. When do you forecast it will start falling?
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By GlobalDataIn the short term, this is tale of different parts of the world. Already, in parts of Europe, there are very strong targets for reducing energy demand by the end of this decade, but if you take really growing parts of the world, like sub-Saharan Africa or South East Asia, there's no expectation that their demand is going to go down. In fact, it should go up because not everybody has access to energy, and the energy use per person is much, much smaller than in this part of the world.
Energy efficiency is not about using less energy necessarily; it’s about using it more efficiently. So an energy efficiency focus in Africa will mean that energy demand will go up but not by as much [as in a business-as-usual scenario], so that energy becomes more affordable and more accessible to more people. We want people to get the benefits of energy but in the most efficient way.
The report notes that investment in energy efficiency saw a fall in year-on-year growth. Can you explain why?
It stiIl grew but just not by as much. We saw growth, for instance, in transport, driven by the record sales of electric vehicles, but yes, buildings are a bit more worrying, because in 2022 and going into 2023, we see that the cost of capital is higher and the cost of construction materials is higher. Building energy efficiency is either building more efficient [new] buildings or retrofitting old buildings, and so cost of capital, insulation materials and construction materials all make a difference. We've not seen a fall, but a stalling in the building sector. Policy really matters here, whether it's incentives for people to upgrade their homes, or business models that allow industry to invest; these are more important than ever when there are financial pressures.
More than $900bn has been spent around the world shielding consumers from rising energy bills. Many believe that has fed inflation, bringing up interest rates as a result, increasing the cost of capital and thereby stymying investment in energy efficiency measures. Do you think some of that government support would be better spent on energy efficiency measures such as improving insulation or subsidising heat pumps?
In the midst of the crisis, when prices were rising so high that businesses and homeowners couldn't afford their energy needs, it was hard to argue against governments intervening to provide support. But it's certainly true that if we can rebalance that kind of payment away from just one-off payments to cover this year, or this month’s energy bill, towards investments in energy efficiency, then you break the vicious cycle and you will start seeing our housing sector, our economy and our infrastructure become more efficient, structurally, and therefore more resilient. In the short term, it's entirely understandable why governments were spending money looking after people's well-being, but as time goes on, the more we can rebalance that towards real investment in energy efficiency, the more we get out of the need for those kinds of one-off payments.
Keep up with Energy Monitor: Subscribe to our weekly newsletterAfter February 2022, energy prices themselves were probably the biggest single driver of inflation, but remember, getting your energy bill down can either be the price coming down or the amount you're using coming down – and that's where it gets more interesting. What matters to me at the end of the month is what my bill is, and if my home is super efficient, then I'm kind of insulated – pardon the pun – from changing prices, because my bills are going to be low anyway.
Countries representing more than 70% of the world’s energy consumption have introduced new or strengthened energy efficiency policies since the start of the global energy crisis. How much has the Ukraine war spurred development of the energy efficiency agenda? What have been the most effective examples of policies that you’ve seen brought in across countries?
It’s true [the Ukraine war has spurred development of energy efficiency]. Obviously for negative reasons, and we have to remember the huge cost of Russia's invasion of Ukraine, but it is undoubtedly true that the energy crisis has spurred an interest in the demand side and in energy efficiency. A lot of governments have done things in the past year driven by that, whether it's new financial support for efficiency or 25 countries introducing behaviour and awareness campaigns. Many countries, for instance, strengthened their building regulations or their appliance regulations. So yes, we think we will look back in a few years and say, 'that was the turning point for energy efficiency; that's where its resurgence really started'. And that's what needs to happen if we're to deliver our goals by the end of this decade.
In terms of policy, in every part of the world, there's something really interesting being done that others can learn from. Every brilliant policy is out there somewhere, but nobody's doing them all. And with regard to the past year, we're watching them as they get installed, and develop, to see what they deliver. Because, of course, an announcement is not necessarily action. That's what we're calling for: make sure you follow up on those announcements, make sure you deliver those policies. If everything that's already in place, and everything that was announced in the last year is fully delivered, we'll be three-quarters of the way towards the 2030 target – but that's an "if" governments need to deliver on.
Europe has been remarkable in its efforts to wean itself off Russian gas to avoid blackouts over last winter, particularly by storing up its gas inventories. Is it on track to do the same for the coming winter? If not, what more needs to be done?
Kevin Lane, senior programme manager, energy efficiency, IEA: Europe managed to fill its storage tanks quickly last summer for a number of reasons, primarily by reducing consumption substantially, though also switching to LNG supplies, fuel switching of end-uses and processes, a relatively warmer winter, some reduction in economic output, and some good policy to help and advise energy consumers. The IEA provided support to the European Commission over this period through, for instance, its 10-point plan to reduce EU reliance on Russian gas, and a paper for preparing for next winter, which listed the actions that would be needed.
IEA energy analyst Gergely Molnar: Storage injections have slowed down compared to previous years: over 16 billion cubic metres (bcm) of natural gas have been injected into storage since the start of April, which is around 20% below the five-year average of storage injections. That said, inventories are at a very comfortable level, considering that the 2022/23 heating season left EU storages 55% full. At the moment, EU storage sites are filled up to 72% of their working capacity and stand at 18bcm above their five-year average. Altogether, the EU is well on track to reach its 90% fill target [by 1 November]. Assuming that storage injections continue at the average rate observed since mid-April, EU storage sites would reach 90% fill levels by early August and close to 100% by mid-September. If Russian piped gas supplies ceased completely, the EU would still be able to fill up its storage sites to over 90% of capacity.
Read more from this author: Oliver GordonHowever, full storage sites are no guarantee against winter volatility and the risk of renewed market tensions, as the global and European natural gas balance is subject to an unusually wide range of risks ahead of the 2023/24 winter. Hence, it will be crucial to keep gas demand in check, including via enhanced energy efficiency standards, gas demand-saving measures in buildings, a more rapid deployment of renewables and quicker installation of heat pumps.
What percentage of emissions reductions in the transition to net zero by 2050 can realistically come from energy efficiency measures? Do you think it’s an under-appreciated climate solution?
Lane: Past IEA reports have shown that efficiency-related measures can deliver a third or more of the carbon reductions needed in the net zero by 2050 scenario, when compared to the current rates of energy efficiency improvement (the STEPS scenario). Historically, efficiency has often been overlooked by commentators and policymakers, although maybe this is changing; for example, at our 8th Annual Global Conference on Energy Efficiency, 45 countries signed up to support stronger efficiency policy to double efficiency this decade in line with the IEA net zero scenario.
For developing countries suffering from the global debt crisis, which energy efficiency technologies can bring the greatest returns for the least investment in the short term?
Lane: Energy efficiency measures are usually the most cost-effective measure to deliver energy services, cheaper and quicker than developing new energy supplies. Some technologies are more cost-effective than others though; for example, lighting technology for new buildings will tend to be more cost-effective than deep retrofits of existing houses.
A strategic combination of regulation, information and incentives can be the most effective way to improve efficiency. For example, some end uses have benefitted significantly, especially when underpinned by minimum energy performance standards (MEPS); increasing efficiency, without necessarily raising purchase prices.
This is increasingly recognised by governments and is increasingly being used. For example, last month, South Africa introduced regulations requiring all new general service lamps sold in the country to be extremely efficient (90 lumens per watt or over), effectively meaning they all have to be energy efficient LED technology. This is even more efficient than compact fluorescent lamps, which also contain [hazardous] mercury.
