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The Big Question | How to achieve high levels of energy efficiency rates

Energy efficiency sits at the centre of achieving the ambitions set out in the Nationally Determined Contributions announced as part of the Paris Agreement at COP21. However, only four out of 38 energy technologies and sectors are on track to meeting this agreement, according to the report ‘Tracking Clean Energy Progress’.

This article first appeared in ESI-Africa Edition 5, 2018. You can read the magazine’s articles here or subscribe here to receive a print copy.

The Big Question we asked the experts is: What technologies, regulations or techniques are needed to achieve high levels of energy efficiency rates that can effectively contribute to reducing carbon emissions worldwide?

Ted Otieno Managing director, Endustrial Support Ltd, Kenya responds

Like all programmes, energy efficiency needs to be sufficiently resourced by targeted and devoted financial, legal and human resources, if at all it is going to have an effect on realising the Paris Agreement. Support is needed in order to: create an enabling national policy environment; and lobby direct investments by public and/or private stakeholders towards energy efficiency solutions.

Energy efficiency obligation schemes (EEOs) are becoming a masterpiece of energy efficiency (EE) policies. More than 50 countries worldwide are using them, including half of the EU member states, which represent 58% of the final energy consumption of the European Union’s 28 states. According to Ricardo AEA et al. (2016) the expected savings would represent about 34% of the final savings notified by the member states to the European commission in relation to Article 7 of the Energy Efficiency Declaration (EED).

Some of the first EEOs (UK, Italy, France, and Denmark) have been capable of achieving positive results over the years, as clearly demonstrated by the ENSPOL project. Looking at the summary of EEO schemes set up in the EU states, UK, France, Italy, Poland, Flanders and Denmark the scope has targeted both households and commercial facilities/industries. Accordingly, EE not only at a commercial level but also across the board will help to achieve the Paris Agreement. Looking at the case of ENSPOL most of the member states have achieved and even surpassed their EE targets. A case in point is Austria whose EEO scheme had a target of savings 5.97 Petajoule (PJ) of energy in 2016 and achieved 7.21 PJ, 54% of those savings being in households.

In Kenya, the climate change action plan estimates that up to 1.3 metric tons of carbon dioxide equivalent (MtCO2e) can be abated through concerted investment in EE measures within the manufacturing sector alone. Global investment in EE was estimated to be $221 billion in 2015, with a projected annual increase of 6%. Over half of this investment occurs in the building sector. In the building sector the attraction has been that there are relatively low cost mass measures that can be applied across the board to achieve savings; for example LED retrofits, occupancy sensors, variable speed drives et al.

Based on our experience as a Kenyan based energy management firm, the following are the three challenges we see that affect adoption of energy efficiency and what we see as the future of the energy efficiency programmes to help realise the Paris Agreement.

  • For countries that adopted some form of EEO, and in particular in the case of Kenya, the Energy Management Regulations 2012 requires all commercial facilities consuming over 180,000kWh annually to conduct energy audits and implement at least 50% of the recommended EE measures. The concern, however, is whether regulation will continue to adopt savings as the low cost mass market technological saving opportunities (low hanging fruit) reduce?
  • The second challenge lies in financing and risk associated with EE savings. Financial support for energy efficiency policy is crucial to realising energy savings. Two options in order to make these schemes successful going forward would be to target lower income groups and also to allow obligated parties to fully recover either via tax incentives or cheaper financing. This is because obligated parties tend to implement programmes where it is the cheapest for them to recoup their investment. It is also easier for obligated parties and ESCOs to implement programmes for higher income households as compared to low-income households despite the latter being the majority. Finally, in order to address risk associated with EE savings, the G20 energy efficiency investment analysis toolkit gives a probable solution which is transferring of EE risks to insurance companies. This will ultimately lower the cost of carrying this risk and – by improving the risk profile of the project – lower the cost of capital.
  • Thirdly it is also crucial that the schemes include measurement and verification (M&V), as well as continuous development within the national context. One way that we as a company are solving this is by employing real-time smart metering post implementation so that we can verify the savings vis-a-vis the baseline as well as compare the savings using readily available simulation tools such as the EDGE App. This enables simplification of M&V procedures in a way that is clear and concise for all stakeholders.

Dorah Modise CEO, Green Building Council, South Africa – responds

Commercial energy efficiency programmes and technologies can contribute significantly to GHG emissions reduction and therefore add to efforts aimed at realising the Paris Agreement. There is a myriad of technology options in the market and as innovation in green technology markets matures, we are seeing an increasing rate of new product entries. The South African government has recently published its carbon tax policy as well as the Climate Change Bill – these regulatory instruments will go a long way in enhancing adoption of energy efficiency and renewable energy solutions. Added to this is an increasing level of corporate responsibility where the private sector is voluntarily implementing environmental sustainability solutions, simply because it is the right thing to do and also because efficiency savings have demonstrated a great level of return on investment.

Globally, we are seeing more and more corporates, local and national governments exploring better ways of doing things. Even in countries where their national or central governments opted not to be part of the Paris Agreement (the US comes to mind), their private sector and local government have taken solid targets and are committed to the realisation of the Paris Agreement (i.e. keeping global temperature rises to below 2 degrees Celsius).

I believe the world has entered a new era – others call it the 4th Industrial Revolution – where new approaches are considered eminent to safeguard whole ecosystems’ survival (including humans – noting that sometimes humans regard themselves as being external to a natural ecosystem).

Wim Jonker Klunne Lead coordinator, Energy and Environment Partnership, South Africa – responds

Energy efficiency should be an easy win in our battle to reduce emissions. However, we are not making the impact we expected to see. Programmes at commercial level can be effective to contribute to realising the Paris Agreement but only if large-scale buy-in is ensured. The mere fact that energy efficiency measures will lead to reduced carbon emissions will not make them successful. For private sectors to be interested, the measures have to make economic sense. Reductions in energy consumption will need to lead to monetary savings that justify the investment made.

Energy efficiency measures need to be complemented by regulatory, fiscal and pricing tools to convince private sectors to take them on board. Non-energy efficient appliances can be restricted from market access by requiring a minimum level of energy efficiency. Such a performance requirement will enforce the introduction of more energy efficient technologies. Fiscal policy can be used to introduce additional financial benefits for using energy efficient technologies and appliances. This could be in the form of tax exemptions for the import of energy efficiency equipment and materials as implemented by Tunisia for example, or in the form of the South African 12L Tax Incentive, which allows for tax reductions for every kWh saved. While pricing signals on energy consumption can trigger investments in energy efficient technologies, higher prices of energy will make energy efficiency technologies more viable by the mere fact of higher avoided expenditure on energy.

However, essential in all of this is public acceptance of energy efficiency. A common understanding that avoiding unnecessarily energy consumption or saving on energy usage is the way to go. If we can achieve that, the energy efficiency of an appliance will become a selling point in itself. Commercial enterprises will start competing on the energy efficiency characteristics of their products and through that a self-enforcing spiral towards more energy efficient projects will start. So yes, energy efficiency programmes at commercial level can be effective. But we need to ensure an eco-system is created in which energy efficiency becomes the norm. If we succeed in reaching that, the required carbon emission reductions will follow. ESI

This article first appeared in ESI-Africa Edition 5, 2018. You can read the magazine’s articles here or subscribe here to receive a print copy.

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