Published on October 8th, 2014 | by Joshua S Hill4
IEA Marks Energy Efficiency As World’s “First Fuel,” Worth $310 Billion
October 8th, 2014 by Joshua S Hill
A new report released by the International Energy Agency (IEA) has estimated the global energy efficiency market to be worth at least $310 billion annually, a figure that is growing, and leads the IEA to confirm energy efficiency as the world’s “first fuel.”
“Energy efficiency is the invisible powerhouse in IEA countries and beyond, working behind the scenes to improve our energy security, lower our energy bills and move us closer to reaching our climate goals,” IEA Executive Director Maria van der Hoeven said at the Verona Efficiency Summit.
The report, now in its second year, also found that energy efficiency finance has become an established market all on its own, thanks to “innovative new products and standards” that have helped push the market past risks, pushing the market as a whole to be considered stable and confident.
“Energy efficiency is moving from a niche interest to an established market segment with increasing interest from institutional lenders and investors,” said the IEA Executive Director. “As energy efficiency is essential to meeting our climate goals while supporting economic growth, the increasing use of finance is a welcome development. To fully expand this market, initiatives to continue to reduce barriers will need to strengthen.”
According to the report, investment in energy efficiency was larger than investment in renewable electricity, coal, oil, or gas electricity generation, and approximately half the size of upstream oil and gas investment.
Energy efficiency is helping countries around the world improve their energy productivity — the amount of energy needed to produce a unit of GDP. The report found that of the 18 IEA countries evaluated in the report, the total final energy consumption was down by 5% between 2001 and 2011 primarily thanks to energy efficiency investments.
The big impressive figure from the report is the cumulative avoided energy consumption over the same time period — 1,732 million tonnes of oil equivalent, which is larger than the energy demand of the United States and Germany combined in 2012.
The report’s Exeuctive Summary (PDF) provides four highlights from the Energy Efficiency Market Report 2014 which are worth ingesting:
- In 2011, energy savings from continued improvement in the energy efficiency of 11 IEA member countries equaled 1 337 million tonnes of oil-equivalent (Mtoe). This level exceeded the total final consumption (TFC) from any single fuel source in these countries, and was larger than the total 2011 TFC for the European Union from all energy sources combined. Energy efficiency savings in 11 IEA member countries were effectively displacing a continent’s energy demand.
- Energy efficiency finance is expanding and innovating, with new funding approaches and business models; there is a notable expansion in funding for development aid projects, as well as in the use of funding vehicles such as energy service companies (ESCOs) and on-bill financing mechanisms.
- Vehicle fuel economy standards now cover 70% of the global passenger light-duty vehicle (LDV) market and will drive the market for more energy-efficient vehicles in the next five years. New standards are estimated to lead to energy efficiency investments of USD 80 billion annually out to 2020 and will save between USD 40 billion and USD 190 billion in fuel costs.
- The market potential for energy efficiency is growing significantly in OECD non-member economies. This is pronounced in the transport sector, where passenger travel is estimated to increase by 90% by 2020 from 2011 levels.
Energy Efficient Transport
Increasing the energy efficiency of passenger travel in emerging economies is a vital part of future energy efficiency goals. According to the report, an estimated $80 billion is spent per year on passenger travel energy efficiency investment — a segment which is expected to offer the largest market opportunity for energy efficiency development.
However, OECD member countries are seeing decreases in transport demand, despite still having the highest rate of vehicle use and distance traveled per vehicle. These figures are sure to shift, however, over the next few years, as emerging economies see a natural expansion of their transport fleets.
A recent study published by independent consultancy Cambridge Econometrics found that the UK’s economy could receive a boost of up to £62 billion a year and 40,000 new jobs created as a result of a 40% cut in energy use by 2030 by increasing energy efficiency measures.
“The benefits of energy efficiency are impressive and we need to be ambitious,” stated Brook Riley, a spokesman for Friends of the Earth. “GDP gains are three times higher with a 40% reduction target than with 30%. It is significant that the countries which were hardest hit by the financial crisis – Greece, Portugal, Ireland – are among the strongest advocates of going as far as we can.”
With studies such as those mentioned above, as well as the growing and stable energy efficiency market, the next decade is set to yield serious growth in the market, but real growth will only happen if governments such as the UK adhere to the suggestions of their experts and push forward on tough energy efficiency measures.