Public policy must take advantage of energy efficiency’s untapped potential
New IEA report outlines the state of the industry and a call to action
What were the three biggest takeaways from October’s IEA report on energy efficiency? First, climate change policy without energy efficiency will not work. Secondly, energy efficiency has enormous untapped potential. And lastly, public policy as a driver of efficiency improvements is now measurable, not guesswork – the IEA has established a baseline to measure future progress.
With governments headed to Morocco in November for the COP 22 climate talks, and with the Paris Agreement coming into force on Nov. 4, now is the time for the federal government to lead by example and take action on creating public policy that incorporates strong energy codes and standards that serve as the basis for provincial commitments, allowing for some flexibility to accommodate the realities of different provinces.
Energy efficiency’s unfulfilled potential
The Energy Efficiency Market Report cites that globally two-thirds of energy efficiency’s economic potential is untapped. While North America and Europe have been moving ahead on energy efficient standards and regulations, 70 per cent of the world’s energy use happens without any efficiency performance requirements. Unbelievably two-thirds of the world’s buildings being built do not have codes or standards. Imagine the potential market for energy efficiency while looking at its current returns: the IEA estimates global investment in EE was US$221 billion in 2015, up 6 per cent from 2014, making investment in efficiency two-thirds more than investment in conventional power generation. And something that CEEA is well aware of – the fastest growing sector is in residential buildings. This is a result of better building energy codes and improvements in minimum energy performance standards for heating and cooling equipment.
Low energy costs do not have to diminish the success of energy efficiency
Another great point laid out in the report was evidence that government policies are vital to curbing the risk lower energy prices can pose to energy efficiency efforts. Energy efficiency levels in IEA countries improved by roughly 14 per cent between 2000 and 2015 and global energy intensity improved by 1.8 per cent in 2015, although it needs to increase to a minimum of 2.6 per cent to meet climate goals. The biggest success story in the report is China. Its EE levels improved by 5.6 per cent in 2015 and its primary energy demand increased by only 0.9 per cent – its lowest growth rate since 1997. All this while the Chinese economy grew by 6.9 per cent.
Government policy that works
The IEA can measure the success of public policy in relation to efficiency improvements through its Efficiency Policy Progress Index (EPPI), which is ultimately useful for examining how the adoption of best-in-class standards can improve energy efficiency.
The report examines how mandatory standards and targets have resulted in significant energy saving over the past 30 years. Vehicle fuel economy standards and appliance standards are the real standouts –mandatory policies on appliances, equipment and vehicles have improved by an average of 23 per cent since 2005.
The need for a national action plan for energy efficient buildings
To keep this momentum going on effective public policy, CEEA has been making recommendations to the federal government over the past year to strengthen its approach on energy efficiency. Our national action plan for energy efficient buildings, which CEEA developed in collaboration with Pembina and TAF, asks for an emphasis on the Federal Buildings Initiative (FBI) and more public reporting by departments. Specifically our group recommends deep energy retrofits to 30 per cent of the building stock by 2030. And calls for new construction of public and private buildings to be nearly zero energy. But first and foremost the public sector should be tackled since private buildings are covered by building codes. Government action can have spin-off affects, look no further than what happened in the U.S. under President Bush. Very stringent goals were set for government buildings which in turn inspired many in the private sector. The federal government can lead with codes standards and must have targets.
Other recommendations include national benchmarking and home energy labelling allowing for building energy performance data, plus continued federal support for Energy Star Portfolio Manager, the EnerGuide Rating System, Energy Star for Homes and the R-2000 program.
A national EE building strategy must also incorporate working with the provinces to facilitate the adoption of building codes and a commitment to long-term improvement of energy and water use performance standards for equipment and appliances.
Let’s also keep in mind the potential boost to the economy. The report shows total spending on energy efficient products and services in building world-wide was US$388 billion, which is just 8 per cent of total global construction spending.
CEEA believes phase 2 infrastructure money should be tied to energy savings and emissions reduction. With millions of dollars being used to build buildings and roads across Canada – we want to ensure stringent energy codes are met and that the best technologies are used to guarantee low carbon projects.
Energy efficient tax policy
Effective public policy must also take into consideration incentives if we are going to change how Canadians think about adopting an energy-efficient mindset. We spend $70 billion on renovations in Canada but we would like to see Canadians change their practices and diversify their own spending on energy efficient changes not just kitchen counters.
That is the reasoning behind CEEAs tax proposal to the federal government on tax deductibility for building retrofits. CEEA has asked the government to clarify existing rules which would provide certainty in the administration of the repairs and maintenance deductibility rules in the Income Tax Act. We believe the move would expand energy conservation and productivity in Canada’s building stock.
Policy can shape the energy efficiency services market
The IEA report highlights Canada’s plans for clean growth and climate change – otherwise known as the pan-Canadian framework. Specifically its intention to invest US$2.3 billion by 2021 to fight climate change and air pollution, including US$102 million for NRCan’s energy efficiency policies and programs.
The importance of public policy is further emphasized in the report by how policies can shape the energy efficiency services market. There’s a table (page 116, Table 6.1) outlining the policies and programs, market concentration and types of contracts for China, France, Germany, India, Italy and the U.S. which is worth taking a look at. For example in Germany the market concentration is for all sectors with a focus on the public sector and industryprocesses. Its targeted policies include federal/state level standardization of EPCs, consumer education by federal/state agencies, transition to renewable energy and the phase-out of nuclear energy. The dominant contract type? ESC with a focus is on the delivery of a contracted supply of services.
Energy efficiency is the first fuel
There’s a lot to digest in the IEA report. No doubt energy transition is a harsh reality that will take time, but the opportunities and need for energy efficiency are great. As we prepare for our meetings and networking at CEEA’s Day on the Hill (Nov. 21-23), and with Morocco just before that, we need to keep in mind that the most effective, and least expensive, place to start is energy efficiency.
Posted October 26, 2016
Elizabeth McDonald is president of CEEA