Contribution of alternatives & EEOs to the total energy saving target

Alternative policy measures are a popular choice for many EU Member States to achieve their target. 24 MS have opted for those measures, using over 350 different types of measures in total, in favor of the logic of building on what exists rather than introducing a major new type of policy. Despite the significant number of alternative measures, the contribution of the latter to the total saving target is approximately 60% with EEOs contribute to the remaining 40%. 

The figure below shows the relative share of EEOs in the overall targeted savings for 2020 along with the contribution of alternative policy measures. On the left-hand side are countries opting wholly for EEOs while on the right-hand side are countries opting for alternative policy measures and placed in the middle are countries opting for a combination of the two. Note that a number of countries, which are proposing to deliver significant savings from EEOs, are introducing this policy for the first time. Those counties, which have an existing, well-established EEO are Denmark, France, Italy and the UK. Poland  has had also an existing EEO scheme in operation, although this is currently undergoing extensive revision.

Source: ENSPOL D3.1 Report on Alternative schemes to Energy Efficiency Obligations under Article 7 implementation

Existing Energy Efficiency Obligation schemes in the EU

The European Commission DG Energy study Evaluating the national policy measures and methodologies to implement Article 7 of the Energy Efficiency Directive (Ricardo AEA, CE Delft and REKK; February 2015) indicates clearly that “Energy Efficiency Obligation Schemes (EEOs) are the most important type of policy measure adopted by MS in terms of energy savings – 40% of the expected cumulative energy savings across all MS are expected to be generated from the implementation of EEOS, far more than any other type of policy measure”. 

The following table summarizes important characteristics of the current schemes. In the country level pages  of this platform, the schemes are described in detail for each country individually.

 Source: ENSPOL report D2.1.1 Report on existing and planned EEOs in the EU - Part I Evaluation of existing schemes

Planned / new EEOs in the EU 

The ENSPOL project has undertaken an analysis of planned and new EEO schemes based on MS notifications to the European Commission and in consultation with key stakeholders in each of the countries opting to introduce new schemes. The table below summarizes the key characteristics of these schemes. From the table it is clear that the current descriptions (as per the MS notifications) of the actual design of these schemes is limited. The ENSPOL stakeholder consultation within MS indicated that the actual implementation of EEOs is still likely to change compared to the original concept. We therefore want to emphasize that this information describes the situation in the MS as it was known by December 2014. The ENSPOL project plans to update this information in early 2016.

Improving energy efficiency is the main driver for the new EEO schemes, in contrast to existing schemes like the UK where CO2 savings and limiting fuel poverty are also important. The main obligated parties are energy suppliers, followed by energy distributors who will realize efficiency improvement in different end-use sectors. Most MS allow obligated parties to generate savings in all end-use sectors, but the residential sector is often indicated as a preferred sector. Concerning the flexibility mechanism, trading of certificates/credits is often allowed, at least as an option, although the trading conditions are not yet described in detail.

(Scroll vertical the table below to see table's full content)

Source: ENSPOL report D2.1.1 Report on existing and planned EEOs in the EU - Part II Description of planned schemes 

Alternative policy measures in the EU

The Energy Efficiency Directive (EED) permits the delivery of part or the entire target by alternative measures that have the effect of reducing end-use consumption (Article 7.9). These are categorized in 

1. Energy or carbon taxes
2. Financing instruments or fiscal incentives
3. Regulations or voluntary agreements
4. Standards and norms
5. Labeling schemes, compliant with the EU labeling framework Directive 2010/30/EU and conform to the principle in the EU energy label that sets requirements for energy-related products with the highest energy savings potential and last but not least
6. Training and education reducing end-use energy consumption.

The ENSPOL project has undertaken an analysis of the different alternative policy measures notified to the European Commission by Member States . The figure below indicates the number of notified types of policy measures for each country.

Unsurprisingly, traditional financial schemes dominate with most measures proposed by MS being of a financial nature, in the form of grant schemes and low-interest loans, outnumbering other options in each country. Characteristic cases are countries such as Croatia proposing mostly financial schemes except for two measures, while Cyprus, Greece and Belgium have the largest number of financial schemes proposed.

Financial/Fiscal schemes have thus a leading position among the sum of measures proposed making up more than 40% of the total number of measures. All MS have adopted at least one financial scheme.

Classification of the different types of policy measures across MS countries

*Lack of information about certain measures

** Lack of information about the majority of the measures for those countries

Source: ENSPOL report D3.1 Report on Alternative schemes to Energy Efficiency Obligations under Article 7 implementation

Under the microscope: alternative policy measures in eight selected countries

The ENSPOL project has undertaken a more detailed analysis of alternative policy measures as notified in the following eight countries: Austria, France, Germany, Greece, Italy, The Netherlands, Sweden and the UK. 

A more detailed classification of measures promoting access to finance to meet the 2020 energy saving targets in the eight Member States evaluated is presented in the figure below. The introduction of those measures is comparatively easier than regulatory measures, in terms of policy (re-)design, although most of them require ongoing funding to operate. The numbers in the figure indicate the number of notified policy measures promoting access to finance for each country. 

Classification of financial and regulations measures promoting access to finance

Measures promoting access to finance are usually proposed as grants in the form of equity or to subsidize loans, and fiscal measures (including Tax-reliefs). Less utilized measures are direct investments in the form of public procurements, 3rd party financing and direct investments for Research, Development and Demonstration. For the latter case only Austria directly supports research and development projects through the Climate and Energy Fund that encourages research projects in the fields of local and regional public passenger transport, the environmentally friendly carriage of goods and mobility management.

Regulatory measures also seem like a favorable option for MS countries, with UK, Sweden, the Netherlands, Greece, Austria and Germany including them in the mix of measures to comply with Article 7. These are usually adopted in the form of tightening of building regulations for new and existing buildings (e.g. Greece, the Netherlands and especially UK with four measures proposed), minimum standards of energy performance equipment (e.g. Greece, the Netherlands, UK) and requirements to undertake energy audits (e.g. UK and Sweden).

Apart from more traditional measures promoting access to finance, Article 20(6) also prescribes that:

‘MS may provide that obligated parties can fulfil their obligations set out in Article 7(1) by contributing annually to the Energy Efficiency National Fund an amount equal to the investments required to achieve those obligations.’

Quite a few MS have adopted National Energy Efficiency Funds, interpreting the term in various ways, hence increasing the risk of overlaps and double-counting of savings with other co-existing financial schemes. A DG Energy study evaluating the national policy measures and methodologies to implement Article 7 of the Energy Efficiency Directive (Ricardo AEA, 2015) stated that Spain is the only country that has adopted a National Fund to supplement the operation of the EEO as described with Article 20(6).  This may indicate a greater risk of policy overlaps for other type of funds implemented in combination with other measures. The Spanish Energy Efficiency Fund will be financed directly through the financial equivalent paid by obligated parties to comply with their energy efficiency obligations. In fact limiting the EEO compliance options to the payment of a financial equivalent reassures the viability of the Fund. France has set-up a fund for energy renovations to guarantee green loans for banks and ensure low-cost financing for households. The Guarantee fund is set up in parallel with the 3rd period of the EEO (2015-2017). EEO obligated parties will be able to fulfil part of their obligation by contributing to this fund.

Support for the human agency including information, education, advice, energy management and best practice dissemination programmes are present in most country plans opting for alternatives. Sweden is a typical case that introduces four measures of this type. These are all training and educational measures aiming to increase skills particularly in the public sector. More specifically they aim to assist Municipalities in understanding how to measure energy efficiency in the first place, and also to recruit suitably qualified staff. 

Finally, existing mechanisms affecting energy prices (i.e. energy taxes/CO2 taxes) have also been proposed by many MS countries. The figure below shows that savings from energy taxes dominate the share of total estimated savings.

Classification of alternative measures based on estimated savings

The most extreme example is the case of Sweden, where energy taxation is expected to deliver 100% of savings. The following table lists the eight countries under evaluation describing their options for energy or CO2 taxes according to their NEEAPS and updated notification reports, by giving a% share only for those countries that enough details were available.

The ENSPOL project has observed that for countries like Austria, France, Germany, the Netherlands and UK a large number of financial measures are proposed to bring about a relatively small amount of estimated savings. In Sweden although a number of measures are notified only savings resulting from Energy CO2 taxes are accounted for to meet with the 2020 target savings. The Swedish example might be quite straightforward however there is no guarantee that the fiscal regime will bring about its estimated energy savings (Xylia and Sylveira, 2014).

As such assigned savings to alternative measures serve more as an indicative target for most policy measures and are subject to change, since energy savings resulting from measures are often highly dependent on the scale of each measure and the replication potential of these measures. In addition most reported national energy savings data is not uniformly corrected for additionality while some MS might overstate their savings thus creating an altered image on the share of different types of measures in total savings. In fact this figure shows that the rationale of MS behind their notified reports on alternative policy measures, was to show that proposed measures are sufficient to meet the Article 7 target; yet MS will make their own decisions on what contribution each measure makes to the total target.

Alternative measures can be characterized by a significant variety regarding the targeted end use sectors. An analysis of the sectoral split, based on their targeted energy savings, has been conducted for each country. 

The figure below shows the sectoral split of proposed measures, based on their sectoral scope as described for each measure (e.g. residential, transport, public, industrial, residential, commercial & tertiary, agriculture). The majority of those have a cross-sectoral scope implemented in different sectors simultaneously. Typical crosscutting measures are proposed in the form of financial schemes applying to domestic and tertiary sectors, energy taxes, and fiscal measures as well as building regulations. More than 50% of the target savings of each country is achieved through crosscutting measures (e.g. France, Austria, Italy and Germany). 

Sectors’ contribution (%) to total energy savings’ target

Sweden, Greece and The Netherlands propose measures with a more specific sectoral scope in order to achieve their target. Sweden in fact is the only country to calculate energy savings resulting from the transport sector, which contributes by 70% over the sum of target savings. The Netherlands emphasized notably more than other countries, on the industrial sector, while Greece and UK expect most savings from the residential sector (by 48% and 62% respectively).

Aiming to explore whether there is a more natural fit of certain sorts of technology / intervention supported by different sorts of measures, the ENSPOL project analyzed eligible technologies and measures as described by each alternative option. The table below attempts to classify alternative measures regarding their technology focus and the sector on which they are implemented indicating which types of measures are usually opted for by MS countries to support certain technology interventions. Please note that the table does not include all measures proposed by countries. Instead only measures adequately described in the notification reports are included in the table. Therefore the table is not meant to be exhaustive but to indicate which technologies interventions are crowding out other options. 

Classification of alternative policy measures based on their eligible technologies and interventions

In the building sector, energy renovation of the thermal envelope of existing buildings (e.g. insulation, facades and windows) seems a common option promoted in every sector (in the residential sector for Austria, France, Germany, Greece, Italy, UK and the Netherlands, and in the Public, Commercial and Tertiary sector for the UK).

Higher cost measures (e.g. whole house renovation, solid wall insulation) seem to be the main focus of alternative measures proposed in the residential sector, usually in the form of soft loans and grants.

In the public sector, street lighting and build envelope measures are the usual interventions targeted mainly through grant schemes, regulations as well as behavioral measures.

The most common intervention in the heating domain chosen by Austria, Germany, Greece, France, Italy, UK, and the Netherlands is the upgrade of heating systems in existing buildings in the residential sector by using condensing boilers, heat pumps and solar thermal, or by using oil to natural gas boilers in the public sector for Austria and Greece, UK.

Automation and smart management systems, Renewables (RES) and Combined Heat and Power (CHP) units dominate crosscutting technologies promoted also through direct infrastructure investments. The same type of measures usually supports the improvement of equipment and process technologies in the industrial sector.

Finally in the transport sector, urban sustainable mobility and low emission vehicles (case of Austria, Germany and Greece) are promoted the most through tolls, regulation and direct infrastructure investments.  

Less targeted by alternative measures, are new products such as domestic refrigeration, appliances and co-generation units as well as energy savings interventions in new builds. District heating & cooling, and waste heat utilization systems are also less common.

Source: ENSPOL report D3.1 Report on Alternative schemes to Energy Efficiency Obligations under Article 7 implementation