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The electricity companies were the first to take on the energy efficiency agenda in the 1990s focusing on information, education and campaigns. Since the focus has shifted towards directly assuring the implementation of energy savings in households as well as the public and private sector.  The EEO of today is based on the scheme from 2006 where focus moved from information and awareness campaigns to implementation of energy savings. The EEO was based on long traditions of voluntary agreements between the authorities and the energy sector. The EEO currently in place is the product of an agreement of November 15th 2012 between the Minister of Climate, Energy and Buildings and the grid and distribution companies. With this agreement the obligated parts voluntary imposed an increasing target on the energy sector as a whole. An increase of 75 pct. corresponding to 10.7 PJ in 2013-14 and 100 pct. corresponding to 12.2 PJ in 2015-2020. The sector specific target is an element in the negotiations with the obligated parties but defined by a ministerial decreed.

Since 2009 the EEO has been subjected to several alterations in the framework leading to the design of the EEO as of 2012. The framework of the EEO is revised every three years and the current EEO is currently being renegotiated with effect from 2016. Even though the overall policy objectives have not changed significantly there has been a significant development in how to implement the energy savings.

Design of Energy Efficiency Obligation scheme (EEO)

The current Danish EEO is based on a voluntary agreement from 2012 between the Minister of Climate, Energy and Building and the grid and distributions companies of electricity, natural gas, district heating and oil. The agreement runs from 2012-2020 and is renegotiated every three years in terms and conditions. The savings target has increased fourfold since 2006 amounted to 10.7 PJ in 2013-14 and 12.2 PJ in 2015-20 corresponding to 3% annual savings of final energy consumption in DK excluding the transport sector.

The obligated parties may to a certain extent take into consideration energy savings in transmission and distribution networks and RES in heating generation. These savings, which are covered by the exemption in Article 7(2)(c), are expected, on the basis of experience, to be much less than 25% of the total energy savings.

Type of measures: The Danish EEO is to promote cost-effective energy savings in the end-use consumption for the benefit of consumers, companies and society. The EEO relies on a broad variation of measures from the obligated parties focusing on consultancy, subsidies and market impact activities. The agreement directly correlates with the political agreement of March 22nd 2012 outlining the Danish energy policy 2012-20.

Scope: The EEO includes savings realized in all sectors as defined by DEA disregarding some technologies e.g. Household appliances and solar panels. Furthermore singular initiatives in the transportation sector may be included. On the primary side grid optimization and RES in the heating sector may be included to some extent.

Obligated parties: The obligated parties includes grid and distribution companies within the electricity, district heating, natural gas and oil sector

Target setting: The savings targets are energy sector specific and based on negotiations between the voluntary parties of the EEO agreement. The energy sector specific savings targets are subsequently allocated to the individual companies within each energy sector based on level of energy distribution. The target amounts to 3% of the final energy consumption excluding the transport sector.

Calculation method savings: Savings can be deemed through the use of standard values in a catalogue or through specific calculations of a reference scenario and the consumption after implementation of the initiative. Deemed ex-ante savings are used mainly in households where specific calculations are used in larger projects. Prioritization factors are included in the EEO to promote favorable savings e.g. with long lifetime or in non-ETS areas. Conversion factors are included to handle conversion from e.g. oil boilers to electricity based heat pumps – thus converting into primary energy.

Additionality: The Danish EEO addresses additionality in two ways. Most important is the focus on the chain of agreements. Specifically with a requirement of a contractual agreement with the end-user before energy savings are initiated in order to be registered with an obligated party. Secondly through an increase in the annual targets make up for eventual additionality.

Verification and Monitoring: The obligated parties are responsible for documentation of the energy savings. Furthermore the obligated parties must conduct a yearly audit internally. This is combined with a yearly spot check across all obligated parties conducted by the DEA.

Control and Compliance: If failing to enter a voluntary agreement the authorities will issues an injunction forcing the obligated parties to follow the requirements on an Executive Order. Costs are reported to the DEA on a yearly basis and bench marked by the Danish Energy Regulatory Authority. The sector administration organ has the authority, in case a company does not deliver its energy savings target, to relieve the company of the sector agreement, in which case the company will instead be indicted by the Danish Energy Regulatory Authority. The company still has to deliver the energy savings stipulated by the EEO.

Administrator - Institutional set up: The institutional set up builds on a consensus-seeking tradition. The “Technical Working Group” is considered the governing body of the Danish EEO with members of all sectors chaired by the DEA with the purpose of increasing compliance with the agreement and creating consensus on technical aspects of the agreement.

Flexibility: The focal points of the Danish EEO are savings in the final energy consumption at the end-user level. Nevertheless production technologies, grid optimization and the transportation sector are included in the scope of the EEO to some extent. As flexibility and the freedom of method are important aspects of how the obligated parties can deliver their energy saving targets. F. example they can acquire energy savings through cooperation with external parties and over/under performance can be transferred between individual years allowing an under performance of 35 pct. of the annual target.

For the full Report on the Danish EEO scheme click here.

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