• Energy Research

Efficiency First (E1st) is now an established principle of EU energy policy. It has been embedded in various legislative pieces of the Clean Energy for All package in 2018-2019. This report reviews the background of this concept and existing definitions in order to draw a definition that can serve as a basis for the ENEFIRST project and its specific objectives, that is, making E1st operational for the building sector and related energy systems. Similar concepts such as ‘Integrated Resource Planning’ (IRP) and ‘Energy Efficiency as a Resource’ have been developed in the U.S. and sometimes tried in some European countries. The well-documented U.S. experience shows how this type of approach can be implemented in the electricity sector. The European approach of E1st aims at a broader scope encompassing the entire energy system. Another difference is that the time horizon considered in the implementation of IRP, or similar concepts, in the U.S. is often in line with the cycles of utilities’ energy planning, that is, five to ten years, whilst E1st in Europe is thought to be applied in multiple timeframes, from short-term investment planning to medium-term targets (for 2030) and long-term goals (for 2050). The background analysis also highlights the importance of the scope of costs and benefits considered when comparing supply-side and demand-side resources. The general trend is to expand this scope to take into account multiple impacts, along with the experience gained in assessing them. Based on these analyses, the definition of E1st adopted for ENEFIRST is as follows: "Efficiency First gives priority to demand-side resources whenever they are more cost effective from a societal perspective than investments in energy infrastructure in meeting policy objectives. It is a decision principle that is applied systematically at any level to energy-related investment planning and enabled by an ‘equal opportunity’ policy design." This report then discusses the application of the principle in six policy areas (renewable policy, energy efficiency policy, climate policy, power market rules, building policy and energy security) with reference to the main EU legislations in these areas. The analysis does not claim to be comprehensive, but highlights the major decision points where E1st should be applied. It is the new power market design where the E1st principle is made operational most consistently from network planning to network company regulation. It is yet to be seen, however, to what extent it will be reflected in the European and national implementation. The report also analyses the process and the methodological issues when comparing demand-side resources with supply investments and identifies those typical investments — both at the system and at the household level — where its application should be considered. These decision points are illustrated by comparing business-as-usual decision paths with ones that would integrate the E1st principle.

AbstractThe Energy Efficiency First (EE1st) principle has recently been placed onto the political agenda in the European Union (EU). While the general rationale for EE1st is described in EU legislation and supporting literature, a common understanding of the principle’s implications for energy-related planning, investment, and policymaking is still missing. Based on an exploratory review of the literature, the objective of this article is to improve the theoretical understanding of EE1st. First, it develops a conceptual framework, describing EE1st as a decision-making principle that prioritises demand-side resources over supply-side alternatives whenever these provide greater value to society in meeting decision objectives. Second, it highlights the unique aspects of EE1st by systematically comparing the principle with associated concepts, such as Integrated Resource Planning. Third, it provides theoretical justification for EE1st by describing the economic rationale behind the principle. Fourth, it outlines policy considerations for its practical implementation. In sum, the EE1st principle is shown to have a compelling theoretical background that can help inform the design of effective policy interventions in order to move from principle to practice.

However simple the concept is, implementing the Energy Efficiency First (EE1st) principle has proved to be a difficult task for European Union (EU) Member States. The National Energy and Climate Plans (NECPs) provide extremely limited information on how the various Member States understand and intend to implement this principle: “they set out limited details on the application of this principle [EE1st principle]”, highlighting that “co-benefits and possible trade-offs between energy efficiency measures and climate adaptation remain unrecognised and untapped” (European Commission, 2020). The European Commission is preparing guidance to aid Member States in devising their EE1st implementation strategy across various policy areas. This report provides input to this discussion. This report identifies promising policy approaches in several EU policy areas: buildings, power markets/networks, gas markets/networks, district heating, energy efficiency, climate, and EU funds. The aims are to facilitate the implementation process in Member States and guide the next steps of the project to enable more detailed analyses about barriers and success factors in implementing EE1st, and then the development of policy guidelines. We screen the policy areas and approaches by reviewing the EU policy context for each policy area; conducting interviews and using the examples of existing implementation of the EE1st principle we found earlier for each policy area. The reviews for each policy area screen the most important strategic and legislative documents where EE1st is relevant, regardless whether the principle is integrated already or not. For each policy area, we discuss a selection of policy approaches where EE1st is or could be implemented. These policy approaches have the potential to be fully implemented across the EU, bringing considerable benefits to consumers. Full and effective implementation most often requires the concerted action of various public and private actors. In each case we can identify the key actors needed for the successful Europe-wide implementation of the policy approach. In some cases, these approaches already have a legislative and regulatory basis, in others it is still to be established.

The energy efficiency first (EE1 st) principle is a key element of the recast Energy Efficiency Directive that emphasises the prioritisation of energy efficiency measures in all energy planning and investment decisions. However, regional authorities often face challenges in putting the EE1 st principle into practice, integrating it into regional energy strategies and balancing it with other energy-related needs. To address these challenges, the REGIO1st project, co-funded by the LIFE programme, focuses on raising awareness of the EE1 st principle among regional governments and their agencies, and providing them with the necessary tools and guidance to integrate this principle into their energy planning and decision-making processes. A key feature of the project is the development of the REGIO1st Planning Framework. This framework is a comprehensive toolkit for integrating the EE1 st principle into regional energy planning. It outlines a structured approach with different stages, each equipped with specific Excel and text-based tools. These tools facilitate data collection, stakeholder engagement, cost-benefit and multi-criteria analysis, ensuring a comprehensive planning process. The framework and its tools will be made available online in the first quarter of 2024, ensuring easy accessibility and usability. Currently, the REGIO1st Planning Framework is being applied in six European pilot regions. The pilots not only test the usefulness of the framework, but also adapt it to different regional contexts, demonstrating its versatility and effectiveness in practice. This paper introduces the REGIO1st Planning Framework, exploring its purpose, methodological foundations, structure and the variety of practical tools it offers. It also discusses its current application in pilot regions, highlighting how it supports regional authorities in integrating the EE1 st principle into their regional energy strategies.

The Energy Efficiency First (EE1st) principle aims to consider and prioritise demand-side resources (end-use energy efficiency, demand response, etc.) whenever they deliver more value than supply-side resources (generation, networks, storage, etc.) in achieving the same objectives. This study set out to provide quantitative evidence on EE1st by investigating the level of end-use energy efficiency measures in the building sector that would provide the greatest benefit for the European Union (EU) in transitioning to net-zero greenhouse gas (GHG) emissions by the year 2050. By using a suite of energy system models, three scenarios are investigated (LOWEFF, MEDIUMEFF, HIGHEFF), each of them reaching the net-zero target. The scenarios differ regarding the ambition level for building retrofits, energy-efficient appliances and other energy efficiency measures in residential and non-residential buildings. These differences, in turn, affect the deployment of energy generators and networks for electricity, district heating, and hydrogen. As such, this analysis helps determine the extent to which society is better off – in pure monetary terms – if end-use energy efficiency in buildings was prioritized over generators, networks and storage facilities, in line the EE1st principle. The findings suggest that energy efficiency in buildings is critical to achieve net-zero GHG emissions by 2050. The LOWEFF scenario (-21.1% reduction in final energy demand for buildings in 2050 vs. 2020 levels) represents the conservative lower end of reasonable ambition levels for end-use energy efficiency in buildings with a view to net-zero emissions. This level of ambition is significantly above the business-as-usual pathway of the EU Reference Scenario (-10.4% final energy demand in 2050 vs. 2020) (Capros et al. 2021). According to the central indicator of energy system cost, the more ambitious scenarios MEDIUMEFF (-30.2% final energy demand in 2050 vs. 2020) and HIGHEFF (-35.5% final energy demand in 2050 vs. 2020) are generally not cost-effective in comparison to LOWEFF. However, there is ample reason to support these ambition levels beyond the LOWEFF scenario. For one thing, the differences in energy system cost are small in magnitude – e.g. the additional annual cost in HIGHEFF vs. LOWEFF corresponds to less than 0.03% of the EU’s gross domestic product. For another, this study did not anticipate the recent spike in energy prices as of 2021–2022, which would justify higher ambition levels for energy efficiency (Eichhammer 2022). The same applies to the inclusion of indoor comfort gains, reduced air pollution and other multiple impacts. As demonstrated in a follow-up report, their consideration significantly enhances the attractiveness of energy efficiency and thus provides further support for the EE1st principle. In practice, the scenarios set out in this study require an ambitious package of planning and policy instruments. Another branch of reports in the ENEFIRST project provides a detailed account of policy design options for EE1st.

The energy efficiency first (EE1st) principle, embedded in the European Union's (EU) recast Energy Efficiency Directive, aims to prioritise cost-effective energy efficiency solutions over new energy supply infrastructure. These solutions encompass not only end-use energy efficiency, but also, notably, demand-side flexibility. This research bridges the gap between the theoretical underpinnings of the principle and practical policy implementation. Drawing on market failure theory, it identifies an inherent bias in EU energy markets in favour of energy supply infrastructure. By highlighting the correction of market failures – from externalities to transaction costs – through targeted policy instruments, it presents a theoretical policy intervention logic for EE1st. Based on this, it offers a set of twenty-nine established and emerging policy instruments linked to specific market failures, thus providing a systematic roadmap for EE1st application. The study concludes that levelling the playing field between energy efficiency and energy supply requires a broad policy response. This extends beyond traditional energy efficiency policy of standards and public financing, and includes instruments such as electricity market design, remuneration schemes for network operators, and emissions pricing.

AbstractEnergy Efficiency First (EE1st) is an important concept that, if implemented, will minimise the cost of the energy transition by exploiting the end-use energy efficiency and demand response potential of end users. The power sector is particularly relevant for the application of the EE1st principle as it needs to be decarbonised early, demand is to grow due to the electrification, and due to the increasing value on demand flexibility to maintain system balance. In this paper we show that consumers need to be considered as multiple resources for the power system and examine key regulatory tools to mobilise consumers to offer their flexibility and DSOs to use this flexibility to reduce the need for network asset investment. The pricing of energy and network is key in delivering demand-side flexibility. At the same time DSOs need to consider them in their network planning by law, and regulators are encouraged to incentivise them to integrate the consumers in network operation innovatively. The European regulation provides an appropriate framework for the implementation of the principle in the power sector. It is now the tasks of national regulators to implement them effectively.

AbstractEnergy Efficiency First (EEF) is an established principle for European Union (EU) energy policy design. It highlights the exploitation of demand-side resources and prioritizes cost-effective options from the demand-side over other options from a societal cost-benefit perspective. However, the involvement of multiple decision-makers makes it difficult to implement. Therefore, we propose a flexible decision-tree framework for applying the EEF principle based on a review of relevant areas and examples. In summary, this paper contributes to applying the EEF principle by defining and distinguishing different types of cases — (1) policy-making, and (2) system planning and investment — identifying the most common elements, and proposing a decision-tree framework that can be flexibly constructed based on the elements for different cases. Finally, we exemplify the application of this framework with two example cases: (1) planning for demand-response in the power sector, and (2) planning for a district heating system.