• 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.

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.

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The European Union's Energy Efficiency Directive calls for EU Member States to put in place ambitious energy efficiency policies and requires them to establish energy saving targets. One of the most important Articles of the Directive is Article 7, which required Member States to implement Energy Efficiency Obligations and/or alternative policy instruments in order to reach a reduction in final energy use of 1.5% per year. This paper assesses how Article 7 has been applied by Member States and what the implications are. Analysing the plans of all 28 Member States we evaluate how Article 7 is implemented across the EU. This includes an analysis of the types of policies used, the distribution of the anticipated savings across the different policy instruments, and whether or not the way Article 7 is applied in reality meets the requirements set by the Directive. Our analysis shows that Member States take very different approaches with some using up to 112 policy measures and others just one. We also identify areas of concern particularly related to the delivery of the energy savings with respect to the Article 7 requirements, the calculation methods, and the monitoring and verification regimes adopted by Member States. We model to what extent the projected savings are likely to materialise and whether or not they will be sufficient to meet the target put forward by Article 7. In our paper we also make suggestions for modifying the Energy Efficiency Directive in order to address some of the problems we encountered.