Fundamentally rethinking efficiency to mobilise efficiency providers

Panel: 1. Policies and programmes

This is a peer-reviewed paper.

Author:
Hans Nilsson, FourFact AB, Sweden

Abstract

This paper explores how common energy efficiency policy instruments can be repositioned to mobilize greater efficiency. The first section explains how two existing concepts – economic rationality and business perspective – are fundamental to rethinking efficiency. The second section outlines seven policy instruments and indicates their ability to impact and develop these fundamental concepts.

The Commission to the European Parliament presents the Energy Union with the following words: “It is necessary to fundamentally rethink energy efficiency and treat it as an energy source in its own right, representing the value of energy saved […] the Commission will ensure that energy efficiency and demand side response can compete on equal terms with generation capacity.” Such rethinking must go beyond the traditional aspects from neoclassical economy which assumes that energy efficiency is hampered only by a set of barriers that prevents the market from working properly and once these barriers are removed or lowered the economy will settle in an optimal state – an equilibrium.

Experience however shows that this economically harmonic state is hard to establish and it seems as if there is a direct need to reconsider the tools we use and rethink efficiency fundamentally. Such rethinking has (at least) two aspects.

• Economic Rationality – one is to improve the traditional rational case for energy efficiency as the cheapest resource.

• Business perspective – the other is the need to widen the view of the benefits of energy efficiency and to develop the business perspective of energy (and resource) efficiency in new directions.

The tools will however not have to be new, but reformed, and may only have to be new in the European context. This paper aims to provide some examples on how this can be done.