Costs and potentials of energy savings in European industry – a critical assessment of the concept of conservation supply curves

Panel: Panel 5. Energy efficiency in industry

Authors:
Tobias Fleiter, Fraunhofer Institute for Systems and Innovation Research, Germany
Wolfgang Eichhammer, Fraunhofer Institute for Systems and Innovation Research, Germany
Martin Wietschel, Fraunhofer Institute for Systems and Innovation Research, Germany
Markus Hagemann, Ecofys Germany
Simon Hirzel, Fraunhofer Institute for Systems and Innovation Research, Germany

Abstract

Conservation supply curves (CSC) were developed to describe and compare the different options for energy conservation in a transparent way. They show the quantity of conserved energy as well as the costs related to specific saving options and thus provide an indication of which options are to be preferred to ensure cost-effectiveness. Furthermore they play a key role in many energy and climate policy models.

The construction of CSC, however, is subject to several methodological issues that have an enormous impact on the slope and position of the final curve. Some of these issues are related to path dependency, the assessment of costs for distinct saving options, the choice of "perspective", the uncertainty related to the estimation of the relevant saving potential or the choice of parameters like energy price forecasts. A critical analysis of these methodological issues and their impact on the final curve is the main goal of this paper. This will be supported by the construction of an exemplary CSC for European industry in order to indicate the quantitative effects involved.

By analysing the influence of these methodological issues on the final CSC, this paper contributes to a better understanding and interpretation of the useful but highly uncertain concept of CSC and aims to enhance the discussion about cost effectiveness in energy conservation, which is the basis for successful policy implementation.

Although the focus of this paper is on (energy) CSC, the very similar marginal greenhouse gas abatement cost curves are also considered as these are based on the same methodological approach and are becoming more widespread in the discussion of the possibilities and costs of climate change mitigation.