From theory to practice: the development of the 'Competitive Efficiency Tender' in Germany

Panel: 2. Energy efficiency policies – how do we get it right?

This is a peer-reviewed paper.

Authors:
Friedrich Seefeldt, Prognos AG, Germany
Martin Pehnt, ifeu Institute, Germany
Martin Bornholdt, DENEFF, Germany

Abstract

With respect to implementing Article 7 (Art.7) of the Energy Efficiency Directive (EED), the discussion amongst German stakeholders has taken on an interesting amount of momentum. In the beginning of this discussion, there were many skeptical voices against the introduction of a pure 'Energy Efficiency Obligation' (EEO).These skeptics expressed doubts about the heterogeneous German market for energy services, which already has a high number of active players, with more than 3000 energy suppliers and nearly 500 ESCOs. It was not clear who amongst these many players should be obliged to take action, nor was it clear as to what action would need to be taken. In particular, the fear of 'market distortion' seemed to be bigger than the courage for energy efficiency. There was no legally viable solution for an 'Energy Efficiency Fund' (EEF), because of the remaining risks with respect to the financial constitution and, most of all, because there was no political solution to the issues of increasing energy prices and the loss of acceptance for another fee. At this time, the discussion had nearly come to stand still.

In the beginning of 2012, however, the idea of an 'Energy Efficiency Tender' (EET), was re-introduced into the discussion by the newly founded German industrial association for energy efficiency (DENEFF). Key in breaking up the stand still, was a shift from a motivating by sticks to a motivating by carrots approach, based on a competition of the best ideas and economic approaches.. Subsequently, the initiative was adopted by several other stakeholders, such as those from the large association of energy suppliers (VKU). The 'Competitive Energy Efficiency Tender' (CET) has now become a prominent part of the 'National Action Plan on Energy Efficiency' (NAPE).

This paper describes the process of the evolution of the Competitive Efficiency Tender, with respect to the battle between governmental change along with that of stakeholder interests in EED implementation. It also addresses crucial design features. As the authors are involved both in the actual design process and the debate, this paper directly leads into the most current state of affairs on this topic.