Conceptualizing the “Energy Efficiency First” principle: from foundations to implementation

Panel: 2. Policy innovations to ensure, scale and sustain action

This is a peer-reviewed paper.

Authors:
Tim Mandel, Fraunhofer Institute for Systems and Innovation Research, Germany
Zsuzsanna Pató, Regulatory Assistance Project (RAP), Hungary
Jean-Sébastien Broc, Institute for a European Energy & Climate Policy (IEECP), France

Abstract

Energy Efficiency First (E1st) has recently entered the EU policy agenda. Although its general rationale has been described in the Governance Regulation and in grey literature, a lack of shared understanding remains about the principle's implications for investment and policymaking.

This paper seeks to synthesise views on the principle, enhance its conceptual foundations and illustrate possible routes to implementation.

First, it explores the historical and practical background of E1st by comparing the principle with similar regulatory concepts from outside the EU, including Least-Cost Planning, Integrated Resource Planning, and Demand-Side Management. This shows that the basic idea behind E1st, i.e. establishing a level playing field for demand- and supply-side resources, is not entirely new and that lessons can be learnt from related concepts.

Second, it provides a theoretical foundation for E1st. By looking at the topic of the energy efficiency gap, as well as market and behavioural failures, the paper explains why, at present, demand- and supply-side resources are not on equal footing. It then explains what would need to change to establish an adequate balance.

Third, based on this conceptual background, the article discusses possible avenues for putting E1st into practice within the EU's institutional framework. It does so by introducing two complementary institutional arrangements for E1st: (i) centralised decision-making (e.g. prescription of cost-benefit analysis in network planning) and (ii) decentralised market-based decision-making (e.g. ensuring market access for demand-side resources in power markets).

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