Energy Efficiency Drivers: Five Lessons for Romania from the IEA 2017 Energy Efficiency Report

The International Energy Agency (IEA) is an autonomous agency that was established in November 1974. It has 29 member states from EU and all over the world (Romania not being amongst them). According to its statute, its primary mandate is twofold: to promote energy security amongst its member countries through collective response to physical disruptions in oil supply, and to provide authoritative research and analysis on ways to ensure reliable, affordable and clean energy for its member countries and beyond. The IEA carries out a comprehensive program of energy cooperation among its member countries, which are obliged at all times to hold oil stocks equivalent to 90 days of its net imports.

The IEA deems energy efficiency’s role as central in any scenario of global energy transition. [1] In a world struggling to find its way between conventional and non- conventional approaches to energy, IEA sees energy efficiency as the most available, secure and affordable resource. Although not an IEA member, Romania has every reason to find valuable policy anchors in this self-sustainable and self-empowering global trend.

How did energy efficiency fare in 2016? What business models are driving greater scale results? According to IEA, the global energy intensity continues to fall, as the world has kept generating more value from a KWh. That means the world is able to produce more GDP per unit of energy consumed. This global efficiency gain was USD 2.2 trillion in 2016 – equal to twice the size of the Australian economy, 1.8% less than the previous year.

Although the current level of efficiency gains needs to be sustained by policy measures in order to keep the favorable trend, data show that consistent upholding and implementing of energy efficiency policies are indeed yielding results in the IEA member states. There is considerable potential to achieve further energy savings by establishing or strengthening policy standards.

There are two main energy efficiency drivers at work in the global economy, with different degrees of policy dependence. The main features of each are briefly presented below.

The first driver is residential efficiency, which has a significant degree of policy dependency. This is a driver mainly based on gas consumption, since it has very much to do with space heating and building improvement. In Romania, it would be very much enabled by the actions of the municipalities and other public stakeholders that can initiate and implement such measures, coupled with access to EU finance and from other institutional or private financiers.

The electricity gain for the residential segment is another important part of the residential driver, that can only be enabled and put to work by through proper regulations. ANRE could enable the mechanics of this driver to come into play by legislating on distributed generation by residential players more proactively and
realistically (i.e., the status of the prosumers, feed-in tariffs, smart metering). Utility companies and services supply companies (as Energy Services Companies – ESCOs) also have an important role in building and enhancing the residential efficiency gains, by creating and growing a market for “smart home” services.

Such a set of articulated actions by stakeholders and the regulator would be very suitable for the Romanian model, and can facilitate the management of peak gas demand from import, and thus improve short-term energy security. According to IEA, this set of strategies has proved successful in UK and Germany, traditionally gas intensive markets.

The industrial efficiency driver has a lesser degree of policy dependency, and is much more anchored in a country’s economic landscape. It consists in implementing technical and innovative solutions to improve electricity and gas use by the industrial operators, in partnerships with ESCOs, along with the introduction of renewables in the source mix. This driver is enabled by an increasing demand for industrial competitiveness, combined with ESCOs’ strategy to create and build a sustainable energy efficiency market designed for industrial operators (industrial lighting solutions, reactive energy management, proactive energy auditing and management, etc).

The role of the regulator and the state would be to facilitate and encourage investment in such solutions by both industrial players and ESCOs through recognizing and incentivizing, including access to EU financing and favorable tax treatment. This set of strategies would be equally suitable for industrialized and emerging economies, such as Romania, where high economic growth is accompanied by high energy consumption.

So how could Romania capitalize on such consistent evidence about how energy efficiency can actually work to the benefit of a state and its energy stakeholders? Below are five answers:

1. Sustained and consistent energy efficiency measures would generate more GDP for the same energy unit consumed.

As described above, the global energy intensity decline is a proven fact. A higher inclusion of renewable energy into the energy mix would also help reduce carbon emissions, enhancing the positive complementarity effect. Such policies would have to be consistent and span across the regulatory cycles; however, results do show up and are proven by the IEA experience.

In some energy-intensive industries, such as steel, average energy efficiency has improved sharply as a result of expanding new production capacities especially in emerging economies, as new facilities tend to be much more efficient than old ones.

2. Energy efficiency strengthens energy security both for short-term needs and long-term objectives.

One way in which energy efficiency can benefit Romania’s energy security is by reducing its reliance on imported gas and even lowering such imports. Energy efficiency also reduces the likelihood of supply interruptions, both in gas and electricity. This results from managing gas peak demand more easily and strengthening the short-term energy security in harsh weather conditions.

Energy efficiency improvements in seasonal gas demands, specifically for space heating, are largely responsible for reducing the severity of demand peaks. Short-term energy security requires the energy system to react promptly to sudden shortages of supply, changes in market conditions or government intervention via emergency measures to maintain system balance. Long-term benefits also come from enhanced predictability year after year in the gas consumption, with commercial effects in the import strategy, and less pressure on maintaining electrical grids, which can improve stability and
security of supply.

3. Energy efficiency can help reduce distribution tariffs.

The investment needed for grid stability in maintenance and repair could see some decrease by involving the industry operators in monitoring and managing peak demands and reactive energy flows into the grid.

At the same time, investment encouragement and recognition policy in both gas and electricity sectors by large-scale roll out of smart metering and digitalization has a similar effect in the medium- to long-run, coupled with improved performance indicators, all in favor of the end clients. Management of gas storage costs can also be improved, with positive effect on tariffs.

4. Energy efficiency helps reduce the impact of price volatility in the industry.

According to IEA, energy use per unit of economic output in the industrial sector fell by nearly 20% between 2000 and 2016. The declines are similar both in the IEA member countries and other major emerging economies. In some energy- intensive industries, such as aluminum, cement and steel, also present in Romania, average energy efficiency has improved sharply on account of new facilities, which tend to be much more efficient than old ones. In these industries, efficiency gains reduce the impact of volatile energy prices on competitiveness by improving predictability and commercial position towards suppliers and producers and decreasing acquisition on spot markets.

5. Energy efficiency can help create more jobs in the energy industry.

According to IEA, over 1 million people are now employed by ESCOs around the world. Energy efficiency has become a tradeable commodity in several countries. Digital technology is expected to enhance the ability for energy efficiency to participate in electricity markets. The deployment of connected devices is growing, which will impact energy efficiency spread among many industries.


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