1

HowEnergyEfficiencycutscostsforatwo-degreefuture

Dr.JakobWachsmuth(Fraunhofer ISI)

ECEEEpolicyseminar“AfterCOP21:Potentialsandpoliciesforenergyefficientdecarbonisation”

Brussels,8February2016

HowEnergyEfficiencycutscostsforatwo-degreefuture

• Introduction• Methodology• Impact• Regionalimplications• Conclusions

Contents

2

Background

3

EnergyEfficiency:ACheaperpathtoatwo-degreefuture

• RoleofEEindecarbonization• Whythisstudy?Whynow?• What’snew?– costsavingsandpolicyfocus• Whyregionsmatter?

INTRODUCTION

Historyshowshopeandchallenges

4

• Mostcountriesareproducingincreasinglymorefromeachunitofenergyconsumed

• Stricterfueleconomystandardshavedecoupledconsumptioninthetransportsectorfromeconomicgrowthbuttotalconsumptionisstillincreasing

0.000

0.050

0.100

0.150

0.200

0.250

0.300

0.350

0.400

1990 2000 2005 2009 2013

koe/$05p

Energy intensity of industry

World EU USA Brazil

Mexico China India

0.000

0.010

0.020

0.030

0.040

0.050

0.060

0.070

1990 2000 2005 2009 2013ko

e/$0

5p

Energy intensity of transport

World EU USA Brazil

Mexico China India

Source:ownrepresentationbasedontheEnerdata database

INTRODUCTION

Globalsavingsandclimatestabilization

5

Aggressiveefficiencypoliciesinbuildings,transport,industrykeytoachieving2degreetarget;cheapestcarbonabatementinmostnations.

Cumulativesavingsof

$2.5– 2.8Trillionto2030

Annualsavingsof

$440– 480Billionin2030

Cumulativesavingsof

$750Billionto2030fromhistorical

policies*

*Policiespassedsince1990in3Regions:China,EuropeanUnion,UnitedStates

Energyefficientpathwayvs.

Energyintensivepathway

INTRODUCTION

Methodology

6

Goal:Assesstheimpactofenergyefficiency(EE)onthecostofdecarbonization basedonexistingestimatesofEEandalternativedecarbonization measures

METHODOLOGY

METHODOLOGY

1. AssessmentofexistingEEpoliciesinthefocusregions

2. Reviewof2°Cscenariosandtheroleofenergyefficiency

3. ProjectionofcostreductionsbyEEpoliciesuntil2030

4. Conclusionsreviewed bylocalexperts

Contributors

7

Aglobalteamofenergyefficiencyexperts

Projectteam• JakobWachsmuth,VickiDuscha,MatthiasReuter,FraunhoferISI

• HannaFekete,MarkusHagemann,NiklasHöhne,NewClimate Institute

• BjoernDransfeld,FelixRöben,the greenwerk

Steering Committee• NilsBorg,ECEEE• FabiánGaioli,CoraliaEnviromental

• Dian Grueneich,StanfordUniversity

• StevenNadel,ACEEE• JamesWolf,independentconsultant

• JoachimSchleich,GrenobleEcole deManagement

METHODOLOGY

Contributors

8

Aglobalteamofenergyefficiencyexperts

Local experts• Brazil:Pontifical Catholic Universityof RiodeJaneiro,RodrigoFCaliliand ReinaldoCSouza

• China:ChineseAcademy of Sciences (CAS),YingFanand Jin-HuaXu• EU:Fraunhofer ISI,WolfgangEichhammer• India:TheEnergyandResources Institute India(TERI),Neha Pahuja• Mexico:Comisión Nacional para el UsoEficiente delaEnergía,JuanIgnacioNavarrette Barbosa

• US:ACEEE,StevenNadel+colleagues

METHODOLOGY

$Benefit

$Cost

emissionsreduction

energyefficientpathway energyintensivepathway

Generation

BuildingsandIndustry

Transport

InterventionType

ComparingTwoPathwaysAfocusonenergyefficiencyturnsabatementcostsintoabatementbenefits.

Eventheenergyintensivepathwayrequiresloweringannualenergydemandinendusesectorsby7%in2030

Highefficiency inend-use sectorsgrants significant flexibility inchoosingoptions fordecarbonizing supply.

Anenergyefficientpathwaysaves$440–480Billiongloballyincomparisontoanenergyintensivepathway,

andyetbothmitigate15’400Mtofemissionsannuallyin2030.

PotentialInterventions

9

IMPACT

10

Highly efficient buildings come withlargeabatement potentials,butvarying cost-effectiveness.

Abatement potentials of REand nuclear powerare by farthe largest,butcosts of fully exploiting themwillbe high.

Until 2030,use of Carbon Capture&Storageboth for powergenerationand industrial processes is mainlyavoidable by energy efficiency &RE.

Efficiencygains inindustry showhugesaving potentials,inparticular inheavy industries.

Increasing fueleconomy of vehicleshighly cost-effectivewith much largerabatement potentialthan biofuels.

Theenergyefficientpathwaysaves$440–480Billiongloballyincomparisontoanenergyintensivepathway

PowerIndustry

0 10 30

Totalannualabatement[GtCO2e/y]

50

100

-50

-100

20

AnnualspecificcostsofGHGabatement[USD/tCO2e] Transport Buildings

$Benefit

$Cost

emissionsreduction

IMPACT

Significantcostsavingsandemissionsreductionin2030

11Morethan85%ofthosesavingsoccurinChina,theEuropeanUnion,andtheUnitedStates

ResultsfortheEnergyEfficiency Pathwayforsix-regionsinclude$220-250Billioninannualsavingsandreductionsof11,000MtCO2equivalentin2030.Notonlyisthisasignificantamountofsavingsfortheseregionsbutitisalargeshareoftheemissionsreductionneededreachatwo-degreepathway.

IMPACT

ChinainFocus

12

Energy Efficient vs.Energy IntensivePathway:• ComparedtoBAU,theIntensivePathwayreducesannualconsumptionby>14EJ

until2030.TheEfficientPathwayachievesadditional savingsof4.7- 6.0EJ.• RealizationoftheEfficientPathwaywouldreducetheannualnetcostsby54- 69

billionUSD(savingof10– 12USD/tCO2e).

Currentpolicies:• historicalEEpolicies, inparticularinindustry(TOP1000andTOP10000program),

havealreadydecreasedthenetcostsby52– 64billionUSDperannum.• significantunaddressed industrialpotentials,especially inthechemical industryand

theiron&steelsector,aswellasinpetroleumprocessingandcoking.• transportsectorrequiresadditionaleffortstoreducefuelconsumption,especially

inHDVs,butalsoamodalshiftinpublicandfreighttransport.

REGIONALIMPLICATIONS

BrazilinFocus

13

Energy Efficient vs.Energy IntensivePathway:• ComparedtoBAU,theIntensivePathwayreducesannualconsumptionby1.6EJuntil2030.TheEfficientPathwayachievesadditional savingsof0.7– 0.8EJ.

• RealizationoftheEfficientPathwaywouldreducetheannualnetcostsby13billionUSD(savingsof54– 55USD/tCO2e).

Currentpolicies:• Historic savings notquantified dueto data constraints butalsomarginalimpacts.• Significantpotentials inbuildingssectorcurrentlytargeted,particularlywithinPROCEL,butretrofitsofHVACsandair-conditioningcallforadditionalmeasures.

• Fortransport,strictfueleconomystandardsandinfrastructureforamodalshiftseemtobenecessaryadditionstotheexisting labelingofcars.

• Industryholdspotential fornumerousEEmeasuresthroughoutallsubsectors.

IMPACT

TheEUinFocus

14

Energy Efficient vs.Energy IntensivePathway:• ComparedtoBAU,theIntensivePathwayreducesannualconsumptionby4.1– 4.5EJuntil2030.TheEfficientPathwaydoublesthesavings(8– 9EJ).

• Realisation oftheEfficientPathwaywouldreducetheannualnetcostsby79– 82billionUSDin2030(savingof72– 75USD/tCO2e).

Currentpolicies:• HistoricalEEpolicieshavedecreasedfuturenetcostsbyatleast8– 10bill.USD/a.• RevisionofEEDwithaconcreteEEtargetfor2030and3rdNEEAPsdriveEE.Ecodesign directiveplaysarelevantroleforheatingandelectricalappliances .

• Realizing industrialpotentialsmainlydependsonsuccessfulreformoftheEUETS.• ModeratefueleconomystandardsforLDVs,absenceofstrongpoliciesforHDVs,andlackofEU-widestandardsforbuildingsretrofitsleaveroomforimprovements.

IMPACT

Conclusion– Global&Regionalimplications

15

Alotofleverswithabatementbenefitsarenotrealizedduetomarketbarriers yet.Amixofmeasurestargetingbarriersandsupportfordiffusionareparticularly important.

India• LowGWPinMVACsandmodalshiftsin

publictransport• EAFinI&Ssector• Efficientnewbuildandnew&retrofitof

coolingsystems

Brazil&Mexico• FuelconsumptionstandardsforHDVsand

MDVsandmodalshift• Largeuntappedpotentialremainsin

industry• EfficientappliancesandHVAC

EU• Significantretrofitofexistingbuildings• Stricter&extendedfueleconomystandards• ETSreformtodrivechangeinindustry

USA• Significantretrofitofexistingbuildings• Reducefuel consumptionofheavyindustry• Modalshiftsinfreight&publictransport

China• Changeinindustrialprocesses(EAFinI&S,

wasteheatrecoveryforchemicals)• Modalshiftsinfreight&publictransport• Retrofittingcommercialbuildings

CONCLUSION

EnergyEfficiency:ACheaperpathtoatwo-degree future

Dr.JakobWachsmuthCompetenceCenterEnergyPolicyandEnergyMarketsFraunhofer InstituteforSystemsandInnovationResearchISI

BreslauerStraße48|76139Karlsruhe|GermanyPhone+497216809-632

jakob.wachsmuth@isi.fraunhofer.dehttp://www.isi.fraunhofer.de

ContactInformation

16

USAinFocus

17

Energy Efficient vs.Energy IntensivePathway:• ComparedtoBAU,theIntensivePathwayreducesannualconsumptionby3.8EJuntil2030.TheEfficientPathwayachievesadditionalsavingsof6.0– 6.3EJ.

• RealizationoftheEfficientPathwaywouldreducetheannualnetcostsby66– 72billionUSD(savingsof29– 33USD/tCO2e).

Currentpolicies:• HistoricalEEpolicieshavedecreasedfuturenetcostsby40– 43bill.USD/a,mainlyinducedbyCAFEstandardsforLDVs,appliancestandards&buildingenergycodes.

• CleanPowerPlan,updatesofCAFEstandardsandbuildingenergycodesarelikelytoboostenergyefficiencythroughoutallsectors.

• AchievingsignificantretrofitsofexistingbuildingsbiggestchallengeforEEpolicy-making.Otherchallenges includereducingfuel intensityinheavyindustries.

IMPACT

IndiainFocus

18

Energy Efficient vs.Energy IntensivePathway:• ComparedtoBAU,theIntensivePathwayreducesannualconsumptionby3.9EJuntil2030.TheEfficientPathwayachievesadditional savingsof1.1– 1.3EJ.

• RealizationoftheEfficientPathwaywouldreducetheannualnetcostsby10– 15billionUSD(savingsof6– 9USD/tCO2e).

Currentpolicies:• Historic savings notquantified dueto data constraints butalsomarginalimpacts.• Onlyalimited numberofEEmeasures isbeingimplemented.• Industryharborssavingpotentials iniron&steelproduction,whiletransporthaspotential forreducedfuelconsumption(mainlyHDVs).

• Bothefficientnew-buildsandreplacingexistingcoolingsystemsofferlargesavingpotentials inthebuildingssector.

IMPACT

MexicoinFocus

19

Energy Efficient vs.Energy IntensivePathway:• ComparedtoBAU,theIntensivePathwayreducesannualconsumptionby0.7EJuntil2030.TheEfficientPathwayachievesadditional savingsof0.1– 0.2EJ.

• RealizationoftheEfficientPathwaywouldreducetheannualnetcostsby1.9– 2.6billionUSD(savingof13- 17USD/tCO2e).

Currentpolicies:• Historic savings notquantified dueto data constraints butalsomarginalimpacts.• Whilebuildingssectorissystematicallytargetedusingnormsandlabeling,potentials inindustryandtransportsectoraddressedonlytoaminorextent.

• AdditionalmeasuresdebatedwithinPRONASE2013– 2018,whichholdshugepotentialtotargetnumerousEEoptionsinheavyindustryandtransport.

IMPACT

02000400060008000

100001200014000160001800020000

20052010202020302040205020602070208020902100

Energyinvestm

ents[billionUSD

(200

5)/a]

GEA_geala_450_atr_fullGEA_geala_450_atr_limbeGEA_geala_450_atr_limbe_limirGEA_geala_450_atr_limirGEA_geala_450_atr_nbecsGEA_geala_450_atr_nbecs_nsink_limbeGEA_geala_450_atr_noccsGEA_geala_450_atr_noccs_nonucGEA_geala_450_atr_nonucGEA_geala_450_atr_nsinkGEA_geala_450_btr_fullGEA_geala_450_btr_limbeGEA_geala_450_btr_limbe_limir

Reviewof the role of EEin2°Cscenarios

20

• Difficulttocomparedifferentmodels,butcoststendtobelowerinscenarioswithhighefficiencywhenusingthesamemodel

• FormostIAMs,EEmeasuresnotmodeledbutdemandreductionisassumed

• Investments(CAPEX&OPEX)inscenarioswithhigh(left)andlowefficiency(right):

Source:Enerdata database,whichisbasedonofficialnationalstatistics

02000400060008000

100001200014000160001800020000

20052010202020302040205020602070208020902100Energyin

vestments[b

illionUS

D(200

5)/a]

GEA_geaha_450_atr_full

GEA_geaha_450_atr_limbe

GEA_geaha_450_atr_limir

GEA_geaha_450_atr_nbecs

GEA_geaha_450_atr_nonuc

GEA_geaha_450_atr_nsink

GEA_geaha_450_btr_full

GEA_geaha_450_btr_nonuc

Source:representationbyNewClimate InstitutebasedontheGEAscenariodatabase

20