Center on Global Energy Policy Columbia University New York NY, October 15, Philippe Benoit Head, Energy Efficiency and Environment Division

Center on Global Energy Policy Columbia University New York NY, October 15, 2015 Philippe Benoit Head, Energy Efficiency and Environment Division

Prologue

Changing oil & gas prices 25 140 20 120 100 15 80 Gas Prices $/MMBTU 10 60 Brent Oil Price $/barrel 40 US Henry Hub 5 Europe - UK NBP 0 May-10 May-11 May-12 May-13 May-14 20 - Asian LNG price (average) Asian spot price Brent Crude

Providing energy access to all of Sub-Saharan Africa? Share of population with access to electricity: More than 50% Less than 50% In sub-saharan Africa, 620 million people two-thirds of the population live without electricity. Only a handful of countries have electrification rates above 50%

Act 1: The little engine that could

Energy Sector GHG emissions: major part of the story Decreasing energy sector emissions key to limiting global temperature increase ~ 6 C ~ 4 C ~ 2 C Energy Emissions Source: adapted from WEO, 2010 and ETP 2012

Changing our portfolio of energy technologies to respond to the climate change challenge Gt CO 2 60 50 40 30 20 10 0 2011 2020 2030 2040 2050 ETP 2014, 2015

Changing our portfolio of energy technologies to respond to the climate change challenge Gt CO 2 60 50 40 30 20 10 0 2011 2020 2030 2040 2050 Nuclear 8% Power generation efficiency and fuel switching 1% Renewables 30% End-use fuel switching 10% CCS 13% End-use fuel and electricity efficiency 38% ETP 2014, 2015

Changing our portfolio of energy technologies to respond to the climate change challenge Gt CO 2 60 50 40 Power generation efficiency and fuel switching 1% 30 20 10 0 2011 2020 2030 2040 2050 End-use fuel and electricity efficiency 38% 40% of emissions savings to 2050 come from energy efficiency in IEA scenarios

Short-term: Four measures by 2020 to put us on the 2 degrees path Emissions savings in the 4-for-2 C Scenario, 2020 Partial removal of fossil-fuel subsidies Reduce methane releases from upstream oil and gas 12% 18% 4-for-2 C Scenario delivers savings 49% of 3.1 Gt CO 2 -eq Implement selected energy efficiency policies Limit use of inefficient coal power plants 21% Four measures can stop the growth in emissions by 2020 at no net economic cost, reducing emissions by 3.1 Gt, the bulk of savings required for a 2 C path

Measure 1: Improve energy Emissions savings in the 4-for-2 C Scenario, 2020 efficiency Buildings Heating & cooling Appliances & lighting Industry Industrial motors Transport Road 20% 40% 60% 80% 100% Share of efficiency savings Energy efficiency reduces emissions by 1.5 Gt, led by minimum energy performance standards additional investment is more than offset by fuel bill savings

Energy efficiency can help drive economic prosperity GDP in Efficient World Scenario versus New Policies Scenario, 2035 4% 3% 2% 1% Japan & Korea OECD Europe United States China India Cumulative investments in energy efficiency of $12 trillion are more than offset by fuel savings & trigger economic growth of a cumulative $18 trillion

Portfolio of actions to reduce energy sector emissions Gt CO 2 60 50 40 Power generation efficiency and fuel switching 1% 30 20 10 0 2011 2020 2030 2040 2050 End-use fuel and electricity efficiency 38% 40% of emissions savings to 2050 come from energy efficiency in IEA scenarios

Long-term investment landscape for a 2 C world Cumulative Investment in the New Policies and 450 Scenarios, 2014-2035 New Policies Scenario 26 7 7 8 450 Scenario 22 6 11 14 10 20 30 40 50 60 Trillion dollars (2012) Fossil fuels Power T&D Low-carbon Energy Efficiency Spending on energy efficiency is $6 trillion higher in the 450 (2 degree) scenario WEO 2013 Special Report

EE s untapped A potential Energy efficiency potential used by sector in the WEO 2012 New Policies Scenario 100% 80% 60% Unrealised energy efficiency potential Realised energy efficiency potential 40% 20% Industry Transport Power generation Buildings Two-thirds of the economically profitable investments to improve energy efficiency remain untapped in the period to 2035

Act 2: The Energy Efficiency Market

USD Billion Energy efficiency investment: bigger than you might think 400 Investments in various fuels 350 300 250 200 150 100 50 310 270 290 950 0 Energy efficiency* Renewable power** Fossil fired power*** Upstream oil, gas and coal**** * IEA (2014), Energy Efficiency Market Report, Paris: OECD/IEA. ** IEA (2015), Renewable Energy Market Report, Paris: OECD/IEA. *** Frankfurt School-UNEP Center (2015), Global Trends in Renewable Energy Investment, Frankfurt: Frankfurt School of Management, UNEP and Bloomberg New Energy Finance. **** IEA (2014), World Energy Investment Outlook, Paris: OECD/IEA.

Facing up to the Fuels Competition EE keeps producing : 1999 Energy Efficiency 1999 2004 2004 2015 2015

Mtoe EE: Big part of energy landscape Output - Energy efficiency: the first fuel savings larger than the contribution of any other fuel to TFC 4 000 3 500 3 000 2 500 TFC and savings within IEA countries (IEA-11*) from EE investments since 1973 Hypothetical energy use had there been no energy efficiency improvements Energy efficiency savings Oil Gas 2 000 Coal 1 500 1 000 Total Final Consumption Consumption Electricity Other 500 TFC 0 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 *IEA-11: Australia, Denmark, Finland, France, Germany, Italy, Japan, Netherlands, Sweden, United Kingdom, United States

Mtoe Energy efficiency: the first fuel Supplied (1336 Mtoe) more in 2011 to meet energy service demand than oil (1200 Mtoe), electricity (552 Mtoe), natural gas (509 Mtoe) in IEA-11* 1 400 Total final consumption of fuels and energy savings from energy efficiency in 11 IEA countries in 2011 1 200 1 000 800 600 400 200 TFC 0 Oil Gas Coal Electricity Other Efficiency savings *IEA-11: Australia, Denmark, Finland, France, Germany, Italy, Japan, Netherlands, Sweden, United Kingdom, United States

Energy efficiency is flattening energy consumption Total final consumption has declined over the last decade 140% Decomposition of Total Final Consumption in IEA countries 1, 1990-2014 130% 120% 110% 100% 90% 80% Activity effect TFC Structure effect Efficiency effect 70% 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Energy efficiency is responsible for two thirds of the downwards pressure on demand 1 Decomposition for Australia, Denmark, Finland, France, Germany, Italy, Japan, the Netherlands, Sweden, the United Kingdom and the United States.

EJ Avoided consumption topped 22 EJ (520 Mtoe) in 2014 Avoided consumption generated by energy efficiency increased by 10% in 2014 24 20 Avoided TFC in IEA countries from energy efficiency investments made since 1990 10% 16 12 8 4 Avoided consumption 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 IEA countries avoided more consumption in 2014 than the TFC of Japan and Korea combined

mb/d Impact of supply- and demand-side improvements on US oil import needs 10 8 6 4 2 2011 net oil import level Projected net imports Reductions due to: Demand-side efficiency Biofuels use in transport Natural gas use in transport Increased oil supply 0 2011 2015 2020 2025 2030 2035 Source: WEO 2012

Energy Efficiency s contribution: now you see it, now you don t Total EE savings = 196 Mtoe Impact of Energy Efficiency improvements since 1990 Other 97 Other Savings, 196 97 Electricity, 321 Electricity, 321 Natural gas, 296 Natural gas, 296 Oil, 719 Oil, 719 TFC for USA (2012) Total TFC = 1,432 Mtoe Total TFC (EE adjusted)= 1,629 Mtoe Illustrative OECD/IEA 2014

Energy Efficiency s contribution: now you see it, now you don t Other 97 TFC for USA (2012) Electricity, 321 Oil, 719 Natural gas, 296 Total TFC = 1,432 Mtoe OECD/IEA 2014

Every country is a producer...

USD billion (2014) IEA consumers are saving hundreds of billions of dollars each year IEA countries saved USD 550 billion in 2014 as a result of energy efficiency investments since 1990 600 Avoided expenditure in IEA countries from energy efficiency investments made since 1990 500 400 300 200 100 0 Cumulative savings = USD 5.7 trillion 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Annual savings are greater than the EU s fuel import bill

Domestic virtual supply : EE as an invisible local energy generator Gasoline consumption for freight/passengers fuel economy standards w/less gasoline Improved windows/building envelopes less demand for energy from the grid (gas, power) PV on the roof or insulation in the roof Efficient air conditioning : same comfort level with energy efficiency and less electricity consumption Industry: same outputs/value-added with less energy consumption (avoids consumption and infrastructure) 32

Mtoe USD billion (2014) Efficiency s domestic production substitutes for fuel imports In 2014, IEA countries avoided primary energy imports totalling 190 Mtoe, saving USD 80 billion in energy import bills and improving trade balances 60 50 40 30 20 10 0 Avoided imports in 2014, as a result of energy efficiency investments in IEA countries since 1990 35 Germany Japan UK France US Domestically produced, efficiency supports energy security 30 25 20 15 10 5 0 Natural Gas Oil Coal Import bill (right-axis)

Ukraine: Activating local EE to meet energy import security challenges Unprecedented energy security challenges resulting from ongoing geopolitical and financial crises Leaders look to energy efficiency to strengthen energy security by decreasing country s reliance on fossil-fuel imports Draft Energy Efficiency Action Plan that outlines energy efficiency measures to achieve energy savings of around 6,5 Mtoe in 2020, equivalent in scale to around 22% of Ukrainian gas imports in 2010 Measures target residential, commercial and public buildings, as well as industry and transport

GtCO2 A clean energy source, efficiency reduces emissions Energy efficiency investments since 1990 have helped to reduce IEA country emissions to below 1996 levels Without energy efficiency investments, estimated IEA member country emissions would have been 870 Mt CO 2 higher in 2014 IEA emissions from fossil fuel combustion and emissions savings from energy efficiency investments since 1990 13.5 13.0 12.5 12.0 11.5 11.0 10.5 Cumulative savings = 10.2 GtCO 2 10.0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Energy efficiency has helped to make the 2 degrees target more achievable by lowering emissions to date Emissions savings Emissions

2008 = 1 Maintaining momentum in a Uneven short-term impacts on demand low oil price environment Indices of new US LDV fuel economy performance, CAFE standard and unleaded gasoline prices 1.75 1.5 1.25 1 0.75 0.5 2008 2010 2012 2014 2016 2018 2020 Measured fleet fuel efficiency Gasoline price CAFE standard Strong policy drivers to insulate EE investments: The EU Energy Efficiency Directive, the US Clean Power Plan INDCs submitted to the UNFCCC should all drive investment Consumption subsidies have been cut in various jurisdictions dampening drop in consumer prices Continued low oil prices could ultimately weaken support

USD billions Energy Efficiency in Buildings: nearly a USD 100 billion market Energy Efficiency Investment in Buildings* estimated at USD 90 billion with 2/3 in the US, China and Germany In the US, and elsewhere, building efficiency investments are growing faster than total buildings investments 100 80 60 40 20 0 Buildings efficiency investments, 2014 2014 US China Germany Other Current trends point to USD 120 billion by 2020 But investment projections fall far short of the estimated USD 215 billion/yr needed by 2020 for 2-Degree Scenario *Includes insulation, HVAC systems, etc. but excludes appliances

CAGR TWh EE: Flattening electricity consumption in IEA countries Electricity consumption in IEA countries has declined by 2% since 2010 Energy efficiency has enabled businesses and households to meet their energy service demands with 2 200 fewer TWh of generation 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Electricity consumption growth in IEA 2 500 2 000 1 500 1 000 500 Electricity savings from efficiency from investments since 1990-1.0% 1971-80 1981-90 1991-2000 2001-10 2011-14 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Low growth is pushing various energy utilities to shift from traditional generation to sale of energy efficiency services Energy efficiency is facilitating the achievement of renewables targets by decreasing the amount of additional GWh required

Market Profiles highlight the diversity of energy efficiency markets Theme Region Findings Energy exporters Russia Rising exports increasing income and domestic Saudi Arabia energy consumption Energy exporters increasingly looking to efficiency to boost export volumes Sub-national government Tokyo Cities and sub-national governments major enablers of energy efficiency markets Seoul Paris Massachusetts Eager to capitalize on multiple benefits of energy efficiency Latin America Mexico Energy efficiency an important supporter of Brazil development objectives IEA Member United Kingdom Using efficiency to adjust to net-energy importer status

In Saudi Arabia, energy efficiency is releasing oil for export revenues Domestic energy consumption has nearly doubled since 2000 reducing share of energy production going to exports: 35% 30% 25% 20% 15% 10% Domestic energy consumption as share of production 5% 0% 2000 2013 Saudi Arabia has implemented efficiency standards on key sources of domestic energy demand including vehicles and air conditioners Air conditioner standards are targeted for 35% efficiency improvement by 2020 (saving 47 million barrels for additional exports, with a USD 2.4 billion value)

In Seoul, LEDs are substituting for Seoul has adopted One-Less Nuclear Plant plan to reduce energy consumption equivalent of one nuclear plant (2 Mtoe) nuclear power http://www.pennenergy.com/articles/pe/2013/10/ https://upload.wikimedia.org/wikipedia/commons/ Plan has retrofit 2 267 buildings enabled market with low interest financing of up to USD 2 million per project Seoul s lighting plan to go 100% LED replacing 2.2 million security and street lights

Massachusetts: a global leader Leading US state on energy efficiency example of subnational government driving market Total energy efficiency investment in 2013 was USD 1 billion led to over USD 2.8 billion in benefits (and over 72 800 efficiency jobs) Market Snapshot: Policies: 1 st in ACEEE ranking Prices: Electricity and NG prices higher than US average Performance: Energy use declined 10% between 2002-12 A global leader in EE market development Castle Square Deep Energy Retrofit https://cstoboston.wordpress.com/2011/12/28/exterior-insulation-progress/

Epilogue

a. Over 115 INDCs, over 140 countries Over 85% of energy related GHG Submitted INDCs (1 October) Submitted INDCs as of early Oct cover over 85% of energy-related GHG emissions, with implications for future energy & emissions trends

Gt INDCs and beyond... 36 INDC Scenario 33 30 27 450 Scenario 24 Room for more energy efficiency stimulus to support greater climate change mitigation action WEO 2015 CC Special Report 2015 2020 2025 2030

b. The multiple benefits of EE

Dirty air prompts free public transport in Paris Public transportation in the capital will be "gratuit" from Friday morning to Sunday night, as officials battle against a spike in "dangerously" poor air quality. Velib' rental bikes and the car-sharing Autolib' scheme are also on the house. Shifting to more efficient transport to fight air pollution March 11, 2014 Credit: Patrick Kovarik AFP

c. OECD and non-oecd action for a low-emissions future 60 GtCO 2 50 40 30 20 10 Other OECD 9% United States 13% European Union 7% Other non-oecd 15% Other emerging economies 14% India 13% China 29% 0 1990 2000 2010 2020 2030 2040 2050 About 70% of the decarbonization action (including through energy efficiency) need to take place in non-oecd countries

c. Growth in Global Energy Demand Over 95% of the projected growth in energy demand between now and 2035 happens outside the OECD (NPS) Source: based on World Energy Outlook 2014

d. Energy intensity to Energy productivity

Energy efficiency for many emerging economies: from doing more with less to to doing even more with more

Energy efficiency for many emerging economies: from doing more with less to doing even more with more raising standards of living and promoting prosperity

Mtoe USD Billions 2005 PPP e. Growth and Energy 20 000 160 000 18 000 140 000 120 000 16 000 14 000 12 000 10 000 100 000 80 000 60 000 40 000 20 000 TPES 6DS GDP (right axis) 8 000 2001 2006 2011 2016 2021 2026 0

Mtoe USD Billions 2005 PPP e. Growth and Energy 20 000 160 000 18 000 140 000 120 000 16 000 14 000 12 000 10 000 100 000 80 000 60 000 40 000 20 000 TPES 6DS BAU-Low EE GDP (right axis) 8 000 2001 2006 2011 2016 2021 2026 0

Mtoe USD Billions 2005 PPP e. Growth and Energy 20 000 160 000 18 000 140 000 16 000 14 000 12 000 10 000 120 000 100 000 80 000 60 000 40 000 20 000 TPES 6DS BAU-Low EE 4DS 2DS High Productivity GDP (right axis) 8 000 2001 2006 2011 2016 2021 2026 0

Mtoe f. China s energy demand... China consumes about 22% (2.8/13.3) of world energy resources China wants to dramatically increase income per capita 3 900 3 600 3 300 3 000 2 700 New Policies Scenario Historically driven by and resulting in higher energy consumption 2 400 2010 2015 2020 2025 2030 2035 China s supply challenge... Based on WEO 2012

f. The emerging importance of demand-side drivers

EJ f. From Peak Oil to Peak Demand? Over recent past: TPES peaked in US in 2007, EU in 2006, Japan 2004 Policies are focusing on peaking demand: Germany to reduce TPES by 50% from 2008 levels by 2050 EE measures in Japan are forecast to decrease TFC by 13% by 2030 US to double energy productivity which would peak TPES even if GDP grew by 3.5% by 2030 Global TPES flattening in the 2DS scenario decoupling from GDP growth 120 TPES trends in EU, Japan and EU GDP, Primary Energy and CO 2 pathways in the 2DS 100 80 60 40 20 United States European Union Japan 0 1990 1994 1998 2002 2006 2010 2014

Thank you Available to download for free at: http://www.iea.org/bookshop/709-energy_efficiency_market_report_2015