Pages 110 Energy Efficient measures and Their Impact on Abatement

Transcription

1 i. ENERGY EFFICIENCY OPTIONS AND THEIR MACROECONOMIC IMPACT: A FIRST LOOK

2 page 110 ENERGY EFFICIENCY OPTIONS AND THEIR MACROECONOMIC IMPACT: A FIRST LOOK Energy efficiency measures hold out the promise of relatively low cost abatement that works directly to delink carbon from growth, the essence of a low-carbon economy. While energy sector abatement options are generally about reducing emissions intensity (CO 2 e created by energy use), energy efficiency focuses on reducing energy intensity (energy required for each euro of output). Both of these factors will reduce Poland s emissions elasticity (with respect to growth) (see Figure 21). Poland s economy is still more than twice as energy intensive as the EU average, suggesting that potential improvements should be easy to find. Indeed, energy efficiency measures are essential to the MicroMAC curve analysis, and many are growth-enhancing by 2030 in the MEMO model analysis. Deeper detailed analysis of energy efficiency options in Poland is needed to be able to provide more specific recommendations on how to overcome implementation obstacles that are preventing households and businesses from realizing the financial savings embedded in many of these measures. Energy efficiency measures play a central role in the MicroMAC curve analysis because of their substantial potential, apparent low price, and impact on growth. Together energy efficiency levels generate about one-third of the MicroMAC curve s potential abatement for Poland. Many of these measures are assessed to have negative financial costs, generating net savings through reduced energy costs after an initial investment. Lastly, energy efficiency measures in general reduce the energy intensity of the economy, beginning the necessary delinking of economic growth from CO 2 emissions. Of the 60 energy efficiency measures analyzed by the MicroMAC curve model, about two-thirds of the abatement potential is in the buildings sector (at an average savings of 14 per tco 2 e), including better insulation, more energy-efficient appliances, water heaters, and lighting. About 20 percent of savings come from energy efficiency measures in the transport sector (saving 8 per tco 2 e), from more fuel-efficient vehicles. 72 The remaining 15 percent is in industry (saving 6 per tco 2 e), and such measures as improving motor systems in chemical plants and implementing energy efficiency projects in petroleum and gas (see Figure 67). Abatement measures do not in reality have negative net costs after implementation barriers are considered. Households and businesses are not ignoring significant savings opportunities from implementing these measures. Instead, it is accepted that various implementation barriers are discouraging action. As mentioned in section e, the types of barriers likely to be preventing up-take are: high upfront investment costs (for example, for an energy-efficient car), principalagent problems (such as the owner, operator, occupant, and bill payer of a building being separate entities), and lack of information (about what savings are likely). A fourth, and potentially most difficult obstacle, is the costs of implementation across a high number of small entities (for example, with lighting). In the absence of analysis of these barriers, a simple assumption is that no NPVs for abatement levers can drop below zero. If so, then the weighted average cost across the MicroMAC curve of 10 per tco 2 e will rise to 15 per tco 2 e, and the overall cost of implementing the MicroMAC curve levers will rise by at least 50 percent. 72 The MicroMAC curve analysis includes transport energy efficiency measures in the broad category of energy efficiency. These levers, combined with other transport measures, are considered together by the TREMOVE Plus model of road transport in section j.

3 page 111 Figure 67. Microeconomic Marginal Abatement Cost (MicroMAC) curve for energy efficiency levers Cost EUR/tCO 2 e Buildings Transport Industry DHP Behavioral/procedural changes Improved maintenance & process control Water heating replacement of electric, Behavioral changes and improved maintenance & process Energy efficiency projects requiring CAPEX at overall plant level (co-generation) control in upstream oil and gas production Energy efficiency II (general) Retrofit HVAC, Energy efficiency Lighting new build controls, GHP projects requiring Retrofit HVAC maintenance, Waste heat recovery CAPEX at process Energy efficiency (general) unit level Aggregated new build efficiency package, 80 Motor Systems, new build DHF Lighting retrofit controls, 70 Lighting Appliances, 60 switch CFLs Lighting T12 to T8/T5, Retrofit building envelope, 50 to LEDs, CHP, retrofit 40 More energy Retrofit building envelope, package 2, 30 efficient new Co-generation, CHP, new build 20 builds in new build GHF 10 upstream Aggregated new build Lighting switch CFLs to Diesel LDV energy effic. -40 efficiency package, LEDs, Gasoline LDV energy efficiency -50 Electronics, consumer, -60 Motor Systems, retrofit Lighting switch incandescents to LEDs, Co-generation, retrofit Lighting switch incandescents to LEDs, Retrofit HVAC controls, Gasoline LDV energy efficiency Appliances refrigerators, -110 Retrofit building envelope, Electronics office, Total abatement potential: 68 MtCO 2 e -120 Energy efficiency projects requiring CAPEX at process unit Average cost: -14 EUR/tCO 2 e -130 level in upstream oil and gas -140 Retrofit HVAC electric resistance heating to electric heat pump, Retrofit HVAC gas/oil heating, Abatement potential MtCO 2 in 2030 Note: Energy efficiency ienc measures es include transport rt sector. Each column is one of the 60 abatement atem ent measures es (only the most significant nt ones are named). The height ht of the columns is the cost in per abated tco 2 e. The width is the amount emissions sion can be reduced. ed. Some measures are shown with net benefits efit (negative costs). s). Source: McKinsey technical paper. Initial analysis of the macroeconomic impact of energy efficiency measures in the MEMO model found that although most energy efficiency measures individually have little potential, if they could be grouped together for implementation, they could be an important carbon abatement tool. Figure 67 presents the MacroMAC curve for just energy efficiency interventions. Among energy efficiency measures, the waste management levers are the most promising for abatement potential and also for their impact on economic growth. As for low-carbon energy supply options, energy efficiency measures are expected to switch from growth hampering towards growth enhancing as soon as the investment phase is finished, and the curve flattens between 2020 and For example, efficiency and envelope shifts drastically from far on the right, with the most costly measures in terms of growth, in 2020, to the far left and the most growth-enhancing.

4 page 112 ENERGY EFFICIENCY OPTIONS AND THEIR MACROECONOMIC IMPACT: A FIRST LOOK Figure 68. Macroeconomic Marginal Abatement cost (MacroMAC) curve for energy and fuel efficiency micro-packages, ckages 2020 and 2030 Emission abatement impact, GDP elasticity Abatement potential, % change in 2020 Emission abatement impact, GDP elasticity Abatement potential, % change in 2030 Note: Model closure is increase in VAT. Source: IBS technical cal paper, pe MEMO model simulations. s.

5 page 113 Exploiting the energy efficiency agenda is not easy, but it is often seen as a w in-win option, with benefits realized relatively quickly and lower upfront costs. Much of energy efficiency potential remains untapped because of the many obstacles to investments: inadequate domestic energy prices and lack of payment discipline, insufficient information on suitable technologies, too few contractors and service companies, and financing constraints. The government needs to address these issues in a coordinated manner. Effective energy efficiency interventions combine critical market-based approaches (which send correct price signals) with irreplaceable regulatory activity (which supports changes in practices and behaviors of economic agents). Numerous but limited energy efficiency measures deliver little abatement individually, but a package of the most growth-enhancing measures could achieve critical mass (and warrant policymakers attention). Rather than focusing only on the interventions capable of significant GDP impact on their own, a package of small but effective levers could raise growth to a greater extent and at lower macroeconomic cost. Thus, an abatement policy oriented to a broad range of energy efficiency measures could be more effective in the long term in stimulating economic growth than a policy focused solely on the largest interventions.