Invitation. The Danish Energy Association invites you to join in the debate on a new energy efficiency policy. Monday, 26 May 2008.

Transcription

1 Invitation Energy Excellence how to achieve new, efficient energy consumption The Danish Energy Association invites you to join in the debate on a new energy efficiency policy Monday, 26 May 2008 Comwell Kolding It is our duty as energy companies to work to achieve the best possible utilisation of energy, which will benefit our businesses, the economy and our customers. Poul Arne Nielsen, Chairman, The Danish Energy Association

2 Dear Reader Energy is of vital importance if we are to have a strong Denmark with a high standard of living, economic growth and developing businesses. But it is no longer sufficient for there to be an ample supply of energy at a competitive price. Energy consumption and production also need to be environmentally sustainable. The EU has published a new, very ambitious energy and climate policy, which was followed up here in Denmark with a new energy strategy in February. The overriding goal is to cut carbon dioxide (CO2) emissions, including in areas where there is not already a joint European instrument for imposing an effective emissions cap. Whereas the EU imposes a joint European cap on emissions from power stations and large-scale industry through its cap-and-trade system, it is a free-for-all for motor vehicles, agriculture and individual oil and gas consumption in homes, the public sector and small and medium-sized industrial enterprises, all of which are outside the EU Emission Trading System (ETS). In other words it is up to Denmark itself to develop a policy that will enable us to bring CO2 emissions from those sectors not covered by the ETS under control. A much stronger commitment to making energy consumption more efficient will be a vital core element in the solution. The political agreement that has just been reached in Denmark contains a large number of concrete measures for incorporating more renewable energy in the energy system, but it offers less in the way of concrete proposals on how to accelerate energy efficiency. It is absolutely vital that Denmark should develop a new energy efficiency policy Energy Excellence. The politicians will have to put a new framework and incentives in place. The energy companies want to help find a solution, so the Danish Energy Association is inviting you to join in the debate on how we can put Denmark in a class of its own with an excellent energy efficiency policy. The challenges are huge 1. There is still plenty of scope for efficiency improvements Danish energy consumption has by and large remained unchanged for years despite strong economic growth. Nevertheless, there is technical and economic potential to make energy consumption even more efficient by at least 25 per cent of current consumption. But this figure could easily become even larger if we get a grip on energy consumption by motor vehicles, for example. 2. There are many barriers Consumers, businesses and public institutions do not always act in accordance with political goals. Consumers buy goods that are stylish rather than energy friendly. Or they cannot afford large one-off investments in energy savings. Businesses concentrate on short payback times and so overlook the potential for energy savings. Public institutions have separate operating and investment budgets, so there is not always the necessary motivation to be energy efficient. The finance market does not focus on energy efficiency. Energyfriendly behaviour is too complicated for consumers. 3. Renewable energy, energy efficiency and flexibility go hand in hand Denmark needs to expand renewable energy significantly in the next few years. The political requirements have been set as a percentage of our energy consumption. This means that energy efficiency measures will become more valuable, as making energy savings will reduce the amount of money we have to spend on supporting renewable energy. As the amount of wind energy in our electricity system increases, we will find power becoming cheap at certain times of the day and production exceeding domestic consumption. The work to improve energy efficiency is therefore not simply about saving energy and making better use of it, but just as much about moving consumption to times when we have a plentiful supply of renewable energy. Gross energy consumption needs to fall by a total of 4 per cent by 2020 compared with The Energy Policy Agreement, 21 February 2008

3 Facts The political objectives are ambitious The EU s heads of state and government have charted a new course in energy and climate policy. Europe needs to cut CO2 emissions substantially and reduce the amount of energy imported from abroad, in practice oil and gas from politically unstable countries. The means of doing this are as follows: making energy consumption for transport, power generation and heating more efficient expanding renewable energy limiting CO2 emissions from power stations and large industrial concerns by means of the EU ETS (sectors included in the ETS) limiting greenhouse gas emissions from cars, agriculture and individual oil and gas boilers in homes, public institutions and small and medium-sided enterprises (sectors not included in the ETS). In February s energy policy agreement the Danish Parliament and Government determined that Denmark should contribute to the joint European goals. Denmark must: step up its efforts to make energy consumption more efficient speed up the expansion of renewable energy guarantee a reduction in greenhouse gas emissions from sectors that are not covered by the EU ETS The Danish Energy Association s calculations show that investment in the new energy and climate policy will cost at least DKK 45 billion in the period up to It won t all be costs, however. There will also be revenue from new jobs, higher turnover for businesses, increased exports of Danish goods to the rest of the world, etc. 4. Europe manages power stations and large-scale industry. Denmark will have to manage the rest itself The agenda for Danish energy and climate policy has been set by the EU. This provides a new fulcrum for Denmark s implementation of energy and environment policy tools, including renewable energy and energy efficiency measures. We therefore differentiate between greenhouse gas emissions from sectors included and sectors not included in the EU ETS. Sectors included in the EU emission trading system: Power stations that produce electricity and district heating plus industrial enterprises with their own large energy installations are subject to the EU ETS. These enterprises have to buy CO2 allowances to cover their emissions. The number of CO2 emission allowances has been fixed as a combined cap for the EU and enterprises are free to trade them within the EU s borders. There are therefore no national targets for reducing CO2 emissions. But this does not rule out energy efficiency measures in this sector. Investments in energy-efficient technology are an advantage for power stations and energy-intensive industrial enterprises if they are cheaper overall than buying allowances. The same applies to savings in relation to the individual consumer. Such savings do not have a direct impact on Denmark s CO2 reduction targets, but will save money on the energy bill. Sectors not included in the EU emission trading system: Emissions from sectors not included in the EU ETS include fuel consumption in non-energy-intensive enterprises, oil and gas consumption for heating homes and public institutions, petrol and diesel consumption by motor vehicles and agricultural emissions of methane and nitrous oxide from livestock production and fertilisers. In contrast to the situation with the sectors included in the ETS, Denmark has a national duty to limit emissions of greenhouse gases from the sectors not included in the ETS. Denmark will probably have one of Europe s toughest national targets for reducing greenhouse gases in the sectors not covered by the ETS. According to the latest draft of the EU directive, we will have to reduce emissions in these sectors by 20 per cent by 2020 the European average is 10 per cent.

4 A long way to go The sectors not covered by the ETS produced 37.5 million tonnes of CO2 in This figure has to be cut by 20 per cent, or 7.5 million tonnes of CO2, by This may rise, however. If transport continues to increase as it has done over the last 15 years or if the EU target is increased, the required cut will be at least 3 million tonnes higher. Part of the solution lies in the new Danish energy agreement of February 2008, but far from all of it. The Danish Energy Agency estimates that the energy agreement will reduce emissions by around 3.3 million tonnes of CO2 by That leaves Denmark with a shortfall of at least 4 million tonnes of CO2. Such a deficit represents a huge task for Denmark. This is how CO2 emissions are distributed between the sectors not included in the ETS (2005). Carbon emissions must be reduced by 7.5 million tonnes of CO2 by This means that we will have to bring greenhouse gases from transport, methane and nitrous oxide emissions from farming and individual oil and gas consumption under control. A small part of the reduction, upwards of 1 million tonnes of CO2, can be covered by what are known as CDM projects, i.e. projects to reduce carbon emissions in developing countries. The main task of a new energy efficiency policy CO2 emissions from sectors not included in the EU ETS m tonnes 37,5 13,8 12,2 5,1 3,6 1,4 1, Transport Farming, methane & nitrous oxide Fuel in smaller enterprises 30 Oil & gas in households Waste Industrial & greenhouse gases 1 The main task of a new, stronger commitment to energy efficiency on the part of Denmark would have two focal points: We must concentrate on energy efficiency in the sectors covered by the ETS as long as it is cheaper than the cost of buying CO2 emission allowances We must expand, strengthen and intensify our commitment in the sectors not covered by the ETS petrol and diesel consumption in the transport sector, methane and nitrous oxide emissions in farming, and oil and gas consumption in smaller enterprises and for heating homes and public institutions otherwise Denmark will have no chance of meeting its international obligations in the sectors not covered by the ETS. Otherwise Denmark will not be able to become independent of oil and gas imports from abroad in the long term. Let s suppose Even with far-reaching initiatives there is a long way to go: If we cut 25 per cent of heat consumption in private households with their own oil or gas boiler 10 per cent of industrial energy consumption in the sectors not included in the ETS the cattle population by 10 per cent 1 If we convert 100,000 households with their own oil boiler to heat pumps 10 per cent of the car population to electric cars 2 we will achieve a total reduction in the sectors not included in the ETS of 900,000 t CO2 500,000 t CO2 250,000 t CO2 430,000 t CO2 380,000 t CO2 2,460,000 t CO2 1 The cattle population is 1,600,000 animals, emissions: t CO2 per animal per annum 2 Total car population: 1,900,000 cars, emissions: 2 t per car per annum (calculated of the basis of 140 g/km, 15,000 km per annum)

5 Nine principles for a new energy efficiency policy 1Energy efficiency is and will continue to be a central tool in energy and climate policy. Denmark needs to set out a cost-effective, targeted commitment right A new national climate strategy for sectors not included in the EU ETS A new overall carbon reduction strategy needs to be drawn up for the sectors not covered by the ETS farming, transport and individual oil and gas consumption in smaller enterprises, homes and the public sector. The reduction required is substantial and, although 2020 is a long way off, we need to get started if the expected target of 20 per cent is to be achieved. now by strengthening its existing work and adding new, targeted initiatives. 2 An intelligent, flexible energy system Energy efficiency in the sectors not covered by the ETS must be given top priority. But that is not enough. Both farming and the transport sector will also have to reduce their emissions by other means. A new, intelligent energy system in which we fully exploit the best power stations and offer a free choice of fuel. Production must be flexible. We must utilise excess electricity for immersion heaters, heat pumps and electric cars. The power grid must be adapted to carry electricity over large distances across national frontiers, while district-heating networks must be connected to ensure better utilisation. Flexible consumption must be promoted with a view to reducing end consumption and moving it to times when we have plenty of renewable energy. Taxes in the sectors not included in the EU ETS must support energy policy targets Denmark is in need of a fundamental overhaul of taxes to ensure that they support energy and climate policy decisions in the sectors not included in the ETS. Joint taxes and allowances in Europe are often an effective tool in the area covered by the ETS. National taxes, on the other hand, could harm the Danish economy. To avoid distortion between sectors that are covered by the ETS and those that aren t, the CO2 tax for sectors not covered by the ETS should continuously be adjusted to the same level as the cost of CO2 emission allowances.

6 Energy-excellent enterprises Energy-efficient enterprises and their products should be labelled so that everyone knows that such enterprises are making a special effort. Greater energy efficiency is a vital factor in ensuring competitive products, jobs, growth and less CO2. A special effort is needed in respect of enterprises where it is not possible to use energy consumption taxes for reasons of competition. We must promote energy efficiency through energy management and energy-conscious planning, while the active involvement of the energy companies in ensuring energy savings in trade and industry must be retained. 4Transport with less petrol and diesel Denmark needs to rein in transport if it is to achieve its CO2 targets. Electricity consumption for electric and plug-in hybrid cars must be exempt from tax until such vehicles are commercialised. The road tax for all vehicles must reflect actual environmental impact. Danish transport policy must be based on energy and climate policy, as road transport accounts for 25 per cent of total Danish energy consumption. The Danish Infrastructure Commission must therefore include energy considerations in its recommendations, with examples being the expansion of public transport and incentives such as road pricing and tolls. 6 5 Green buildings with fewer kilowatt-hours New buildings must be energy efficient. This can be dealt with through building regulations. The real challenge lies in the existing housing stock. It needs to be much more energy efficient and use far less heat. In this area in particular there is a need for a robust strategy to enable us to make serious inroads into the energy hungriness of buildings. A special effort must be made to cut back on the use of oil and gas for heating. We need accelerated energy labelling of homes, offices and public buildings, possibly combined with progressive property taxes that reward energy efficiency. Information must be targeted at consumers so that it becomes simple and straightforward for them to use energy efficiently.

7 Organisation with the big picture in mind 7Denmark needs to reorganise its energy efficiency 8 work. This should ensure that the existing commitment to energy savings is maintained with the substantial addition of a special commitment to the sectors not included in the EU ETS. Cooperation between existing players must be strengthened, there needs to be a clear division of responsibility and there must be a joint strategy. Denmark is in a unique position in that it has energy companies that also take responsibility for energy efficiency. This position needs to be enhanced, with the energy companies also making an active contribution to meeting the challenges presented by the sectors not included in the ETS. The authorities, energy-saving players and customers must form a partnership that takes stock every two years and adjusts its efforts if necessary. Danish leadership on standards Denmark should work towards more ambitious European requirements for energy efficiency in those products that can be sold on the European market. Europe should lead the way when it comes to energy efficiency in cars and energy-consuming products. Denmark must exert pressure by putting forward its own suggestions for joint European policy on energy-efficient products. Not necessarily with a view to establishing specific requirements for the Danish market, but in order to put pressure on the European Commission and other European countries. Denmark must be a trailblazer just as we are when it comes to combined heat and power, wind turbines and energy efficiency. 9 Research for the future Denmark needs more energy-efficient, consumer-friendly products and solutions on the shelves. More money needs to be put into researching, developing, demonstrating and commercialising energy-efficient products for consumers, businesses and the public sector. Some of the money must be targeted at making heat consumption more efficient, particularly in the existing housing stock. The time frames for grants must be long-term, with grants running for at least 10 years at a time. It is vital for the results to be put to use and a close link between research and production must be ensured.

8 Denmark s national energy agreement A number of objectives for Danish energy policy were established in the Danish Government s energy policy agreement of 21 February The agreement will run until 2011 and its sights are trained on In particular, the agreement focuses on reducing Denmark s dependence on fossil fuels and increasing the proportion of renewable energy. It sets out national Danish targets for energy efficiency and expansion of renewable energy. Note: In the EU s proposal Denmark is supposed to increase the proportion of renewable energy to 30 per cent by Denmark and the EU use different methods of calculation. The 30 per cent calculated using the EU s method is equal to 26.8 per cent in the Danish system. Link between energy efficiency targets and renewable energy The proportion of renewable energy will be dependent on energy consumption. Twenty per cent renewable energy can be achieved by 2011 by using energy efficiency measures or establishing renewable energy. The lower energy consumption is, the less renewable energy will have to be expanded. For example, energy savings equivalent to the energy consumption of 2,000 households can be made instead of setting up a 2 MW offshore wind turbine at a cost of around DKK 35 million. Gross energy consumption PJ Proportion of renewable energy % , , End energy consumption Energy intensity trends PJ Transport Households Non-energy purposes Manufacturing Commerce & services Source: The Danish Energy Agency s statistics for PJ Source: The Danish Energy Agency s statistics for 2006 Energy intensity, end energy consumption index GNP in 2000 prices End energy consumption index In many ways energy consumption trends and the development of energy-saving policy in Denmark can be described as a success story. As the graph shows, total energy consumption has only risen slightly since In the same period GNP grew by about 50 per cent. This means that energy intensity measured as energy consumption per unit of GNP has fallen considerably. Please note that international shipping is included in GNP, but not end energy consumption. Produced by The Danish Energy Association Rosenørns Allé 9 DK-1970 Frederiksberg C For more information visit May 2008