EU's Energy Efficiency: Innovation Through Regulation

By Dominique Ristori, Director-General for Energy, European Commission
Spring 2014

Energy is one of the biggest challenges facing Europe in the coming decade. Our dependence on imports, in particular on oil and gas, is a matter of great concern. It is set to grow to more than 80% by 2035, and this against a backdrop of increasing global competition for energy resources. Despite having become one of the least energy-intensive economies in the world, more investments are needed to increase our competitiveness. More renewable energy, more energy efficiency and more low-carbon technology will help make Europe more competitive, more sustainable and enhance our energy supplies.

The European Union has been a motor of the development of a highly-advanced policy framework for Energy Efficiency: the Energy Efficiency Directive, the Ecodesign and Energy Labelling Directives, and the Energy Performance of Buildings Directive are the four pillars boosting innovation in the field.

The Energy Efficiency Directive, adopted in October 2012, provides the framework to achieve the 20% energy efficiency target in 2020, tapping energy savings potential in all phases of the energy chain, from generation to consumption.

As regards products, the Ecodesign and Energy Labelling Directives set minimum efficiency requirements, in order to remove the worst performing products from the market, and label the energy performance of products with a view to raise consumers' awareness of highly energy-consuming products.

As for buildings, the revised Energy Performance of Buildings Directive sets the target for all new buildings to be 'nearly zero-energy' by 2021, allowing the European Union to decrease energy consumption, greenhouse gases emissions and energy bills considerably.

Despite having been relatively recently adopted, the regulatory framework in energy efficiency has generated very concrete impact in terms of innovation - with positive results in terms of energy prices and costs.

The regulatory measures on phasing-out old, highly energy-consuming appliances and promoting new, energy efficient appliances had a direct stimulating effect on product development and innovation, improving the competitiveness of the European industry. For example in 2009, almost 90% of refrigerators, washing machines and dishwasher's sales corresponded to an efficiency class equal or above 'A' class. On average, about 30% of new refrigerators sold in 2009 were in the highest efficiency class (labels 'A'’ or 'A++') compared to less than 10% in 2005.

As for buildings, the introduction of energy efficient measures in buildings (e.g. better insulation) contributed to a significant decrease of the average energy consumption per dwelling: 11% for Ireland, 16% for Sweden, 27% for Denmark, around 35% for France and Netherlands, and even around 50% for Germany and Slovakia between 1990 and 2009.

Besides regulation, innovation also needs effective financial instruments. To speed-up the energy transition towards a low-carbon, efficient, affordable and sustainable energy system, the EU has stepped-up its efforts through the new EU 2014-2020 Financial Framework. 23 billion Euros are now ring-fenced for low-carbon investments under the European Structural and Investment Funds. A relevant part of this funding should boost the market uptake of both new and mature energy efficient technologies. A large part of the funding is expected to be channelled through innovative financial instruments, combining public and private finance. Further, more than 1 billion Euros is available for energy efficiency research and innovation under the Horizon 2020 Program.

As financing is one of the key challenges for energy efficiency investments, new business models and financing products are needed to attract private capital. Therefore, specific attention is given to supporting innovation in this area. Following the Communication on Energy Technologies and Innovation, adopted in 2013, an EU Integrated Roadmap is currently under development by the Commission services and stakeholders. The Roadmap will address the whole energy system and ensure better coordination of available funds at EU and national level.

Evidence shows that innovation in energy efficiency can bring forth growth, a renewed and dynamic industrial competition, and job creation. It brings savings for consumers and promotes less dependence on energy. Innovation in energy efficiency is without any doubt the way to make Europe a world leader in energy.