ENEFIRST – Making the Efficiency First principle operational

ENEFIRST – Making the Efficiency First principle operational

The EC Horizon 2020 ENEFIRST project runs for 30 months and addresses the issue of the Efficiency First principle. “Energy Efficiency First” or “Efficiency First” (E1st) is a fundamental principle applied to policymaking, planning and investment in the energy sector, which is gaining visibility in European energy and climate policy.

Dominique Ristori, Director-General of DG Energy at the European Commission wrote recently that “E1st is not an advertising slogan but a fundamental principle”.

E1st is a powerful approach to energy policy that could save families and businesses billions of euros in energy costs annually, improve energy security, and accelerate progress toward Europe’s goals for carbon reduction and a clean energy economy. Briefly described, the concept of E1st prioritizes investments in customer-side efficiency resources (including end-use and supply side energy efficiency and demand response) whenever they would cost less, or deliver more value, than investing in energy infrastructure, fuels, and supply alone.

Although in the Energy Union Strategy energy efficiency has been recognised as a resource in its own right at the same level as generation capacity and the E1st as a guiding principle has been brought forward, still numerous barriers impede this principle to be streamlined and the benefits of energy efficiency to be adequately taken into account in financial and political planning and decision making. On the demand side, investments in efficient solutions are hindered by numerous market barriers to individual action; and on the supply side, industry traditions, business models and regulatory practices continue to favour energy infrastructure and sales over lower sales and energy saving technologies.

Departing from the above, ENEFIRST will help making the E1st principle more concrete and operational, better understand its relevance for energy demand and supply and its broader impacts across sectors and markets. This will enable the EU and its Member States (MS) to take the next step from principle to practice by providing a clear definition, understanding its value for the energy system, developing policy proposal and testing those in specific cases.

The objectives of ENEFIRST follow this logic:

1. To define the principle of E1st in practical terms, assess how it has been applied internationally and how it applies to the EU context.

ENEFIRST considers it of utmost importance to develop a clear definition of E1st in the various policy contexts, since existing definitions in the proposed legislation are very high-level and do not provide enough clarity and guidance for policy makers and market stakeholders. ENEFIRST will thus assess the existing approaches of E1st and develop a clear and sufficiently detailed definition of the principle which will also set the conceptual framework for ENEFIRST. To synthesise the various approaches, ENEFIRST will take stock from at least 20 international practices related to the E1st principle and the lessons learned in the areas of Integrated Resource Planning and Least Cost Planning, which are related approaches. The definition of E1st will be developed at both general policy level and specifically for buildings, as a key sector to ENEFIRST. We will develop definitions for at least 5 different policy areas (such as network codes, renewable energy policy, building regulations, capacity markets, tariffs, energy networks and others) in addition to one overarching definition, which will be consulted with experts’ groups. The analysis of the international experience will also enable the design of the steps required for applying E1st in the European energy policy context.
2. To assess the value of applying E1st across different policy areas for buildings’ end-use energy efficiency and to quantify the impacts of increased building energy efficiency for the future energy system in the EU.

E1st considers requiring energy efficiency in all types of energy investments in all sectors, and then prioritises efficiency after assessing all investment options that can reveal that customer-side resources are a better value. To this end, ENEFIRST adheres to the E1st principle that public policy should promote end-use efficiency whenever energy savings provide greater value than conventional supply-side options. To capture the maximum impacts, ENEFIRST focuses on buildings as the most important sector in terms of the potential for energy savings . The impact on the strategies for energy efficiency in buildings will be assessed through quantifying the potential value of applying E1st to at least four different policy areas, including but not limited to renewable energy supply, electricity and heat networks, capacity markets and others. This assessment will be based on established methodological approaches (such as the Total Resource Cost (TRC) ) that have been used internationally to quantify costs and impacts of investing in energy demand-side versus supply-side resources. These costs and impacts for improving end-use energy efficiency in buildings will also demonstrate the wider benefits, beyond the building owners and inhabitants/tenants, to the energy system (for example avoided distribution and transmission capacity costs). The quantitative impact assessment in ENEFIRST takes place in the context of energy systems in Europe that are faced with growing electrification on the demand side (in particular electric cars, heat pumps, electric processes in industry) and growing distributed renewable electricity generation on the supply side (including avoided investment in grid and generation infrastructure). End-use efficiency as well as supply side efficiency have direct impacts on the size of the energy system and the costs of running it including grid infrastructure and generation capacity. The quantitative impact assessment will rely on model-based economic analysis of energy system costs and trade-offs between end-use efficiency and network/supply options, on the one hand, and multi-criteria analysis and multiple impacts of these trade-offs, on the other hand. The modelling work will consist of 3 scenarios from an integrative work of 5 different models (related to the buildings and the energy system as a whole). The first scenario is a reference development one, and the other two ENEFIRST scenarios consist of a) optimizing only the energy system cost and b) making use of a multicriteria analysis. Furthermore, these scenarios will be complemented by 5 more detailed modelling case studies where both the user and overall economic perspectives will be considered. The cases have been selected so to cover different planning levels (micro, meso, macro-view to E1st), different stakeholder perspectives (individual building owner, municipal perspective/city planner, industrial/ commercial zones) and different local conditions (in particular existing and newly-to-be-built infrastructure. To extract the knowledge for the assumptions on the quantification of the effects, consultations with an Expert Advisory Board and the ENEFIRST Stakeholder Community (consisting of 30-40 key EU stakeholders) will take place.

3. To identify key policy areas for the application of E1st and develop policy proposals for its implementation in the EU Buildings Sector.

E1st is sometimes understood as simply more energy efficiency – however, this is not what it means. To unveil the actual meaning of E1st (to assess whether demand-side alternatives can provide the same services as supply-side resources more cost-effectively) ENEFIRST will focus on energy efficiency in buildings, which are influenced by a range of different policy areas. Policy areas in the building sector often thought outside of energy efficiency policy (e.g. energy networks) will be analysed in terms of their suitability for application of the E1st principle through policy interventions resulting in an increased buildings energy efficiency. The preconditions in the policy landscape for introducing the E1st in buildings will be assessed in depth with regard to at least 4 policy areas, that cover the energy networks and power market, the investment market and tenancy regulation, innovation stimulations, in three regions or MS (selected in synergy with five modelling case studies) and an analysis will be carried out of how the integration of E1st in policies in other countries can be transferred. In order to move the debate in Europe beyond the high-level definition of E1st and adoption in legal documents in policies in buildings, ENEFIRST will develop a set of 10 customized policy proposals for the implementation of the E1st that will address at least 5 specific barriers. The applicability of the E1st policy guidance will be also systematically tested and validated with the ENEFIRST Stakeholder Community members through a series of consultations and workshops to increase the project’s policy consistency.