The cheapest and greenest energy is the energy we don’t use

Recognising the crucial need to use energy wisely, Jürgen Fischer, Danfoss president of Climate Solutions, argues the importance of energy efficiency in the drive to reduce greenhouse gas emissions. 

As governments pour huge amounts of money in restarting the economy after the pandemic, it is crucial that this money is wisely spent so investments generate jobs and boost economic growth, while also having positive, measurable environmental impact and reduced emissions. 

Energy efficiency should be at the heart of all these efforts, but is still not getting all the attention it needs to make it real.

The EU Commission’s fit-for-55 package is a set of policy measures to reduce greenhouse gas emissions by 55% by 2030 to achieve carbon neutrality by 2050. The previously existing 40% target was deemed not high enough to achieve this goal. 

The greenhouse gas target is accompanied by dedicated targets for renewables and for energy efficiency, which have also been increased. Renewables from 32% to 40% and energy efficiency from 32.5% to 36% for final energy consumption. 

Until now, out of the three targets, energy efficiency has been the only one not binding – and the only one where the EU is strongly lagging behind. This has now changed. In the new proposal by the EU Commission, the energy efficiency target is also binding. Altogether, these are good news. But at the same time, especially the energy efficiency target is still too low. Energy efficiency can contribute significantly to achieving the EU’s climate and energy goals – and also deliver on the Paris Agreement.

Good sense

Perhaps it’s not as exciting as talking about renewables and greenhouse gas emissions, but energy efficiency is the most measurable solution, and globally, an estimated 9-30 jobs can be created for every million dollars invested in energy efficiency. 

It also makes good sense to make a green restart of the economy – and decarbonise the economy – because, according to the IEA, more than 40% of the savings in the Paris Agreement need to come from energy efficiency for the cheapest, fastest transition. But ironically, the IEA’s brand-new sustainable recovery tracker reveals that only 2% of the money that governments are spending to rebuild their economies is going to clean energy measures. This is difficult, if not impossible, to understand – energy-related emissions account for roughly 80% of total greenhouse gas emissions in Europe. The energy transition is therefore key to achieve climate neutrality.

Challenges

However, switching from fossil fuels – where energy is supplied steadily and whenever needed – to fluctuating renewables comes with several challenges. Namely, the fact that supply does not always match demand.

Consider, for example, that to match peak loads, the grid infrastructure needs to be built up accordingly and, at the end of the day, the consumer will have to pay for this. At a time when people are starting to notice how much they personally are going to have to spend to reduce carbon emissions, if the focus is only on renewables and taxing emissions, this can well lead to a situation where governments don’t get the much needed backing for their climate related measures.

At the end of the day, the cheapest and greenest energy is the energy we don’t use. It is urgent for governments to spend wisely, investing in energy savings and energy efficiency. A higher ambition for energy efficiency with a 40% binding target would be significantly better because it also boosts the economy, creating jobs at local level – exactly where we need them to support the economy and a green restart after the pandemic.

Opportunities

Concretely, to achieve the increased overall targets for greenhouse gases, renewables and energy efficiency, the EU’s fit-for-55 package builds on the review of several key policy measures including, but not limited to, the Energy Efficiency Directive, the Renewable Energies Directive, the Energy Performance of Buildings Directive and the EU’s Emission Trading Scheme.

All measures combined offer great opportunities to reduce greenhouse gas emissions in the most cost-effective way. For example, by boosting a move towards a circular use of energy and, by doing so, reducing the energy demand. This includes a more systematic use of excess thermal energy such as waste heat recovery from industrial or cooling processes as in data centres or supermarkets and feeding it into district heating networks. 

Technical building systems are another priority area, particularly in the context of renovating the building stock. This includes heat pumps, one of the key solutions to decarbonise the heating sector which is still mainly based on fossil fuels, and digitised solutions such as building management systems.

Such targeted measures to use energy wisely will ensure that the on-going and crucial decarbonisation of the power sector will not come at the expense of the consumer, while making sure that sector integration with the electrification of heat and transport will be truly meaningful and achieved with green electricity.

There is no shortage of solutions. Stakeholders need to work together from municipalities through to utilities, planners, and industry to make them happen on the ground. Finance ministers and treasury secretaries around the world need to get much more involved in the green transition to ensure that money is wisely spent so that investments generate jobs and boost economic growth, while also having positive, measurable environmental impact and reduced emissions.

Climate change is real. The mix of extreme heat, longer droughts, warming permafrost, melting icebergs, and rising sea levels must be taken seriously if we want our children and future generations to inherit our planet.