Making “Step changes” in energy efficiency
Building on experienced success.
Hans NilssonChairman of the IEA DSM-Programme
FourFact ABwww.fourfact.com
Energy-use in the IEA-11
Source: 30 years of energy use in IEA countries
Actual energy use
20
40
60
80
100
120
140
160
1973
1980
1985
1990
1995
1998
Ex
ajo
ule
s
49%49%
Hypothetical energyuse without savings
1975
AUSDEKFINFRAGERITAJAPNORSWEUKUS
20%
Additional energy use with1973 intensity = Energy saving
The rise in welfare depends more on energy efficiency improvements than on
growth in energy use!
Energy efficiency – The most important means to reduce GHG
1
2
3
4
5
Source: The IEA EnergyTechnology Perspectives, 2006
The best way to satisfy a growing need for energy services
Time
Demand
System capacity
+ 1 kWh
-1 kWh
Should be the cheaper of the two options:More supply or less demand
AB
Difference in Electricity Investment in the Alternative vs. Reference Scenario
2003-2030
Additional investments on the demand side are more than offset by lower investment on the supply side
-2 000
-1 500
-1 000
- 500
0
500
1 000
bil
lio
n d
oll
ars
(200
0)
Difference
Additional demand-sideinvestment
Efficiency measures Avoided supply-side
investment
Generation
Transmis-sion
Distribu-tion
Source WEO 2004
Energy Efficiency is the cheapest resource
Negative Costs!
The curse of the Energy Efficiency
• Energy Efficiency is invisible
• Energy Efficiency is not a Product, but a characteristic (with products in comparison)
• Energy Efficiency is delivered in many small packages
• …..and on different occasions
LARGE-SCALE ENERGY EFFICIENCY
“Mandating” Market Acceptance
StandardsAgreedactions
Delegated
Actions Commitments
Price-responsivecustomers
“Commoditise” for Non Price-responsive
e.g. VoluntaryAgreements;TechnologyProcurements
e.g. Muni-cipalities Planning;FEMP
e.g. White Certificates
e.g. ESCO; Labels, Branding e.g. Taxes;
DR (elasticity)
e.g. MEPS;Top-runner;Energy Star
But there are several means
Market Transformation
Product Performance
Market Penetration
Base case
Preferred Case
NEW
MORE
LESS
Market Transformation
Product Performance
Market Penetration
Base case
Preferred Case
TechnologyProcurement (TP)
Aggregatedproc. (AP)& Labels
Standards& Directives
Means for accelerated diffusion
Diffusion curve
Time after introduction
Technology Procurements,Demonstration
Feed-in tariffs,Certificates,Campaigns
Labelling,Training
Comprehensiveadaptablestrategies
Join
t Res
earc
h on
a)Te
chno
logi
es
b) M
arke
t res
pons
e
(Res
ult =
Pot
entia
l * A
ccep
tanc
e)
The (textbook) market
Flow of goods
Relation
Actor
Influent
User
SUPPLIER
Price
Quantity
The (real) market
Wholesale
Retailer
IInstaller
Owner
Service
Consultant
Subsupplier
Flow of goods
Relation
Actor
Influent
Authority
User
SUPPLIER
Energy Efficiency has multiple dividends
• Employment• Industrial development• Poverty alleviation• Holds back prices in supply• Reduces pressure on
supply reserves
• Cost• Environment/Climate
Energy Efficiency is the first step on the road to sustainability
Supply
High Density (e.g. fossil, nuclear)
Low Density (e.g. solar, wind, bio)
End-
Use
of E
nerg
y
High Efficiency (Low Intensity) e.g. CFL and LED lighting; Adjustable speed drives
UNECONOMICAL
SUSTAINABLE
Low Efficiency (High Intensity) e.g. Incandescent lamps, Direct electrical heating
PRESENT SYSTEM
HARDLY FEASIBLE
Thank you!
EXTRA MATERIAL
1. The learning investments have to be covered and recovered
• Learning investments are not subsidies IF they can be anticipated to yield future profit
• Someone has to start the process
• It takes TIME to reach break even
• The investments might be HUGE
Cumulative Sales
Pri
ce Challenging New TechnologyA
BC
Learning investments
…and ditto profit
4. There is always someone to share the bill
• (I) Government and companies that have a “first-mover” interest
• (II) Private sector (users) who have a worse alternative
• (III) Private sector (users) who have an interest in showing leadership
Cumulative Sales
Pri
ce Challenging New Technology
Willingness to payon niche markets
I
IIIII
INDIA150 GW
Break-even 1$/W
General Market Segmentation
• Innovators (Enthusiasts)• Early Adopters
(Visionaries)• THE CHASMTHE CHASM• Early Majority
(Pragmatists)• Late Majority
(Conservatives)• Laggards (Sceptics)
General Market SegmentationDiffusion curve
Time after introduction
Ad
op
tio
n o
f iin
ova
tio
n
Innovators (2.5 %)
Early adpoters (13.5%)
Early Majority (34%)
Late majority (34%)
Laggards (16%)
"Take-off" in the region 5%-15% of the market
Accelerated diffusionDiffusion curve
Time after introduction
Ad
op
tio
n o
f iin
ova
tio
n
Innovators (2.5 %)
Early adpoters (13.5%)
Early Majority (34%)
Late majority (34%)
Laggards (16%)
Accelerated diffusion
Cumulative Sales
Pri
ce
IncumbentTechnology
Challenger
Willingness-to-pay inChallenger Niche Markets
A
B CD
Government and industry (R&D)
A’
Positioning companies (capitalising)
Customers withHigh alternativeCosts (incumbent+)
Lead users(capitalising) “Chasm-crossers”
New paradigms – Distributed Generation
Source: Distributed Generation In Liberalised Electricity Markets. OECD/IEA 2002
Bypass congestion
Reduce losses
Enables use
Stimulatescompetition
28
Potential
Marketpotential
EconomicPotential ( individual)
Technicalpotential
EconomicPotential ( societal)
Time
1.ReduceTransac-tion costs
2. Improve Credibility,Organise
3. ImproveSupplierslearning
4.Improve technology
Result (Efficiency) = Potentialtechn.;time. * Acceptancetime; exposure
29
TO MEASURE SUCCES
Electricity in Finland