INSIGHT: IEA wants world to look at energy efficiency differently

28 October 2013 13:00 Source:ICIS News

By Nigel Davis

LONDON (ICIS)--Energy efficiency has been high on the agenda for chemical companies for many years as energy prices have climbed and pressure from regulators has increased. For some processes feedstock and energy represent more than 80% of production costs, so it is clearly in their best interest for it to be so.

Companies in most jurisdictions must realise too that the legislative push to cut carbon emissions has a direct impact on the way they operate, particularly as it leads to higher energy costs, but also in subtler ways as energy efficiencies come into play.

So the fact that the International Energy Agency (IEA) this month signalled that it, at least, is prepared to look at energy efficiency in a different way is likely to have implications across the sector.

Investments in energy efficiency were $300bn in 2011, on a par with investments in renewables and in fossil fuel power generation, the IEA says.

"Energy efficiency has been called a ‘hidden fuel’, yet it is hiding in plain sight," IEA executive director Maria van der Hoeven told the World Energy Congress in South Korea.

The IEA and others have for years tried to understand just what energy efficiency is. But when you start putting energy efficiency numbers together and compare investments – and energy savings – with energy supply it becomes clear that we are dealing with something big.

In its just released ‘Energy Efficiency Market Report 2013’ the IEA treats energy efficiency as it would any other energy resource to better grasp its impact on energy production and consumption and on global energy markets.

Since 1973 energy efficiency has avoided the equivalent of 32 billion tonnes of oil equivalent consumption in the 11 IEA member companies. From 2005 to 2010, cumulative avoided energy consumption was 570m tonnes of oil equivalent. The saving at a price crude oil price of $100/bbl was $430bn.

Looking back again to the cumulative energy efficiency investments made in the 11 IEA member countries since 1973, they avoided the consumption of 1,500m boe, or 63 exajoules. That is larger than the consumption of oil, electricity or natural gas in these countries alone in 2011, the IEA says.

Taking these savings as read, there are many questions about how greater efficiencies can be achieved and at what pace, and the potential impact of those savings on consumption of primary energy resources such as oil and natural gas, and of renewables.

National government policies drive energy efficiency but energy suppliers and consumers have also made major efficiency contributions. The market for energy efficient products is growing.

Van der Hoeven says that simply by adopting the best technologies available now on a wider scale the potential savings from efficiency are huge. The ‘efficient world’ scenario for 2035 adopted by the IEA in its World Energy Outlook 2012 analysis sees energy demand cut in half compared to a baseline scenario, fuel bills cut by 20% on average, and the global economy boosted by a cumulative $18,000bn, she adds.

The IEA believes that by integrating energy outlook analyses and its understanding of energy efficiency trends it can start a process of expressing energy efficiency in monetised terms including the value of investments and avoided energy demand.

That sort of information could be useful to regulators. It should be watched carefully by energy intensive producers.

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By Nigel Davis