Energy efficiency gains - key to
curbing energy demand growth and saving the environment
The impact of energy efficiency gains on overall energy seldom
makes headlines as do alternate renewable sources. But there is no denying that
energy efficiency has had a significant impact on curbing energy usage with
attendant benefits to the environment, including on emissions of greenhouse
gases (GHGs), particularly carbon dioxide. However, as a new report from the
International Energy Agency (IEA), a think-tank, points out, global energy
demand is still rising, despite progress in energy efficiency and declines in
the energy intensity of major economies. The good news is that across all
important sectors – industrial, transport and buildings – there are still
sizeable gains to be had in the manner in which energy is used.
Since 2000, improvements in energy efficiency have the enabled
the world’s major economies offset more than one-third of the increase in
energy-using activities. Much of the savings has come from industrial sectors
and from buildings. If not for these improvements, global energy use in 2017
would have been 12% higher, with adverse consequences for the environment and
for countries that are deficient in fossil fuels (like India) and need to
import a significant portion of their requirements.
Word primary energy demand could be steady
In the IEA’s Efficient World Scenario (EWS), in which all energy
saving measures are implemented between now and 2040, world primary energy
demand is expected to remain more or less steady, despite a doubling of the
size of the world economy. These improvements are based on technologies
currently available, are cost-effective purely based on the energy savings
realised, and require no financial crutches or doles from governments. As a
result of these improvements, global energy-related emissions of GHGs are
expected to peak around 2020 and then decline by 12% in 2040 from the levels of
today. In other words, energy efficiency improvements could alone provide 40%
of the abatement required globally by 2040 to be in line with the goals set
under the Paris Agreement on combating climate change. Further reductions GHG
emissions will come from wider deployment of renewable energy – particularly
wind and solar – and other measures.
Benefits to India
For countries like India and China, the impacts of energy
efficiency improvements will go far beyond the energy sector. The two countries
could reduce their fossil fuel import bill by a colossal $500-bn in 2040,
compared to a scenario wherein these energy efficiency gains are absent. The
benefits such savings could have include increasing consumer spending power,
strong macro-economic conditions, bigger resources with governments for
priority sectors (infrastructure, healthcare, education etc.), and a cleaner
environment.
The IEA estimates that the EWS would cut key air pollutants such
as nitrogen oxides, sulphur dioxide and particulate matter by one-third from
the levels of today – with massive health benefits for citizens. More efficient
cooking alone could reduce premature deaths from indoor air pollution by almost
a million a year by 2040 – no small achievement.
Significant investments needed
Deploying energy efficient technologies will require significant
investment; average annual investments would need to double between now and
2025, and then double again after 2025. But the economic rationale for this to
happen will be strong – the technologies needed are largely proven, and pay
back on average by a factor of three based on energy savings alone. Current
investments levels – $236-bn in 2017 – will not be adequate, and new financing
mechanisms will be needed to raise the annual spends. Currently, most energy
savings measures are self-financed – through personal savings or company
balance sheets – and alternative mechanisms such as energy service companies
(ESCOs), green banks and green bonds are needed at a much larger scale than
now.
Transportation – the largest energy savings potential
Government policies will also play an important role – acting as
a proverbial stick. There have been some initiatives in 2017 related to
transportation with new mandates being set for fuel efficiency of passenger
cars and trucks in several countries, including India, China, the US and the EU,
but a lot more remains to be done here. This sector has the largest energy
savings potential, but has made the least improvements since 2000, compared
with buildings and industry. Key initiatives needed include setting of higher
fuel efficiency targets and increasing the adoption of electric vehicles (EVs).
Under the EWS, EVs could represent over 40% of the global passenger car flee by
2040. Trucks, which account for 40% of the current road transportation fuel
consumption norms, also significant potential for gains, but policy coverage
and stringency in this area is still poor.
Non-road transport – aviation, shipping and rail – will also see
significant gains under the EWS. In aviation, for example, gains could come
from innovations in aviation management and technology, as well as improved
flight routing.
Buildings – wider adoption of codes
The gains in the buildings sector will be driven by wider
adoption of building codes and appliance standards. Two-third of countries now
lack mandatory building energy codes and 60% of the energy use for appliances
is not covered by standards. If these gaps are addressed, and best-in-class
technologies adopted, the global building stock could be 60% larger in 2040
from today, with no increase in overall energy demand.
Focus less-energy intensive manufacturing
In the industrial sector, important technologies contributing to
gains in energy efficiency are motor-driven systems, and electric heat pumps
for low-temperature process heat. If all countries implemented and strengthened
standards for electric motors at the same time as the fastest movers, today’s
global electricity demand for industrial use could have been 16% lower. The
bulk of the potential energy savings in industry are in less energy-intensive
manufacturing sectors, which could reduce their energy intensity by more than
40% by 2040. This will require policy support, innovative financing mechanisms
and business models.
India – much to be done
In India much of the energy efficiency gains since 2000 have
been in the industry and service sectors and in residential buildings. Without
these changes, improved economic activity would have doubled energy use between
2000 and 2017. About 1% of the savings came from structural changes in the
economy – the shift from energy-intensive manufacturing to less-intensive
manufacturing and the service sectors. But the impact of these changes was
completely offset by the structural changes that boosted energy use;
specifically increases in residential building floor area and appliance
ownership, shifts to less efficient modes of transport and decreasing vehicle
occupancy rates.
In the EWS scenario, IEA estimates that India could limit its
energy demand growth in 2040 to 82% above its current levels, saving almost
10-EJ of additional energy use. The largest opportunities are in industry (45%)
and buildings (30%). In industry, the largest opportunities are in less
energy-intensive manufacturing sectors such as food, beverage and textiles. In
the buildings sector, the largest energy savings come from space cooling (29%)
and appliances.
In 2017, 23% of India’s energy use was covered by mandatory
energy efficiency policies, with coverage highest in the industrial and
non-residential buildings sectors. In industry, the Perform, Achieve and Trade
(PAT) scheme remains the key policy to drive gains, while stronger norms for
space cooling came into effect in January this year. These recent actions to
strengthen performance standards for air conditioners will push the Indian
market to greater levels of efficiency, the current market average performance
is just 2% lower than the new standard level, which is nearly 46% lower than
the current best available technology in the Indian market – indicative of the
potential for energy efficiency gains from this important sector.
Role for governments
The IEA report concludes that governments can maximise the
efficiency of energy efficiency policy by enacting ambitious measures, with
appropriate follow-up and enforcement. Government measures also have a role in
ensuring market readiness to deliver efficiency improvements, and in evolving
measures, using monitoring and evaluation, to increase ambition as technologies
develop and costs fall.
Chemical Weekly Issue date: 30th October 2018
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