Energy Efficiency Investment at the Municipal Level – Time to Think Bigger

July 2, 2018

By Mark Lister, Copenhagen Centre on Energy Efficiency.

Global targets for emissions reductions set forth in the Paris Climate Agreement have put energy efficiency high on the political, industrial and social agenda. Energy efficiency at a global level is an essential response to climate change and fundamental to achieving the goals of the 2015 Paris climate agreement. But energy efficiency is not only about saving our climate. Multiple benefits arise from energy efficiency actions, including improved health and well-being, cleaner air, greater economic productivity and employment creation. Of all the potential clean energy solutions, it is the cheapest, most geographically dispersed, most quickly deployed and most widely available energy resource. This is why most studies estimate that energy efficiency will need to contribute roughly half of the emissions reductions required to meet our climate objectives between now and 2030.

Despite a lack of headline stories about energy efficiency, there is much good news from many of the existing efforts and initiatives towards energy efficiency improvement. Interest in and commitment to development of national policies on energy efficiency has now taken hold around the globe, and energy efficiency can be found prominently in policy and regulatory initiatives and in the Nationally Determined Contributions of most countries. However, so far, the vast majority of energy efficiency action has arguably been in words – through the creation (and, less often, enforcement) of policies, strategies, roadmaps, action plans, and targets for the slightly too distant future, established through too many meetings, workshops, summits and conferences. Some serious and large-scale mechanisms to create substantive change are long overdue. In 2018, energy efficiency ‘action’ has to be taken to mean physical changes in behaviour, financial investment, and installation of energy savings equipment that changes the number of kilojoules and kilowatt hours the world uses to meet its energy needs.  Anything else is moving too slowly.

Faced as we are with this imperative to act, we have reached a point where words will no longer move things forward alone and new measures are required from the international community. The task is immense – and will need to be financed. For too long, energy efficiency investments have suffered from being small, disaggregated, and with difficult-to-verify cash flow from savings. We must solve this – overlooking the opportunity is no longer acceptable, and cannot just be regretted. The World Bank estimates that investment in energy efficiency globally needs to increase by a factor of at least six to meet the UN Sustainable Development Goal of doubling the rate of improvement in global energy efficiency by 2030. In 2016, this investment totalled USD 231 billion, so we are talking about USD 1.5 trillion of additional investment annually. This cannot and will not happen incrementally. The European Union, which accounts for the largest share of this spending, believes that an amount close to this global spend (USD 212 billion per year) will be necessary for Europe alone to meet its own 2030 energy and climate objectives.

Decisions on energy efficiency are often taken at the local or municipal level, where most of the world’s people live and work. Most cities around the world are interested in similar, well tested and well-proven energy savings projects in for example renovation of buildings, street lighting, transport, district energy, or municipal water supply. However, the cities and project themselves are regularly too small to justify the involvement of climate and development financiers, and often lack the know-how to technically develop their projects.

Based on this, the Copenhagen Centre on Energy Efficiency sees a clear opportunity to think bigger, as the title of this article suggests. We are working on standardization of relatively similar energy efficiency investment projects at the local (i.e. municipal or district) level in a country to get volume and scale in energy efficiency implementation. Targeted technical assistance, including financial structuring assistance at the proposal identification and development stage, paired with long-term support to local authorities based on training, communications and awareness raising, an organized and standardized methodology for data collection, and consolidated project analysis, could bring economies of scale and form a supply pipeline of much larger energy efficiency investments that can align with existing climate and development financing structures, and subsequently engage private sector finance.

This model is generating a great deal of interest in our partner countries, who see it as a way to finally break the deadlock around insufficient investment funds flowing to energy efficiency implementation, and as a way for energy efficiency to contribute to the achievement of NDCs. There are a number of barriers to solve including technical specifications, contracting, procurement and financial structuring issues, that we are working through with partners at present. Lessons learned from the approach are now being documented by the Copenhagen Centre, so that replication in future countries can happen more quickly and concertedly towards genuine global scale.

In a meeting recently with Danfoss, our Danish colleagues and one of our strongest corporate supporters, Head of Communications Kenth Kærhøg made the following comment in relation to energy efficiency progress: “When all is said and done, much more ends up being said than ends up being done.” We believe that the Copenhagen Centre on Energy Efficiency’s role is to change that: we want to bring best practice knowledge and our wide network of implementation partners to bear, and move beyond intent and aspiration, to realise energy efficiency impacts on the ground. Creating the methodologies to allow project aggregation and implementation scale is a good start, and we welcome collaboration with interested parties who share this vision.

Source: IPEEC