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Investment Must Triple to Hit 2030 Energy Efficiency Goals: IEA

Energy efficiency measures can boost the performance of the world’s buildings, transportation systems, and industry by one-third, drive down carbon emissions by almost 40%, cut consumer energy costs, and create four million jobs by 2030, but it’ll take a “massive and unprecedented transition” to get it done, the International Energy Agency concludes in its Energy Efficiency 2021 report issued Wednesday.

“As energy efficiency offers some of the fastest and most cost-effective actions to reduce CO2 emissions, front-loading efficiency measures into net-zero strategies will be crucial for closing the gap between climate ambitions and current trends,” the agency says in a release.

The IEA’s modelling shows [pdf] how a dramatic improvement in energy intensity could reduce total demand by 7%, in spite of its prediction that the global economy will grow 40% through 2030, making energy efficiency “the key factor that enables growth in clean energy sources to outpace growing demand for energy services.” But to make it happen, countries will have to triple their efficiency investments to reduce the energy they consume per unit of economic activity by 4% per year, compared to just 1.3% between 2016 and 2020.

“We consider energy efficiency to be the ‘first fuel’ as it still represents the cleanest and, in most cases, the cheapest way to meet our energy needs. There is no plausible pathway to net-zero emissions without using our energy resources much more efficiently,” said IEA Executive Director Fatih Birol. “A step change in energy efficiency will give us a fighting chance of staving off the worst effects of climate change while creating millions of decent jobs and driving down energy bills.”

The IEA says governments have scaled up job-intensive energy efficiency programs after 2020 took its place as the “worst year in a decade” for efficiency gains. But even though the improvement in energy intensity is expected to recover to 1.9% this year, it’s far off the pathway laid out in the Paris-based agency’s net-zero modelling—and far short of the potential.

“Investments in the energy efficiency of buildings—a well-established driver of construction jobs—are expected to rise by 20% in 2021 compared with pre-pandemic levels,” the IEA release states. But “even with this record level of spending, the report details how four million more jobs could be added by 2030 by further increasing spending on efficient buildings, appliances, and other measures.”

About 80% of efficiency measures the IEA envisions deliver cost savings to consumers. And they go far beyond slapping insulation or even a vapour barrier on an existing structure. 

“To enable the transition, the electrification of transport, building heat, and lower-temperature heat in industry will be important,” the report states. “Electrical equipment is not only generally much more efficient, but also offers the potential to be powered with renewable energy sources. For example, electric heat pumps are three to four times more efficient than fossil fuel-powered boilers, and electric vehicles can be more efficient on a well-to-wheel basis, if powered with renewable energy.”

The transition “will also require a broadening of energy efficiency’s role through digitally enabled, grid-integrated technologies such as smart meters, appliances, and devices,” the agency adds. “Such advances are essential to provide the power system flexibility needed to support higher deployment of variable renewable energy sources.”

But it’ll take a lot more investment to get it done. While the IEA expects government policies to increase energy efficiency spending by 10% this year, to nearly US$300 billion world-wide, those dollars will have to triple by 2030 to meet the agency’s targets. The report’s executive summary has current investments focused primarily on buildings and centred in Europe, “suggesting polices are needed in other regions to achieve global climate goals.”

While China increased its deployment of digital technologies by 12% last year, the summary adds, “approved energy efficiency spending by governments is regionally unbalanced, with the majority of spending coming from advanced economies. There remains considerable potential for governments elsewhere to use recovery packages to boost spending, which would create jobs and promote economic growth.”

The IEA also warns that the last several months of supply chain shortages and bottlenecks could take a toll on energy efficiency goods and services. Prices are up for everything from building materials to semiconductors, supply shortages have slowed down project work, and a 13% increase in construction wages through May, 2021 added to project costs.