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Efficiency First: A Crucial Building Block for the Energiewende

When the German Ministry of Energy and Economic Affairs published its green paper on energy efficiency, it not only put the spotlight on efficiency, it also started the conversation around a necessary underlying energy policy framework. Until now, energy efficiency has been viewed merely as an additional service offered to end-use customers, but rarely as one of the fundamental building blocks for a successful “Energiewende,” or energy transition, in Germany.

Although it may seem counterintuitive, today’s energy markets do not automatically consider the economic value of demand-side resources, such as energy efficiency or load shifting, not even in competitive markets. Every saved or avoided kilowatt hour has a long-term system value of 11 to 15 euro cents, based on avoided generation, transport, and distribution costs. Most efficiency investments cost even less. Yet Germany, like many other countries, opts primarily for supply-side options. This disconnect is driven by the notion that liberalized energy markets are the perfect, and therefore the only, way to achieve an economically efficient energy sector.

However, the key to an economically efficient energy sector is the regulator. Only policymakers can systematically eliminate the existing misconceptions and investment shortfalls, or the different methods for valuating energy resources. It is, however, considerably more difficult in competitive markets (in contrast to monopolistic structures) to establish the necessary long-term planning approaches, such as integrated resource planning and least-cost planning.

RAP developed the principle of “Efficiency First” as a decision-making principle and economic instrument for bridging these gaps. Efficiency First prioritizes any efficiency measure that costs less or delivers more value than planned investment in supply resources—particularly fossil fuels—and infrastructure. In order to implement this systematic evaluation of investment options, policymakers need an overarching regulatory framework that not only recognizes the value of demand-side resources, but also empowers the competent institutions to work together to craft and recommend comprehensive solutions, in addition to reviewing existing measures. In order to base discussions of Efficiency First on real-world experience, RAP has collected examples of similar existing measures from across Europe to inform practical discussions with decision-makers and market partners.

There’s a lot of work ahead of us if we’re going to do more than just pay lip service to the green paper on efficiency. The questions posed in the Ministry’s public consultation are headed in the right direction. Being able to answer these questions without any hidden agenda, ulterior motives, or bias for specific business models will allow the Ministry to craft a white paper with concrete recommendations for Efficiency First that can be implemented by the next federal government. The Ministry has already taken an important first step. Now it’s up to citizens and organizations, their associations, and their representatives to step up to ensure that this topic becomes part of the next election platform and, thus, part of the next coalition agreement.

The existing, relatively small, differences of opinions among stakeholders must be put aside. The alternative is an expensive Energiewende, or possibly even an Energiewende facing failure. Along these same lines, capturing the full value of various energy resources will also be crucial in decarbonizing the heating and transportation sectors through beneficial electrification. This valuation is the deciding factor in whether the German Energiewende can be a valuable model for other countries. RAP will continue to work toward this goal.

By Andreas Jahn

The post Efficiency First: A Crucial Building Block for the Energiewende appeared first on Regulatory Assistance Project.

Photo Credit: Emanuele via Flickr

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Discussions

Rick Engebretson's picture
Rick Engebretson on Apr 20, 2017 4:14 pm GMT

I got this linked article about Chinese manufacturing efficiency from someone who says it’s accurate;

http://www.businessinsider.com/qa-with-an-iphone-factory-worker-at-pegat...

The young engineer sending it doubted it could be replicated in the US (or lazy Europe for sure). But as an older American I knew people who did far more with far less. The old logging camps, grain crop harvests, meat packing, and worst of all spring street cleaning in Minnesota before cars (frozen horse dung measured in feet). How a worse than lazy regulator (a lazy snob WITH AUTHORITY) will fix a society racing to financial and environmental bankruptcy is beyond me?? Kudos to Chinese manufacturing efficiency, historic growth at our foolish expense. Most workers in the US work harder commuting to work in expensive cars on expensive roads, than producing value added products.

Bob Meinetz's picture
Bob Meinetz on Apr 21, 2017 3:06 am GMT

Andreas, several years ago I went to my bank to conduct some business at the counter. I presented the teller with three simple tasks – accept a deposit and give me a receipt. Then, I had a question about how to get a copy of a prior statement. The teller answered the first two requests with the same question: “Did you know you can take care of that at the ATM?” Fine, I thought. But when the last request elicited a similar response: “Did you know you can take care of that online?”, hackles were raised.
“I understand the bank wants to shift its burden to customers to save money,” I groused. “I don’t want my bank to do that, so maybe I should look for another bank?” Met with a blank stare, I did exactly that.

Similarly, Germany now wants to shift the burden for lowering emissions from utilities to the public. Faced with the spectacular failure of wind and solar to deliver as promised, its “energy wind” is blowing the burden of when Germans can economically use electricity onto the backs of everyday people – those who it will burden the most.

“Capturing the full value of various energy resources” using your strategy will not be “crucial” for decarbonizing the heating and transportation sectors – it will be impossible. By requiring the public to use electricity when it’s convenient for their utility, you’re only putting its full value further out of reach. What will be crucial for decarbonization in Germany is firing up its mothballed nuclear reactors – and the sooner, the better. Anything else is a conceit which increases the day-to-day burden on German citizens, and that of climate change on the rest of the world.

Thorkil Soee's picture
Thorkil Soee on Apr 21, 2017 5:37 pm GMT

Yes, of course, energy efficiency is better than nothing.
But it can only delay the final collapse of the ambitious Energiewende.
I have tried to collect some of the unpleasant facts on http://wp.me/p1RKWc-11F

Engineer- Poet's picture
Engineer- Poet on Apr 21, 2017 7:13 pm GMT

Thorkil, stop using URL shorteners.  They only obfuscate.

Thorkil Soee's picture
Thorkil Soee on Apr 23, 2017 9:33 am GMT

Yes and NO
The information on my link http://wp.me/p1RKWc-11F can not ‘just’ be written without using a WordPress page.

Engineer- Poet's picture
Engineer- Poet on Apr 23, 2017 2:01 pm GMT

This is what your obfuscated URL redirects to:

https://thorkilsoee.wordpress.com/2015/12/26/12-9/

Darius Bentvels's picture
Darius Bentvels on Apr 24, 2017 7:11 am GMT

EP,
It’s easy.
All Thorkil’s links refer to his own WEB-pages at which he explains his faulty beliefs (often presented as facts) and can censor arguments against his beliefs.

Beliefs such as that the successful German Energiewende is a failure. Though many made similar mistake since 2000.

Still remember the, sometimes long, articles of 5 – 15 years ago at a.o. Der Spiegel, Atomic Insight that the ‘unreliable’ (wind+solar) could never deliver a substantial part of German electricity….

The faulty conviction that German population couldn’t support such idiotic transition, hence would choose against govt at coming elections. so the new govt would end it, etc.
Even the polls which then showed ~70% support for the Energiewende (now ~90%), couldn’t change people’s mind about that.

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