Outstanding challenges for EU Member States in the design, implementation and MRV of energy efficiency programmes: An interview with Samuel Thomas

Disclaimer: the information and opinions set out in this interview reflect the views of the interviewee and do not necessarily reflect the official opinion of his affiliation.

Samuel Thomas is a senior adviser to the Regulatory Assistance Project. In his role with RAP, he works with the European Commission and Member States on the design and implementation of policy measures. He also organises the User-Centred Energy Systems international research collaboration, a Technology Collaboration Programme by IEA. Sam previously led the IEA’s energy efficiency analytical team and the UK government’s climate change economics team.

Question 1: Did the 2018 recast of Article 7 of the Energy Efficiency Directive (EED) address all the main issues with the original directive or do you think there are still some aspects that would need to be improved?

The 2018 recast of the Energy Efficiency Directive made many improvements to the original Directive. The change of metric from energy sales to final energy consumption ensures a focus on end-use energy efficiency policy measures. This aligns the intention of the Directive with the energy savings obligation it places on Member States, removing the scope for energy savings to be claimed from renewable energy measures such as behind-the-meter solar PV, which is subject instead to the Renewable Energy Directive.

The way in which Member States’ targets are calculated is a clear improvement on the original Directive. Member States still have the freedom to define their targets in many different ways, however, they must achieve new annual energy savings at least equal to 0.8% of baseline final energy consumption, using the dataset constructed by Eurostat (FEC2020-2030). This ensures fairness across Member States and represents an increase in ambition compared to the 2014-2020 period, where the 1.2% target for new annual savings translated to only around 0.7% after Member States had used all the various options open to them to reduce their obligations.

The guidance on how to calculate energy savings has also been improved. The Guidance Note produced by the European Commission explains clearly how to take account of additionality, materiality and double-counting, and what is required in order to put in place compliant monitoring and verification programmes.

Further improvements could still be made. The longer target period 2020-2030 (as opposed to 2014-2020) encourages actions with longer lifetimes, however it does not fully reward actions with lifetimes longer than 10 years, such as building fabric improvements. On the other hand, policy measures that rely on short-lived behaviour change to generate energy consumption reductions, such as taxation measures, are unaffected. With each passing year of the target period, the savings that can be reported from actions reduces, further exacerbating this effect. Defining the energy savings obligation in terms of lifetime savings would overcome this problem and further align the target with broader climate and energy transition objectives.

A further improvement could be made in relation to the consistent treatment of energy efficient heating equipment. Heat pumps, which are commonly powered by grid electricity, are significantly more efficient than the most efficient gas boilers. The Directive supports heat pump take-up by specifying that only the fuel consumption of heat pumps should be counted in the energy savings calculation, that means not including estimates of the ambient heat drawn from the wider environment. A heat pump that is 300% efficient would show significant savings compared to 96% gas boiler. However, solar thermal heaters are not treated in the same way. Instead they are treated as being 100% efficient, meaning that the savings, relative to a gas boiler delivering the same level of energy service would be very small. Counting solar thermal in the same way as heat pumps, only counting the consumption of grid derived energy, which in this case would be zero, would ensure that they are treated fairly and would be more likely to be supported by policy measures.

Question 2: What do you consider the priority ranking for the identified policy design and implementation gaps?

First, let me say that the views of those designing, implementing and participating in policy measures should carry the most weight. In this respect, I was delighted by the response to the ENSMOV survey, which asked government officials and wider stakeholders to rank their priorities for policy redesign and MRV in the context of Article 7 of the EED. Respondents really interacted with the survey and their responses give cause for optimism in the development of energy efficiency policies in the EU. The top-ranking priority of government officials relates to ensuring the financial sustainability of policy measures, which is a key factor in maintaining progress in the development of the energy efficiency supply chain. This was closely followed by “assessing the side effects of policy measures”, showing that government officials are looking to evaluate their programmes and design them in a way that enables well-informed evaluation. This is an aspect of good practice policy making with room for improvement in the EU, especially when compared to what is done in the United States.

Ensuring the additionality and materiality of energy savings are key concepts in the EED and government officials are understandably keen to make sure that their policy measures adhere to the rules of the Directive. Both of these issues featured in the top five priorities they identified. The two issues are related and both are important in ensuring that policy measures deliver savings beyond what would be achieved if they were not in place. So, for example, policy measures that provide incentives for new products, heating equipment and vehicles need to ensure that they are leading to sufficiently energy efficient purchases and that savings are calculated relative to the relevant market average or minimum standard benchmarks.

The other top-ranking priority raised by government officials relates to cost-effectiveness. This is a perennial concern of policy makers and can be seen in the increasing number of Energy Efficiency Obligation schemes in Europe as well as the growing interest in auctions and competitive tenders as a means of allocating financial support. These types of market-based policy measures drive cost-effectiveness, at least in terms of value for bill-payers money, given the incentives faced by obligated parties and auction winners to meet their targets at least cost. It is important, however, that policy makers relying on these types of policy measures to deliver savings for Article 7, make sure that they are consistent with the cost-effective meeting of broader energy transition objectives. Article 7 targets should act as a floor to ambition and not a ceiling, given the progress that will need to be made on building renovation over the coming decade if climate targets are to be met.

An ENSMOV report with a detailed gap analysis on policy (re)design, implementation, monitoring, reporting and verification has been recently released.

Question 3: The ENSMOV project aims at providing support to Member States in implementing art. 7 and setting up monitoring, reporting and verification (MRV); what kind of support do you think would be most useful for Member States?

The ENSMOV project can provide support Member States in a number of useful ways. Amongst the consortium of organisations working on the project, we have a lot of expertise related to Article 7 of the EED. This means that we can help to clarify issues related to MRV in the Directive and accompanying guidance and help Member States set up systems that both comply with the Directive and lead to better outcomes. As an example, government respondents to the ENSMOV survey picked out “defining the sample size and parameters for representative MRV” as the most important issue related to MRV. This is a technical issue that the EED demands is taken into account by Member States. Through the ENSMOV project, we can provide practical guidance on how to do so in various policy contexts.

A second area where the ENSMOV project can be useful is in facilitating knowledge sharing between Member States, for example in how guidelines for programme participants have been specified, or how web-based reporting tools have been designed. Those Member States that have mature MRV systems can provide excellent examples of how to approach their development and redesign in order to comply with the EED.

Finally, ENSMOV as well as the work from other Horizon 2020 projects could be useful in supporting Member States develop their MRV systems. At RAP we are working on the Horizon 2020 SENSEI project, which is supporting the development of pay-for-performance energy efficiency programmes in the buildings sector in the EU. This approach to the measurement of energy efficiency gains, using advanced metering infrastructure is at the cutting edge of MRV and is an area that a number of Member States have expressed an interest in piloting.

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