High energy prices, Ukraine war and rising demand response

Energy efficiency, the cleanest, lowest cost, most overlooked resource in the climate fight, is now part of the world’s pushback against Russia’s invasion of Ukraine, according to the International Energy Agency.

Energy efficiency, or EE, is fundamental to the clean energy transition, analysts have long agreed. But the Ukraine war-driven urgency for the European Union to end reliance on Russian natural gas and arbitrary Russian threats like the July 11 shutdown of the Nord Stream 1 natural gas pipeline to Germany, and avoid stopgap coal burning now makes EE vital, a June 10 statement co-signed by the U.S. and 25 IEA parties in the Americas, Africa, Asia and the EU recognized.

EE is “critical” to keeping world energy “affordable, secure, and clean,” IEA Executive Director Fatih Birol told the annual IEA Global Conference on Energy Efficiency June 8. And world leaders must make the conference “a meeting of hope” where “the world hits the accelerator on efficiency” or they may “pay the price for years to come.”

This “could be the peace project of our time,” U.S. Principal Deputy Assistant Secretary for Energy Efficiency and Renewable Energy Kelly Speakes-Backman added at the conference. “Russia’s unlawful invasion of Ukraine has challenged us to think differently about how we generate, distribute, and use energy, and the case for energy efficiency has never been more urgent.”

In the U.S., EE has enormous potential but must demonstrate its value across different regulatory and market circumstances, Speakes-Backman and other U.S. EE advocates said during and after the IEA conference. With more innovative and comprehensive policies, EE can have great value as demand response, or DR, and be used when and where the power system needs kWh reductions the most, they said.

The IEA initiative

New numbers support the IEA initiative.

Halving EU energy intensity, a ratio of energy use to gross domestic product, could reduce the need for “650 billion cubic meters of natural gas per year,” about four times the EU’s 2021 Russian imports, according to the IEA report released during the conference. “Total energy savings” could lower EU electricity bills “at least $650 billion a year by 2030,” the report added.

The Ukraine invasion “has massively disrupted European and global energy markets,” said the May summary of REPowerEU, the European Commission, or EC, plan to end Russian fossil fuel dependence. It called for raising the EU-wide target on total energy savings through efficiency efforts for 2030 from 9% to 13%. 

“The current scale of energy efficiency action is not sufficient” and implementation must be accelerated “on a global level,” the IEA post-conference 26 party statement agreed. EE “offers immediate opportunities to reduce energy costs and reduce reliance on imported fuels,” it stressed.

The EC proposal to accelerate EE “would be a step forward,” but “still must be approved by the European Parliament’s 27 member states,” Regulatory Assistance Project Executive Director for the EU Jan Rosenow told Utility Dive.

Final approval could come in the fall, and “hopefully before the next winter heating season because there could be real shortages and price spikes,” Rosenow warned. “But at least EU countries are finally considering policies that recognize it is necessary to move entirely away from natural gas as soon as possible.”

Recent executive orders from President Biden on heat pump production and liquified natural gas exporting show it supports the new EU initiative and may see market opportunities in it, Rosenow and others said.

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EE in the U.S.

It is not clear if or whether the IEA initiative will directly impact the U.S. because “we march to our own drum,” American Council for an Energy Efficient Economy Executive Director Steve Nadel told Utility Dive. Only a few of some 50 federal efficiency standards that need revision have advanced, though new state and local performance standards for buildings and vehicles are making a difference, he said.

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