Danish Experience within Increasing Energy Efficiency

Danish Experience within Increasing Energy Efficiency – and how it is Organised Søren Dyck-Madsen The Danish Ecological Council

“Energy Efficiency” – Ministry of Economy, Warsaw, 27.11.2012

The Danish Ecological Council

Danish Energy Targets • • • • •

35 % renewables in 2020 50 % electricity from wind in 2020 12 % reduction in 2020 compared to 2006 in Gross energy use 7 % reduction in final energy use in 2020 compared to 2010 40 % domestic reduction in GHG emission in 2020 compared to 1990 - 6 % is going to come from agriculture and transport, but not agreed yet

• 2030 – Phase out of use of coal in Denmark • 2035 – 100 % renewables in electricity and heating sectors • 2050 – 100 % renewables in Danish energy system • The long term goals cannot be reached cost effectively without EE

“Energy Efficiency” – Ministry of Economy, Warsaw, 27.11.2012

The Danish Ecological Council

The Expected Increase in Energy Efficiency in Different Sectors from 2009 until 2050 120 100 80 60 40 20 0 Heating

Appliances

Transport

Industry and agriculture

Source: “Green Energy”, the report of the Danish National Commission on Climate Change Policy

“Energy Efficiency” – Ministry of Economy, Warsaw, 27.11.2012

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Danish Focus on EE - it is the Cheapest Way Cost of Saving or Producing kWh’s

“Energy Efficiency” – Ministry of Economy, Warsaw, 27.11.2012

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EE Obligations is a Cost Effective Instrument

Ratio between: Price of energy and Cost of instrument for saving

Source: EA-Analysis, Evaluation in 2009 for The Danish Energy Agency

“Energy Efficiency” – Ministry of Economy, Warsaw, 27.11.2012

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Energy Efficiency Improves the Competitiveness of the Industry Increase in Output prices if energy prices doubles 14

Poland Energy-price sensitivity , whole Economy

10

Energy -price sensitivity, industry

per cent

12

EU

8 6

Denmark

4 2 0

Source: National Bank of Denmark, 2009

“Energy Efficiency” – Ministry of Economy, Warsaw, 27.11.2012

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Energy Savings Obligation in Danish Energy Policy

Total energy consumption in Denmark 807 PJ (241TWh) 2015 saving target is around 1,45% of total energy consumption incl. transport “Energy Efficiency” – Ministry of Economy, Warsaw, 27.11.2012

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Basics on the Danish EE-system • Obligation on DSO – Distribution System Operators • Cost recovery in distribution tariff with benchmarking on Energy Regulator’s website • Newly agreed obligation increases target with 75 % in 2013 / 2014 and 100 % from 2015 to 2020 – but also broadens the savings base • Internal and external audit every second year and evaluation procedure every third year • Compliance: Financial sanctions and the possibility to loose the license to operate as a distribution company

“Energy Efficiency” – Ministry of Economy, Warsaw, 27.11.2012

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Which Savings can be Included • First year savings only – not cumulative

• Savings in final energy consumption in all sectors • Avoiding losses in grids can be counted – especially district heating (2010) • No efficiency improvement in generation (thermal solar is allowed) • Solutions have to be better than standard to be counted • Simple weighting factor are introduced from 2011 – Reflect lifetime, primary energy, non-ETS • DSO can only count savings where they are direct or indirect involved in the implementation

“Energy Efficiency” – Ministry of Economy, Warsaw, 27.11.2012

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Why does Denmark do it?

• Yesterday we said: “We are selling energy – not saving it?”

• We see an increasing bundling of selling energy and delivering energy efficiency services in partnership with installers and others •

Retailers are developing niche markets focusing on: – Energy savings in public buildings – Climate Partnership with a strong CSR element, – ESCO projects and energy performance contracting etc.

• Today we say: “We want to service our customers and to capture of the value in related to energy usage”

“Energy Efficiency” – Ministry of Economy, Warsaw, 27.11.2012

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High costumer satisfaction • Interview with 300 businesses that have received EE-services

Source: Epinion Research, August 2011.

“Energy Efficiency” – Ministry of Economy, Warsaw, 27.11.2012

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Almost Half of the Savings are in Industry

The Yellow colored bar is savings in industry – by the four obliged energy DSO’s – resulting in the fifth column 2010 results

“Energy Efficiency” – Ministry of Economy, Warsaw, 27.11.2012

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Energy Efficiency Projects in Industries - a Case from SE Big Blue • NPV = 111,7 mill. DKK (for every 1 DKK invested the owners received 3,89 DKK in return) Heat recovery: Heat consumption is reduced from index 100 to index 82 Savings of 18 GWh a year by improving efficiency of dry ovens

• IRR = 57,46% • Avg. payback time = 1 Year 9 months

• SE Big Blue: Jes Christensen, jbch@se.dk

“Energy Efficiency” – Ministry of Economy, Warsaw, 27.11.2012

The Danish Ecological Council

EE in Buildings • Denmark have high energy taxes for households and public buildings • ESCO’s is only working in some public buildings • We do not see that many savings done in private buildings • Those we see are mainly in the technical systems – and replacement of windows or window glazing • Insulation of roof, walls and floor is rather costly compared to these savings • Maybe more focus on the additional improvements in in comfort and liveability will trigger more energy savings as instrument • Working group on an energy savings strategy in existing buildings has started working – and will report in 2013 “Energy Efficiency” – Ministry of Economy, Warsaw, 27.11.2012

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Conclusion: Energy Efficiency Obligations has Started the Market for Energy Services in DK • We see an increasing bundling of selling energy and delivering energy efficiency services in partnership with installers and others • The energy efficiency obligation has transformed parts of the retail market • The cost recovery element is crucial in order to remove risks for kick starting the energy service market • Energy efficiency is about innovation in business models, new ways to approach the customer and for job creation • Energy efficiency actually improves competitiveness in industries

“Energy Efficiency” – Ministry of Economy, Warsaw, 27.11.2012

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Søren Dyck-Madsen The Danish Ecological Council www.ecocouncil.dk Soeren@ecocouncil.dk

“Energy Efficiency” – Ministry of Economy, Warsaw, 27.11.2012

The Danish Ecological Council