How to calculate energy savings and costs of energy saving obligations in a harmonized way? Demet Suna Institute of Energy Systems and Electrical Drives-Energy Economics Group Vienna University of Technology Gusshausstrasse 25-29/370-3 1040 Vienna Austria [email protected] Reinhard Haas Institute of Energy Systems and Electrical Drives-Energy Economics Group Vienna University of Technology Gusshausstrasse 25-29/370-3 1040 Vienna Austria [email protected] Keywords Introduction energy savings certificates, energy savings calculation, cost effectiveness The new Energy Efficiency Directive (2012/27/EU) prescribes that “each member state shall set up an energy efficiency obligation scheme”. Currently within the European Union Energy Saving Obligations (ESOs) for utilities are implemented in the United Kingdom (UK), France (FR), Italy (IT), Denmark (DK) and the Flemish part of Belgium (BE-FL). In this context, Figure 1 illustrates, according to a general energy supply chain, which countries impose obligations on which type of utilities. Moreover, this graph also indicates the target sector(s) of the ESO schemes. On the one hand, the design features as well as calculation methods differ fundamentally from country to country which makes a comparative analysis a challenge. On the other hand, defining a harmonized methodology can help to compare the implemented ESO schemes so that countries can learn from the experience gained within the case studies. Thus, this paper attempts to define and apply a consistent methodology to compare achieved energy savings and related costs, whereby attention will be given to transform quantitative targets and measured progress into comparable units (e.g. converting targets in toe vs. kWh) and to derive at valuable indicators. From a methodological viewpoint this means to apply a standardised approach to deal with (harmonised) discount rates, to incorporate the rebound effect in a consistent manner, to define and apply an approach to derive net energy/monetary savings, and to consider consistently the lifetime of savings within these calculations. The applicability of such a harmonised approach is demonstrated exemplarily for two countries, namely the United Kingdom and Italy. Subsequently the general frameworks of implemented utility obligations are explained briefly for these two countries, focussing on the periods analysed in detail throughout this assessment. Abstract The relevance of Energy Saving Obligations (ESOs) as a key policy tool for the achievement of energy efficiency targets increased throughout last couple of years. At the European level this was confirmed recently by the new Energy Efficiency Directive (Directive 2012/27/EU) adopted by the European Parliament and Council in October 2012, where nationally implemented mandatory ESOs imposed on energy supplier are one of the key measures to bring forward energy efficiency implementation. Within the EU Energy Saving Obligations for utilities have already been implemented in the United Kingdom, France, Italy, Denmark and the Flemish region of Belgium. However, design features of programs differ from country to country fundamentally. A comparative analysis of achieved energy savings and related costs becomes a challenging exercise since implemented ESOs generally differ in (sector, time etc.) coverage as well as in the approach used for calculation and measuring of savings. Several studies exist that analyze ESO experiences, identify the differences between country-specific implementations and that allow to draw tentative conclusions on likely advantages or disadvantages arising from them. Nevertheless the authors of this abstract are not familiar with a study comparing the achieved energy savings and costs in different ESO implementing countries using a harmonized approach. Thus, this paper attempts to define a consistent methodology and to apply this approach to compare two country examples; namely the United Kingdom and Italy. ECEEE SUMMER STUDY proceedings 2105 7-425-13 Suna, Haas 7. Monitoring and evaluation Figure 1. Energy Saving Obligations in EU countries: obligated utilities and sector coverage (residential and commercial consumers) by implementing country. EEC-CERT in the United Kingdom Within Europe the UK is the most experienced country with respect to utility obligations for energy efficiency measures. A first obligation scheme has already started in 1994, at that time called “Energy Efficiency Standards of Performance Programme (EESoP)” and continued until 2002. In April 2002 the current system called the “Energy Efficiency Commitment (EEC)” was put into operation, whereby the first phase (EEC1) ended by March 2005 (Forfori, 2006). The EEC is a legal requirement imposed on electricity and gas suppliers in order to improve energy efficiency in the UK’s household sector. The EEC does not establish a trading platform for certificates but bilateral trade of energy savings between suppliers is allowed. The suppliers (retailers) have been obligated to increase energy efficiency in households in the regulatory rounds in 1998, 2000, 2002, 2005 and 2008. During these periods, although the name of instruments has been changed, the continuity of implementations has been maintained (Eyre et al., 2009). In 2008 the name EEC was changed to CERT (Carbon Emission Reduction Target) and obligations are since then expressed in CO2 savings instead of fuel standardized energy (FS) which was the applied unit for target description in EEC1 and EEC2. Within this program energy suppliers undertake activities such as marketing for energy-efficient products or offering subsidies for energy efficiency measures. These measures are delivered through several ways such as contracts with installers, retailers of efficient appliances, local authorities etc. For end users, CERT means that energy suppliers provide grants or offer assistance to implement efficiency measures and / or renewable energy technologies for their homes while it is not a precondition to be customer of these gas or electricity suppliers. Most energy suppliers are implementing these measures by themselves and provide loft and cavity wall insulation for free 2106 ECEEE 2013 SUMMER STUDY – RETHINK, RENEW, RESTART to certain building owners (e.g. elderly people over 70 years or customers in receipt of certain benefits ) (UK-EST, n.d.). In this paper the second period of the Energy Efficiency Commitment, subsequently named as EEC2 (2005-2008) will be analysed. The main characteristics of the ESO scheme in this period are: • For suppliers an overall energy saving target of 130 Fuel Standardised (FS)1 TWh was set. • At least 50 % of this target had to be achieved in the low income Priority Group. • Suppliers had been allowed to carry forward 35 TWh of en- ergy savings from EEC1 into EEC2, just over half of which were realised within the Priority Group. The Italian TEE2 The utility ESO scheme in Italy has been launched in January 2005 with the aim of increasing end-use energy efficiency. The obligation is imposed to electricity and gas distribution companies (distribution system operators) which have at least 50,000 customers (Di Santo et al., 2011). The reduction target is set in primary energy, accounted in tons of oil equivalents (toe), and the saving can be derived through actions among (all types of) end-users. Before 2008 targets for the electricity sector were set separately for low and high voltage consumers. This has been changed to distinguish among residential and non-residential consumers from 2008 on. One of the central elements of this scheme is the trading of certificates which are called as TEE. Until the latest reforming at the end of 2011 where the Ital- 1. “Fuel standardized” indicates carbon weighted final energy. The used FS factors within EEC2 are; 0.801 for electricity, 0.353 for gas and 0.464 for oil. 2. TEE- acronym of the Italian legislative definition “titoli di efficienza energetica”, meaning “energy efficiency certificates”. 7. Monitoring and evaluation ian Electricity and Gas Authority (AEEG) changed the rules regarding lifetimes and discounting, see (Di Santo et al., 2012), in the Italian scheme the lifetime of saving was 5 years for most types of measures . Only for measures related to the building envelope 8 years were applied, and 10 years for high efficient CHP (Pavan, 2012). In the Italian program saving is accounted via three ways: deemed saving approach, engineering estimates and monitoring planning (M.P.) approach. The so called “deemed saving approach” is used for some actions for what AEEG has defined “special files” on standardized savings making (expensive) on-field measurement unnecessary. Special files with on-field measurement are called engineering estimates. In the other cases, when it is not possible to obtain a simplified file, so called “monitoring plans” serve as an alternative where the proponents must get a prior approval for the measurement and evaluation (Di Santo et al., 2011). Evaluation of “net energy saving” and specific “cost of energy saving (CES)” Next we illustrate the approach elaborated and applied to derive the “net energy saving” as well as for calculating the specific “Cost of Energy Saving (CES)”. Deriving net energy saving In order to calculate specific cost of derived energy saving within a certain policy programme or measure, firstly it is necessary to define how within the programme energy saving is defined, measured and/or calculated. For the assessed ESO schemes in the UK and Italy the applied calculation methods differ substantially. In general, for calculating net energy savings the following parameters are essential to be considered. Baseline/Additionality The term baseline describes the level of energy saving which would also have been achieved in the absence of the analyzed program, because of technical improvements, behavioural changes as well as exiting policies. In this respect the “free rider” effect – i.e. the people who would invest in any case in efficient systems – is also a part of baseline definition. Bertoldi and Rezessy (2009) indicates that the baseline can be determined by either taking into account i) the sales average and performance of appliances and historic rates of retrofits insulations in the buildings or ii) the average consumption of current installed stocks. As an evaluation of energy savings should only focus on additional savings, it should also exclusively focus on additional costs. This can be explained by the following example: Assume that a refrigerator has reached the end of its lifetime and, thus, needs to be replaced by a new one. The new device may now either be a Standard (ST) or a Best Available Technology (BAT). The difference between the cost of ST (what one has to pay in any case) and BAT is considered as additional cost indicating the initial investment and usually considered for calculation of specific cost of saving. In both the UK and the Italian scheme baselines and/additionality have been considered. How this issue is handled within the analysed schemes is discussed in the following sections on “Annual Saving for UK EEC2” and “Annual Saving for IT-TEE”. 7-425-13 Suna, Haas Rebound factor Sorrell (2007) defines the direct rebound effect as follows: energy efficiency measures make energy services cheaper and accordingly the consumption of these services increases which cause that the efficiency improvements do not lead to the predicted reduction of consumptions. This phenomenon has been keeping economists busy for many years. Sorrell (2007) reviewed several studies on rebound effect and concluded that 30 % represents a reasonable rebound factor value for the evaluation of energy efficiency policies. This value is also considered by Defra, the UK’s Department for Environment, Food and Rural Affairs, for the accredited insulation measures within the program EEC2.3 On the other hand, Defra’s own research depicted that the rebound factor (which is called comfort factor in the UK scheme) for insulation measures is below 15 %. Thus, the evaluation report from Lees (2008) considered this lower value and within our calculations we also followed this estimation. For residential lighting the rebound effect is estimated between 5 and 12 % (Greening et al., 2000). This estimation fits also to the evaluation of Lees (2008), deriving an rebound factor of 7 % for the case of lighting measures within EEC2. Technical reduction factor Especially in the case of measures related to buildings such as cavity wall and loft insulation – the mainly implemented measures in the UK – a difference between estimated and (actually) derived energy saving occurs. In this respect Sanders and Phillipson (2006) reviewed thirteen papers related to this phenomenon in the UK and called it a “reduction factor”. Note that this includes rebound factor (e.g. changed indoor temperature) as well as technical reduction factors such as insulation performance, ventilation, tiles areas of wall, lintels, areas of solid wall as well as any underperformance of insulated areas of wall (for example due to imperfect fill) etc. (Ofgem, 2008a).Sanders and Phillipson (2006) reviewed 13 papers relating to the predicted and the actual energy saving in the case of housing insulation. Accordingly they estimated this reduction factor as 50% of the theoretically expected savings of which the rebound factor is 15% and a technical reduction factor 35%. Regarding rebound effects it has to be mentioned that the estimations from the evaluation report on UK’s EEC2 from Lees (2008) accord to a large extent with the review study from Greening et al. (2000). Finally, Table 1 summarizes rebound and technical reduction factors considered for our evaluation. Deriving net “annual energy saving” Deriving of annual energy savings is important for our specific cost assessment as well as for comparing these two schemes in respect of further calculation of achieved lifetime savings. Figure 2 shows which steps have been taken in order to deduce annual net saving for both analysed countries. The annual savings which are called also “first year saving” within some ESO schemes are not comparable as the implemented measures differ from country to country and the lifetimes of measures differ from each other, In general, it is decisive for encouraging some specific measures to set the measurement of savings within a 3. An exception to this general rule is hot water tank wraps. ECEEE SUMMER STUDY proceedings 2107 7-425-13 Suna, Haas 7. Monitoring and evaluation Table 1. Summary of considered rebound and technical reduction factors. Rebound Technical reduction Main categories for residential sector Building insulation measures Measures relating heat demand for DHW Lighting Energy Efficiency Appliances Boilers Innovative heating (heat pumps, solar thermal etc.) 15%* # # 15%* 7% *° 0 *° 0* 0* Measures in Service Sector Measures in Industry sector 35% 0 10% + Sources: * (Lees, 2008), ° (Greening et al., 2000), + average of 0–20 % given in Greening et al. (2000), # (Sanders and Phillipson, 2006). Official Data on achieved saving (from OFGEM) UK-EEC2 (2005-2008) Fuel Standardizied (FS) lifetime discounted final energy saving [TWh] IT- TEE (2005-2010) mainly 5 (some cases 8) years lifetime primary energy saving [toe] Distinguishing of saving between final gas, electricity and others (mainly oil) by measures Converting primary energy to the final energy [TWh] Converting FS energy to the actual energy Official Data on achieved saving (from AEEG) Distinguishing of saving between final gas, electricity and others (mainly oil) by measures Deriving annual energy saving by considering program lifetimes and 3.5% discount rate Deriving annual energy saving (Annual energy savings of 2010) Remove factors: rebound, technical reduction, free rider and uplift Remove factors: rebound and technical reduction Lifetime discounted energy saving (harmonic lifetimes and discount rate) Figure 2. Deriving actual annual energy saving for UK-EEC2 (2005–2008) and IT-TEE (2008–2010). programme on an annual basis or to follow a lifetime approach. For example in the UK where lifetime saving is considered, saving is derived mainly from insulation measures, characterised by a long lifetime. In comparison to that, within Italy where accounted lifetimes of savings are set artificially mainly to 5 years (short-term impacting) lighting measures were of dominance. Annual saving for UK-EEC2 (1 April 2005–31 March 2008) Lees (2008) evaluates the EEC2 period for the Department of Energy and Climate Change (DECC) and explains in more detail how the data are assessed. In order to derive the net annual saving for this scheme we have mostly followed the line of this study and its approach. In UK’s EEC2 scheme the saving is measured based on an exante approach where “baseline” has been defined preliminarily by estimating the “free rider effects” (which is called “deadweight effects” within this program). Lees (2007) indicates that in the first period of EEC1 the free rider effect was minimized, 2108 ECEEE 2013 SUMMER STUDY – RETHINK, RENEW, RESTART but through the increase of activities, some costumers were supported, who would have taken the measures also in the absence of this programme. Therefore, Defra undertook an approximation of this effect based on an assessment of historical levels of installations that took place in the absence of the energy efficiency measure, reflecting a “business as usual (BAU)” trend. However, Defra has deducted the free rider effect only for the estimation of net carbon saving (Lees, 2008) but not for the energy saving. Within our calculation the free rider effect was used for both the derivation of net energy saving as well as for the related cost assessment, whereby data used was based on (Lees, 2008). Under EEC the term “additionally” was defined by the question “which saving does EEC program bring additionally?”. This issue can be explained according to the following examples in further detail: In UK’s EEC program suppliers were obligated by deriving at least 50 % of saving in the “priority group” namely low income consumers and those over 70 years of age 7. Monitoring and evaluation in order to reduce their “fuel poverty”. In this respect suppliers choose to interact with other fuel poverty programmes such as “Warm Front” in order to comply with this requirement. If for example the programme “Warm Front” allowed installing a new central heating the suppliers provided the insulation measures. On the other hand, suppliers had to demonstrate that they implemented additional measures in comparison to other schemes, and that, consequently corresponding additional costs occurred. A correct definition of “additionality” was a key issue for such kind of programmes (Ofgem, 2008b). Accordingly, it can be concluded that except “free rider effect” the additional saving has been accredited within this program and the official data on achieved savings expresses the “additional savings” to a sufficient extent. As above mentioned within EEC2 rebound is called as “comfort factor”. Comfort factors are determined but not considered for certification of achieved savings. They consider this only in forthcoming ex-post evaluations. In order to derive net saving these factors should also be considered (see Table 1) for both analysed ESO schemes. In order to estimate the real saving of EEC2 the measures have been considered which were accounted to fulfil EEC2 targets (without EEC1 carryover). Table 2 provides an overview on the energy saving measures counted towards EEC2 period based on Lees (2008). Lees (2008) has calculated achieved saving of all measures to be 127.2 TWh FS, using a 50 % uplift factor4, meaning that in Table 2 given measures cover about 99 % of this value. On the other hand, an inconsistency could be seen between data given in (Lees, 2008), where it is indicated that new Ofgem data are used, in comparison to data given in Ofgem’s own EEC2 evaluation report (Ofgem, 2008b). In Ofgem’s report total achieved saving has been denoted as 130.3 TWh FS and total uplift equals 3.6 % of achieved target5 which means by reducing this factor the actually achieved net savings account to 125.7 TWh FS. Despite of this discrepancy the value from Lees (2008) has been considered in this study as Lees (2008) points out that the data he used is newer than the one in Ofgem’s evaluation report. Table 2 summaries annual net energy savings by original fuels as well. These values are calculated based on FS factors as well as estimations from Lees (2008) regarding free rider, rebound and the proportional breakdown of saving to the original fuels. Annual Saving for IT-TEE (January 2005–December 2010) In the case of the Italian scheme only additional savings in relation to baseline are considered. The baseline is defined by using market averages for the energy savings from lighting, appliances and boilers whereas the building regulation requirements pose the baseline in the case of new buildings (Lees, 2010). For the measures such as solar water heater, PV systems or improvement of thermal insulation in the buildings the energy 4. Within EEC2 an innovation uplift factor of 50 % has been implemented for measures such as solar water heating, ground and air-sourced heat pumps, combined heat and power (CHP) units, integrated digital TVs (iDTVs) and TV recorders, set top boxes, imaging equipment, stand-by savers and potentially for other renewable energy sources (Lees, 2008). 5. 130.3 TWh is the reported achieved saving which includes about 2.57 TWh innovation uplift and 2.1 TWh Energy service uplift (Ofgem, 2008b). 7-425-13 Suna, Haas consumption without the added device or insulation is considered (Bertoldi and Rezessy, 2009). Accordingly the official data indicates the “additional savings” but without considering “free rider” effect. For the time period from the beginning of the scheme in 2005 up to the end of 2010 the cumulative saving data is taken from (AEEG, 2011a) By the year 2011 there are 29 technological measures for the deemed and engineering estimates files. If we look at the cumulative savings by the end of 2010, seven of these measures account for 97 % of all savings based on deemed and engineering estimates, meaning that there is a large concentration on certain types of measures (see also Mebane and Piccinno (2012)). 21.4 % of total saving is derived from different measures evaluated by monitoring planning. Table 3 shows the categories where most of the savings were derived while the rest is summed under the category “others”. Accordingly, all savings, including monitoring plans, are fragmented based on the three main sectors; residential, service and industry. The cumulative primary energy has been converted to the final energy by considering different assumptions. In line with the approach used by Mebane and Piccinno (2012) and taking the information from (Odyssee, n.d.) regarding fuel-specific final energy use for water heating in Italy into account, we calculated average figures for the period 2005 to 2010, considering information given on energy saving by different fuels from (AEEG, 2011a). AEEG (2011a) gives the information that the achieved cumulative energy saving of 8.017 Mtoe is divided into the fuels as follows: 72 % refers to electricity, 23 % to gas and 5 % to other fuels. Accordingly, about 57 TWh final energy was saved within the period 2005 to 2010 based on the conversion factors 0.187 toe/MWh for electricity (indicates Italian production mix) and 0.086 toe/MWh (Di Santo et al., 2011) for gas and other fossil fuels. For measures relating to water heating, 27 % electricity, 73 % gas and 10 % oil savings are considered. For the monitoring planning measures in the industry and service sectors again the primary energy has been divided to the final energy in accordance with abovementioned information. Thus, our estimations indicate a total saving of 58 TWh in terms of final energy which fits well to the abovementioned savings according to (AEEG, 2011a). In Italy, saving is accredited on a yearly basis and needs to be reported to AEEG until May 31st of the year subsequent to the obligation (Di Santo et al., 2011). One year saving of a measure is accredited through program lifetimes (e,g. a measure implemented in 2005 accounts for 5 years, i.e. in the period 2005 to 2009). In order to derive the annual saving of savings from 2005–2010, the difference between cumulative saving from 2010 (AEEG, 2011b) and 2009 (AEEG, 2010) has been taken into consideration. This value indicates the annual saving of the year 2010 which comprises all annual savings of implementations until 2010 except those which have been taken in the year 20056. 6. In 2005 the program was put into operation and 287 toe (AEEG, 2006) were reported as derived energy saving from the program start (January 2005) until 31 May 2006. Considering cumulative saving in 2010, this represents about 3.6 % of the cumulative saving in 2010, but there is no information applicable which part of this could be derived already in 2005 and which in the first half year of 2006. Therefore, data for this first reporting year was neglected in our assessment and has consequently not been added to the annual saving (of prior measures taken) in 2010. ECEEE SUMMER STUDY proceedings 2109 7-425-13 Suna, Haas 7. Monitoring and evaluation Table 2. Energy saving measures counted towards EEC2 period and converted values to the net annual saving by original fuel (UK). Energy efficiency measures CWI pre & post 1976 Loft insulation (top up) Loft insulation (virgin) DIY loft insulation (sq metres) Solid wall insulation Hot water tank jackets Glazing (sq metres) CFLs retail CFLs direct Energy eff. cold appliances Energy efficient wet appliances Standby savers Integrated digital TVs All boilers Heating controls (individual TRVs) Fuel switching Innovative heating Totals Number of measures 1,460,063 688,645 354,255 4,532,582 7,060 83,129 1,460,359 33,597,730 17,547,498 3,777,526 4,565,817 2,943,384 9,450,182 2,082,812 2,054,508 1,403 2,892 84,609,845 FS lifetime discounted energy savings GWh/yr 62,110 10,219 22,773 1,284 479 188 230 7,172 3,716 2,194 932 2,005 3,471 7,837 195 100 479 125,384 Annual FS GWh saving 2,908 556 1,238 70 26 23 16 544 282 227 96 174 568 680 17 9 22 7,456 Actual GWh net electricity saving GWh/yr 157 61 129 0 2 0 1 518 103 172 19 109 354 0 0 2 4 1,631 Actual GWh net gas saving GWh/yr 2,766 483 1,236 0 11 0 10 0 0 0 0 0 0 1,806 24 1 2 6,338 Actual GWh net other fossil saving GWh/yr 223 51 139 0 2 0 0 0 0 0 0 0 0 37 0 5 15 473 CWI: Cavity Wall insulation, CFL: Compact fluorescent lamp and TRVs: Thermostatic radiator valves. Taking the annual saving of 2010 into consideration and removing the side effects, in this case the rebound effect, net annual final energy saving has been calculated by original fuel as listed in Table 3. In order to compare both schemes in respect of their total savings the lifetime-discounted saving is calculated. The determination of lifetimes for different measures in the residential sector is based on UK’s current ESO scheme CERT (see (Ofgem, 2008a)). Within this current UK scheme lifetimes are estimated based on long years experiences of UK’s program, and according to Lees ( 2008) they can be regarded as realistic. In this respect the lifetime defined within the CERT7 program are also considered for the implemented measures in the household sector in our subsequent own quantitative comparison of both assessed schemes UK-EEC2 and IT-TEE (2005–2008). For measures in the Italian scheme such as hot water savings, UK’s CERT scheme does not provide information on lifetimes. Therefore the lifetime estimations from Pavan (2012) have been taken into consideration. For the necessary discount rate we followed the approach used in EEC2, applying 3.5 % as estimate. Note that a discount rate in respect of energy saving can be understood as deterioration of technical measures over its lifetime actualizing annual savings for different measures with different life spans (Bertoldi and Rezessy, 2009). Figure 3 indicates the calculated net lifetime-discounted final energy saving for the two analysed ESO schemes. Thus, “net saving” shall mean that all related side effects are removed. For dominating measures we expressed also explicitly the saving value within this graph, and for all measures the applied lifetimes are applicable in the legend. Accordingly, in the UKEEC2 scheme within the three years evaluation period the implemented measures brought forward net lifetime-discounted saving of 144.5 TWh only in the residential sector. Despite the fact that all side effects and uplift factors are removed, this value (which can be classified as actual saving) is considerably higher than the calculated FS saving within the EEC2 scheme (130.3 TWh FS based on (Ofgem, 2008b)) as the lifetimes of insulation measures – a key measure in the UKs scheme- is considered as 40 years in this work which is 30 years in EEC2. In comparison to the UK the Italian net final lifetime-discounted energy saving amounts to about 221 TWh in cumulative terms, i.e. within their six years of period. This figure comprises all main economic sectors, namely residential, service and industry. Assuming a linear implementation, a reasonable estimate for (virtually) three years of implementation would lead to a value of 110.5 TWh (in consistency with the UK). About 126 TWh (or 57 % of the total) can be estimated as lifetime discounted saving achieved in the Italian residential sector. As indicated above, lighting measures account for the majority of savings. Table 4 shows a comparison of both schemes in respect of derived net annual saving per capita and the ratio of saving in comparison to total final energy consumption.8 Annual saving of implemented measures within “virtually one year” is calculated in order to allow a reasonable comparison of these 7. The main difference between CERT and EEC2 with respect to the lifetimes is that the insulation measures have been calculated over 40 years within CERT whereas the lifetime is 30 years in EEC2. 8. Note that for both countries the applied figure on final energy consumption reflects the country-specific average annual final energy consumption of the period 2005 to 2008. Lifetime discounted programme net energy saving: UK-EEC2 vs. IT-TEE 2110 ECEEE 2013 SUMMER STUDY – RETHINK, RENEW, RESTART 7. Monitoring and evaluation 7-425-13 Suna, Haas Table 3. Energy saving measures counted towards IT-TEE (2005–2010) converted to the net annual saving by original fuel. Energy efficiency measures toe [%] in total Total Net Final energy [GWh] Residential 1 – Lighting (CFL) 12 – Energy Eff. Appliances 8 – Solar thermal collectors for DHW* 13a – Low flow shower taps 14 – Low-flow water taps aerators Service 4,366,239 69,823 137,919 1,073,041 363,749 54% 1% 2% 13% 5% 23,359 374 1,531 11,908 4,037 18 – MV Public lighting lamps->HPS lamps 180,679 2% 967 13c- 2nd Group Low flow shower taps in sport centres 106,999 1% 105,000 30,000 30,000 30,000 587,000 451,000 271,000 214,511 8,016,960 M.P: CIV-T M.P: CIV -GEN M.P: CIV-E M.P: IP Industry M.P: IND-GEN M.P: IND-T M.P: IND-E Others (deemed+engineering) Total Annual Net Final energy [GWh/yr] Electricity Gas Other fossil 6,969 101 54 402 150 – – 318 360 880 – – 44 323 121 146 – – 1,187 96 564 77 1% 0% 0% 0% 1,004 287 161 161 73 -10 47 8 231 -32 – – 91 -13 – – 7% 6% 3% 3% 100% 5,610 4,310 1,450 1,839 58,183 333 611 761 129 9,869 1,053 1,931 – 237 7,542 417 765 – 57 1,882 DHW: Domestic Heat Water MV: Mercury Vapor HPS: High Pressure Sodium M.P: Monitoring Planning CIV -T: Service sector: measures for reduction of heat demand (efficient boilers, water heaters, building related measures etc.) CIV-GEN: Industrial processes: electricity generation from renewable sources, heat recovery, or cogeneration CIV -E: Service sector: measures for reduction of electricity demand (efficient appliances, lighting etc.) IP: efficient public lighting IND-GEN: Industrial processes: electricity generation from renewable sources, heat recovery, or cogeneration IND-T: Industrial processes: generation or heat recovery for cooling, drying, burning, and melting IND-E: Industrial processes: efficient drive systems (motors, etc.), automation and power factor measures UK-‐CERT2 (3-‐year period) Lifetime discounted saving [%] 100% 90% 4% 12% 80% 70% Others All boilers (12 years) 31% 60% Loft insulation (40 years) 40% Others 90% 5% 5% 80% 21% 70% 50% 12% 3% 3% 10% 40% 46% Cavity wall insulation 20% 6% 10% 0% M.P: E-‐IND (20 years) M.P: T-‐IND (20 years) M.P: GEN-‐IND (20 years) M.P: T-‐CIV (20 years) RS-‐Solar thermal (20 years) 30% 20% Lighting (18 years) 10% 0% 100% 60% 50% 30% IT-‐TEE (3-‐year period) Lifetime discounted saving [%] 42% RS-‐Low flow water taps (6 years) RS-‐Lighting (18 years) Figure 3. Lifetime discounted saving in UK and IT schemes (Right in Italian scheme, R.S means residential sector). ECEEE SUMMER STUDY proceedings 2111 7-425-13 Suna, Haas 7. Monitoring and evaluation Table 4. Indicators on energy saving in both assessed schemes (Source: Own assessment, complemented by data from (Odyssee, n.d.)). Population in 1000 (2009) UK-EEC2 (2005–2008) IT-TEE (2005–2010) Annual net saving (one year) [GWh/yr] 61,792 60,340 2,814 3,215 programs. For this achieved (cumulative) savings in the final year and the years of operation of the assessed programs were considered.9 Accordingly, although the UK’s scheme comprises just the residential sector the achieved one year (average of three years) annual within the period 2005 to 2008 is equivalent to 0.16 % of total consumption whereas the Italian TEE scheme has led to 0.20 % (average of 6 years). Moreover, the Italian scheme implies also higher savings per capita. Calculation of specific cost of energy saving In order to calculate the specific costs the annuity method is applied, reflecting a common approach in this respect. Assuming that the annual saving and the annual costs (despite investment) are constant the specific cost of saving can be calculated according to the following formula. (ΔI 0 * CRF ) + ΔCom − p * ΔE (1 − f side ) CES = ΔE (1 − f side ) (ΔI 0 * CRF ) + ΔCom − p * ΔE (1 − f side ) (Eurocent/kWh) CES = ΔE (1 − f side ) where, ΔI0 Total initial additional investment (difference between efficiency measures to baseline) CRF Capital recovery factor CRF = i * (1 + i) n 1 = PVF (1 + i) n − 1 where, ΔCom Additional annual operation and maintenance costs (Note: in this study neglected) p Average energy prices of programme period (e.g. Eurocent/kWh) ΔE Annual energy saving (kWh/yr) (considered as constant) i Discount rate n Depreciation time (yr) fside Side factors, included rebound , technical reduction factors and free rider 9. For UK-EEC2 the yearly saving was calculated by dividing achieved cumulative savings in the final year (2008) by 3, reflecting the three years of operation, while for IT-TEE the calculation is consequently done by dividing cumulative savings in the final year 2010 by 6, reflecting the six years of operational period from 2005 to 2010. 2112 ECEEE 2013 SUMMER STUDY – RETHINK, RENEW, RESTART Average yearly final energy consumption (2005-2008) [GWh] 1,798,425 1,577,921 Total annual saving (one year) per capita [kWh/cap] 46 53 Annual (one year) saving ratio in total final consumption [%] 0.16% 0.20% For the economic evaluation of selected programmes from different stakeholders’ viewpoints Table 5 summarizes discount rates as well as depreciation periods mainly based on (VROM, 1998) cited in (Joosen and Harmelink, 2006). These values are used for the Energy Saving Programmes analysed within AIDEE10 projects. Cost of Energy Saving (CES) for the Society as a whole In order to calculate the CES from different actor’s viewpoint there is need to know the investment costs broken down among the stakeholders such as consumers, utilities, government as well as third parties like Energy Service Contracting Companies (ESCOs) etc. Lees (2008) provides a comprehensive overview on estimates of average cost of implemented measures for the UK, offering a fragmentation of investment costs for the UK’s EEC2 scheme11 based on prices from July 2006. In order to allow a cross-country comparison these values given in national currency have been translated into Euro, and all costs and fuel prices have been converted to €2005-PPP as summarised in Table 6. In the case of the Italian scheme there is no information how the costs are shared by different actors. Nevertheless, it can be stated that in most of the projects the investments are carried by the end-users, while ESCOs and distributors participate as consultants in order to receive the white certificates. This can also happen if the end-user qualifies to present the project directly as an organization with an energy manager. Only seldom the investment costs are paid by the ESCOs and DSOs (Distribution System Companies).12 On the other hand, estimation on the whole private investment can be found in Mebane and Piccinno (2012).13 By converting these values into 2005-PPP the private investment cost by different measures are shown in Table 6. For the Italian scheme the public contribution for the first five years (by end of 2009) is given in (AEEG, 2011c) as about 531 million Euro. Summing up, with the 326 million Euro (AEEG, 2011d) for the year 2010, 857 million Euro was the public contribution between 2005 and 2010. This indicates the total reimbursement given to the obliged DSOs for their certificates presented to the AEEG. Certificate prices ranged 10. AID-EE: Active Implementation of the European Directive on Energy Efficiency, Intelligent Energy Europe, EIHOR/EIE/04/114/2004 (more detail see Joosen and Harmelink (2006)). 11. In this study the costs estimations generally indicate “additional cost”, indicating the “marginal costs” that are needed for the change of purchase decision of householders. In few exceptional cases such as insulation, CFLs and heating controls these costs indicate however the total costs (Lees, 2008). 12. Di Santo Dario, personal communication, 6 January 2013. 13. Please note that for the Italian scheme also the “additional investment costs” are considered in Mebane and Piccinno (2012). Nevertheless, detailed information on how this issue was treated by measures could not be derived. 7. Monitoring and evaluation 7-425-13 Suna, Haas Table 5. Default assumptions on discount rates by sector and on depreciation periods of energy saving measures. Source: (VROM, 1998) cited in Joosen and Harmelink (2006). Default discount rates in sectors Default depreciation period of energy saving measures Discount Rate (%) 4 Sector Government Other Organisations 4 End-user Households Agriculture Services Industry Transport Society (as a whole) 8 8 15 15 15 4 Type of energy saving measure Depreciation period (years) Installation, appliances 10 Measures connected to buildings (e.g. insulation) 25 Table 6. Investment cost by different actors for UK-EEC2 (2005–2008) and private vs. public contribution for IT TEE (2005–2010). UK-EEC2 [M€2005-PPP] Measures CWI pre & post 1976 Loft insulation (top up) Loft insulation (virgin) IT-TEE [M€2005-PPP] Suppliers Customer Third Party Cost contribution contributions 348 114 76 62 22 7 DIY loft insulation (sq metres) 4 8 Solid wall insulation Hot water tank jackets Glazing (sq metres) 4 1 1 0 0 10 CFLs retail 14 18 CFLs direct 31 0 Energy eff. cold appliances Energy efficient wet appliances Standby savers Integrated digital TVs All boilers 17 8 6 12 39 30 Heating controls (individual TRVs) 1 Fuel switching Innovative heating 1 6 Total 681 Privat Public Investment cost Residential 1 – Lighting (CFL) 12 – Energy Eff. Appliances 8 – Solar thermal collectors for DHW 13a – Low flow shower taps 14 – Low-flow water taps aerators Service 390 165 472 8 107 15 129 284 116 39 18 – MV Public lighting lamps->HPS lamps 14 20 13c – 2nd Group Low flow shower taps in sport centres 14 12 185 -38 60 2 11 3 3 3 6 M.P: T-CIV M.P: GEN-CIV M.P: E-CIV M.P: IP Industry 5 2 M.P: GEN-IND 249 63 0 11 1 2 M.P: T-IND M.P: E-IND 741 537 49 29 Others (deemed+engineering) 319 23 3159 867 174 from 88.92 to 100.00 Euro per toe from 2005 to 2010 (Di Santo et al., 2011)). Total public costs are divided in accordance with derived toe saving by different measures in order to divide public costs by measures (see Table 6). In line with above, the specific CES can be calculated based on the formula given above, taking into account a 4 % discount rate for the society (as a whole) and default depreciation times given in Table 5. For the “society as a whole” investments costs from all actors can be summed up as follows. 19 20 5 Measures 19 0 73 Total ΔI0 = ΔIConsumers + ΔIUtility + ΔIGovernment + ΔIThird_Party The economical benefits of energy saving is calculated based on average fuel prices (IEA, 2011) of analysed periods without all levies and taxes. Joosen and Harmelink, (2006) justifies the use of this approach arguing that taxes for one sector cancel out benefits for another sector. However, it must be kept in mind that these prices contain generation costs, grid tariffs rates as well as the utility profits. ECEEE SUMMER STUDY proceedings 2113 7-425-13 Suna, Haas 7. Monitoring and evaluation UK-‐EEC2 (2005-‐2008), CES for the society [€cent 2005-‐PPP/kWh] IT-‐TEE (2005-‐2010), CES for the society [€cent 2005-‐PPP/kWh] All 7.66 All -‐0.30 Fuel switching 1.85 -‐2.12 M.P: T-‐IND -‐1.68 All boilers -‐3.18 M.P: GEN-‐IND -‐7.00 Integrated digital TVs M.P: E-‐CIV -‐2.08 Energy e fficient wet appliances M.P: GEN-‐CIV -‐6.22 Energy e ff. c old appliances -‐0.02 M.P: T-‐CIV -‐3.74 Lighting (CFLs direct ) 10.13 Others (deemed+engineering) 0.00 6.95 -‐4.68 Low flow shower taps for r esidential -‐2.25 Loft insulation (virgin) -‐2.08 Solar thermal collectors for DHW Energy e fficiency appliances 12.00 10.00 8.00 6.00 4.00 -‐2.00 -‐4.00 -‐6.00 -‐8.00 -‐12.00 -‐14.00 -‐16.00 12.00 10.00 8.00 6.00 4.00 2.00 6.56 Lighting -‐12.77 0.00 -‐2.00 -‐4.00 -‐6.00 -‐1.57 CWI pre & post 1976 -‐8.00 1.75 Low flow water taps areators -‐2.15 0.00 -‐1.04 Loft insulation (top up) -‐10.00 3.27 All r esidential Solid wall insulation DIY loft insulation (sq metres) 2.74 Public ligting -‐12.32 Glazing (sq metres) Hot water tank jackets 2.29 -‐5.02 Low flow shower taps for sport c . Lighting (CFLs r etail) -‐10.00 -‐6.64 -‐12.00 M.P: IP -‐10.30 Standby savers -‐6.75 2.00 Heating c ontrols (individual TRVs) 2.58 -‐4.60 M.P: E-‐IND 0.00 -‐2.3 Innovative heating Figure 4. CES for the society by dominating measures (left for UK-EEC2 (2005–2008 and right for IT-TEE (2005–2010). On the other hand, Joosen and Harmelink (2006) also say that the subsidies for the cost calculation from the societies viewpoint should not be included. Nevertheless, in this study government expenditures related to analysed programs have been added as the aim of this work is to show the total costs of energy saving measures for which we see directly related governmental expenditures being an essential part of. Despite the rebound factor related increases of comfort can be regarded as a benefit for the end users and, accordingly, also for the society as a whole, we have removed all side effects (rebound technical reduction and free rider) as the main target of an energy efficiency programme is to achieve “energy saving”. Accordingly, the CES for the society as a whole by different implemented measures are shown in Figure 4. Partly negative costs occur, indicating that the benefits for the society outweigh the costs. Within the UK-EEC2 the specific cost of saving of all measures amounts to -2.3 Eurocent2005-PPP/kWh, considering the weighted average of insulation measures (62 % of total, depreciation time is 25 years, see Table 5, whose specific costs are -1.73 Eurocent2005-PPP/kWh and other measures (installation and appliances depreciation time 10 years) ) whose CES is 3.4 Eurocent2005-PPP /kWh. In comparison to the UK scheme in Italy the specific CES of all measures conducted amount to 2.58 Eurocent2005-PPP /kWh, and the corresponding figure for the residential sector is 1.75 Eurocent2005-PPP/kWh. Considering the measures for the residential sector it can be seen that efficient appliances and lighting are common measures which are implemented within both schemes in representative terms. Thus, significant differences with respect to the resulting specific CES are becoming apparent. In the case of efficient appliances the CES in the UK scheme is -2.08 and -6.22 Eurocent2005-PPP (wet and cold appliances) whereas this is in Italy in size of about 6.56 Eurocent2005-PPP/kWh. If we look 2114 ECEEE 2013 SUMMER STUDY – RETHINK, RENEW, RESTART at the specific (additional) investment costs for the appliances, e.g. investment costs expressed per achieved kWh saving, we see that the Italian scheme has higher costs per kWh than the UK’s scheme which largely explains the higher CES for appliances in Italy.14 The other category lighting indicates also significant differences for CES between the UK and Italy but in contrast to above the societal benefit is now almost twice as high in Italy compared to the UK (i.e. -6.64 vs. -12.77 Eurocent2005-PPP/kWh). This can be explained by the comparatively high electricity prices in Italy (in contrast to the UK) – i.e. the average electricity prices without taxes amount to 14 Eurocent2005-PPP/kWh in Italy which is almost twice as high the corresponding figure for the UK (7.4 Eurocent2005-PPP/kWh). This consequently means that each kWh saved electricity through lighting measures leads in Italy to also almost twice as high savings for the society in comparison to the UK. Results and Conclusions Deriving annual saving has shown that the UK-EEC2 scheme has provided 8.4 TWh net annual programme saving only in the residential sector through measures implemented within three years (2005–2008). The corresponding figures for the Italian TEE scheme are 19.3 TWh but the programme was implemented over a period of six years (2005–2010) and comprised all main economic sectors. Lifetime-discounted net saving of both schemes have been calculated, indicating for the UK 144.5 TWh (2005–2008) and 221 TWh (2005–2010) (approxi14. The reasons for differences in investment costs between the two countries may lie in the consideration of “additional savings” and “additional costs” in practice – despite the fact that in theory an almost identical baseline definition is used, and which is based on market averages. Other reason may also be differences in purchase prices of appliances due to differing market and retail structures. 7. Monitoring and evaluation mation for three years: 110.5 TWh) in Italy where about 57 % is derived through measures in the residential sector. In contrast to above, the comparison of energy saving indicators shows that the Italian programme has slightly more favourable values if we consider the annual savings of one year average of both countries and take the different implementation periods into account. Accordingly, the achieved net annual saving amounts to 0.16 % of total yearly final energy for the UK, while in Italy average annual savings in size of 0.20 % were achieved. In respect of specific cost of energy saving (CES) for the society it can be seen that, considering all implemented measures, the average CES amounts to -2.3 Eurocent2005-PPP/kWh for the UK, indicating net benefits, whereas this is in size of 2.58 Eurocent2005-PPP/kWh for the Italian scheme, meaning net costs. The CES in the Italian scheme for the measures in the residential sector amounts to 1.75 Eurocent2005-PPP/kWh, indicating slightly more favourable conditions in comparison to the overall figure. The comparative assessment of the two ESO implementations, namely the Italian-TEE (2005–2010) and the UK-EEC2 (2005–2008) system, conducted within this paper represents a first attempt to define and apply a consistent methodology. Thus, the work has proven the ability for doing so but it also helped to gain further insights on difficulties and bottlenecks. Moreover, it allows drawing first conclusions: The main conclusion of this work is that a quantitative comparison of different ESO implementations appears feasible but data requirements are significant. Thus, a standardised documentation of the progress achieved in energy efficiency programme, and in particular in ESO schemes, should be facilitated, better to say required, with the call for EU wide ESO implementations as set out by the new Energy Efficiency Directive (2012/27/EU). Thus, a detailed catalogue allowing a standardised documentation of forthcoming ESO implementations, including standardised approaches also related to the consideration of side effects such as rebound and free rider as well as for the identification of baseline, additional savings and related additional cost appears indispensable. In general, a quantitative cross-country analysis makes sense as long as a harmonised approach is used for doing so since otherwise one can hardly compare savings or cost. Using the saving indicators is also essential to understand what the results really mean. The comparison of specific cost by different measures shows that there are significant differences in the case of some common measures between both programmes (e.g. efficient appliances and lighting). There is a need for further research to explain these differences. References AEEG, 2006. Primo Rapporto annuale sul meccanismo dei titoli di efficienza energetica-Situazione al 31 maggio 2006- (1st Annual Report on the TEE mechanism). AEEG, 2010. Il mleccaniismo dei Tiitollii di Effiiciienza Energetiica (certiifiicatii biianchii) dall 1° gennaio all 31 maggiio 2010. 7-425-13 Suna, Haas AEEG, 2011a. Il meccanismo dei Titoli di Efficienza Energetica (certificati bianchi) dal 1° giugno al 31 dicembre 2010. AEEG, 2011b. Il meccanismo dei Titoli di Efficienza Energetica (certificati bianchi) dal 1° gennaio al 31 maggio 2011. AEEG, 2011c. 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