GLOBAL OVERVIEW
Many policy makers consider energy efficiency to be a priority for achieving various energy goals, including improved energy security and energy access, reduced air pollution and fuel poverty, employment growth and industrial competitiveness .1 Moreover, scenarios for achieving CO2 emissions reductions recognise that energy efficiency will play a critical role .2 Energy efficiency also has significant synergies with renewable energy;
together they can achieve more than the sum of their partsi . For example, energy savings help renewable energy to meet a higher share of energy demand at a lower cost and open up new markets . Shifting from thermal power to non-thermal renewables also improves primary energy efficiency .
Energy efficiency policies are the main driver of investment in energy efficiency, with innovations in technology and finance also playing important roles . Thus, despite lower oil prices in 2015 and much of 2016, households, businesses and governments continued to invest strongly in energy efficiency .3
Due to a lack of precise indicators of energy efficiency, energy intensity often is used as a proxy for energy efficiency trends, even though it also is affected by structural changes in the
economy and by changes in the energy mix . Primary energy intensity is measured as total primary energy supply (TPES) per unit of gross domestic product (GDP) . Alternatively, final energy intensity is measured as total final consumptionii (TFC) per unit of GDP . TFC intensity may better reflect trends in end-use energy efficiency than TPES intensity because it excludes losses in power generation or fuel conversion .4 However, primary energy data usually are available earlier and generally are more reliable . Also, TPES intensity is more relevant to monitoring overall energy demand and related greenhouse gas emissions .
In 2015, global primary energy intensity improved by 2 .6% .5 That is the average rate that needs to be achieved between 2010 and 2030 to meet the Sustainable Development Goal 7 target of doubling the rate of improvement in energy efficiency .6 However, between 2010 and 2015, energy intensity declined by only 10 .2%
overall – an average annual rate of 2 .1% .7 Over the same period, TPES grew by 1 .3% per year, amounting to a total increase of 6 .8% .8 (p See Figure 53.)
Energy intensity, whether primary or final, varies widely among regions and countries . In 2015, primary energy intensity improvements were less marked in developed economies than in developing and emerging economies, most of which are still
i Renewable energy and energy efficiency are twin pillars of a sustainable energy future . Synergies exist between the two across numerous sectors . This means that the interaction of renewables and energy efficiency can result in an outcome greater than the sum of the parts . In recognition of the important linkages between renewable energy and energy efficiency, there has been a dedicated chapter on energy efficiency in the GSR since 2015 . (p See Feature in GSR 2012 for more on renewable energy–energy efficiency synergies.)
ii Total final consumption includes energy demand in all end-use sectors, which include industry, transport, buildings (including residential and services) and agriculture, as well as non-energy uses, such as the use of fossil fuel in production of fertiliser . It excludes international marine and aviation bunkers, except at the global level, where both are included in the transport sector . IEA, Energy Efficiency Market Report 2016 (Paris: 2016), p . 18, https://www .iea .org/eemr16/files/medium-term-energy-efficiency-2016_WEB .PDF
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Global primary
2010 2011 2012 2013 2014 2015
12,900 13,778
Source: See endnote 8 for this chapter.
Note: Dollars are at constant purchasing power parities.
ENERGY INTENSITY
is the ratio between the gross inland consumption of energy and GDP calculated for a calendar year.
Figure 53. Global Primary Energy Intensity and Total Primary Energy Supply, 2010-2015
growing rapidly and have more efficiency potential remaining . For example, China’s primary energy intensity improved by 5 .8% in 2015 as the country’s TPES increased by 0 .9% (the lowest rate since 1997), even as GDP grew by 6 .9% .9 India’s economy also has become steadily less energy-intensive over the past decade .10 Brazil, on the other hand, has experienced rising primary energy intensity since 2012, and energy intensity of electricity generation in Vietnam increased by 70% between 2004 and 2014 (driven in part by a rising share of coal-fired power generation) .11
High levels of primary energy intensity are due to some combination of: a relatively large share of energy-intensive economic activities, the use of less energy-efficient technologies, under-utilisation of power generation capacity, and a relatively large share of thermal power generation, in particular coal . For example, China’s primary energy intensity decline in recent years is due in large part to structural changes in the economy away from heavy industry and towards services and high value-added manufacturing (in line with China’s overall growth policy), as well as towards a more low-carbon energy mix .12 China’s 13th Five-Year Plan aims to lower coal’s 2020 share of primary energy from 62% to 58% .13 Structural change has been important for reducing energy intensity in several other countries as well, including the United States and Canada .14
Total final consumption in member countries of the Organisation for Economic Co-operation and Development (OECD) as a whole peaked in 2007 .15 Isolating energy efficiency from activity and structural effects requires detailed data that are not always available . Nevertheless, decomposition analysis of IEA countries for which data are available finds that, in 2015, energy efficiency was responsible for more than 80% of the downward pressure on energy consumption .16
Global TPES in 2014 (the most recent data available) was 13,699 million tonnes of oil equivalent (Mtoe), of which nearly 38% was
allocated to power generation .17 Global TFC in 2014 was 9,425 Mtoe;
of this total, more than 32% was consumed in buildings, 29%
in industry and nearly 28% in transport, with the remainder consumed in other sectors and for non-energy applications . Electricity makes up a portion of final energy use in all end-use sectors, and energy efficiency in power generation must be gauged in terms of its primary energy use . By contrast, the efficiency of end-use sectors is better measured in the context of final energy use .
The next few sections examine primary energy efficiency in the generation of electricity, followed by efficiency of final energy use in the buildings, industry and transport sectors . The chapter also covers recent trends and developments in energy efficiency investment and finance, as well as policies and programmes .
ELECTRICITY GENERATION
Primary energy efficiency in the power sector can be improved mainly by shifts in the energy mix and by improving the efficiency of electricity generation technologies . Further efficiency gains can be achieved through combined heat and power (CHP), which captures waste heat for thermal applications, as well as through reduced transmission and distribution losses .
Thermal power plants convert only about one-third of their energy inputs to electricity (38% on average for OECD generation), while conversion losses for non-thermal renewable energy such as hydro, wind or solar power are low and generally are not accounted for in energy balances .18 Therefore, achieving greater shares of non-thermal renewable power increases primary energy efficiency .
The efficiency of electricity generation ranges from about 30-35% in the Russian Federation and the Middle East to almost 55% in Latin America, where a significant share of electricity
is generated by hydropower . Electricity generation efficiency improved between 2000 and 2014 in all regions except Latin America, where it declined by 0 .6% because hydropower output declined and was replaced by fossil fuel generation .19 In Europe and North America, efficiency improved with rising shares of natural gas and increasing use of CHP .20
In addition to fuel switching, the efficiency of the electricity generation sector can improve through advances in the efficiency of generation technologies themselves . The efficiency of fossil fuel power plants increased in all regions between 2000 and 2014 . Gas-fired plants experienced the highest rate of improvement, with the increase in efficiency exceeding 20% in North America and Africa .21
Energy also is lost through electricity dissipation in the grid and through non-technical losses . In 2014, global transmission and distribution losses averaged 8 .6%, with lower rates in developed regions and far higher losses in some developing countries .22 More-efficient transformers and cables can reduce transmission and distribution losses, as can demand management and automation . In some circumstances, increased use of distributed energy can reduce transmission and distribution losses by producing electricity closer to where it is used . Non-technical losses may be addressed through better management of the grid and billing system .23
BUILDINGS
Buildings account for nearly one-third of global TFC, of which almost three-quarters is consumed in residential buildings, with the remainder used in commercial facilities (services) .24 The largest
portion of TFC in the sector comes in the form of electricity (30%), followed closely by modern and traditional uses of biomass for heating and cooking (29%), and by natural gas (21%) .25 Efficiency of energy use in buildings is affected by building envelopes, design and orientation, as well as by the efficiency of energy-consuming devices, including climate control systems, lighting, appliances and office equipment . Energy intensity per square metre in the buildings sector has improved in many regions, but not rapidly enough to offset the doubling of floor area since 1990 .26
Markets for more-efficient building materials, technologies and equipment are growing worldwide, both for renovation and new construction . The largest market is in Europe, where it is driven by building energy codes and energy prices . North America and Oceania are major markets as well .27 Net zero energy buildings (NZEBs) take fullest advantage of the synergies between energy efficiency and renewable energy by facilitating the use of on-site renewable energy in meeting building energy loads (p see, for example, heat pumps in the Enabling Technologies chapter) . The number of NZEBs remains small but continues to rise, particularly in Europe but also in the United States and Canada .28
The buildings sector accounts for around half of world electricity demand .29 In residential buildings, global average electricity consumption was nearly flat between 2010 and 2014 (0 .2%
average annual increase) .30 In North America, Europe and the Pacific, electricity consumption per household declined between 2010 and 2014, in part a result of improved energy efficiency . These declines were outweighed by increases elsewhere .31 (p See Figure 54.)
+0.2%
+2.1% +1.5% +3.4% +2.6% +0.9%
–2.4% –1.1% –1.9%
World
Europe CIS North
America Latin
America Asia Oceania Africa Middle
East
Compound average annual change, 2010-2014
Despite efficiency improvements, household electricity use is up overall, due largely to a growing number of electrified households and to rising demand for appliances and electronics.
kWh/household
0 2,000 4,000 6,000 8,000 10,000 12,000
14,000 2010
HOUSEHOLD
2014
Figure 54. Average Electricity Consumption per Electrified Household, Selected Regions and World, 2010 and 2014
Source: See endnote 31 for this chapter.
Note: Dollars are at constant purchasing power parities.
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Electricity demand for appliances has been increasing steadily for decades, due largely to a rapid increase in units per household, in addition to the growing number of electrified households . In developed countries, TFC growth for appliances has slowed significantly over the past decade as markets for some products have approached saturation and as energy efficiency has increased .32 However, energy efficiency improvements have not yet cancelled out growing demand for some categories, such as mobile phones, televisions and networked devices .33
The market share of efficient lighting solutions also is growing rapidly, as a result of declining light-emitting diode (LED) prices, international initiatives, green procurement policies and policies to phase out incandescent lamps .34 Smart lighting controls have the potential to improve the energy efficiency of lighting systems even further .
Energy efficiency in the service (commercial) sector can be indicated by the ratio of electricity consumption to value-added in commercial activity, in constant purchasing power parity (PPP) . Between 2010 and 2014, the electricity intensity of the service sector declined in every region except the Middle East and Latin America .35 (p See Figure 55.)
As with other sectors, the energy intensity of services is the product of several factors . These include structural changes within the sector (e .g ., between more energy-intensive sub-sectors, such as hospitals, and less energy-intensive ones, such as warehouses) and across the economy, the growth of building size relative to sector GDP, and the uptake of more-efficient technologies .36
INDUSTRY
The ratio of industry TFC to industry value-added (PPP) is an indicator of the intensity of the industry sector as a whole . It can be improved by structural changes, such as displacement of heavy industry, higher utilisation rates of equipment during a period of strong economic activity, or growth in less energy-intensive sub-sectors, as well as improvements in energy efficiency .37 Measures of industrial energy intensity based on physical production would be better but require data that often are lacking .
Between 2010 and 2014, TFC intensity of the global industrial sector decreased by an average of 1 .5% annually and improved in all regions, with the fastest improvement observed in Asia .38 (p See Figure 56.)
In China, structural changes in energy-intensive sectors in recent years have tended to balance each other out .39 However, structural change is expected to be an important factor influencing energy use .40 India, driven by policy (e .g ., Make in India), is seeing growth in the manufacturing sector . A focus on manufacturing brings economic benefits but also tends to increase the energy intensity of the economy, making energy efficiency improvements all the more important .41
Industrial energy efficiency can be influenced by changes in industrial processes and also by changes in capacity utilisation . For example, the energy intensity of the steel sector of the EU worsened after 2007 due to the economic recession, in large part because the energy consumption of steel-producing equipment did not decline in proportion to lower utilisation of plant capacity .42
-1.2%
–2.0%
+1.3%
–0.4%
+0.7%
–2.1%
–2.1% –1.5% –3.2%
40 80 120 160 Wh/USD2005
World
Europe CIS North
America Latin
America Asia Oceania Africa Middle
East
Compound average annual change, 2010-2014
Electricity intensity in the service sector declined in every region except the Middle East and Latin America.
0
2010
SERVICE
2014
Figure 55. Electricity Intensity of Service Sector, Selected Regions and World, 2010 and 2014
Source: See endnote 35 for this chapter.
Note: Dollars are at constant purchasing power parities.
In general, varying performance by the steel sectors of different countries is explained in large part by their process mixes . For example, the use of electric-arc furnaces in steel production and recycling requires two to three times less energy than the oxygen process .43
TRANSPORT
There is significant untapped energy efficiency potential in the transport sector . The energy intensity of the sector is affected by energy efficiency improvements within transport modes (rail, road, aviation, shipping) and by shifts between transport modes (e .g ., from private car use to public transport, from road freight to rail) . Between 2010 and 2014, the final energy intensityi, of world transport overall declined by an annual average of 2 .5%, driven mostly by advances in road transport .44 Most regions saw an improvement over the four-year period, except for Africa (1 .3%
annual growth) and Latin America (virtually unchanged) .45 Road transport accounts for 75% of transport energy use .46 Improvements in the global average fuel economy (fuel used per unit of distance) of light-duty vehicles averaged 1 .5% per year for the decade 2005-2015, slowing gradually to 1 .1% in 2015 .47 Improvements in OECD and EU countries have slowed after relatively rapid improvement of 2 .8% annually between 2008 and 2010, falling to 0 .5% in 2015 .48 Conversely, annual improvements in non-OECD countries accelerated from 0 .3% annually between 2008 and 2010, to 1 .6% in 2015 .49
Progress has been much slower in the freight sector than for passenger vehicles, due to a relative lack of fuel economy standards . Heavy-duty vehicles make up only 11% of the world’s vehicle fleet, yet they consume around half of all transport fuels .50 Electric vehicles, including plug-in hybrid vehicles, can drive improvements in fuel economy on a final energy basis .51 As the share of non-thermal renewable energy in electricity increases, the contribution of such vehicles to primary energy efficiency will increase as well . However, because the share of EVs is still extremely small, advances in internal combustion efficiency are still a critical component of energy efficiency improvements in road transport .52 (p See Electric Vehicles section in the Enabling Technologies chapter.)
Aviation accounts for about 13% of fossil fuel use in transport worldwide .53 Aviation fuel efficiency can be increased through operational measures such as reducing the weight of on-board equipment and through improved aircraft design and materials . Shipping consumes about 4% of total transport energy use .54 Technology and supply chain innovation can deliver savings in that sector .55
The efficiency of transport also is improving through the spread of more sustainable modes such as electric trams and bus rapid transit (BRT) . By early 2016 at least 200 cities had BRT systems, transporting more than 33 million passengers per day .56 The BRT system in Bogota (Colombia) replaced ageing public buses with more efficient models, delivering 47% savings in fuel consumption .57
i This is defined as energy use in transport per unit of GDP . A more direct indicator of transport efficiency might be defined in terms of energy use per passenger-kilometre and energy per cargo-tonne-kilometre, but aggregated global data across all transport segments are not available .
–2.0%
–1.8% –1.7% –0.5% –2.3% –0.6% –0.9% –0.2% –1.5%
World
Europe CIS North
America Latin
America Asia Oceania Africa Middle
East Compound
average annual change, 2010-2014
Energy intensity in industry improved in all regions, with the fastest improvement observed in Asia.
koe/USD2005
0 0.05 0.10 0.15 0.20
0.25 2010
INDUSTRY
2014
Figure 56. Energy Intensity of Industry, Selected Regions and World, 2010 and 2014
Source: See endnote 38 for this chapter.
Note: Dollars are at constant purchasing power parities.
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FINANCE AND INVESTMENT
In 2015, global incrementali investments in energy efficiency in buildings, industry and transport increased by 6%, to USD 221 billion .58 The buildings sector led with an estimated 53% of the total, followed by transport (29%) and industry (18%) .59 Investments in energy-efficient assets and technologies yield estimated two- to four-fold returns in lifetime cost savings .60 Most energy efficiency investments are made using the cash and savings of individuals and businesses, or directly from public money .61 The remainder is financed primarily by traditional commercial banks through loans and leases . Increasingly, however, financing is coming from other sources, including dedicated national energy funds, green banks, development finance institutions (DFIs) and green bonds .
As of 2016, at least 40 countries had dedicated energy efficiency funds, led by Germany's development bank KfW .62 During the year, new facilities were established in Poland, where a multistakeholder partnership set up a residential buildings energy efficiency financing facility of USD 214 million (EUR 200 million), produced a benchmarking report on operating costs in commercial buildings and created a platform for public-private dialogue and action; and in Latvia, which established an energy efficiency fund as part of its law to implement the Energy Efficiency Directive .63 In addition, Ukraine worked to develop an Energy Efficiency Fund for district heating and related energy efficiency activities . An amount of USD 31 million was allocated to the fund, and additional monies totalling up to USD 110 million were expected to come from international partners; the fund was scheduled to start operations in 2017 .64
Green banks at the national level (e .g ., United Kingdom) and sub-national level (e .g ., the US states of Connecticut and New York) continued to scale up their lending in 2016, and more than a dozen banks were operational around the world by year’s end .65 These banks have a strong focus on energy efficiency, and they provide funds – as well as advice and clarity on default risk – for programmes in areas such as energy efficiency retrofits and street lighting .66 DFIs also play an important role in energy efficiency investment
Green banks at the national level (e .g ., United Kingdom) and sub-national level (e .g ., the US states of Connecticut and New York) continued to scale up their lending in 2016, and more than a dozen banks were operational around the world by year’s end .65 These banks have a strong focus on energy efficiency, and they provide funds – as well as advice and clarity on default risk – for programmes in areas such as energy efficiency retrofits and street lighting .66 DFIs also play an important role in energy efficiency investment