Energy saving potentials

An Energy Saving Potential (ESP), is the amount of energy that can be saved by increasing the current efficiency of a system to a higher target efficiency. Therefore, any energy saving potential is directly proportional to increases in efficiency. Understanding and quantifying ESPs is necessary to enable the comparison between demand side measures and supply side ones. Different ESP, can be calculated according to the target efficiency of interest. Rogner, in the 2000 UNDP World Energy Assessment report [132], provides a comprehensive definition of five type of potentials: theoretical, technical, societal, economic and market trend. A similar list of saving potentials is given by Jaffe and Stavins [133] in their 1994 article on the energy efficiency gap. A summary of the given definition of the five types of potentials is given below.

• Theoretical potential represents the minimum allowable use of energy for the provi-sion of a given energy service.

• Technical potential represents the energy that could be saved by employing the best commercially available, or near commercially available technology, irrespective of cost considerations.

• Societal potential includes all energy saving measures that would make society as a whole better off. This includes the externalities linked to energy use (i.e. savings associated with a fair carbon price).

• Economic potential refer to the savings that could be achieved while still being profitable for firms and individuals ignoring the costs associated with externalities.

• Market trend potential indicates the savings that are likely to be achieved by stock turnover and substitution since new products tend to be more efficient than older ones.

Economic potential

An economic energy saving potential refers to the amount of energy that can be saved through energy efficiency improvements at a zero net cost, that is, with investments in efficiency that can be repaid through the monetary savings resulting from lower energy costs over a defined payback period. Conversely, the economic efficiency limit is the efficiency that can be reached without a net loss of financial resources.

According to neoclassical economists, economic saving potentials exists because markets deliver sub-optimal efficiency (through under-investment in efficiency technologies) due to market and behavioural failures. A market failure is an inherent fault in the market that causes it, when unregulated, to allocate resources inefficiently. Behavioural failures occur when agents fail to make rational choices (i.e. profit maximising for firms and utility-maximising for consumers) [134, 135]. The difference between the observed market driven trend in efficiency and the optimal economic efficiency is called the “energy efficiency gap” [133].

Some economists challenge this view by claiming that there are hidden costs that are not accounted for in economic analyses, which would justify the lower uptake of efficiency measures in the market [134]. Work by Rohdin and Thollander [136] and Sorrell [137] has helped to describe the mechanisms that cause sub-optimal efficiency levels. Their work includes the “hidden costs” mentioned by other economists, yet they highlight a number of market and non-market failures that warrant the existence of the efficiency gap and therefore the need for government policy to intervene. Policy actions aimed at fixing these market failures (such as mandatory energy labelling or mandatory energy audits) are therefore expected to increase overall energy efficiency at minimal costs to firms and consumers.

Yet, the level of energy efficiency that is optimal from the point of view of individual firms and consumers is often lower than the one that would maximise the welfare of society as whole. This is because energy consumption is associated to negative externalities [138].

Externalities are costs that are associated with a certain action but that are not reflected in the cost of the action [139]. Therefore, if the costs of mitigating the externalities of energy use were internalised in energy prices, higher overall energy efficiency would result [134]. The consequences of this theoretical framework mean that governments can rightfully attempt to internalise these costs to the energy price, for example by means of energy or carbon taxes, with the aim of stimulating more investment in energy efficiency.

The grey literature contains several estimates of economy-wide economic energy saving potentials estimated for each sector that have been used to inform decision makers– a list of high profile examples are shown in Table 2.2.

Table 2.2 List of recent bottom-up studies commissioned by governments with the aim of

McKinsey Capturing the full electricity effi-ciency potential of the UK

2012 UK Power Sector [141]

Fraunhofer ISI

Study on the energy saving po-tential in EU member states indus-try and on possible policy mech-anisms

ENERGETICS Bandwidth study on energy use and potential energy saving op-portunities in US Industry

2014 US Industry [144]

These types of analyses are often the foundation for policy making in the field of energy efficiency since governments look for policy mechanisms that will increase efficiency while minimising the impact on the economy. In these reports, the barriers to efficiency investment are identified, and the impact of possible policies on the energy efficiency of specific sectors is quantified. Therefore, some of the most important energy efficiency policy decisions, such as energy consumption reduction targets and minimum energy performance standards [145], are based on reports that calculate the economic saving potentials.

These studies are useful for short term policy and strategic decisions since they help decision makers prioritise action that will yield incremental improvements. At the same time, the conclusions drawn from these studies can be misleading within the context of climate change mitigating policy. Policies for climate change require a long-term perspective and ambitious targets rather than incremental change, as outlined in every iteration of the IPCC’s assessment report. For this reason, limiting the analysis to current economic cost structure and technology performance is not desired. History has shown that technical efficiency has rapidly

increased over the past century [146, 147], and that what was considered to be Best Available Technology at one point in time can quickly become a common performance level [148].

Equally, over the long term both the economic structure and the energy system structure can change. Savings estimated by extrapolating the current energy system might never be realised – if a technology is superseded by a superior one –or be heavily underestimated, if the future improvement of a technology is underestimated.

Theoretical potential

On the other end of the spectrum to economic saving potentials are the theoretical saving potentials. These are calculated using theoretical efficiency limits which refer to maximum conversion efficiency limits, dictated by laws of physics. These limits are absolute and are defined by derivation of well proven physical laws. Examples of theoretical limits are the Betz limit [149] – concerning the maximum efficiency of wind power – and the Shockley–Queisser limit, defining the maximum efficiency of solar photovoltaics [150]. The most notorious and widely used theoretical limit is the Carnot limit, which stems from the second law of thermodynamics and determines the maximal efficiency of a heat engine operating between two temperatures (T_l,T_h) [151].

η_C= 1 − T_l

T_h (2.4)

In the 1970s, the field of finite time thermodynamics has attempted to provide more “realistic”

efficiency limits compared to the Carnot efficiency by removing the infinite process time embedded in reversible processes [152]. This technique has been used to study several engineering processes such as heat engines and refrigeration cycles [153–156]. One of the main outputs of this field is the introduction of the Curzon–Ahlborn efficiency (η_CA) [157]

which defines the efficiency of a Carnot engine operating at maximum power output between to reservoirs at T_l and T_has

η_CA = 1 −r T_l

T_h (2.5)

Since the Curzon–Ahlborn efficiency is always lower than the Carnot efficiency some authors have misunderstood the use of this efficiency as a more realistic efficiency limit. Two recent examples of this include Muratori et al. [33] who use it to define the long term efficiency limits of power plants, and Cullen who uses it as a heuristic for the estimation of the technical efficiency limits of conversion devices [97]. This misunderstanding has been the cause of academic debate in the past [158]. In this debate, Chen et al. [159] drafted a concise explanation of the meaning of the Curzon–Ahlborn efficiency:

the Curzon–Ahlborn efficiency is not the maximum efficiency of a heat engine but determines the lower bound on the optimal efficiency of a heat engine affected by finite rate heat transfer. [...] It is, thus, obvious that although the efficiencies of real heat engines cannot attain the Carnot efficiency, it is possible, and is often desirable, for the efficiencies to exceed the respective maximum power efficiencies.

Therefore, while the field of finite time thermodynamics offers clean models, with analytical solutions, of conversion efficiencies for several heat engines and thermodynamic cycles, it cannot be used to gain further insights on the theoretical limits of efficiency.

The field of Societal Exergy Analysis uses thermodynamic limits (Carnot) to estimate saving potentials. For example, Van Gool [160] and Hammond [161, 162] use exergy efficiency of a given process or economic sector to define an Improvement Potential which compares the current efficiency with an ideal irreversible state, represented by an exergy efficiency of unity. Therefore, the improvement potential represents the theoretical energy gains that could be obtained if all processes were operating at Carnot efficiency (for the assumed temperature levels). This approach was also used by Cullen and Allwood [97]

to study the saving potential for conversion devices with the aim of prioritising action in efficiency improvements. This approach has the benefits of being transparent (as long as all assumed temperature levels are stated) and simple to implement. However, the issue of using theoretical limits to assess saving potentials is that it ignores well known loss mechanisms that make it impossible to reach the theoretical limits, for example friction losses and finite temperature heat transfer. This has two implications: firstly, the resulting saving potentials are known a priori to be unreachable; secondly, the analysis lacks the technological granularity needed to assess the feasibility of reaching the theoretical limit for each technology. The exploration and application of technical limits – which include practical considerations and known unavoidable energy losses – can avoid these problems.

Technical Potential

There is no shared definition of the concept of technical efficiency limit in the energy literature. However, two broad understandings of the technical efficiency limit (and therefore of the technical energy saving potential) can be identified.

In the mainstream energy efficiency literature, technical efficiency limits and technical saving potentials are defined in opposition to economic limits and savings. That is, technical efficiency limits include measures that are not cost effective. This definition is used in

relation to electric motors [163], building insulation [164], and space heat demand [165]. In all of these articles, and in the wider energy efficiency literature, much attention is paid to the dynamics of energy efficiency improvements which depend on factors such as: stock turnover rates, product lifecycles, and efficient product uptake rate. These parameters are important to decision makers because they can be directly affected by regulations such as minimum energy performance standards, scrappage schemes, or energy labelling. System wide studies looking at technical potentials are less common. Letschert et al. [166] estimate the savings associated with the introduction of the most aggressive minimum energy performance standard possible in four major economies. They assume that by 2015 only the appliances with the currently best available technology can be sold and estimate that such a measure would lower energy demand by 20% compared to business as useful by 2030. The authors refer to this energy saving as a technical energy saving. However, this approach does not take into account the fact that by 2030 technologies allowing for even higher efficiencies could become available.

In research stemming from the Societal Exergy Analysis (SEA) literature, technical efficiency limits are defined in opposition to theoretical efficiency limits. Hammond [162] describes the technical limit to efficiency savings as the savings that can be achieved “in practice”.

Similarly Cullen talks about the technical potential as setting a “target based on practical design and material limitations” [35]. Therefore, if theoretical limits are unreachable, techni-cal limits are reachable through technitechni-cal innovation. Recent examples of this conception of the technical limit are rare. In work by Beaudreau and Lightfoot [167], authors attempt to understand the physical limitations to R&D outcomes and their impact on the limits to economic growth. To this end, they define values of efficiency beyond which further R&D efforts would not enable further gains and define the technical limits for several end-use energy technologies. The main drawback of their approach is the lack of a consistent method-ology and theoretical framework to define the efficiency limit, thus the resulting estimates are purely a result of the author’s expert opinion. An interesting framework to define technical efficiency limits is provided in the Bandwidth Study on Energy Use and Potential Energy Saving Opportunities [144]. Here, a distinction is made between two types of technical potential: the Current ESP and the R&D ESP. The former refers to the energy savings that can be achieved by complete adoption of best available technologies. The latter refers to the energy that could be saved by the deployment of all technology currently under research, which is always higher than the former because R&D activity can push the boundaries of what is currently available. In addition, this study also defines for each industrial process a “thermodynamic minimum” energy demand which can be understood as the theoretical limit. The study uses this insightful framework to define different type of saving potentials, which enables decisionmakers to visualise different levels of possible ambition, both now

and accounting for future development, and to quantify the difference between the potential gains of regulation and those stemming from further R&D.

Within the context of climate change mitigation policy all possible technical efficiency improvement measures should be accounted for. Limiting the assessments to the current level of efficiency and performance results in the underestimation of the role of end-use measures. In the academic and grey literature much attention has been given to the dynamics of technical energy efficiency improvement while the maximum level of efficiency that is technically reachable has not been carefully assessed.

2.3.2 Research Gap

This literature review has shown that there are at least three ways to define efficiency limits and energy saving potentials. Among the three, the technical limits are the most informative for long term perspectives which are required in the context of climate change, yet they are those for which there the literature is least dense. Additionally, it was shown how Cullen’s technique of categorising technical efficiency options into those affecting conversion devices and passive systems separately can provide some useful insights as well as provide a coherent physical basis for the estimation of energy saving potentials.

Entire Sector

Fig. 2.3 Types of energy saving potentials compared with with different disaggregation levels of technical efficiency measures. The matrix shows that there is a gap in the literature concerning the technical saving potentials of conversion devices and the economic saving potentials from passive systems. All other combinations have at least some literature covering the topic.

The information gathered in the review is summarised in Figure 2.3, where is clear that the main research gaps exist in passive system economic saving potential and in conversion device technical saving potentials. While topic of economic saving potentials of passive systems is very important due to the already identified magnitude of the technical saving potentials, this gap will not be addressed in this thesis because it would require extensive socio-economic analyses which are considered outside the scope of the thesis. Conversely, the estimation of the technical saving potential for conversion devices requires a purely engineering approach. In light of the discussion presented in Chapter 1, it is more important to focus on end-use conversion devices than upstream conversion devices because of their technological diversity and because their efficiency will always have an important effect on the energy consumption and CO₂emissions. Therefore, the research question that can be formulated to fill this research gap is as follows

Q2: What are the technical efficiency limits of end-use energy conversion devices?