Energy efficiency has tremendous potential to boost economic growth and avoid greenhouse gas emissions, but the global rate of progress is slowing – a trend that has major implications for consumers, businesses and the environment. Energy Efficiency 2019 examines in detail the reasons for this recent deceleration in efficiency progress and also includes a special focus on the ways in which digitalisation is transforming energy efficiency and increasing its value.
Global energy efficiency improvements are slowing
...which is a lost opportunity for the global economy
However this figure could have been $4 trillion – an amount greater than the size of the German economy – had energy intensity improved at 3% every year since 2015.
Industry and weather
On the supply side, after three years of flat growth or decline, coal power generation increased in 2017 (3%) and 2018 (2.5%) to supply stronger electricity demand growth. More fossil fuel-based electricity generation increases primary intensity because energy is lost when these fuels are converted from primary to final energy.
Longer-term structural factors are also playing a part in the slowdown. While technologies and processes are becoming more efficient, structural factors, like changes in transport modes and more building floor area per person, are dampening the impact of these technical efficiency gains on energy demand, and slowing global energy intensity improvements.
The coverage of mandatory efficiency policies increased in 2018, but this was almost exclusively due to existing policies. Meanwhile the strength of mandatory policies increased by less than 0.5%, slightly higher than the previous two years, though still below the five-year historical average, indicating more can be done to ensure mandatory policies are effective. The coverage and strength of energy efficiency obligation programmes remained largely unchanged.
In terms of energy security, importing countries reduced their exposure to oil market instability through technical efficiency improvements. In 2018, efficiency improvements since 2000 reduced oil imports in the world’s major economies by over 165 mtoe, similar to the combined annual primary oil demand of Germany, Australia and Belgium.
This had signifcant financial benefits for oil importers. For example, in 2018 Japan spent $20 billion less on imported oil thanks to a 20% reduction oil imports due to efficiency improvements since 2000. China reduced spending on imported oil by a similar amount, as efficiency gains since 2000 cut oil imports equivalent to 10% of total imports.
Technical efficiency gains continue to deliver cuts in energy-related emissions. Between 2015 and 2018, technical efficiency improvements reduced energy-related carbon emissions by 3.5 gigatonnes of carbon dioxide (GtCO2), roughly the equivalent of the energy-related emissions of Japan over the same period.
This is helping to bring the world closer to an emissions trajectory consistent with achieving global climate change goals.
Digitalisation is modernising energy efficiency and increasing its value – and it can unlock greater efficiency if barriers are removed.
At a time of deep change in the energy system, with larger shares of intermittent generation being added to electricity systems, digitalisation is making demand-side energy efficiency a more valuable resource than in the past. This is because in addition to providing gains in end-use efficiency, many digital technologies also provide other services, such as flexible load, that increase the efficiency of the entire system.
While end-use efficiency has always had system benefits, digitalisation allows for these benefits to be measured and valued more quickly and more accurately.
Returning the world to a less energy-intensive pathway will require new approaches to boosting energy efficiency. Digitalisation offers opportunities for gains in both end-use and system energy efficiency– if the right policies are in place.
Policy could accelerate the adoption of digital technologies for energy efficiency but policy focused on digital technologies for efficiency is still rare.
The IEA has identified a set of critical policy considerations within its new Readiness for Digital Energy Efficiency policy framework. The framework is designed to ensure the benefits of digital energy efficiency are realised through policies that address a range of issues: from balancing data accessibility with data privacy, to helping remove regulatory barriers to innovation.
- Improve access to energy-related data
- Ensure adequate protection from cyber security and data privacy risks
- Strengthen trust in digital technologies
- Ensure energy markets value the services provided by digital energy efficiency
- Ensure equitable access to digital technology and infrastructure
- Increase digital skills and plan for job market transformation
- Minimise negative environmental impacts
- Encourage technology and business model innovation