The EU’s energy infrastructure faces numerous challenges over the next decades. It needs to be decarbonized whilst ensuring the competitiveness of EU industry, providing energy security, addressing energy poverty, reducing energy bills, and empowering consumers, who play a crucial part in the energy system of the future. Getting those choices right is key for ensuring a sustainable, fair, and affordable and secure energy future. The principle of “Efficiency First” delivers on all three.

Efficiency First is a principle applied to policymaking, planning, and investment in the energy sector. Put simply, it prioritizes investments in customer-side efficiency resources (including end-use energy efficiency and demand response) whenever they would cost less, or deliver more value, than investing in energy infrastructure, fuels, and supply alone. At a first look, this is purely a common-sense policy—surely public policy should promote end-use efficiency whenever saving energy or shifting its use in time costs less or delivers greater value than conventional supply-side options. Doesn’t this happen automatically?

Unfortunately, no. On the demand side, investments in efficient solutions are impeded by numerous market barriers to individual action; and on the supply side, industry traditions, business models, and regulatory practices have always favoured, and continue to favour, fossil fuel based energy infrastructure and sales over lower sales and energy saving technologies.

For this reason, rules that prompt an Efficiency First approach need to be built in at all relevant places within the governance framework for the Energy Union, at both the EU and national levels. Efficiency First has gained traction at the EU level since the launch of the Energy Union Communication in February 2015 and in some European countries such as Germany where it has become an energy policy principle and is now being explored further in Germany’s Green Book on Energy Efficiency.

This paper builds on ten key applications of Efficiency First identified through an expert process convened by the European Climate Foundation during 2016, and summarised in the publication Governance for Efficiency First: “Plan, Finance and Deliver”. This paper provides selected European examples that illustrate the Efficiency First principle in practice across the 10 policy areas (“asks”). The focus of this paper is on:

1. Efficiency as a resource to the energy system: ‘save before you build’;
2. Local energy planning and investment: using efficiency to unleash local benefits; and
3. Broader climate and energy policy: putting Efficiency First to solve the trilemma of sustainability, competitiveness, and affordability.

While this paper does not cover the broad application of Efficiency First principles across the EU policy and decision-making landscape, it provides an important step in demonstrating its value in practice. This, in turn, will be critical in ensuring that efficiency is recognized and valued in other areas, such as the use of EU funds, cross-border infrastructure priorities, and energy security, to name a few.

This report forms part of the Energy Union Choices series. Energy Union Choices aims to provide practical, independent, and objective analysis on the next set of infrastructure choices to accelerate the transition to a low carbon economy in line with the energy security, environmental, and economic goals of the European Union.