On 30 November 2016, the European Commissions published its so-called “Winter Package” of energy legislation that will provide the framework for energy policy in the European Union for many years to come. It contains proposals for a broad range of energy-related issues, including energy markets, energy infrastructure, renewable energy, climate policy, and energy demand. In this article, we carry out a preliminary review of the proposals and what they mean for energy efficiency. The European Union adopted the principle of “Efficiency First” in a communication issued in February 2015. More specifically, we analyse the revised Energy Efficiency Directive (EED), the Energy Performance in Buildings Directive (EPBD), the directive on common rules for the internal energy market for electricity (IEM), the regulation on the electricity market, and the regulation on governance of the Energy Union.

Our key recommendations are:

• Energy Efficiency Directive: The target has been changed from initially 27 percent non-binding to 30 percent binding by 2030. Analyses of the cost-effective potential of energy efficiency shows that a target of 40 percent is justified even if we ignore the multiple societal benefits of energy efficiency. Two options for strengthening the EED are 1) rectifying the lack of clarity regarding new buildings and whether savings from building codes can fully be counted, and 2) linking the current period with the new period.
• Energy Performance in Buildings Directive: The proposed reforms to the EBPD are unambitious and consist mainly of streamlining existing legislation, albeit leaving a number of gaps such as not directly aligning the obligation to renovate public buildings with the building renovation strategy. The main innovative change is the introduction of a smartness indicator, which is supposed to ensure that buildings are ready to connect and interact with the occupants and the grid. In principle, this is a promising approach, but the EPBD does not yet specify what exactly this will mean in practical terms. In order to make the Directive more effective, fundamental revisions are required that harmonise the targets for buildings set out in the EPBD with the new 2030 framework.
• Internal energy market: New provisions introduced into the Electricity Directive and regulation strengthen the recognition of energy efficiency as a resource for the electricity system, but fall short of delivering a policy framework to stimulate planning and investment in energy efficiency on a level with supply-side resources. Energy efficiency is recognized as a reliability resource, yet there is no requirement that capacity remuneration mechanisms allow energy efficiency to compete on a comparable footing with supply-side resources. Regulators must provide incentive frameworks and cost recovery for innovative measures to raise the energy efficiency of their networks. This could be a strong stimulus for investment in energy efficiency; however, clarification is needed to ensure that the framing includes end-use efficiency. Distribution system operators are enabled to invest in energy efficiency, but not required to do so. Simply creating an enabling framework is unlikely to stimulate investment beyond what is required under energy efficiency obligations.
• Governance regulation: The governance regulation recognizes the crucial role that energy efficiency must play in meeting the Union’s 2030 and 2050 climate and energy goals, and sets out a planning process that would chart a path to meeting energy efficiency goals in each Member State. However, the regulation reveals a striking gap between assessment and enforcement. It does not chart governance rules that would cause Member States, utilities, and system operators to invest in efficiency where it is less expensive or more valuable than supply-side options; nor does it contain specific enforcement tools to pay for and deliver energy savings if Member State efficiency programs were to underperform.

This paper was originally published in the journal Energy Research & Social Science.

Please cite as: Rosenow, J., Cowart, R., Bayer, E., & Fabbri, M. (2017). Assessing the European Union’s Energy Efficiency Policy: Will the Winter Package deliver on ‘Efficiency First’? Energy Research & Social Science 26, pp. 72–79.