USD 560bn Investment in Energy Efficiency in 2022

Global investment in increasing energy efficiency could reach USD 560 billion in 2022, up 16% from the previous year, according to the International Energy Agency (IEA). Preliminary data shows that investment has accelerated as governments and consumers have reacted to the fuel supply disruption and record energy prices. The world economy used energy 2% more efficiently than in 2021, a rate of improvement almost four times greater than that of the past two years and almost double the rate of the past five years.

The COVID-19 pandemic has led to a global drop in energy efficiency, but there are now prospects for an increase. However, things are still far from what is needed to reach ‘net zero emissions’ by 2050. Efficiency improvements need to average around 4% per year this decade to meet the European Commission’s target, the IEA says in its report ‘Energy Efficiency 2022’.


Decarbonisation and energy security

This indicator’s improvements in areas such as building renovation, public transport and electric car infrastructure are estimated to result in total electricity bills that are USD 680 billion lower globally in 2022 than if these measures were not taken.

“The oil shocks of the 1970s led to a massive push by governments on energy efficiency, resulting in substantial improvements in the energy efficiency of cars, appliances and buildings. Amid today’s energy crisis, we are seeing signs that energy efficiency is once again being prioritised. Energy efficiency is essential for dealing with today’s crisis, with its huge potential to help tackle the challenges of energy affordability, energy security and climate change,” said IEA Executive Director Fatih Birol.


Triple investment in renewables

Energy efficiency has been at the heart of key policy initiatives by governments around the world. These include the US Inflation Reduction Act (IRA), the EU’s REPowerEU plan and Japan’s Green Transformation (GX) programme.

However, investments in energy efficiency need to be more evenly distributed, both in developed and developing economies. Such legislative packages, as well as much of the investment in energy efficiency in general, are concentrated in advanced economies and much greater investment is needed in emerging and developing economies, warns the IEA.

The report builds on the call made shortly before the start of the World Meteorological Organisation’s Climate Change Summit (COP27), recently held in Sharm El-Sheikh (Egypt), for investment in energy efficiency to be included in the effort to triple annual investment in renewable energy by 2030.


Buildings, responsible for 40% of energy consumption

Implementing more extensive measures to increase energy efficiency in buildings would reduce residential energy demand in the long term and increase GDP by 0.7-1% in Europe between 2030-2050, according to analysis by Cambridge Econometrics in August 2022.

Therefore, zero-emission housing could reduce Europe’s annual gas import bill by EUR 15 billion in 2030 and EUR 43 billion in 2050. Buildings account for 40% of the EU’s energy consumption, which is likely to continue to rise unless immediate action is taken, Cambridge Econometrics added in its analysis.


Investment, covered by fuel savings

Part of the drive for greater energy efficiency, particularly in the heating sector, is focused on heat pumps, the IEA said in a report entitled ‘The Future of Heat Pumps’, published at the end of November 2022.

The report noted that heat pumps are a key technology that could contribute to the global energy transition while providing safe and sustainable sources of heat to commercial, industrial, and household customers. But it would require an annual investment of USD 160 billion a year globally, but this would be covered by the savings in fuel costs, especially if prices remain close to current levels.


Heat pumps, increasingly sought after

It is estimated that almost 3 million heat pumps would be sold in 2022 alone in Europe, up from 1.5 million in 2019 and 2 million in 2021. Annual sales could rise to 7 million by 2030 if governments succeed in meeting their decarbonisation and energy security targets, says the IEA.

Heating buildings now accounts for a third of the EU’s gas demand, says the IEA. Heat pumps could reduce this demand by almost 7 billion cubic metres in 2025, reaching at least 21 billion cubic metres by 2030 if the EU’s climate targets are met.


In Romania, 8 out of 10 buildings await rehabilitation

Statistics show that in Romania, almost 8 out of 10 buildings (77%) are in need of energy renovation, having been built before 1980, when there were no energy efficiency standards for the building envelope.

According to the National Long-Term Renovation Strategy, “Romania has a large stock of buildings constructed between 1960 and 1990 with a low degree of energy efficiency measures (no thermal insulation or minimal thermal insulation, adapted to the thermal insulation requirements existing between 1960 and 1985), some of which have structural deficiencies, while others have little (or no) maintenance after decades of use.”


Government plan, hit by price hikes

The Government’s strategy estimates that around EUR 12.8 billion would be needed for the energy retrofitting of buildings in the residential, education, health, administrative and commercial sectors by 2030. But with the explosion in building material prices, the Government’s energy renovation plans have become considerably more expensive over the past year.

Under the National Recovery and Resilience Plan (NRRP), Romania has a budget of EUR 2.2 billion to fund the building renovation programme. The money is split almost equally between energy renovation measures for multi-family housing (EUR 1.1 billion) and public buildings (EUR 1.17 billion).

Only 1,330 blocks are to be rehabilitated through the NRRP, which is far short of what is needed, so for the rest the municipalities will have to do it themselves. As local budgets do not allow such investments, the most serious option remains bank loans contracted by municipalities.

Overall, the NRRP-funded renovation programme aims to achieve primary energy savings of at least 30%.


Deep renovations, only 0.1%

Of the nearly 340,000 buildings proposed for energy retrofitting under the scenario recommended by the national renovation strategy, nearly 310,000 are residential buildings. In addition, there are 4,361 schools, 161 hospitals, 14,324 other health facilities, 1,539 office buildings and administrative headquarters, 73 hotels, 2,394 restaurants and cafés, and 7,686 shops and shopping centres.

A study on the energy renovation of buildings carried out for the European Commission estimates that in Romania only 1.3% of renovations carried out in the residential sector were of medium depth and 0.1% were deep renovations, the latter meaning that in addition to the renovation of the building, energy efficiency works were also carried out, resulting in a 60-70% reduction in energy consumption. Also, for non-residential buildings only 1.9% of renovations were medium depth and 0.4% were deep renovations.


INECP to be updated

Under the Integrated National Energy and Climate Plan 2021 – 2030 (INECP), Romania aims to achieve a final energy consumption of 25.7 million toe (1 MWh = 0.086 toe – tonnes of oil equivalent), in a scenario that considers the energy retrofitting of the most inefficient buildings. Also, as part of the decarbonisation policy, the reduction in greenhouse gas (GHG) emissions in the residential and tertiary sector (government buildings, public buildings, office buildings) between 2021 and 2030 would reach 2.34 million tonnes of CO2.

However, Romania has proposed to revise its INECP in 2023 to align with the new European Commission energy targets, and this will mean taking on higher targets for the share of renewable energy in final energy consumption, increasing energy efficiency and decarbonisation.

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