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Global energy efficiency market ‘an invisible powerhouse’

Hydrocarbon Engineering,

According to the International Energy Agency (IEA), the global energy efficiency market is worth at least US$ 310 billion/y and growing. A recent report by the Agency finds that energy efficiency finance is becoming an established market segment, bringing stability to the market.

The annual report, which is now in its second year, shows that investments in energy efficiency are helping to improve energy productivity (the amount of energy needed to produce a unit of GDP). Among 18 IEA countries evaluated in the report, total final energy consumption was down 5% between 2001 and 2011, primarily as a result of investments in energy efficiency. Cumulative avoided energy consumption over the decade was 1732 million toe in IEA countries – larger than the energy demand of the US and Germany combined in 2012.

IEA Executive Director Maria van der Hoeven  commented: “Energy efficiency is the invisible powerhouse in IEA countries and beyond, working behind the scenes to improve our energy security, lower our energy bills and move us closer to reaching our climate goals”.

Previous IEA analysis has shown that energy efficiency is not just a hidden fuel but is also the ‘first fuel’ in the IEA’s largest economies. This year’s report shows that energy efficiency investments over the past four decades have avoided more energy consumption than the total final consumption of the EU in 2011. Efficiency investments and policies are reducing a continent’s worth of energy demand in a time when fast developing economies are adding energy demand to the global energy system.

Indeed, the report reveals that huge potential for energy efficiency exists in emerging economies outside the OECD, with efficient vehicles and transport infrastructure a major opportunity. The IEA estimates that efficiency can reduce up to US$ 190 billion in fuel costs in transport globally by 2020 and can help alleviate local air pollution and even address critical congestion issues in rapidly developing urban transport systems.

According to the IEA, approximately 40% of the global energy efficiency market is financed with debt and equity, meaning that the financial market for energy efficiency is in the range of US$ 120 billion/y. The number of products and the volume of finance have greatly expanded in recent years, with green bonds , corporate green bonds, energy performance contracts, private commitments, carbon and climate finance, and multilateral development banks and bilateral banks all offering expanded sources of finance for energy efficiency improvements. Bilateral and multilateral lending alone amounted to more than US$ 22 billion in 2012.

Maria Van der Hoeven said: “Energy efficiency is moving from a niche interest to an established market segment with increasing interest from institutional lenders and investors. As energy efficiency is essential to meeting our climate goals while supporting economic growth, the increasing use of finance is a welcome development. To fully expand this market, initiatives continue to reduce barriers will need to strengthen”.

Energy efficiency represents the most important plank in efforts to decarbonise the global energy system and achieve the world’s climate objectives: in the IEA scenario consistent with limiting the long term increase in global temperatures to no more than 2 °C, the biggest share of emissions reductions (40%) comes from energy efficiency.

Adapted from a press release by Emma McAleavey.

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