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Energy efficiency measures could boost global economic development

Hydrocarbon Engineering,

According to a recent report by the International Energy Agency (IEA), the benefits of energy efficiency go well beyond the simple scaling back of energy demand. In a study that reframes the discussion about the so-called ‘hidden fuel’, the IEA shows how energy efficiency ahs the potential to support economic growth, enhance social development, advance environmental sustainability, ensure energy-system security and help build wealth.

IEA analysis has previously demonstrated that energy efficiency has the potential to boost economic growth while reducing energy demand. But despite the vital role that energy efficiency could play, IEA assessments suggest that under existing policies, two thirds of the economically viable energy efficiency potential available between now and 2035 will remain unrealised. This is in part because energy efficiency is routinely and significantly undervalued.

The new study, ‘Capturing the multiple benefits of energy efficiency’, challenges the assumption that the broader benefits of energy efficiency cannot be quantified. It shows how it is possible to move beyond qualitative assessments, providing examples of how existing methodological tools can be applied to measure and even monetise the value of energy efficiency to the economy and society.

The report shows that when the value of productivity and operational benefits to industrial companies were integrated into their traditional internal rate of return calculations, the payback period for energy efficiency measures dropped from 4.2 to 1.9 years.

IEA Executive Director Maria van der Hoeven commented: “This report lays out the case for governments to invest more time in measuring the impacts of energy efficiency policies, to improve understanding of their role in boosting economic and social development and to facilitate policy design that maximises the benefits prioritised by each country. By adopting the multiple benefits approach advocated by the IEA in this study, governments can help unlock the potential of energy efficiency”.

The IEA emphasises that energy efficiency may be a hidden fuel, but it is hiding in plain sight. The market for energy efficiency is growing, with aggregate annual investment reaching US$ 300 billion in 2012 – equal to investments in coal, oil and gas generation. The resulting savings have been larger than the energy provide from any other fuel, making energy efficiency the ‘first fuel’ for many IEA countries. IEA Analysis has also shown that the uptake of economically viable energy efficiency investments has the potential to boost cumulative economic output through 2013 by US$ 18 trillion – larger than the current size of the economies of the US, Canada and Mexico combined.

Adapted from a press release by Emma McAleavey.

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