Documents considered by the Committee on 5 April 2011 - European Scrutiny Committee Contents

7   Energy Efficiency Plan 2011



+ ADDs 1-6

COM(11) 109

Commission Communication: Energy Efficiency Plan 2011

Legal base
Document originated8 March 2011
Deposited in Parliament14 March 2011
DepartmentEnergy & Climate Change
Basis of considerationEM of 28 March 2011
Previous Committee ReportNone, but see footnotes
To be discussed in CouncilJune 2011
Committee's assessmentPolitically important
Committee's decisionCleared


7.1  As we have noted in various Reports from time to time, energy efficiency is at the heart of the EU's 2020 growth strategy, in that it is seen as one of the most cost-effective ways of enhancing security of energy supply and of reducing emissions of greenhouse gases and other pollutants. In particular, the Communication "Energy 2020" which the Commission put forward in November 2010[18] placed heavy emphasis on the EU's aim of increasing energy efficiency in 2020 by 20%, and on the need for further action in a number of areas if that aim is to be achieved.

7.2  With this in mind, the Commission said that it would present an Energy Efficiency Plan in early 2011, and it has now sought to do so in the current document (which it says should be pursued consistently with other policy actions under the Europe 2020 Strategy's Flagship Initiative for a Resource Efficient Europe).[19] There is also a read-across between the document and the Communication[20] setting out a roadmap for moving to a competitive low carbon economy in 2020, on which we are reporting separately.

The current document

7.3  In putting forward this Communication, the Commission notes that the greatest potential for energy saving lies in buildings, followed by transport, and that targets for energy efficiency are an effective way to trigger action. In the latter case, it proposes a two step approach, with the targets currently set by Member States being evaluated to assess the likelihood of the overall EU target being met, following which the Commission will propose legally binding national targets for 2020 if an assessment in 2013 shows that the present approach will not deliver the required savings. The Communication then looks in turn at the contribution which the public sector can make, at the steps needed to reduce the energy consumption of buildings; at those needed to reduce consumption by European industry; at the available national and European financial support; and at the implications for consumers.


7.4  The Commission notes that publicly owned or occupied buildings represent about 12% by area of the EU building stock, and that a stronger emphasis on energy efficiency in the public sector is crucial, covering purchasing, the refurbishment of buildings, and the encouragement of high performance in cities and communities. In particular, it looks at:

  • Energy efficiency in public spending

The Commission suggests that steering public spending towards energy efficient products, transport methods, buildings, works and services helps to reduce expenditure by public authorities on energy bills and offers improved value for money. It says that it has developed procurement criteria which take energy efficiency into account, with those public bodies which are subject to the EU public procurement Directives being required already to take into account energy efficiency criteria in their purchases of vehicles or office equipment. It adds that this will also be the case from 2019 onwards for new buildings, which will have to reach a "nearly zero-energy" performance level, and that high standards of energy efficiency should systematically be applied when public authorities purchase goods, services and works.

  • Renovation of public buildings

The Commission believes that public bodies should take the lead in bringing their buildings up to high energy performance levels, and that it would be appropriate for them to at least double their current renovation rate. It therefore intends to present a legal instrument requiring public authorities to refurbish at least 3% of their buildings (by floor area) each year, with each refurbishment bringing the building concerned up to the level of the best 10% of the national stock.

  • Energy performance contracting

The Commission says that this is an important tool in the refurbishment of buildings, with monetary savings from lower utility bills and maintenance costs being used to cover part or all of investment costs. It adds that this approach has proved cost-effective in a number of Member States, but that it is in many cases hampered by legal ambiguities and a lack of reliable energy consumption data: it therefore intends to bring forward legislative proposals in 2011 to overcome these problems.

  • Implementing energy efficiency

The Commission observes that more than 2,000 cities have volunteered to implement sustainable energy measures through the EU-supported Covenant of Mayors,[21] and that this is given concrete effect through Sustainable Energy Action Plans. It says that the benefits go beyond energy saving, in that the measures adopted are employment-intensive and involve the creation of skilled jobs, and that it will continue to support the local approach in this way, and to encourage partnerships with like-minded cities, including those outside the EU. In addition, it will launch a Smart Cities and Smart Communities initiative to develop innovative low-carbon and efficient energy solutions at the municipal level, involving the translation of research results into practical innovations and supporting large scale demonstration projects.


7.5  The Commission points out that nearly 40% of final energy consumption is in houses, public and private offices, shops and other buildings, and that two-thirds of consumption in residential homes is for space heating. It also says that a large energy saving potential remains untapped, with the both the renovation rate of buildings and the uptake of the most efficient appliances being too low: and it invites Member States to establish promotion systems for private sector building to overcome barriers to energy efficiency.

7.6  The Commission then addresses a number of specific issues:

  • Tackling heat use in buildings

The Commission says that this is of prime importance, and that it will further explore the range of available solutions, including the promotion of district heating.

  • Legal obstacles

The Commission believes that one important barrier is "split incentives" for upgrading energy performance, with owners and tenants each reluctant to improve the energy performance of a rented building because the benefits are shared between them. It notes that several Member States have developed legal provisions defining the amount which can be recovered by investors from tenants, and suggests that Energy Service Companies (ESCOs) can help to overcome the problem in public and commercial buildings. It says that it will bring forward legislative proposals to require Member States to introduce measures, in line with national property law, to address this issue.

  • Training

The Commission points out that energy efficient building solutions are often technically demanding, with a lack of appropriate training for craftsmen involved with refurbishment, and a shortfall in the availability of qualified workers. It says that it is therefore launching an initiative to support Member States in assessing training needs for the construction sector, developing strategies to meet them, and fostering effective training schemes, which may lead to recommendations for certification, qualification or training of craftsmen. It will also work with Member States to adapt their training curricula, and notes that its Flagship Initiative "An Agenda for New Skills and Jobs"[22] calls for skills supply to be matched with labour market needs.

  • Role of ESCOs as catalysts for renovation

The Commission points out that ESCOs deliver energy efficiency improvements, accepting financial risk by covering upfront investment costs and refinancing this through the savings achieved, and that they help public authorities upgrade buildings by grouping them into scalable projects. However, it suggests that the European market for energy services is not developing to its full potential, with clients often lacking information on available services, and it says that it will propose that Member States provide market overviews, lists of accredited energy service providers, and model contracts., with emphasis also being placed on comprehensive renovations in order to avoid repeated disruption of buildings. At the same time, it notes that ESCOs need access to finance, for example through the provision of liquidity and guarantees, credit lines and revolving funds.


Efficient generation of heat and electricity

7.7  The Commission points out that about 30% of the EU's primary energy is consumed by the energy sector in transforming energy into electricity and heat and distributing it, making it important that, when ageing equipment is replaced, new capacity reflects the best available technology (BAT). It believes that the Emissions Trading Scheme and the Industrial Emissions Directive (2010/75/EU) will encourage this, and it says that it will monitor the extent to which these lead to an improvement in the efficiency of new generation. It will then consider introducing a legal provision requiring Member States to make BAT levels mandatory for new installations, and to ensure that existing installations are similarly upgraded as part of their permit update. It says that another important task will be to secure effective recovery of heat loss from electricity and industrial production processes, which requires an integrated, cross-cutting approach, adding that greater use of co-generation (including that from municipal waste treatment plants) and district heating can make an important contribution. It will therefore propose that, where there is a sufficient potential demand, authorisation for new thermal power generation should be conditional on its being combined with systems allowing heat to be used (combined heat and power), and that district heating systems are combined with electricity generation wherever possible. In addition, it will propose that electricity distribution operators should provide priority access for electricity from combined heat and power.

Energy efficiency in electricity and gas networks

7.8  The Commission says that it will strengthen the basis for national grid regulators to take energy efficiency into account in monitoring the management and operation of gas and electricity grids and markets, including network regulations and tariffs.

Energy efficiency as a business sector

7.9  The Commission believes that creating value for energy savings through market mechanisms is a prerequisite for an energy efficient Europe, and that instruments are needed to put a financial value on energy savings and link the profits of utilities to energy efficiency rather than the volume delivered. It notes that some Member States have already delivered successfully a system of national energy saving obligations for the energy industry, under which utilities are required to deliver a fixed amount of savings, and it says that it will propose that all Member States should establish an appropriate national energy saving obligation scheme.

Increasing competitiveness of manufacturing industry

7.10  The Commission notes that industry accounts for about 20% of the EU's primary energy consumption, and is the sector where progress has been greatest. At the same time, it believes that worthwhile saving opportunities remain by addressing such areas as lack of information, lack of access to capital and short term business pressures. It suggests that the obstacles are most acute for small and medium sized enterprises (SMEs), and it says it will encourage Member States to provide them with information and develop appropriate incentives. It will also support the exchange of best practices and the development of tools enabling SMEs to benchmark their energy use against comparable companies. In the case of larger companies, the Commission says that it will propose making regular energy audits mandatory, and recommend Member States to develop incentives for companies to introduce an energy management system, whilst also encouraging voluntary agreements.

Role of research and innovation

7.11  The Commission says that it will continue to foster the development, testing and deployment of new energy-efficient technologies in order to reduce costs and improve performance, generate new solutions, and facilitate widespread market take-up.


7.12  The Commission observes that many energy efficiency investments pay for themselves quickly, but are not realised due to market and regulatory barriers, and that market incentives and price signals therefore need to be intensified through energy and carbon taxes and national energy saving obligations for utilities. It also says that the availability of funding plays an important role in accelerating investment, and notes that the EU is currently able to support energy efficiency through the Cohesion Fund (involving support of about €4.4 billion for the period 2007-13); the Intelligent Energy Europe Programme (with €730 million available to overcome market failures); intermediated finance from international financial institutions provided through local banks; €1 billion from the European Economic Recovery Programme; and a €1 billion contribution from the 2007-13 Framework Programme for Research towards more than 200 projects. It says that, in preparing the next multi-annual financial framework, it is examining the results achieved, and will analyse the scope for improving existing EU financial mechanisms as well as further options to trigger investments on the scale necessary to achieve the EU's 2020 energy and climate objectives.


7.13  The Commission says that improvements to the energy performance of devices used by consumers should play a greater role in achieving possible cost savings, and that it will ensure that consumer interests are properly taken into account in work on labelling, energy saving information, metering and use of ICT, and identify those policy solutions likely to bring about desired changes in behaviour, including clear and precise information on their energy consumption. It goes on to point out that improving the performance of buildings and the products used to heal, cool, ventilate and light them, is one of the more tangible ways in which energy efficiency can benefit household budgets, and that eco-design standards and energy labels have already delivered substantial energy savings for consumers (and business opportunities for manufacturers). It says that it will continue this approach by setting stricter consumption service for various household appliances, by launching a consumer survey of consumer understanding of energy labels, and by promoting the uptake of more efficient building components, such as double glazing.

7.14  The Commission also looks at the impact of new technology for consumers, noting that, whilst they should under current EU legislation already be informed about their consumption at the time of use, and provided through their bills with information about prices and energy costs, in practice these rights need to be properly implemented. It says that it will work with Member States to address this issue, and it also draws attention to the role in future years of a European "smart grid" in bringing about a step change in communicating information about energy supply and consumption. It adds that it will propose measures to ensure that technological innovation, including the roll-out of smart grids and meters fulfils this function.


7.15  The Commission points out that transport accounts for 32% of final energy consumption, is the sector with the fastest growing use (and strongest reliance on fossil fuel), and is thus a key area for savings. It notes that it will shortly be producing a White Paper, which will define a strategy for improving the sector's efficiency, including advanced traffic management systems, infrastructure investment, and the creation of a Single European Transport Area.


7.16  The Commission comments that Member States have the key role in introducing the energy efficiency policies needed to achieve the 20% savings target, and that National Energy Efficiency Action Plans have so far provided the framework for policy development. It says that the additional measures set out in the current document will require an expansion of the scope of these Plans, and that it will also consider how best to monitor subsequent progress towards achieving the EU 20% target.

The Government's view

7.17  In his Explanatory Memorandum of 28 March 2011, the Minister of State at the Department of Energy & Climate Change (Gregory Barker) says that the Government shares the Commission's view that further action to improve energy efficiency within the EU is needed if the target of reducing primary energy consumption of the EU by 20% by 2020 is to be met, and it therefore welcomes the Energy Efficiency Plan, which it says contains a timely and ambitious set of proposals. He adds that the Government particularly welcomes the focus on those areas where either action can only be taken at the EU level, such as to expand and strengthen the standards and labels regime for energy using products, or where collaboration and co-operation can add value, recognising that it is at the national level where policy can most effectively be delivered. It also welcomes action to promote combined heat and power, and the strong focus on facilitating action at the local level and providing support for SMEs.

7.18  The Minister adds that there is also an important role for the EU in improving consumer information and promoting innovation to support jobs and growth by fostering the development, testing and deployment of new energy efficient technologies. Similarly, it is vital that EU programmes and financial mechanisms (such as the regional development funds) actively support efforts to improve efficiency, and he welcomes the Commission's proposals in these areas, with particular reference to encouraging higher uptake of energy efficiency measures by SMEs. The Government also welcomes that fact that the Plan draws on successful policies deployed in the Member States, but points out that, in encouraging, facilitating or requiring action at the national level, there is a need to be careful about over-prescription and any tendency to adopt a one-size-fits-all approach, adding that the Commission should always be aware of the over-arching need to take national circumstances into account in order to avoid compromising the very national schemes and programmes which it is seeking to replicate.

7.19  The Government also agrees with the Commission that there is an important role for the public sector in demonstrating leadership, and therefore welcomes the focus on public procurement. However, it believes that, although detail is currently lacking, the proposed renovation target for public sector buildings could be costly, overly bureaucratic to administer, and conflict with the ability of local communities to determine their own priorities. It also believes that it will be important to avoid placing unnecessary additional regulatory burdens on business, and that, whilst it is entirely right to promote the benefits of energy audits, there is no justification for making them compulsory, as proposed.


7.20  As we noted in our Report of 15 December 2010,[23] the Commission Communication "Energy 2020" placed heavy emphasis on the EU's aim of increasing energy efficiency in 2020 by 20%, and on the need for further action in a number of areas if that aim is to be achieved. To the extent that the current Communication seeks to identify that further action, it is clearly an important document which it is right to draw to the attention of the House. Having said that, it is — like many recent comparable Commission Communications — couched in relatively broad terms, and, insofar as any of the actions recommended it require further consideration, we think it would be more sensible for this to take place as and when specific proposals are put forward. In view of this, and the general welcome which the Government has given to the Communication, we are content to clear it.

18   (32170) 16096/10: see HC 428-xi (2010-11) chapter 2 (15 December 2010). Back

19   (32473) 5869/11: see HC 428-xviii (2010-11), chapter 8 (2 March 2011) Back

20   (32592) 7505/11: see chapter 8 of this Report. Back

21   This is a formal commitment to reduce carbon dioxide emissions by more than 20% by 2020 through sustainable energy measures. Back

22   (32293) 17066/10: see HC 428-xii (2010-11), chapter 7 (12 January 2011). Back

23   (32170) 16096/10 + ADD 1: see HC 428-xi (2010-11), chapter 2, (15 December 2011).  Back

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