Slow progress on energy efficiency puts climate targets at risk, misses $2.6 trillion of benefits

The International Energy Agency has warned that the global rate of progress on energy efficiency is slowing, with global primary energy intensity improving by only 1.2% in 2018 – the slowest rate since the start of the decade.

According to its Energy Efficiency 2019 report, the rate of global primary energy intensity improvement – an important global indicator of how heavily the world’s economic activity uses energy – has now declined for three years in a row and is well below the 3% minimum that is central to achieving global climate and energy goals.

Further, beyond simply not meeting targets, the IEA finds that if the rate of global primary energy intensity had reached 3% annually the world could have generated a further US$2.6 trillion (AU$3.76 trillion) of economic output – close to the size of the entire French economy.

The 1.2% improvement in energy intensity seen between 2017 and 2018 resulted in economic improvement of US$1.6 trillion (AU$2.3 trillion) more Gross Domestic Product (GDP) for the amount of energy used compared to 2017.

Energy efficiency has long been regarded as the cheapest and most obvious solution to rising pollution and emissions. But it also the most forgotten, partly because of the resistance of established and vested interests, who fear declining profits if consumers are given the means and encouraged to use less energy.

“The historic slowdown in energy efficiency in 2018 – the lowest rate of improvement since the start of the decade – calls for bold action by policy makers and investors,” said Dr Fatih Birol, the IEA’s Executive Director.

“We can improve energy efficiency by 3% per year simply through the use of existing technologies and cost-effective investments. There is no excuse for inaction: ambitious policies need to be put in place to spur investment and put the necessary technologies to work on a global scale.”

The IEA highlighted a “range of short-term factors” that contributed to the slowdown in global energy intensity improvement in 2018 including energy-intensive industries in China and the United States increasing their share of industrial production and pushing up demand for all primary energy fuels.

Global weather conditions also played a role with a cooler winter and a warmer summer in the United States, driving up energy use for both heating and cooling and a milder winter in Europe cutting demand for gas heating.

On the supply side, coal power generation increased in 2017 by 3% and by 2.5% in 2018 in an effort to supply stronger electricity demand growth, leading to increases in primary intensity as fossil fuels are converted from primary to final energy.

However, the IEA also highlighted “longer-term structural factors” as playing a part in the global slowdown resulting in a dampening effect on the impact of more efficient technologies and processes on energy demand and slowing global energy intensity improvements.

In industry, the impact of structural change away from energy-intensive industries has gradually weakened since 2013 and in 2018 structural change in industry actually added to energy demand.

In the global transport sector, and despite improvements in vehicle efficiency, the IEA found that energy intensity is worsening because sales of new, more efficient vehicles have slowed, with consumers preferring larger cars and typical vehicle occupancy rates falling.

In the residential building sector, increased device ownership and use combined with a significant growth in average per capita residential floor area in all economies have “consistently matched or outpaced efficiency gains since 2014.”

“If these structural trends continue,” the authors of the report conclude, “technical efficiencies will need to increase much more rapidly to achieve a level of energy intensity improvement consistent with meeting global climate change and sustainability goals.”

The IEA report also highlighted the ways in which digitalisation is transforming energy and increasing its value, providing energy efficiency gains beyond what was possible when interconnections between buildings, appliances, equipment, and transport systems were largely disconnected.

“As digitalisation transforms the global energy system, the IEA is committed to helping countries ensure they are able to maximise the benefits while navigating the challenges,” Dr Birol said.