In June 2011, the European Commission released a proposal for a directive on energy efficiency (the “Proposed Directive”). If adopted, the proposal will establish an EU common framework for promoting energy efficiency. The immediate driver is the EU’s target of saving 20% primary energy use by 2020. On current projections the EU will fall very far short of this.
As a result the European Commission feels the need for sweeping legislative changes. More direct and purposive legislation is proposed, which is aimed at shaking up current interests, attacking barriers and correcting market failures which impede energy efficiency. The Proposed Directive will have implications for energy generators, large industrial installations, lenders and real estate investors, contractors, planners, facility managers, the ICT community and those involved in public procurement.
Repeal of existing legislation
The European Commission could not be clearer. Two existing directives that were intended to be important vehicles for the delivery of energy efficiency, have failed. They are the Co-generation Directive (2004/8/EC), and Energy Services Directive (2006/32/EC). Subject to one or two nuances, these two directives are to be repealed, and replaced with the Proposed Directive.
Some of the noteworthy measures envisaged by the Proposed Directive are listed below:
- From 1 January 2014, 3% annually of the total floor area of buildings over 250m2 owned (not leased) by public bodies which do not meet minimum energy performance standards, are to be renovated so as to meet minimum energy performance standards (this is thought to amount to a doubling of the current rate of renovation).
- Public bodies are to be prohibited from purchasing or renting buildings which do not meet minimum energy performance requirements.
- Public Bodies will be required to establish, and make publicly available, an inventory of buildings owned by public bodies detailing the energy performance of each building.
- Public bodies will be required to make energy efficiency purchasing decisions by procuring (and require that their service providers to procure), high energy performance products and services, based on available energy labels and certificates, including office and IT equipment.
Legislative and policy incentives for co-generation and district heating
- Member States are to be required, by 2014, to produce National Heating and Cooling Plans to develop the national potential for co-generation and efficient district heating and cooling. These plans are to be updated every 5 years.
- Necessary measures are to be taken to develop efficient district heating and cooling infrastructure to accommodate the development of high efficiency cogeneration.
- Subject to certain exceptions all new thermal generation of electricity installations (above 20 MW), and all existing installations when its environmental permit is updated (again above 20 MW), are to have waste heat recovery technology fitted. In the case of new thermal installations, these are to be sited in locations where waste heat can be matched with a heat demand. Planning laws will need to be reviewed and amended where necessary to accommodate this.
- Similarly, in the case of industrial installations (either on new build or substantial refurbishment) which have a total thermal input exceeding 20 MW which generate waste heat, are to be required to capture or make use of the waste heat.
Smart metering, transmission and distribution
- The Proposed Directive provides provisions in these areas (this will be the subject of a subsequent LawNow).
Energy efficiency obligations and audits
- Energy efficiency obligation schemes are to be established in each Member State. Either all energy distributors or all retail energy sales companies will be obligated to achieve, at Member State level, an annual energy-saving target equal to 1.5% of their previous year’s energy sales by volume (excluding transport). The use of short term measures in achieving this obligation (i.e. distribution of light bulbs, shower heads, energy audits and information programmes) are to be restricted (to less than 10% of the energy savings obligation of an obligated party and must be combined with longer term savings). Interestingly the EU Commission is also to establish a system whereby obligated parties in one Member State may count energy savings that obligated party (presumably over) achieved in another Member State.
- The savings of each obligated party are to be made public.
- Appropriate measures must be taken to remove non-regulatory barriers to energy efficiency (including the landlord and tenant relationship and administrative practices relating to public purchasing, accounting and budgeting).
- Larger companies will be required to undertake independent energy audits every three years.
The above is merely a snapshot of some aspects of the Proposed Directive. The Proposed Directive has potential significant implications for existing businesses. It will also create material opportunities for many organisations.
New legislative instruments in this arena, by dint of their nature and what they are seeking to achieve, do not sit comfortably with business as usual. Often they also conflict with national priorities and policies. The simple point, however, is that the European Institutions have taken the view that, having been given substantial time and having been left to their own devices, the markets and national policy makers will fail to meet future demands. Whilst there will be resistance from some quarters, there will be considerable support from others. We shall have to see how this Proposed Directive develops during its legislative passage.
One final point to make: the Proposed Directive expressly points out that this legislation will not stop at the 20% target reduction in primary energy savings by 2020. The Proposed Directive is also to pave the way for further energy efficiency improvements beyond 2020.