Xin Yu

Energy-Efficient Technologies

Nowadays, research, development, deployment, and investment in energy-efficient technologies take place in many areas including lighting, household appliances, building envelope, windows, doors, heating, ventilation, air-conditioning, heat exchangers, working fluids, geothermal heat pumps, water heating, sensors and controls designed to measure building performance, smart grids, industrial process, electrical motors, and energy-efficient transport. This chapter briefly introduces some technologies that are related to these areas including energy-efficient lighting, refrigerators, electrical motors, and vehicles. It also presents policies to facilitate investments in several most common energy-efficient technologies and provides economic and technical guidance on choosing and investing in energy-efficient technologies.

Energy-Efficient Urban Transport

Urban transport alone consumes nearly 8 % of world energy use, and it is one of the largest contributors in both global and local pollutions. Urban transport energy efficiency is to maximize travel activity with minimal energy consumption through combinations of land-use planning, transport modal share, energy intensity reduction, fuel-type switching, and replacement of information transmission for vehicle travels. Different kinds of cities have different barriers to energy-efficient transport modes. To achieve urban transport efficiency in energy use, government policies are needed to unlock these barriers in the market. Sustainable energy efficiency transport system needs both public and private sector investments. PPPs can greatly facilitate low-carbon and high energy-efficient transportation technologies. Substitution of moving information for moving people can greatly improve energy efficiency in the transport sector. A future efficient transport system in urban area will be in affordable, frequent, and seamless public transport that integrates information technologies, trains, bicycles, taxies, and sidewalks.

Energy Efficiency Policies

This chapter presents energy efficiency policies at the national government level and identifies some prominent policy trends. Four key findings emerged from this chapter: (1) It is necessary for the government to constantly revise or strengthen national energy efficiency policies to make these policies suitable for the changing of national realities; (2) an effective government policy in one country may not be applicable to another country, although many national government policies can be shared among different countries; (3) there is no widely accepted methodology for evaluating effectiveness of energy efficiency policies; (4) coordination among the national government policy makers and policy implementers is increasingly important; and (5) there are opportunities to significantly improve policy performance through a unified strategy.

Overall Methodology in This Study

The previous chapters reviewed the important position of energy efficiency as the first fuel in national energy development strategy and 11 market barriers that prevent energy-efficient technologies from being fully invested and deployed. This chapter presents a methodological framework for the book. The framework expanded to five areas: government policies and regulations; theory and example of economic and financial analyses for projects; project financing; energy service companies (ESCOs) and private investments; and energy-efficient technologies and green transport. Two case studies are presented as a foundation to support the methodology framework. Presented at the end of the methodology are conclusions from the analysis. Finally, data collection to support this study is briefly introduced in this chapter.

Market Barriers to Energy Efficiency

Market barriers to energy efficiency come from various aspects including social psychology, organizational theory, system perspective, and economic concepts. Widely covering these aspects, this book classifies 11 barriers to energy efficiency investments in the energy market. These barriers include fossil energy subsidies in the energy market, high transaction costs for small- and medium-sized energy efficiency project investment, distorted market for energy efficiency investments, high risk for local banks to release low-interest loans to small- and medium-sized enterprises, and lack of capacity to develop and implement energy efficiency projects in developing countries. Fortunately, these barriers can be unlocked by various proven measures. These measures include, but not limited to, implementing government energy pricing reforms, using program approach to cutting down transaction costs for small projects, creating transparent and competitive energy markets through effective government policies and regulations, lowering interest rates of bank loans by establishing de-risk funds at local banks, and building capacities for developing countries.

Energy Efficiency Project Finance

Lack of financing mechanism in the market is a barrier to energy efficiency in many developing countries. Government policy can create effective financial mechanisms in the market to unlock this barrier. These effective financial mechanisms can be in the forms of rebates, grants, or low-interest loans for energy efficiency improvements, direct income tax deductions for individuals and businesses, and exemptions or reduced sales tax on eligible products. Incentives offered by national governments are generally in the form of tax incentives. Utilities can rebate energy-efficient appliances and equipment for any energy end users in the system, which facilitates energy efficiency investments. Private sector-based ESCOs and individual energy end users or customers are beneficiaries of governments’ and utilities’ financial mechanisms.

Energy Efficiency Becomes First Tool for Climate Change Mitigation

In November 2014, the US and the Chinese governments announced their carbon emission reduction targets by 2030. The objective of this chapter was to quantitatively project the two countries’ carbon emissions. A top-down approach is used to analyze the relationship between the Chinese economic development and energy demand, and identify potentials of energy savings and carbon emission reduction in China. A simple time series approach is utilized to project carbon emission reduction in the USA. The predictions drawn from the analysis of this chapter indicate that both China and the USA need to use energy efficiency as a first tool to achieve their carbon emission reduction goals.

Energy Efficiency Becomes First Fuel

Energy efficiency can be defined as an energy resource because energy efficiency is capable of yielding energy and demand savings that can displace electricity generation from primary energy resources. Investments in energy efficiency and the resulting resource benefits are factored directly into utility energy resource decision making about investing in new resources and operating existing systems. Defining energy efficiency as a resource and integrating it into utility decision making is especially critical because of the clear resource cost advantage of energy efficiency. Energy savings from customer energy efficiency programs are typically achieved at one-third of the cost of new generation resources. Efficiency programs can also reduce the need to install, upgrade, or replace transmission and distribution equipment. In addition, energy efficiency when integrated with smart grid technologies can improve system reliability and allow utilities to reduce and manage peak demand in their power systems. Finally, energy efficiency will reduce fossil fuel consumption and increase energy security; it is indeed considered the first fuel now by many countries.

Energy Service Company Development

ESCOs and the energy market for ESCO financing have been developing since 1976 when oil prices increased dramatically. ESCOs’ services cover projects in many energy areas, including energy extraction, power generation, energy conversion, transportation, power transmission, energy consumption, project financing, energy project audits, monitoring, and energy savings verification. In developing countries, there are many barriers in the energy market that are preventing ESCOs from developing. These barriers include lack of appropriate policy, financial mechanisms, and local capacities for ESCO development and management. Over the past 20 years, the GEF financed 39 ESCO projects in 25 countries and regions to remove these barriers. The results of these projects show that some countries are very successful in ESCO development, but others are not. Different models of ESCOs in different financial markets in various countries are analyzed; case studies are undertaken for China, India, Ukraine, and Brazil. This chapter concludes that while developing financial markets for ESCOs, countries need to consider the following: (1) initiating national government policy to stop energy subsidies and to reform energy pricing, (2) establishing a real, market-based financial mechanism for ESCOs, (3) involving the private sector in project co-financing, (4) creating incentives to ESCOs in the market by investing part of government revenue from energy tax, and (5) incentivizing ESCOs by government corporate tax exemption.

Energy Efficiency Cost-Effectiveness Test

Cost-effectiveness for energy efficiency projects can be undertaken from at least five perspectives: participants (energy end users), energy utility, total customer of the utility, total customer and the utility together, and the society or the economy. The mathematical formulas to calculate the costs and benefits for the five tests are very similar, but some of the parameters have different meanings. In all cases, it is necessary to calculate net present value of a project over lifetime. This chapter presents basic formula for energy efficiency cost-effectiveness test from the perspective of participants or energy end users.