cost of energy versus savings

Article 7 of the European Union’s Energy Efficiency Directive is a key driver of energy efficiency in Europe, and as such it is worth looking more closely at how well it can deliver benefits to consumers. An examination of energy efficiency obligations (EEOs) and other measures deployed by Member States to comply with Article 7 shows that they deliver a wide range of benefits to consumers, the energy system, and society—benefits that far outweigh their costs.

A look at the comprehensive data from EEOs, which, out of all Article 7 compliance measures, provide the largest share of the savings, finds that the measures are highly cost-effective—from a customer’s perspective, it is five times cheaper to save one unit of energy than it is to be supplied with it. Similar results can be seen from alternative efficiency measures such as loans, tax rebates, and grants. Program costs are more than offset by the energy cost savings.

Lowering demand at the customer end, in turn, lowers costs at every link in the power system. The benefits here include avoided transmission and distribution costs, avoided line losses, minimization of reserve requirements, and, in competitive power markets, lower clearing prices for power and lower per-kWh charges for customers. Article 7 also delivers a wide range of so-called “non-energy” benefits: improvements in health, comfort, air quality, public housing, and welfare costs, job creation, and economic growth, as well as significant mitigation of carbon dioxide emissions. These multiple benefits make a compelling case for strong efficiency metrics and targets.