The Governance Regulation aims to streamline and align planning and reporting across the five dimensions of the Energy Union. The introduction of “Energy Efficiency First” into this framework is a necessary organising principle to deliver on the goals of the Energy Union and secure a fair deal for energy consumers.
Energy Efficiency First has been championed by the Commissioners in charge of the Energy Union and further introduced in proposed amendments to the Governance Regulation, the Energy Performance of Buildings Directive, the Energy Efficiency Directive, and market design legislation. Along with this growing visibility in European energy and climate policy comes the need to understand what this principle means in practice.
The European Parliament has proposed the following definition: “’energy efficiency first’ means the prioritisation, in all energy planning, policy and investment decisions, of measures to make energy demand and energy supply more efficient, by means of cost-optimal energy end-use savings, demand-side response initiatives and more efficient conversion, transmission and distribution of energy.”
Energy Efficiency First is meant to provide a compass to guide decision making, rather than to prescribe certain actions. Implementing the principle is largely a matter of sequencing: It means considering energy efficiency and demand-side response first, followed by network and supply-side efficiency, in energy-related policy, planning, and investment. Due to the deep market barriers to energy efficiency investments and powerful incentives for supply-side solutions, failing to follow this sequence can lead to over-investment in supply-side and network infrastructure and, ultimately, to stranded assets.
Evidence from many countries in Europe and around the globe demonstrates the value of Energy Efficiency First: lower bills, easier uptake of variable renewables, least-cost carbon abatement, improved energy security, and many broader health and societal benefits. Yet these benefits won’t appear just because we want them to.
As the examples in this policy brief demonstrate, delivering these benefits requires deliberate consideration of efficiency’s potential at various decision points in energy policymaking, planning, and investment. For this reason, it is necessary to include the principle not in the introductory recitals alone, but as a legislative mandate grounded in transparency and accountability.