Changing Behaviour

Diverse Ways Intermediaries Promote Energy Efficiency: Opportunities and Challenges

Energy efficiency has become a global concern in recent years. While national governments and energy utilities used to be responsible for promoting energy efficiency, this has changed due to the privatization and competition in energy markets. These utilities have encountered problems and thus, had to be re-configured and re-invented. New intermediary organizations such as energy service companies (ESCOs), energy agencies, and specific organizations funded by public benefit charges are now needed to address the demand side of energy efficiency.

However, there is more diversity in the promotion of energy efficiency in Europe today. It is promoted under different headings like climate change mitigation, sustainability, eco-efficiency, and energy self-sufficiency. Moreover, intermediary organizations are varied, including non-governmental organizations, public-private partnerships, and regional or sectoral networks.

This paper aims to present the diversity of ways in which new energy intermediaries are working to promote energy efficiency in old and new member states of the EU. It will discuss the opportunities and challenges encountered by different kinds of intermediaries. It will also analyze the merits of “nesting” energy efficiency within a broader climate or sustainability agenda.

Energy Efficiency Promotion in the Past

Energy efficiency was first introduced to the energy policy agenda in the 1970s as a result of the energy crises. Most countries adopted research, development, and deployment policies, information and education, financial incentives, and energy efficiency standards for buildings. These policies are considered to have been successful as government funding for research, development, and deployment has promoted energy efficiency measures such as heat pumps and new building designs. Grants or tax incentives have been used to promote energy efficiency upgrades like home retrofits and lighting equipment replacement. Efficiency standards have been effective in reducing energy consumption per floor area in some countries. Market transformation programs have also been used to promote the market penetration of energy-efficient appliances, while voluntary agreements and sectoral commitments have been adopted in some countries. It is estimated that the “negajoules,” or energy saved compared to a “no-policy scenario,” have become the largest single energy source in Europe.

The Emergence of Demand-Side Management Programs

The energy crisis was also the impetus for the first utility demand-side management (DSM) programs, which grew rapidly in the 1980s and 1990s due to government requirements and incentives for least-cost or integrated resource planning. This required energy utilities to consider investments in energy efficiency similarly to how they consider investments in new production capacity. However, as energy markets were privatized and opened up to competition, DSM programs run by utilities encountered increasing problems, leading to reconfiguration and reinvention. Today, there is no direct financial incentive for utilities to reduce energy consumption, and motives for utility DSM programs are now more related to customer retention or image-building, or to control peak load through demand management. While some of the early utility-driven DSM programs were disappointing as business models, energy efficiency and energy conservation have gained renewed interest due to their cost-effectiveness in meeting climate change mitigation targets. This has forced traditional players in the energy efficiency market, such as utility companies, to adapt to the new challenge and find more successful business models to promote energy efficiency and generate less profit due to falling demand. They have done this in different ways, such as developing new services for their customers or selling products that help customers save energy.

New Players in Energy Demand Side Management

At present, new players are emerging in the field of energy demand side management, including specialized energy service companies (ESCOs), government-funded energy agencies, or specific organizations that gain their funding from public benefit charges. ESCOs provide energy services to end-users and generally act as energy managers, implementing energy efficiency measures on behalf of their clients.