Written by Attila Farkas
Reducing energy consumption is paramount to decrease the environmental impact, especially carbon footprint of our society. Efficiency affects the whole value chain from resource extraction to final consumption and waste management (recycling). According to the International Energy Agency, half of the energy-related Greenhouse Gas emission reduction can (and should) be achieved by energy efficiency measures. Consider also, that energy-related emissions constitute the largest share in total GHG emissions.
The real significance of energy efficiency lies however in its positive social and economic externalities. Reduced resource use means industrial competitiveness, decreasing expenditures for households, decreasing environmental hazards besides GHG-emission reduction (e.g. more efficient stoves emit less harmful particles reducing the chance of respiratory damages), easier and more secure access to energy services (the same energy system can serve more users, and investments can be channeled into grid development instead of the expenditure of production capacities), increasing resilience towards energy import shocks.
Energy efficiency is therefore a cornerstone of sustainable development – acknowledged by the global community as well, as Target 7.3 of the SDG #7 on modern energy systems states: “By 2030, double the global rate of improvement in energy efficiency”. SDG #7 is mostly based on the ongoing Sustainable Energy for All (SE4ALL) initiative, under which energy efficiency received a major role under the Global Energy Efficiency Accelerator Platform with the leadership the Copenhagen University. The Platform’s goal is to discover and promote globally applicable energy efficiency solutions by accelerating their (pilot) use on local levels with strong public-private participation. The projects will set examples for future projects and policies as well and tackle on of the main obstacles of energy efficiency developments: the lack of shared information.
In order to realize the energy efficiency potential, energy utilities and energy providers need to take central stage. Utilities have information on and access to basically every step and actor along the energy value chain (resource extraction and transmission being a common, although less significant exceptions). Utilities can not only reduce their own energy consumption but incentivize their consumers to pursue similar behavior as well.
It seems counterintuitive for an energy provider to be interested in the consumption-reduction of its own customers. There are some positive effects however in promoting energy efficiency as the IEA puts it: “For utilities and energy providers […] energy efficiency can help to improve system reliability, enhance capacity adequacy, better manage peak demand, optimise utilisation of generation and network assets, create opportunities to defer generation and network investment, and dampen price volatility in wholesale markets.” (IEA Capturing the Multiple Benefits of Energy Efficiency (2014) pp. 153-154).
Apart from market incentives, regulatory measures can also foster energy efficiency gains on behalf of the utilities. The EU introduced in the Energy Efficiency Directive (2012) the obligation for energy providers to cut their marketed volume 1,5%/y through energy efficiency measures. A similar measure was proposed in Switzerland as well on federal level, and although the Parliament has recently rejected the idea (within the context of the Swiss Energy Strategy for 2050 which on the other hand strongly builds upon energy efficiency measures), it is alive on Cantonal level, e.g. in Geneva.
Case Study: SIG
Services industriels de Genève or SIG serves 275.000 households within the Canton of Geneva. The multi-utility covers electricity, gas and district heating as well in terms of energy services. The company portfolio includes renewable energy production capacities and the import almost exclusively generated by renewable sources, i.e. the company is committed to sustainable energy not just in terms of energy efficiency.
The company offers energy efficiency services to its customers through its eco21 program. The program has been launched in 2007 as an initiative by the SIG with the support of the Canton. The company is investing 1% of its annual turnover into promoting energy efficiency solutions generating returns for the Canton through lowering energy bills and creating market for local entrepreneurs (retrofitting, retail etc.).
The program covers single households, medium and larger communities/industrial consumers as well and aims to provide flexible, personalized solutions if possible. The program provides information both on current consumptions patterns (audits performed by SIG) and possible efficiency investments (advisory and planning by the utility). It finances certain investments (light bulb switch for households, changing heating/cooling appliances) and helps to operate and maintain large-scaled projects.
The SIG gradually changes its role from energy distributor to service provider – instead of offering energy to the end-user the company is trying to maximize consumer experience in every aspect of energy use. This means operational efficiency on one hand (centrally optimized subsidy schemes, economies of scale in projects, faster best practice accumulation) but also the ‘monopolization’ of the energy sector and increased exposure from the consumers (by reducing their consumption they weaken their links to the company, but on the other hand the management of the Canton’s energy sector is gradually shifting to the company: audits, investments, subsidy allocation).
The SIG is able to successfully manage the abovementioned shift: through eco21 27.000 t CO2-emission and 110 GWh electricity consumption was avoided while the company was able to preserve its profitability without allowing end-user prices to increase. As a result Geneva’s per capita electricity use is only 80% of the Swiss average. The success of the shift can be explained by the strong trust of the consumers towards the company. Customers need and accept the SIG’s experience, recommendations and in general the company’s role in nudging and intermediating between consumers and retailers.
Another important factor in the success is that SIG 1) has a monopoly on the retail market, 2) is publicly owned and the ownership is shared between the Canton and the municipalities. As a result the market pressure is much smaller on the company, and it has administrative resources available to strengthen the communication and trust towards its customers.
It is questionable therefore whether in a more competitive environment and without the historical and administrative advantages the successful operation of SIG could be replicated. Its shift in focus and self-identity towards a more service based and personnel operation is a change public utilities will however hardly be able to avoid in the future.