Opinion of the European Economic and Social Committee on the ‘Proposal for a Directive of the European Parliament and of the Council on energy end-use efficiency and energy services’(COM(2003) 739 final — 2003/0300 (COD))
Date: 2004-10-28
Institutions: European Economic and Social Committee
Subjects: ESC opinion, EU policy, energy consumption, energy efficiency, energy policy, energy saving, environmental protection

20.5.2005

EN

Official Journal of the European Union

C 120/115

Opinion of the European Economic and Social Committee on the ‘Proposal for a Directive of the
European Parliament and of the Council on energy end-use efficiency and energy services’

(COM(2003) 739 final — 2003/0300 (COD))

(2005/C 120/21)

On 23 January 2004 the Council decided to consult the European Economic and Social Committee, under
Articles 175(1) of the Treaty establishing the European Community, on the abovementioned proposal.

The Section for Transport, Energy, Infrastructure and the Information Society, which was responsible for
preparing the Committee's work on the subject, adopted its opinion on 5 October 2004. The rapporteur
was Mrs Sirkeinen.

At its 412th plenary session of 27 and 28 October 2004 (meeting of 28 October 2004), the European
Economic and Social Committee adopted the following opinion by 117 votes to 10 with 14 abstentions.

1. Background

EU energy policy has during recent years followed three

1.1
main lines:

— creating effective open markets for electricity and gas,

— ensuring security of energy supply, and

— reaching stringent environmental targets and in particular

combating climate change.

Key legislation adopted in these areas includes the revised elec-
tricity and gas-market Directives, which open markets for non-
household users in mid-2004 and all consumers in 2007. On
security of electricity supply a Green Paper was published in
2001, highlighting demand-side management as one key action
for both security of supply and combating climate change.

1.2
A reliable energy supply at reasonable prices is an
important precondition for economic growth and welfare of
the citizens of Europe. Consequently,
the EESC has in its
opinions supported the Commission's objectives and approach.

1.4
Efficiency of energy end-use, or energy conservation, has
for long been recognized as a powerful element of the energy
market. Less use of energy saves money and contributes
directly to both security of supply and often to reducing green-
house gases by decreasing the need for generation and for
investments in new production, transmission and distribution.

1.5
There is much potential for better energy efficiency. The
Communication refers to studies that on average show that
final energy consumption in the EU could be reduced by at
least 20 % without reducing comfort and at no extra cost. The
efficiency potential for electricity use is generally lower than
this total figure, and higher for other forms of energy.

In a Communication accompanying the energy package
1.6
the Commission states that future growth in electricity demand
will be taken care of by demand-side management. Some new
investment is, however, seen to be needed simply to renew
plants that have reached the end of their life. Much of this the
Commission expects to take the form of renewables and distrib-
uted small scale combined heat and power generation.

1.3
The proposal for a Directive on end-use efficiency and
energy services was presented by the Commission as a part of a
package of proposals dealing with energy infrastructure and
security of supply. The Commission points out that in this
the question of supply-demand balance cannot be
context
neglected. An underlying cause of
the increased stress on
networks is demand growth, which can partly be counteracted
by demand-side management.

1.6.1
The Committee cannot agree with this description of
future trends and needs in the electricity sector. In a Communi-
cation on security of supply, much clearer and realistic infor-
mation on future trends and potentials is to be expected. In
particular when much better quantified information and
scenarios are available,
including material produced by the
Commission itself. Nobody is served by avoiding clear and
realistic — be it for many unpopular — baseline information.

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1.6.2
A very rough calculation can provide an idea of the
magnitude of the problem and options to solve it. Electricity
demand grows presently at a rate of 1-2 % per annum in the
EU. The EU target for increasing electricity generation from
renewable energy sources means a yearly increase of less than
1 %. The target proposed for energy efficiency would cut yearly
growth by 1 %. Renewables and efficiency could thus compen-
sate the growth in demand, and in addition possibly substitute
existing capacity by much less than 1 % per annum. Power
plants run for 30-50 years, which means theoretically that
substitution needs to take place at a yearly average rate of 3 %.
The International Energy Agency (IEA) notes a need for new
power plants in the EU of over 200 000 MW over the next 20
years.

2.4
A sectoral target is set for Member State public sectors,
which need to save at least 1.5 % energy a year, notably thanks
to energy-efficient public procurement. These savings would
also contribute to the general yearly savings target of 1 %.

2.5
A supply-side obligation is set for the sale of energy
services. Energy distributors and/or retail supply companies
would have to integrate energy services into their distribution
and sales of energy until a 5 % share of their customers has
been covered. Alternatively, energy audits would be offered.

2. The Commission proposal

2.1
The goal of the Commission proposal is to ensure that
every year 1 % more of the energy previously used in each
Member State is saved through increased energy efficiency. The
1 % of energy to be saved is calculated on the average yearly
energy use of the past five years in the Member State. This will
lead to around 6 % energy savings in the year 2012. Member
in accordance
States would be obliged to report and verify,
with the Directive's provisions that this amount of energy has
been saved each year up to 2012. Energy use in the Member
State can still grow, but at a lower rate than without the
measures.

The draft Directive boosts energy-efficiency measures
2.2
and aims at promoting the market for energy services such as
lighting, heating, hot water, ventilation, etc. Member States
would be obliged to respect two energy savings targets and to
ensure that suppliers of energy offer energy services for the
period 2006 to 2012.

2.3
The general energy end-use savings target of 1 % per
year means 1 % of the average amount of energy distributed or
sold to final customers the previous five years. These savings
will have to be registered from the following sectors: house-
holds, agriculture, commercial and public sectors, transport and
the industry. Air and maritime transport are excluded for
measurement reasons. Excluded also are energy-intensive indus-
tries, which are already covered by the emissions trading Direc-
tive and the IPPC Directive. All types of energy will be taken
into account: from electricity and natural gas to district heating
and cooling, heating fuel, coal and lignite, forestry and agri-
cultural energy products and transport fuels.

A method of calculation allows credit

2.6
for measures
taken earlier. Member States may measure and verify the
continued impact of already existing energy services and effi-
ciency measures which were not
introduced before 1991.
Energy taxes and energy saving information campaigns can be
taken into account provided their impacts are also measurable
and verifiable.

2.7 Member States will decide which sectors should be
addressed and how much each sector should contribute to
reaching the national target, although all eligible customers
should be offered some form of energy service or energy-effi-
ciency programme or measures.

2.8
Savings will be calculated as the sum of the measured or
estimated reductions in final energy consumption attributable
to energy services, energy-efficiency programmes and other
eligible measures. Member States will report regularly on their
success in meeting targets. Examples of eligible energy services
and energy-efficiency guidelines for measuring and verifying
energy savings are set forth in the proposal.

3. General comments

3.1
The EESC has on several previous occasions stressed the
importance of energy saving and enhanced end-use energy effi-
ciency in order to meet the goal of sustainable development
and, in particular, to combat climate change. The Commission's
initiative to focus serious attention on this issue is welcomed.
The EESC supports strongly the objective of energy efficiency
and some of the proposals in the draft Directive, but also has
proposals for changes.

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3.2
In many Member States action has been taken in this
area, which today features a large variety of policy measures,
practical experiences and results. Perhaps the most widespread
form of activity in this area, also with some sectoral EU-wide
examples, is voluntary action, in unorganised forms or based
on agreements.

3.7
Against this background the target set in the Directive
of 1 % yearly efficiency gains is ambitious, but not unrealistic
overall. The target of 1,5 % in the public sector, which relates
mainly to energy use in buildings, can in some Member States
be very difficult and expensive to reach in the proposed time-
frame.

3.3
At EU level there are requirements for labelling house-
hold and other appliances and a Directive on energy use in
buildings. Other measures,
like the Directive on design of
energy-using products, are in the pipeline. Many other parts of
EU policies support also end-use energy efficiency,
like the
IPPC (1) and energy-tax directives. Unfortunately these policies,
to a large extent, include measures that considerably increase
the cost of energy. This can be seen as supportive of saving
energy, but damages caused by higher costs to households and
the competitiveness of industries can overweigh the positive
effects.

3.8
The main argument in support of setting a mandatory
target is that targets are strong motivators. But there are many
arguments against a binding target.

Differences in past and present actions are such that a
3.8.1
single target would imply different costs to energy users in
different Member States. Individual targets for Member States
are not feasible because of lack of comparable information as a
calculation base.

Relevant actions

3.4
to enhance energy efficiency vary
widely because of different local circumstances and actions so
far. The effects of these actions on the internal market seem
limited. Against this background it is important, in line with
the subsidiarity principle, that additional actions at EU level
give genuine added value.

3.5
In its proposal the Commission seems to try to take
account of the differences and varieties of actions. But given all
existing national and EU regulations and,
in particular, all
in the view of the
voluntary activities, the proposal needs,
EESC, some adjustments in order to add optimal value to
existing measures. Also the coherence with other,
related
requirements, such as those laid down in the building directive,
should be clarified.

3.6
The potential of better energy efficiency has been
subject to many studies. The EESC broadly agrees with the
Commission on the figures it presents. The potential is large,
but some of it has to be viewed critically by taking better
account of economic realities. The profitability of efficiency
investments has been calculated against a pay-back period of
the lifespan of the investment, which is often not viable in
practical life. For example, if the extra cost of a more efficient
heating system in a family house has a pay-back period of the
lifespan of the appliance, that is tens of years, the owner would
hardly see this as a profitable investment. Similarly in a small
business with a limited investment budget, the manager would
not put the replacement of a machine which is still operational
by one using less energy higher on his list of priorities than a
project that increases total output and turnover.

(1) Integrated Pollution Prevention and Control.

3.8.2
Another argument is that a target would be seen as a
instead of a carrot and this would give the wrong
‘stick’
message. The potentials and the benefits of enhancing better
energy efficiency should be communicated and enhanced in a
positive, stimulating fashion.

3.8.3
The information base on present energy use, energy
efficiency situation and effects of present measures is poor in
many Member States. The calculation methods for savings
presented in the draft Directive are not well defined. Flexibility
on this point can be welcomed, but results are comparable and
reliable vis-à-vis the target only when both the baseline infor-
mation and the calculation methods are reliable and compar-
able.

3.8.4
The EESC is also concerned that sub-optimisation, in
this case of energy efficiency by setting binding targets, does
not serve well the optimisation in relation to overall objectives,
such as total efficiency of the economy or decreasing green-
house gas emissions in a cost effective way.

For the above mentioned reasons the EESC does not
3.9
support the setting of a binding target for the Member States.
A minimum requirement for setting a target is that fully satis-
factory and feasible calculation methods are defined.

3.9.1
Instead of optimal national binding targets the EESC
proposes that Member States should be obliged to establish or
update existing programmes for energy efficiency,
including
monitoring. The targets of 1 % and 1,5 % for the public sector
should be set for the average of the Member States.

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3.10 Member States must be free to decide on how to direct
targets and actions to different sectors and forms of energy. It
is, however, important that all sectors and fuels are included
and participate in relation to their potentials.

3.11
The provisions of the draft Directive on documenta-
tion, verification and monitoring (Article 4.5) mean a workload
that can be out of proportion to expected resulting benefit. The
quality of proof of this work remains questionable as it is diffi-
cult to clearly connect a specific measure with a particular
amount of energy saved. A much more simple and clear but
reliable approach is needed.

The same results as with these mandatory actions can
3.12
better be achieved by tackling the underlying problems of
information and financing more directly. Actions in this direc-
tion are the provisions in Article 8 on establishing appropriate
qualification, accreditation and/or certification systems
for
energy services. These provisions should be further developed
and broadened. Innovative financing methods, like loans with
low interest rates, need also to be developed, to help in cases of
long pay back periods, as the examples mentioned in 3.6.

3.13 Measures to support and develop existing and proven
voluntary actions should also be added. In accordance with
Article 12, information and easy availability of energy audits,
developing energy audit applications suitable for SMEs or a par-
ticular branch of activity and support for further training of
people to be able to act as energy managers are examples of
measures
that have shown good results and should be
enhanced by the Commission.

3.14
Instead of dealing with massive reporting, the Commis-
sion could support Member States in their efforts for better
energy efficiency by helping them to create a better informa-
tion base, both in the Member States and for itself. A thorough
analysis of existing barriers to better energy efficiency is
needed. The Commission could also enhance co-operation and
exchange of best practices between Member States.

3.15
A proposal like this, with implications on markets and
costs to consumers, must be subjected to a proper impact
assessment. As this has not been done in the preparatory stage,
the EESC calls for an assessment to be immediately executed,
before decisions are made in the Council and Parliament.

3.16
The Commission presents the idea of possibly intro-
ducing at a later stage a system of so called white certificates.

Brussels, 28 October 2004.

Such a system could only work if binding obligations for
energy conservation or efficiency are introduced. The EESC
does not support the introduction of binding obligations for
this purpose and cannot therefore support the introduction of
white certificates either. In addition, the functioning of both
emissions trading and trade with green certificates should be
carefully monitored and evaluated before even thinking of
introducing new schemes to an already complicated energy-
related market.

4. Detailed comments

In Article 3, Definitions, the concept of energy services
4.1
should be more clearly defined. Also the threshold of 50 GWh
in the definition of ‘Small distributors and retail energy sales
companies’ should be re-evaluated — it may be impractically
low.

Article 4 should be revised according to the General

4.2
Comments of this Opinion.

4.3
Article 6(a) and 10(b): A growing supply of energy
services is desirable. But the EESC does not agree with the
Commission approach that these should be supplied by energy
distributors and retail supply companies only, and the cost inte-
grated into their distribution and sales prices until a certain
market penetration has taken place. Already now energy
services are supplied by others, too — like house-maintenance
companies, consultants and ESCO companies — and the
market for these must be open to everyone on equal terms.
The proposal of offering a share of 5 % of customer services
with no charge, at the cost of all customers, is not fair to custo-
mers and discriminates against other suppliers.

The concept of ‘eligible customer’ in Article 7 needs to

4.4
be clarified.

4.5
Article 10(a): It is hard to see how transmission tariffs
can be set so as to specifically enhance energy efficiency. It is
not easy to understand the relevant mechanisms of the exam-
ples given in the paragraph.

4.6
The metering requirements in Article 13 can prove very
costly, and it will always be the consumer who carries the
costs, in the end. Measures on metering should therefore be
approached carefully.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND