Renewable and Efficient Energy: Pathways to a Better Future

May 19, 2009Sophia, Bulgaria

Brian T. Castelli

Executive Vice President

Alliance to Save Energy

The Role of Energy EfficiencyThe Role of Energy Efficiencyin in

Energy Security & Climate ChangeEnergy Security & Climate Change

Presentation Outline

Current Energy Situation Security Climate Change

Energy Efficiency’s Importance & Potential The Challenges of Energy Efficiency in the

Region

Private Sector Role in Energy Efficiency

Overcoming Barriers to Energy Efficiency

Alliance work in the region

Features of the Current Energy

Market Tight Supplies Growing Demand Limited Spare Capacity Heightened Geopolitical and Investment risk Higher Prices Climate Concerns

……an an

UNSUSTAINABLUNSUSTAINABLE E TRACKTRACK

CLIFF CLIFF AHEADAHEAD(sorry)(sorry)

Source: Frank Verrastro, CSISSource: Frank Verrastro, CSIS

Global Energy Global Energy ConsumptionConsumption

Source: EIA /IEO 2007 & Source: EIA /IEO 2007 & Frank Verrastro, CSISFrank Verrastro, CSIS

LiquidsLiquids

Natural GasNatural GasCoalCoal

NuclearNuclearHydro/RenewablesHydro/Renewables

23%23%

7%7%

26%26%

38%38%

6%6%

2005: 447 Quad Btu2005: 447 Quad Btu

24%24%

34%34%

28%28%

8%8%6%6%

2030: 702 Quad Btu2030: 702 Quad Btu

Geopolitical Concerns Geopolitical Concerns AboundAbound

RussiaRussiaPolicyPolicy

RussiaRussiaPolicyPolicy

USUS Refinery Refinery

BottlenecksBottlenecks

USUS Refinery Refinery

BottlenecksBottlenecks

EuropeEuropeGas Gas

SuppliesSupplies

EuropeEuropeGas Gas

SuppliesSupplies

EuropeEuropeOil Oil

SuppliesSupplies

EuropeEuropeOil Oil

SuppliesSupplies

IranIranNuclear Nuclear

AmbitionAmbition

IranIranNuclear Nuclear

AmbitionAmbitionIraq: Iraq:

SabotageSabotage

Iraq: Iraq: SabotageSabotage

NigeriaNigeriaCivil UnrestCivil Unrest

NigeriaNigeriaCivil UnrestCivil Unrest

Latin AmericaLatin AmericaResource Resource

NationalismNationalism

Latin AmericaLatin AmericaResource Resource

NationalismNationalism

N-KoreaN-KoreaNuclear Nuclear

AmbitionAmbition

N-KoreaN-KoreaNuclear Nuclear

AmbitionAmbition

USUS HurricanesHurricanes

USUS HurricanesHurricanes

ChinaChinaDemand Demand increaseincrease

ChinaChinaDemand Demand increaseincrease

Strait of Malacca Strait of Malacca PiracyPiracy

Strait of Malacca Strait of Malacca PiracyPiracy

PakistanPakistanPolitical Political Turmoil Turmoil

PakistanPakistanPolitical Political Turmoil Turmoil

Source: Frank Verrastro, CSISSource: Frank Verrastro, CSIS

Climate Change !

Imperatives for Energy Efficiency:Energy Use is a Global Climate Issue

Share of Global Energy-Related CO2 Emissions by Country (2005)

China, 19%

Russia, 6%

Japan, 4%

India, 4%

Western Europe, 13%

,

Others, 32%

US Other Sectors, 13%

US Buildings, 8%

Source: Energy Information Source: Energy Information AdministrationAdministration

COCO22 Emissions - 450 Emissions - 450 Stabilisation CaseStabilisation Case

By 2030, emissions are reduced to some 23 Gt, By 2030, emissions are reduced to some 23 Gt, a reduction of 19 Gt compared with the Reference Scenarioa reduction of 19 Gt compared with the Reference Scenario

1010

1515

2020

2525

3030

3535

4040

4545

20052005 20102010 20152015 20202020 20252025 20302030

Gt o

f CO

Gt o

f CO 22

CCS in industryCCS in industryCCS in power generationCCS in power generationNuclearNuclearRenewablesRenewablesSwitching from coal to gasSwitching from coal to gasEnd Use electricity efficiencyEnd Use electricity efficiency

End Use fuel efficiencyEnd Use fuel efficiency

Reference ScenarioReference Scenario

450 Stabilisation Case450 Stabilisation Case27 Gt27 Gt

42 Gt42 Gt

23 Gt23 Gt

Energy-Related COEnergy-Related CO22 Emissions Emissions

Source: IEA World Energy Outlook 2007 & Frank VerrastroSource: IEA World Energy Outlook 2007 & Frank Verrastro

So, Where Are We????So, Where Are We????

Facing Simultaneous Challenges of:Poverty/Equity,Climate Change with New Players, New Alignments, New Rules, and Outmoded Institutions

As an energy resource, efficiency is: CHEAPER

- Each $1 invested in Energy Star program = $75 in energy cost savings and $15 of investment in new efficiency technologies

QUICKER- In 2001, California cut peak electricity use by 10% in less

than a year

CLEANER- “Negawatts” produce NO ENVIRONMENTAL FOOTPRINT

MORE SECURE- A “homegrown” resource!

Why Energy Efficiency?

Globally, EE is One Possible Means to Contain Demand

Energy Efficiency at the NexusEconomic Economic ObjectivesObjectives

Environmental Environmental ObjectivesObjectives

Security & Security & Foreign Foreign Policy Policy ObjectivesObjectives

Energy Energy EfficiencyEfficiency

RenewableRenewable

EnergyEnergy

NuclearNuclear

OilOil

CoalCoal

Natural Natural GasGas

Carbon Carbon Capture and Capture and

StorageStorage

Affordable/AccessibleAffordable/Accessible

Promotes/Supports Promotes/Supports Economic Growth & Economic Growth & EmploymentEmployment

Environmentally Environmentally BenignBenign

Low/no Low/no emissionsemissions

Promotes/Promotes/Supports Supports Sustainable Sustainable EnvironmentEnvironment

DefensibleDefensible

Reliable and SecureReliable and Secure

Source: Frank Verrastro, CSISSource: Frank Verrastro, CSIS

Plenty of Opportunity forPlenty of Opportunity for Improving Energy Intensity Improving Energy Intensity

Source: Frank Verrastro, CSISSource: Frank Verrastro, CSIS

Energy Efficiency: Powering the U.S. Economy for 30 Years

America's Greatest Energy Resource Energy Efficiency and Conservation Improvements Since 1973

Have Reduced Annual Energy Consumption by 50 Quads

50

40

24

23

8

4

3

0.8

0 10 20 30 40 50 60

Geothermal, Solar and Wind

Conventional Hydroelectric

Wood, Waste, Alcohol

Nuclear Electric Power

Coal

Natural Gas

Petroleum

Energy Efficiency and Conservation

Quads

2007 Domestic Production Net Imports

Alliance to Save EnergyAugust 2008

Huge EE Potential RemainsHuge EE Potential Remains

40%40% Energy EfficiencyEnergy Efficiency

Adapted from McKinsey Adapted from McKinsey AnalysisAnalysis

Energy Efficiency should be fully Energy Efficiency should be fully considered in GHG reductions. All considered in GHG reductions. All items to the left of the arrow items to the left of the arrow represent “negative marginal represent “negative marginal costs”costs”

Huge Potential for Energy Efficiency

•Russia is very rich in energy resources and self-sufficient in fuels. Energy sector highly significant in Russian economy.

Very high Energy Intensity (energy needed to produce per unit of GDP) in Russia and many FSU countries.

•Supplying HEAT accounts for about 45% of all domestic energy use; close to 50% of fossil fuel use.

• Potential estimated at 45% of current consumption.

Source: Wall Street Journal, 8 May Source: Wall Street Journal, 8 May 20062006

Inefficiencies Strain Poor Households in Region

Private Sector Role in EE in the FSU

2 major EE markets: privately held industrial enterprises municipal utilities and housing. District heating, formerly fully municipal, has a growing share of private ownership through leasing or privatization. Private sector provides:

equity for investments energy-saving goods and services.

Private sector in financing: • ESCOs, public-private partnerships, third party financing • Proven effective for utility infrastructure but seldom applied. • Negotiations to create ESCOs and use performance contracting

were especially slow and difficult.

Environment for Private Sector is Improving Legal reforms attracting some investment:

• Private participation now allowed in urban heating • Gradual privatization and elimination of subsidies • Prices expected to rise over time to cost-recovery

levels

When done properly: More effective management

Transparent accounting Improved customer service & QC

But a common pitfall in FSU countries: • CHPs privatized, DH remained municipal, & municipal facilities given priority in sales • RESULT: private CHPs failed (under-loaded, therefore less efficient and higher

priced)

Overcoming Barriers to EE in the Region

1) POLICY Legal & regulatory frameworks must be improved…

Create incentives for promoting energy efficiency

Open the energy sector to private participation

Promote metering and DSM measures

Eliminate subsidies ~ Energy tariffs should recover costs ~

Modernize energy standards & technical regulations

Promote energy efficiency services market

Overcoming Barriers to EE in the Region, cont.

2) CAPACITY and AWARENESS• Strengthen national agencies for: setting energy efficiency targets developing programs ensuring implementation• Train energy managers and auditors• Cultivate partnerships among: energy consumers, service providers, financiers• Provide Information: test EE models, document case studies, prepare guidelines, advocate.

3) FINANCING - Need mechanisms, such as… loan funds vendor credits leasing credit guarantees carbon finance

Municipal Network for EE: MUNEE

Purpose: to provide EE knowledge to municipalities, utilities and housing associations to improve heating and water supply Scope: 17 countries in Eastern Europe and FSU Vehicle: dissemination through web site and events. Topics:

project financing public awareness campaigns municipal planning, but mainly…

POLICY REFORM - improving & creating laws to promote EE

Our Most Recent MUNEE Work: In-depth assessments of policies, programs and key issues on 1) urban residential heating 2) the impact of EE on ability of poor to afford heating

(http://www.ase.org/section/program/munee/)(http://www.ase.org/section/program/munee/)

Alliance in Southeastern Europe

Supported creation of RENEUER in 1999 (with Bulgarian Center for EE, EnEffect)

• Regional Network for Efficient Use of Energy & Water Resources for Southeastern Europe •Albania • Bosnia-Herzegovina •Bulgaria •Croatia • FYR Macedonia •Moldova •Romania •Serbia & Montenegro

Gabrovo, BulgariaGabrovo, BulgariaCommon state of windows in CIS countries

Contact Contact Us!Us!

Brian T. CastelliBrian T. CastelliExecutive Vice PresidentExecutive Vice President

bcastelli@ase.org202-857-0666202-857-0666www.ase.orgwww.ase.org