Energy Efficient Prosperity: The “first fuel” of economic development

(Paris) — 10 October 2016

From family homes to large-scale factories, energy efficiency offers governments, businesses and households a range of tools and solutions to reduce power bills, curb carbon emissions, and save money at the same time.

This notion of “energy-efficient prosperity” is especially relevant for developing countries, which can most benefit from investing in energy efficiency improvements that provide affordable and reliable services, while supporting a strong economy and improved quality of life over the long term.

As this series will show, energy efficiency policies are available to all, from factories in the Balkans to households in South Africa. Many can benefit from simple investments that can deliver more services for the same amount of energy input, or the same services for even less energy input. In fact, governments are looking at energy efficiency as the “first fuel” –  a source of energy in its own right, in which they can invest ahead of other more complex or costly energy sources.

The International Energy Agency in its latest report, Energy Efficiency Market Report 2016, found that last year consumers, businesses and governments spent USD 221 billion on energy efficiency improvements in 2015.

As a result, energy intensity – the amount of energy used per unit of GDP – improved by 1.8% last year compared with 1.5% in 2014 and triple the average rate seen over the past decade.

Between now and 2035, more than 95% of the projected growth in global energy demand will happen in developing countries, especially in China, India and Southeast Asia. And while sustained economic growth is likely to lead to higher levels of energy use overall, there is clear potential for countries to use energy more efficiently.

One example among many is a furniture factory in the Balkans where workers used to start their days by loading wood briquettes into a furnace. Like many manufacturing companies in post-Communist Balkan countries, its operations relied on old, inefficient equipment and incurred high energy costs.

But a set of energy efficiency improvements supported by the European Bank for Reconstruction and Development has helped it turn a corner. It installed new energy-efficient building insulation, lighting systems and windows, improving overall energy efficiency and comfort by making the factory warmer and brighter for the workers.

The factory cut its energy costs almost in half by powering the furnaces with new wood briquettes made from the factory’s own sawdust by-products and wood waste. Workers don’t have to wear winter jacks and hats indoors anymore because of bad heating. New lights made the working environment safer, which also led to gains in productivity.  

Energy efficiency improvements tend to be both cost-effective and widely available, making them a logical consideration for countries facing surging energy demand. They also boost energy productivity because they reduce the amount of energy needed to produce each unit of gross domestic product.

Analysis by the IEA has shown that if energy efficiency investments were scaled up, they would have the potential to reduce South Africa’s need for additional electricity generation capacity by 18% in 2030. They could also allow the country to avoid burning 25 million tonnes of coal, equivalent to 275 000 railcars full of coal.

Meanwhile, in rapidly growing India, energy efficiency measures have the potential to reduce national energy consumption by more than 10%. Energy efficiency has already been a major driver of the decline in the energy intensity of India’s GDP, which has almost halved between 1981 and 2011.

For growing economies like these, meeting energy demand also means improving both energy access and energy security. The use of available energy efficiency measures could achieve universal provision of modern energy services with 50-80% less energy.

From the industrial and building sectors to home appliances and transport, energy efficiency should be treated as a key ingredient in building prosperous societies.

This is the first of a five-part series on energy efficiency focusing on real-life examples in developing countries (Part 2, Part 3, Part 4, Part 5). Check out #EnergyEfficientWorld on Twitter to join the conversation.

Photo courtesy of Flickr user Lenny van Dijk.

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