Recent global upheavals and uncertainties are putting increasing pressure on businesses around the world. This is prompting governments to look more and more to energy efficiency to promote industrial competitiveness, increase resilience of businesses, protect jobs, reduce strain on grids, and enhance energy security.

Providing government-led energy management programmes or policy packages for industry is one of the quickest and most cost-effective ways of ensuring fast and continual energy efficiency implementation. By encouraging and supporting companies to adopt energy management, governments can help ensure energy demand reductions and cost savings, as well as further benefits for companies and society. 

At the 28^th Conference of the Parties (COP28) in 2023, nearly 200 countries reached a landmark agreement to collectively double the global average annual rate of energy efficiency improvements by 2030. The rate of global energy efficiency progress has actually slowed, and, as the number one driver of global energy use industry is one of the main reasons for this slowdown. This is a result from two factors happening in parallel: first, the stagnation of industrial efficiency, and second, the growth of industrial energy demand. This is the worst possible scenario for efficiency progress.

However, there is a clear advantage to investing more resources in industrial energy efficiency. While industry is acknowledged as one of the most difficult sectors to decarbonise, it yields the best results from funding.

Energy management - the proactive and systematic monitoring, analysis, control, and optimisation of energy - effectively incorporates energy efficiency into business practices and provides a structured approach that effectively identifies opportunities and increases the rate of implementation.

Energy management in industrial companies has been shown to deliver more than 10% energy savings on average within the first three years of implementation, well exceeding average improvements in energy intensity across industry. A growing number of companies are demonstrating even larger savings of 30% or more, with many of the measures at low- or no-cost.

In International Energy Agency (IEA) Member countries alone, aligning the energy performance of all firms with the top 25% most energy-efficient companies in their respective subsectors could reduce total industrial energy costs by up to USD 600 billion per annum. While not all firms can achieve the performance of the top 25% due to variations in product composition, specifications, and value, the magnitude highlights the significant savings potential from scaling up best practices already in use.

Energy management policy packages can also facilitate the spread of energy management practices over multiple sites and along supply chains, increasing the magnitude of savings and other benefits achieved. This often requires effectively no or limited additional government support.

Despite these benefits, the adoption and effective utilisation of energy management in industry remains moderate. With further policy intervention through 2035, an Improved Coverage Scenario could unlock around 20 EJ of additional savings, which are particularly significant in light industries. This is equivalent to half the total final demand of the European Union in 2023. Adding increased uptake of AI-enabled savings could further increase savings of up to 8 EJ, resulting in 28% less energy being used to produce the same unit of value added in 2035.

Investing in energy efficiency and energy efficiency practices has been shown to deliver many other positive impacts at both firm and country level. At firm level, energy efficiency enables increased productivity, such as higher capacity utilisation rates of production equipment, and increased production capacity as a result of more efficient processes and lower production costs. It can lead to improved resource use, a reduction of equipment downtime and unplanned shutdowns, lowered maintenance costs, and potentially reduced staff requirements for operation and monitoring. Efficiency has also been shown to increase worker health and safety, reducing the incidence of work-related accidents, healthcare, and insurance costs.

At the country level, these energy efficiency measures bundle to enable increased economic activity while using the same amount of energy, and are linked to increased labour productivity and other economic benefits. Industrial energy efficiency is an effective means of supporting power grid stability by reducing strain on grids, freeing up capacity, facilitating demand-side flexibility, and enhancing energy security. On average, energy efficiency costs less than half the cost to build new generation capacity and grid infrastructure. Energy efficiency measures can also be deployed quickly - typically in less than a year. Generation and transmission projects, however, require between one and seven years on average, or over a decade for nuclear.

Approaching energy efficiency in a systematic and continual manner - through energy management - is a more effective way of unlocking competitiveness and other associated benefits than stand-alone or ad hoc measures. Combined, these multiple benefits can more than double those of energy cost savings.

Effective energy management policy packages include a combination of regulation, information, and incentive measures. Countries can support the uptake of energy management through voluntary programmes including information campaigns, training and capacity building, technical support, and incentives such as subsidies, awards, and recognition. Potential programmes include regulatory measures, such as audit requirements and requirements to have energy managers or energy management systems in place.

Evidence from policy implementation shows that strategically combining measures leads to better outcomes. This can deliver higher rates of savings as compared with the implementation of stand-alone industrial energy efficiency measures. For example, an energy management policy package can generate more and higher-quality projects for grant funding. Grant funding, in turn, can build momentum for continuous improvement, justifying the investment of time and resources needed to establish and maintain measures.

As a starting point, governments could review existing industrial energy efficiency measures, including any current energy management programmes, assessing effectiveness, uptake, and alignment with national energy and climate goals. This review could inform decisions on whether to:

a) Enhance existing energy management policy packages, by expanding coverage, increasing support, or improving design features.

b) Develop new energy management policy packages, particularly where significant gaps exist, such as in coverage of small and medium-sized enterprises, supply chains, or specific high-impact sectors.

To support this process and to design more effective measures, much can be gained from international experience. Many countries have successfully introduced, scaled, or refined energy management policy packages in ways that offer useful insights. For example:  

• The United States set up effective partnerships where programmes are jointly implemented, either with national laboratories that develop free tools and deliver training or with industrial assessment centres that carry out free audits.
• Many countries have established long-term networks and agreements to support implementation, as was done in Finland and Ireland.
• Japan combined incentives to implement energy management with benchmarking systems to provide guidance and further drive implementation.
• Tailored information, incentives, and support for small and medium-sized companies have been provided by many countries including France and Japan.
• Saudi Arabia has developed a comprehensive online platform with information and trainings for different levels of expertise to provide easy-to-access, tailored information and capacity building.
• Australia’s National Greenhouse and Energy Reporting Scheme promotes energy-related data gathering, analysis, validation, and sharing in the industrial sector, with an aim of increasing the potential energy savings at industry level and helping inform governments in their design and delivery of policies.