Global energy efficiency reaches turning point

Fuel costs rose in 2022, increasing the government’s ambition for efficiency. As a result, many significant policies, spending pledges, and public campaigns were introduced.

Global energy efficiency initiatives have surged in 2022, marking a potential turning point after several years of lackluster development, as governments and consumers have increasingly turned to efficiency measures as part of their responses to fuel supply problems and record-high energy costs.

According to the IEA’s most recent market analysis, Energy Efficiency 2022, global investments in energy efficiency, such as building renovations, public transportation, and electric car infrastructure, reached USD 560 billion in 2022, an increase of 16% over 2021.

According to preliminary data, the world’s economy used energy 2% more efficiently in 2022 than it did in 2021, an increase that was over four times the rate of the previous two years and nearly double the rate of the previous five. Efficiency, one of the major areas for international efforts to reach net zero emissions by 2050, might reach a critical turning point in 2022 if the current rate of improvement can be built upon further in the ensuing years.

The IEA analysis found that past investments in building insulation and energy-efficient cars save many consumers thousands of dollars each year. As a result of energy efficiency measures implemented since 2000, total energy bills in IEA countries are set to be USD 680 billion less than they otherwise would have been in 2022 – or about 15% of their total energy expenditure this year.

Concerns over energy security and the inflationary effects of higher energy prices on economies and people’s livelihoods around the world have substantially increased as a result of the global energy crisis brought on by Russia’s invasion of Ukraine. The first and greatest solution, according to the IEA analysis, is to use energy more efficiently.

According to IEA Executive Director Fatih Birol, “the oil shocks of the 1970s led to a tremendous push by governments on energy efficiency, resulting in substantial advances in the energy efficiency of cars, appliances, and buildings.” “In spite of the current energy crisis, there are indications that energy efficiency is once again being given top priority. Energy efficiency is crucial for resolving the current crisis because it has the enormous potential to address issues with energy affordability, energy security, and climate change.

The worldwide energy efficiency progress saw two of the worst years ever in 2020 and 2021 as a result of COVID-19, with yearly advances decreasing to about 0.5%. A larger proportion of energy-intensive industries in energy consumption as other sectors shrank and a slower rate of building retrofits and upgrades were important contributing causes. Before the pandemic, progress on energy efficiency had already slowed, with the global rate of improvement dropping from 2% in the first half of the previous decade to 1.3% in the second.

For this decade, efficiency gains must progress at a rate of roughly 4% annually in order to meet the IEA’s Net Zero Emission by 2050 Scenario. Positive advancement indicators are present. One in eight new cars sold globally is now electric, and nearly 3 million heat pumps are expected to be sold in Europe alone in 2022, up from 1.5 million in 2019, as they become a more affordable means of heating. These trends show that the electrification of heating and transportation is accelerating.

In emerging and developing economies, existing building rules are being reinforced and new ones are being implemented, and a growing number of energy-saving awareness initiatives are assisting millions of people in better managing their energy use. For instance, all governments in Southeast Asia are currently creating laws for effective cooling, which is essential for a region where electricity demand is increasing at one of the highest rates in the world.

Several key policy and spending announcements made this year indicate that future years will see ongoing development and investment in efficiency. These include the Inflation Reduction Act in the United States, the REPowerEU plan of the European Union, and the Green Transformation (GX) program of Japan. Together, these plans will spend hundreds of billions of dollars on more energy-efficient homes, vehicles, and businesses over the ensuing years.

These programs, like a large portion of investment in energy efficiency more generally, are focused on industrialized economies, and emerging and developing economies require a lot more investment.

See report