Discussion Papers

Stephan Schmitt

Energy Efficiency and Network Regulation

No. 389/November 2014

(Full Version only available in German)

Summary

An increase in energy efficiency offers a promising and often untapped instrument for the transition of the energy sector. The overall goal of energy efficiency improvements is a permanent decrease in energy consumption. In comparison to previous standards, the energy efficiency directive 2012/27/EU (EED) further tightens the energy efficiency goals for the period 2014 until 2020. In order to deal with the stricter requirements, new and yet unexploited energy efficiency potentials need to be tapped. For this reason the EED extends the focus also to the role of network operators and network regulation. Three possible fields of activities can be deduced from the directive. The first two, the introduction of an energy efficiency obligation scheme and the establishment of an energy efficiency national fund, are novel instruments for Germany. An economic evaluation of these instruments depends substantially on their actual design, as the underlying formulation in the EED is rather general. For the energy efficiency obligation it is for example of major importance, whether energy suppliers or network operators are the obliged parties or whether other policy measures are applied to achieve energy savings among final customers. The third field of activity is the removal of potential obstacles and negative incentives in energy grids and its regulation. On the one hand, regulated network operators may increase energy efficiency by own investments. However, they are not totally free with regard to their (investment-) decisions due to existing incentive regulation, which in some cases might impede investments. On the other hand, more cost-reflecting network tariffs can provide stronger incentives for an increased use of energy efficiency measures by third parties, as e.g. demand side management.

Overall, the energy grids seem to be a neglected element within the scope of energy efficiency measures. However, the grid can be information source as well as trailblazer for many types of efficiency measures. This is in particular true for new, yet untapped forms of energy efficiency measures, which have not been applied in the past.

Discussion Paper is available for download.

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