SCALING UP ENERGY EFFICIENCY IN DEVELOPING COUNTRIES THE BUILDING BLOCKS OF ENERGY EFFICIENCY November 2020 ABOUT THIS PROJECT USAID’s Energy Efficiency for Development (EE4D) program partners with the Lawrence Berkeley National lab to provide technical assistance to energy system planners, regulators and utility managers in partner countries to overcome challenges associated with implementing energy efficiency programs ACKNOWLEDGEMENTS Michael McNeil (Lawrence Berkeley National Laboratory) authored the original version of this report with support from Stephane de la Rue du Can (Lawrence Berkeley National Laboratory) and Alberto Diaz Gonzalex (Lawrence Berkeley National Laboratory). The authors would like to thank Amanda Valenta (USAID) and Monica Bansal (USAID) for their comments and contributions to this report. FOR MORE INFORMATION Amanda Valenta, USAID/E3/Energy Division [email protected] Michael McNeil, Berkeley Lab/Energy Analysis and Environmental Impacts Division [email protected] TABLE OF CONTENTS I. EXECUTIVE SUMMARY .................................................................................................................................. 1 Energy Efficiency Technologies and Policies ......................................................................................... 1 Benefits of Energy Efficiency Policies For Developing Countries .............................................. 1 The Building Blocks of Energy Efficiency ............................................................................................... 2 Strategies for Success...................................................................................................................................... 2 II. THE VALUE OF ENERGY EFFICIENCY POLICY ..................................................................4 Energy Efficiency in Industrialized Economies .................................................................................... 4 Energy Efficiency in Developing Countries ........................................................................................... 5 III. THE BUILDING BLOCKS OF ENERGY EFFICIENCY ......................................................9 ENERGY EFFICIENCY STANDARDS AND RETROFITS .........................................................12 Equipment Performance Standards ..............................................................................................12 Building Codes and Public Sector Retrofits ..............................................................................14 Energy Management Systems and ESCO Sector Development .......................................... 15 MARKET PRIMING AND FINANCING ........................................................................................16 Bulk Procurement .............................................................................................................................16 Incentive Programs............................................................................................................................16 ABOUT THIS PROJECT Energy Efficiency Funds and Low income and Small Business Programs......................... 17 POLICY PLANNING ............................................................................................................................19 Energy Efficiency Policy Prioritization and Road Mapping ...................................................19 Energy Efficiency Utility Resource Planning ..............................................................................20 IV. ENSURING SUCCESS .........................................................................................................................21 Communicate Benefits Effectively ............................................................................................................. 21 Design Integrated Programs ........................................................................................................................ 22 Set Goals and Integrate Energy Efficiency in National Plans ....................................................... 23 ACKNOWLEDGEMENTS V. REFERENCES .............................................................................................................................................25 FIGURES FIGURE 1: The Building Blocks of Energy Efficiency ..................................................................................................... 2 FIGURE 2: Building Blocks Work Together to Transform Markets for Energy Efficiency ..................................... 3 FIGURE 3: Estimates of Economic Benefits .................................................................................................................... 5 FIGURE 4: Impacts of Energy Efficiency Programs in Mexico ................................................................................ 6 FIGURE 5: Proliferation of MEPS and Residential Energy Efficiencies Building Codes ......................................... 7 FIGURE 6: Projected Savings for Equipment Efficiency Standards in Major Economies – 2010-2015 .............. 8 FIGURE 7: Thermal Image showing heat losses in South African Water Heaters (Left). Savings projection of efficiency standards for products in South Africa (Right) ................................ 13 FIGURE 8: Building Blocks Work Together to Transform Markets for Energy Efficiency ...................................... 22 THE BUILDING BLOCKS OF ENERGY EFFICIENCY | i TABLES TABLE 1: Energy Efficiency Building Blocks and Objectives ......................................................................................... 10 STANDARDS IN ACTION BOXES Scaled Energy Efficiency Impacts – Mexico ...................................................................................................................... 6 Effective Technical Assistance – South Africa Water Heaters ....................................................................................... 13 Space Cooling Energy Efficiency – A Critical Development Tool ................................................................................ 18 ACRONYMS DOE Department of Energy EE Energy Efficiency ESCO Energy Service Company ESPC Energy Savings Performance Contracts IEA International Energy Agency ISO International Standard Organization GDP Gross Domestic Product HVAC Heating, Ventilation, and Air Conditioning LEDS Low Emissions Development Strategies M&V Measurement and Verification MEPS Minimum Energy Performance Standards NAECA National Appliance Energy Conservation Act NDC Nationally Determined Contributions OECD Organization for Economic Cooperation and Development U.S. United States USAID United States Agency for International Development ii | SCALING UP ENERGY EFFICIENCY IN DEVELOPING COUNTRIES 1. EXECUTIVE SUMMARY ENERGY EFFICIENCY TECHNOLOGIES AND POLICIES By reducing the amount of inputs needed to provide a desired energy service, energy efficiency minimizes the financial costs of energy and alleviates other negative effects associated with energy production and use. Energy efficiency policies address market failures that limit adoption of efficient technologies, thereby providing net economic benefits to users while supporting other public goods. This document will highlight the building blocks of solid energy efficiency policy planning and implementation in the context of developing economies and will provide practical information and strategies for helping to implement these policies effectively. Building blocks include 1) regulatory actions (standards) to “raise the floor” of efficiency of new equipment and construction, 2) market priming to pave the way for new technologies and thereby “raise the ceiling” of the market, and 3) integrated planning to prioritize energy efficiency in national economic and environmental policy. Well-designed technical assistance can provide the catalyst to pursue these programs and the expertise to help make them successful. This document is meant as a resource for technical assistance programming that considers energy efficiency policy as a top priority for energy sector technical assistance, and treats it as an integrated whole with multiple interacting and self-reinforcing components. BENEFITS OF ENERGY EFFICIENCY POLICIES FOR DEVELOPING COUNTRIES After several decades of energy efficiency policy development in North America, Western Europe, Japan, Korea, and Australia, developing countries began to enact similar policies based on successful models. To date, however, developing countries lag significantly behind their wealthier counterparts in spite of clear potential benefits. Energy Efficiency Policies are Well-Suited to Meeting Developing Country Goals – As elsewhere, developing countries gain from energy efficiency in multiple ways, including increased energy security, job creation, and environmental mitigation. In addition, a particular benefit for economic development exists in reducing the expense of energy inputs that produce lower net economic output than other goods. Furthermore, energy efficiency contributes to reduction in the need for capital in the power sector and the cost of servicing loans supporting large-scale energy infrastructure. Energy Efficient Technologies are Widely Available – Most of the technologies that do the “heavy lifting” of energy efficiency – efficient lighting for example– are globally traded commodities available to developing country consumers. The goal of energy efficiency policy is therefore to reduce the price and increase access to these, while giving local