A new era for industrial energy efficiency

When the financial community and the energy efficiency sector met in Copenhagen last week, four action areas were agreed to propel energy efficiency into a new era.

To deliver 40% of the Paris Agreement, investments in energy efficiency need to triple within the next 10 years. The funding gap is particularly wide for industrial energy efficiency, despite the huge potential it has to mitigate the impacts of climate change, slash operational costs, boost productivity, and improve energy security.

As soaring energy prices ramp up inflation worldwide and the climate crisis moves up the global agenda could this be the impetus the financial sector needs to back the world’s fastest and cheapest clean energy solution?

Last week, Mission Efficiency, a coalition of governments, organisations and initiatives seeking to accelerate the transition towards energy efficiency, pushed the momentum forward when it held its first Energy Efficiency Financing Charette. The event, which took place in Copenhagen, got development banks, philanthropic organisations, climate finance facilities and private investors around the table with the energy efficiency sector, which works in industry, appliances and products, buildings, district energy, transport and mobility.

After an intensive two days the participants developed an action plan with four work streams needed to propel energy efficiency into a new era. Dedicated cross-sector working groups were formed to drive each area forward, with eyes firmly set on key milestone events, such as COP27, the 17th G20 Heads of State and Government Summit, the 13th Clean Energy Ministerial, and the Global Energy and Energy Efficiency Conference of the International Energy Agency (IEA).

“The event brought these two sides [financial community and energy efficiency sector] together, to look at this topic from different perspectives and see the missing links,” explains Ilina Stefanova, International Project Coordinator, Energy Systems and Infrastructure Division at UNIDO, who represented UNIDO at the charette. “We had everyone in the room we needed: the technical people, the financial people, the legal people, and all the other expertise required to create a new way of thinking and accelerating on energy efficiency.”

The four action areas

(1) Changing the narrative

Energy efficiency is an ‘invisible solution’ and this means it often gets overlooked. A key area will be to change the narrative to show the huge range of benefits energy efficiency brings – value that goes far beyond energy and financial savings.

Essential to shifting the current perception will be to demonstrate how industry energy efficiency not only ensures energy systems are reliable and secure, use less energy and cost far less, but can also decrease price risks by making companies less exposed to volatile international markets, and enable countries and regions to gain more energy independence – something that is vital for world peace and prosperity.

(2) Selecting the right projects

It is time to ensure the most impactful energy efficiency solutions are the ones that get investment. To achieve this, a technology, service and policy ‘selector’ will be developed. This overarching tool will signpost anyone who wants to invest in energy efficiency – or who needs funding or financing for it – to best practices, recognised policies, key model regulations, standards and codes.

(3) Widening the net

The Mission Efficiency partnership (formerly known as The Three Percent Club) is seeking to drive progress on energy efficiency and engage with new members. It welcomes new solution providers with broad expertise, financial institutions and decision-makers, but it is also looking to connect with cities, local and central governments that are committed to bolder action on energy efficiency. The network will support every partner to elevate energy efficiency up the agenda, exchange best practices and match solution offers. Partners’ strategic and technical expertise will help stimulate private and public investments in impactful energy efficiency projects – and the more partners that join the network, the more these investments will grow.

(4) Developing a marketplace

This area is all about building better understanding between project promoters and the financing community. Technical and financial people often approach energy efficiency from a different perspective. By bridging the gap between these perspectives – by finding a common language and understanding – a buoyant marketplace will be created.

Advocacy to build an enabling environment and raise awareness will help to transform the energy efficiency market. For example, government policies provided stimuli for energy efficiency investment and rose by 10% in 2021 to almost $300 billion. But most of the financing was channelled to buildings and transport, with the industrial sector missing out. It’s time to achieve better geographical and sector distribution of funds and ensure all the ingredients needed for an industry energy efficiency market to thrive are supported. Sector coupling opportunities – for example, exploring the huge untapped potential of integrated renewables with industrial energy end use – will also be utilised.

Read more on financing industry energy efficiency.