Energy efficiency investments jump in 2022 spurred by energy security concerns

Energize Weekly, December 28, 2022

Global investment in energy efficiency – from building renovations to public transport to electric vehicle infrastructure – increased 16 percent in 2022, reaching $560 billion as efficiency gains grew fourfold, according to the International Energy Agency (IEA).

“If the current rate of progress can be built upon further in the coming years, then 2022 could mark a vital turning point for efficiency, which is one of the key areas for international efforts to reach net-zero emissions by 2050,” the agency said.

Preliminary data in IEA’s Energy Efficiency 2022 market report indicate that in 2022, the global economy used energy 2 percent more efficiently than it did in 2021. That is a rate of improvement nearly four times that what it was for the previous four years.

Global events have played a major role in implementing or not implementing energy efficiency programs.

The COVID-19 pandemic led to two of the worst years ever for global energy efficiency progress, with annual gains falling to about 0.5 percent in 2020 and 2021.

Then, energy efficiency initiatives got a boost as natural gas and oil markets were roiled by the February 2022 Russian invasion of Ukraine.

“The oil shocks of the 1970s led to a massive push by governments on energy efficiency, resulting in substantial improvements in the energy efficiency of cars, appliances and buildings,” IEA Executive Director Fatih Birol, said in a statement.

“Amid today’s energy crisis, we are seeing signs that energy efficiency is once again being prioritized,” Birol said. “Energy efficiency is essential for dealing with today’s crisis.”

Still, the agency estimates that energy efficiency improvements worldwide must average 4 percent a year through 2030 to keep on a pace to reach net-zero greenhouse gas emissions by 2050.

As a result of the war, Russia’s share of total European gas demand has fallen to 9 percent in 2022 from 47 percent in 2019.

“This loss of supply has precipitated an acute energy security crisis, given the limited availability of alternative affordable natural gas, and has brought into focus the pressing need for greater diversification of supply sources and routes,” the IEA said.

Consumer energy price inflation in the European Union (EU) for 2022 through October was 39 percent, with around a quarter of households estimated to be living in energy poverty.

It has also created an inflationary impact on energy prices around the world, creating pressures to conserve where possible.

About 75 million people who have recently gained access to electricity are estimated to have lost the ability to pay for it, and 100 million people may need to switch back to using traditional stoves for cooking, the IEA said.

The largest tranche of 2022 efficiency investments was in transport, which were set to rise 47 percent year-over-year to $220 billion, including $90 on electrification.

Investments in building energy efficiency were estimated at $215 billion and building electrification at $84 billion.

Among major new government initiatives that include energy efficiency components are the Inflation Reduction Act in the United States, the EU’s REPowerEU plan and Japan’s Green Transformation program.

The IEA noted that such programs are helping to concentrate energy efficiency investment in advanced economies, while investment need in developing countries is much greater.

Emerging markets and developing economies account for about 60 percent of global energy demand, and that is projected to grow to 65 percent by 2030, according to the IEA.

As emerging countries accounted for a greater and greater share of energy demand, the largest energy efficiency opportunities will increasingly be found in such countries as Brazil, the People’s Republic of China, India, Indonesia, Mexico and South Africa, the agency said.

“Not since the founding of the IEA in 1974 has the need for a coordinated effort on energy efficiency to reduce wasteful and inefficient use of energy been so great,” the agency said. “No other energy resource can compare with energy efficiency as a solution to the energy affordability, security of supply and climate change crises. This is why the IEA calls energy efficiency the ‘first fuel’ of all energy transitions.”