Thesis
Reference
Energy programs for buildings: analysis in the context of the Swiss energy transition
FREYRE, Alisa
Abstract
This thesis focuses on energy programs for buildings in the context of Swiss energy transition.
The insights gained in this thesis provide strong indication that it is advisable to use the energy programs as one of the instruments of Swiss Energy Strategy 2050. The energy programs can bring macro-economic benefits, including by contributing to GDP growth and employment increase. However, energy programs may represent additional costs for utilities and ratepayers. It is also likely that high free-rider effects will occur in some energy programs.
The results also indicate potential positive spill-over effects of the programs with regard to technology uptake within social circles. Effectiveness and benefits of Swiss energy programs may be increased by implementation of a number of measures, including: a) development of legislative base; b) definition of the requirements for program administrators with regard to program design and operation; c) increased attention for long-term collaboration with stakeholders.
FREYRE, Alisa. Energy programs for buildings: analysis in the context of the Swiss energy transition. Thèse de doctorat : Univ. Genève, 2019, no. Sc. 5352
DOI : 10.13097/archive-ouverte/unige:121352 URN : urn:nbn:ch:unige-1213524
Available at:
http://archive-ouverte.unige.ch/unige:121352
Disclaimer: layout of this document may differ from the published version.
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UNIVERSITÉ DE GENÈVE
Département F.-A. Forel des sciences de l’environnement et de l’eau
Institut de sciences de l’environnement
FACULTÉ DE SCIENCES Professeur Martin Patel
ENERGY PROGRAMS FOR BUILDINGS
ANALYSIS IN THE CONTEXT OF THE SWISS ENERGY TRANSITION
THÈSE
Présenté à la Faculté des sciences de l’Université de Genève
Pour obtenir le grade de Docteur ès sciences, mention sciences interdisciplinaires
Par
Alisa Freyre
Née Yushchenko
De
Khabarovsk (Russie)
Thèse № 5253
Genève 2019
2
3
Acknowledgements
I would like to express my gratitude to all persons who helped me with this thesis.
Prof. Dr. Martin Patel for his supervision, transmitting his knowledge and skills, his understanding and support, leaving space for initiative and autonomy, while always being present when needed for advice and help, as well as for letting me combine my research and non-academic professional activities with SIG and the UN.
Prof. Dr. Bernard Lachal for being a wonderful teacher, and for organizing MUSE Master studies in an inspiring and supportive way, that helped me a lot in starting and pursuing my professional career in the field of energy.
My colleagues from the University of Geneva from whom I could learn both professionally and personally, for all the interesting discussions and work we did in common: Dr. Daniel Cabrera, Dr.
Jean-Luc Bertholet, Prof. Dr. Franco Romerio, Dr. Pierre Hollmuller, Stefan Schneider, Eric Pampaloni, Dr. Loïc Quiquerez, Dr. Jad Khoury, Dr. Carolina Fraga, as well as Dr. Jérôme Faessler, Dr. Floriane Mermoud, Dr. Pierre Ineichen, Elliot Romano, Fleury de Oliveira and Dr. Francis Bergeron.
I also express appreciation to my colleagues from Energy Efficiency group which whom it was a pleasure to share my PhD experience: Jibran Zuberi, Bram Van Megen, Hae-In Cho, Kai Nino Streicher, Dr. Selin Yilmaz, Dr. Mahbod Heidari, Dr. David Parra, Dr. Meinrad Bürer, Dr. Jonathan Chambers and Martin Soini.
A big thank to the colleagues from Swiss academia and experts in the field of sustainable energy who gave their professionals advice and sharing their knowledge that helped me a lot in the research works:
4 Dr. Carsten Nathani, Prof. Dr. Marlyne Sahakian, Prof. Dr. Regina Betz, Dr. Sandra Klinke, Prof. Dr.
Sebastien Rausch, Dr. Florian Landis, Dr. Emanuele Facchinetti.
My greatest appreciation to Services Industriels de Genève (SIG) for the support of this PhD work.
Special gratitude to Matthias Rüetschi for being a strong and inspiring team leader from whom I learnt a lot both professionally and personally; Pascale le Strat for her full support of my academic and professional activities, sharing her knowledge and expertise on the energy programs; Gilles Garazi for initiating and supporting this research work; Marcel Ruegg for his professional advice and great help in addressing the challenges I faced; Cédric Jeanneret for his supervision, inspiration and support; Konrad Rieder for his professional advice and fruitful discussions; Wilfred Atgé for finding the solution to combine my academic and professional activities; to Céline Zosso, Dr. Boris Reynaud, Frederik Chappuis, Olivier Grand, Caroline Cacheiro, Thierry Chaix, Swati Mayor and Annick Niarquin for providing information and sharing their knowledge; to Eric Perdrisat and Rodrigo de Pablo Peña for being great colleagues.
I would also like the thank the members of this thesis committee Prof. Dr. Volker Hoffmann, Prof.
Dr. Matthias Finger, Prof. Dr. Evelina Trutnevyte, Prof. Dr. Géraldine Pflieger and supervisors of my pre-doc exam Prof. Dr. Ed Vine and Prof. Dr. Frank Krysiak for their expertise and scientific feedbacks.
My greatest thank to my beloved husband Dr. Christophe Freyre for always being by my side, for understanding, help and advice, giving strength and inspiration. My dear mother Elena Yushchenko for being a great example for me and her ever support in all my life adventures. And my precious friends Maxim Ageenkov, Dr. Stéphanie Favre, Géraldine Chollet and Marie-Caroline Tiffay to adding joy and balance to my life.
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Abstract
Nowadays, in many locations across the globe, the transition to energy efficient and renewable energy technologies is recognized as top energy policy priority. Switzerland has adopted ambitious energy policy targets that call for effective and complementary energy policy instruments. Currently there are controversial opinions about the utility, benefits and costs of energy programs for the Swiss energy transition.1
This thesis focuses on energy programs for buildings, both with regard to energy efficiency and renewable energy measures, as well as heating and electricity consumption. It is the objective of the thesis to evaluate whether it is advisable to implement energy programs as complementary approach to other policy mechanisms, and whether the energy programs represent more costs or benefits to the Swiss society. Also, the thesis aims to develop recommendations on the design of energy programs in order to maximize exploitation of energy efficiency and renewable energy potentials, as well as related macro-economic benefits.
The research explores and applies different analytical tools and evaluation methodologies, including macro-economic, cost-benefit, investment analysis, qualitative social sciences methods and literature review. The thesis is composed of four articles. The first article (Chapter II) provides an evaluation of the impacts of Swiss energy programs on GDP and employment. The second article (Chapter III) analyzes the cost-effectiveness of energy efficiency programs in Switzerland, considering perspectives of the following stakeholders: program participants, energy consumers, program
1 An “energy program” can be defined as an incentive energy policy instrument that provides financial and non-financial support to final consumers, building owners and/or energy professionals (contractors) for implementation of energy efficiency and renewable energy measures.
6 administrator, utility, geographic jurisdiction territory and society. The third article (Chapter IV) analyses whether it can be advisable to use carbon tax revenue for financing energy efficiency and renewable energy programs in Switzerland, as a complementary policy measure. The fourth article (Chapter V) focuses on the role of installers and the energy programs in adoption of renewable space heating technologies.
The insights gained in this thesis provide strong indication that it is advisable to use the energy programs as one of the instruments of Swiss Energy Strategy 2050. In particular, energy programs would help to remove both financial and non-financial barriers to the achievement of energy savings and emissions reduction that can be hardly addressed by other policy mechanisms. The energy programs can bring macro-economic benefits to Swiss society, including by contributing to GDP growth and employment increase. However, energy programs may represent additional costs for utilities and ratepayers, including low-income households. It is also likely that high free-rider effects will occur in some energy programs. At the same time, the results indicate potential positive spill- over effects of the programs with regard to technology uptake within social circles.
Effectiveness and benefits of Swiss energy programs may be increased by implementation of a number of measures, including:
• Development of legislative base that: a) sets quantitative targets for energy savings and CO2
emissions reduction; b) establishes financing and feedback mechanisms; c) defines the role of utilities; d) encourages the use of energy programs as a tool for integrated resource planning.
• Definition of the requirements for program administrators with regard to program design and operation, including: a) the objectives on cost-effectiveness of the energy programs, including program administration costs; b) a requirement for constant improvement of program design;
c) a requirement for program support to be in accordance to market developments, and tailored to consumer and technology sub-types.
• Increased attention for long-term collaboration with stakeholders, including: a) development of partnership with installers; b) assistance for building owners and consumers in equipment and installer choice, and problem resolution.
It is important to highlight that energy programs are not sufficient for realizing Swiss energy transition. Instead, they should be integrated with other policy instruments. Currently there is a need to identify “overlaps” and “gaps” in the existing and considered policy instruments, and to adjust the policy accordingly.
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Résumé
De nos jours, dans beaucoup d’endroits à travers le globe, la transition vers des technologies renouvelables et efficientes est reconnue comme une priorité en matière de politique énergétique. La Suisse a choisi des objectifs ambitieux en termes de politique énergétique ce qui implique des instruments de politique énergétique efficaces et complémentaires. Actuellement, il existe des opinions controversées à propos de l’utilité ainsi que des coûts et bénéfices des programmes énergétiques pour la transition énergétique suisse. 2
Cette thèse se concentre sur les programmes énergétiques pour les bâtiments, à la fois en ce qui concerne les mesures d’efficience énergétique et les énergies renouvelables, mais aussi en ce qui concerne le chauffage et l’électricité. L’objectif de la thèse est d’évaluer s’il est recommandé d’implémenter des programmes énergétiques comme une approche complémentaire aux autres mécanismes de politique énergétique et si ces programmes représentent plus de coûts que de bénéfices pour la société suisse. De plus, cette thèse vise à émettre des recommandations sur la conception des programmes énergétiques afin de maximiser l’exploitation des potentiels en efficience énergétique et d’utilisation des énergies renouvelables ainsi que sur les bénéfices au niveau macroéconomique.
Le contenu de cette thèse explore et applique plusieurs instruments analytiques et méthodes d’évaluation : analyses macro-économique, coûts-bénéfices et financier, sciences sociales qualitatives et revue de la littérature. Cette thèse est composée de quatre articles. Le premier article (Chapitre II) fournit une évaluation des impacts des programmes énergétiques suisses sur le PIB et
2 Un « programme énergétique » peut être définit comme un instrument incitatif de politique énergétique qui permet des soutiens financiers et non financiers aux consommateurs finaux, aux propriétaires de bâtiments et aux professionnels dans le domaine de l’énergie pour l’implémentation des mesures en lien avec l’efficacité énergétique et les énergies renouvelables.
8 l’emploi. Le deuxième article (Chapitre III) analyse le coût-efficacité des programmes énergétiques en Suisse, en considérant les points de vue des parties prenantes suivantes : participants aux programmes, consommateurs énergétiques, administrateur des programmes, les entreprises énergétiques, la juridiction du territoire géographique et la société. Le troisième article (Chapitre IV) analyse s’il est recommandé d’utiliser le revenu de la taxe CO2 pour financer les programmes énergétiques et renouvelables en Suisse comme une mesure politique complémentaire. Le quatrième article (Chapitre V) se concentre sur les rôles des installateurs et des programmes énergétiques lors de l’adoption de technologies renouvelables de chauffage.
Les idées qui émergent de cette thèse fournissent une forte indication qu’il est recommandé d’utiliser les programmes énergétiques comme l’un des instruments de la Stratégie Energétique Suisse 2050.
En particulier, les programmes énergétiques pourraient aider à enlever les barrières financières et non-financières à la réalisation des économies d’énergie et des réductions d’émission de CO2 qui ne pourraient pas être abordées par d’autres mécanismes de la politique énergétique. Les programmes énergétiques peuvent apporter des bénéfices macroéconomiques à la société suisse, y compris en contribuant à la croissance du PIB et à la création de l’emploi. Cependant, les programmes énergétiques peuvent représenter des coûts additionnels pour les fournisseurs d’énergie et les consommateurs, y compris les ménages à faible revenu. Il est également probable que des effets aubaines se produiront dans certains programmes énergétiques. Dans le même temps, les résultats indiquent des potentiels effets d’entraînement en ce qui concerne l'adoption de technologies par les cercles sociaux.
L’efficacité et les avantages des programmes énergétiques suisses peuvent être augmentés par la mise en œuvre d’un certain nombre de mesures, notamment :
• Développement d'une base législative qui: a) fixe des objectifs quantitatifs en matière d'économies d'énergie et de réduction des émissions de CO2; b) établit des mécanismes de financement des programmes et de retours d'information entre les acteurs impliqués; c) définit le rôle des fournisseurs d’énergie; d) encourage l'utilisation de programmes énergétiques en tant qu'un outil de planification intégrée des ressources énergétiques.
• Définition des exigences pour les administrateurs de programmes en ce qui concerne: a) les objectifs de coût-efficience des programmes énergétiques, y compris des coûts d'administration; b) une exigence d'amélioration constante de conception des programmes; c) une exigence que le soutien fourni par les programmes soit aligné aux évolutions du marché et façonné aux sous-types de consommateurs et de technologies.
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• Une augmentation de l’attention portée à la collaboration à long terme avec les parties prenantes, notamment: a) le développement d'un partenariat avec les installateurs et autres professionnels; b) assistance aux propriétaires de bâtiments et aux consommateurs dans le choix des équipements et des installateurs, ainsi que l’aide à la résolution des problèmes.
Il est important de souligner que les programmes énergétiques ne sont pas suffisants pour réaliser la transition énergétique en Suisse. Au lieu de cela, ils devraient être intégrés à d'autres instruments de la politique énergétique. À l'heure actuelle, il est nécessaire d'identifier les «chevauchements» et les
«lacunes» dans les instruments politiques existants et envisagés, et d'adapter la politique énergétique en conséquence.
10
Table of content
Acknowledgements ... 3
Abstract ... 5
Résumé ... 7
Table of content ... 10
Glossary and abbreviations ... 16
1. Glossary ... 16
2. Abbreviations ... 16
I. General introduction ... 17
1 Drivers and barriers for energy efficiency and renewable energy technologies uptake ... 19
1.1 Political motivations for support of energy efficiency and renewable energy investment .. 19
1.2. Barriers for energy efficiency and renewables ... 20
2 Policies to promote energy efficiency and renewable energy use ... 21
2.1 Energy policies ... 21
2.2 Energy programs ... 22
3 Case study of Switzerland ... 23
3.1 Swiss energy sector and policy targets ... 23
3.2 Swiss energy policy instruments ... 24
3.3 Debate on the role of the energy programs in Switzerland ... 26
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4 Thesis aims and structure ... 27
4.1 Research objectives ... 27
4.2 Structure of the thesis ... 27
II. Contributing to a green energy economy? A macroeconomic analysis of an energy efficiency program operated by a Swiss utility ... 29
1. Introduction ... 30
2. Methodology and data used ... 31
2.1 Case study ... 31
2.2 Choice of method ... 34
2.3 Types of impacts and system boundaries ... 35
2.4 Initial expenditure ... 36
2.5 Income impacts of energy savings ... 38
2.6 Input-output analysis ... 40
2.7 Sensitivity analysis ... 42
3. Results ... 43
3.1 Initial expenditure and income impacts of energy savings ... 43
3.2 Total impacts ... 46
3.3 Program comparison ... 49
3.4 Sensitivity analysis for 2009-2014 ... 52
3.5 Energy efficiency programs from a green energy economy perspective ... 54
4. Conclusion ... 57
Appendix A Composition of retail electricity price in Switzerland ... 59
Appendix B Possible impacts on energy sector and ratepayers in the case of electricity demand decrease ... 60
Appendix C Ratios of total impacts to initial expenditure ... 62
Appendix D Shares of import in initial expenditure ... 63
12 Appendix E Impacts of electricity import share in the volume of avoided electricity consumption
on the results if domestic demand decrease is not compensated by export ... 64
Supplementary material 1 Electricity production, consumption and international trade in Switzerland in 1995-2014 ... 65
Supplementary material 2 Calculated GDP and employment multipliers, final consumption patterns in the Swiss IOT 2011 ... 66
Supplementary material 3 Adjustments of employment data to the Swiss Input-Output table 2011 ... 68
Supplementary material 4 Initial expenditure on domestic and imported goods and services in 2011 basic prices ... 70
Supplementary material 5 Results of sensitivity analysis of net impacts on GDP and employment of Eco-sociales ... 72
Supplementary material 6 Results of sensitivity analysis of net impacts on GDP and employment of Communs d’immeubles ... 73
Supplementary material 7 Results of sensitivity analysis of gross impacts on GDP and employment of Eco-sociales ... 74
Supplementary material 8 Results of sensitivity analysis of gross impacts on GDP and employment of Communs d’immeubles ... 75
III. Cost-effectiveness of energy efficiency programs: how to better understand and improve from multiple stakeholder perspectives? ... 76
1. Introduction ... 76
2. Methodology ... 79
2.1 Existing methods and their limitations ... 79
2.2 The proposed cost-effectiveness analysis method ... 81
2.3 Case study ... 83
2.4 Calculations ... 86
2.5 Finding the ways to improve cost-effectiveness ... 88
3. Results and discussion ... 89
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3.1 Cost-effectiveness from multiple stakeholder perspectives ... 89
3.2 How to improve cost-effectiveness ... 93
4. Conclusions and policy implications ... 99
Supplementary material 1 Structure of Swiss electricity tariff and elements accounted in the analysis ... 101
Supplementary material 2 Cost-effectiveness tests results ... 102
Appendix A Extension of the analysis ... 104
IV. Carbon tax and energy programs for buildings: rivals or allies? ... 113
1. Introduction ... 114
2. Methodology ... 116
2.1 Case study of Switzerland ... 116
2.2 Objective and structure of the study ... 120
2.3 Calculations and data sources ... 121
3. Results and discussion ... 125
3.1 Heating costs of fossil and renewable solutions, impact of subsidies and CO2 tax ... 125
3.2 Cost-effectiveness of EERE measures and EERE programs nowadays ... 128
3.3 Incremental impacts of alternative climate policy scenario ... 130
4. Conclusions and policy implications ... 131
Supplementary material 1 Heating costs by technological solution and type of building ... 135
Supplementary material 2 Initial investment costs, subsidies and CO2 savings by data source .. 139
Supplementary material 3 Initial investment costs of renewable heating systems per unit of installed capacity or surface ... 140
V. How to improve effectiveness of renewable space heating programs by better understanding homeowner – installer interactions. General insights and focus on heat pumps. ... 141
1. Introduction ... 142
2. Current state of knowledge about homeowners in the context of renewable heating systems adoption ... 143
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2.1 Homeowner awareness and willingness to install a renewable heating system ... 143
2.2 Information sources used by homeowners ... 144
2.3 Factors influencing the choice of a heating system ... 145
2.4 Knowledge about post-installation period ... 146
3. Methodology and data ... 147
3.1 Case study ... 147
3.2 Methodology ... 149
4. Results ... 151
4.1 Participant profiles ... 151
4.2 Choice of heating system type and installer ... 152
4.3 Feedback on heat pump installation and use ... 157
4.4 Participation in renewable heating program ... 160
4.5 Additional information ... 163
5. Discussion ... 165
5.1 Which information sources do homeowners use when choosing an installer? ... 165
5.2 Which factors impact the choice of installers? ... 165
5.3 How do interactions with installers impact homeowner satisfaction with the choice of renewable heating system? ... 166
5.4 How could installers be included in renewable heating programs with the objective of increasing renewable heating technology uptake? ... 166
5.5 Evaluation of results ... 167
6. Conclusions and recommendations ... 168
Appendix A Participant profiles ... 171
VI. Summary and conclusion ... 173
1. Summary of the study “Contributing to a green energy economy? A macroeconomic analysis of an energy efficiency program operated by a Swiss utility” ... 175
15 2. Summary of the study “Cost-effectiveness of energy efficiency programs: how to better
understand and improve from multiple stakeholder perspectives?” ... 178
3. Summary of the study “Carbon tax and energy programs for buildings: rivals or allies?” ... 181
4. Summary of the study “How to improve effectiveness of renewable space heating programs by better understanding homeowner – installer interactions. General insights and focus on heat pumps.” ... 184
5. Conclusions and recommendations ... 186
List of figures ... 190
List of tables ... 196
Bibliography ... 199
CV and publication list ... 216
16
Glossary and abbreviations
1. Glossary
• Energy program – incentive energy policy instrument that provides financial and non- financial support to final consumers, building owners and energy professionals (contractors) for implementation of energy efficiency and renewable energy measures.
• Energy measure – equipment installation or replacement, or behavioral change at a defined site that leads to energy savings and (or) energy substitution at this site or installation.
2. Abbreviations
• EE – energy efficiency
• EU – European Union
• RE – renewable energy
• SIG – Services Industriels de Genève
• t CO2 – tonne of CO2
17
I. General introduction
Today’s economic and social prosperity were enabled by past industrial revolutions, that cannot be separated from the evolution of energy use [1]. The first industrial revolution (second half of the 18th century to the mid-19th century) brought development of machine tools and the rise of the factory system based on use of steam power [1]. The second industrial revolution (end of the 19th to the beginning of the 20th century) resulted in massive industrialization and increased globalization involving widespread adoption of gas and water supply, sewage systems, electrical power, telegraph and telephone, railroad networks [1]. The third industrial revolution (second half of the 20th century) led to globalized economy with automated production and mass consumption involving rise of electronics, nuclear energy, massive use of cars and air transport [1]. These three industrial revolutions relied largely on the constant increase of energy consumption, based mainly on fossil fuels (i.e., coal, oil and natural gas) and, to a lesser extent, on nuclear energy [1]. Today humanity enters into the fourth industrial revolution, which is characterized by widespread digitalization, a shift from goods to services, and recognition of the need to decouple economic development and social welfare from unsustainable exploitation of natural resources as well as to reduce pollution, namely with regard to energy supply and use [2].
Against this background, transition to energy efficient (EE) and renewable energy (RE) technologies have become one of the top energy policy priorities. The majority of countries in all five continents have already adopted various sustainable energy policy targets, varying from the quantitative targets in the European Union members states to qualitative plans in countries with the developing economies [3-6]. However, there is a significant gap between adopting a policy target and achieving timely energy transition in practice.
18 The challenge of achieving sustainable energy consumption lies in the complexity of energy systems, involving a multitude of stakeholders which are acting on different geographical and time scales and in different contexts and are therefore subject to different drivers and barriers. Further challenges are the variety and constant evolution of technological solutions, their interaction within complex and evolving technical systems as well as difficulties in retrieving the relevant information and exchanging it. Energy policy targets are set on international, state and local levels by the respective governmental bodies; based on the adopted goals, energy policy instruments are developed and realized by legislative and executive authorities respectively; the policy instruments put in place impact the implementation of energy measures by energy professionals (i.e., architects, engineers, installers, energy service companies), energy consumers (i.e., households, companies and other organizations) and asset owners (i.e., building owners); the implementation of the energy measures results in changes in energy consumption, related pollution and use of the respective assets (e.g., comfort, security, operation practices); these effects are measured and evaluated by the mandated agencies, but do not always have real impact on further energy policy development (Figure 1).
Transition to sustainable energy system cannot be achieved within the desired timeframe without efficient feedback and adjustment among the actors in charge of policy-making, implementation and evaluation.
Fig. 1 Energy policy making, implementation and evaluation process (based on [7])
19 This thesis focuses on the aspects of policy evaluation and design, in particular on energy programs as a policy instruments for promotion of EE and RE measures in buildings sector in the context of Swiss energy transition.
This introductory chapter provides an overview of the political motivations for support of EE and RE investment (section 1.1), and of the barriers that impede EE and RE technologies uptake (section 1.2).
It also includes a summary of the policy instruments used to address the barriers for EE and RE investment (section 2.1), with a special focus on energy programs (section 2.2). The case study of Switzerland is further described, including the structure of the energy sector and the adopted policy targets (section 3.1), the policy instruments put in place (section 3.2) and the current debate on the role of the energy programs in Swiss energy transition (section 3.3). Against the presented background, the research questions (section 4.1) and the thesis structure (section 4.2) are defined.
1 Drivers and barriers for energy efficiency and renewable energy technologies uptake
1.1 Political motivations for support of energy efficiency and renewable energy investment Transition to EE and RE technologies is currently among the top energy policy priorities in many locations, including Europe [3-6]. The drivers for adoption of EE and RE policy targets include a wide variety of economic, environmental and social motivations (Table 1) [8-11].
Table 1 Motivations for support of EE and RE investment Motivations Objectives
Energy security Reduce energy imports Increase energy export
Increase reliability of energy supply, resilience Environment Reduce greenhouse gas emissions to mitigate climate
change
Economy Increase competitiveness by reducing production costs Lower energy cost burden for low-income households Renew energy infrastructure and building stock Development of domestic energy service sectors Reducing dependence on fluctuating energy prices Social Decrease air pollution
Improve public health Source: adapted from [8-11].
20 1.2. Barriers for energy efficiency and renewables
Despite the fact that many EE and RE solutions are cost-effective, the uptake of EE and RE technologies in practice face a number of barriers (Table 2) [12].3
Table 2 Barriers for the uptake of EE and RE technologies
Categories Barriers
Market and financial The principal agent problem (e.g., landlord-tenant dilemma) Higher upfront costs and long payback period
Uncertainty about future energy prices High transaction costs and price distortions
Competitivity failures (e.g., established companies may have market power to keep their positions)
Regulatory and institutional
Institutional bias via supply-side investments
Lack of incentives for energy providers to provide EE and RE services rather than selling energy
Ineffective or distorting energy tariffs
Insufficient / excessive / ineffective regulation (e.g., regulations and codes not keeping pace with development)
Technical Lack of experience and training in developing and implementation of new EE and RE solutions
Lack of affordable EE and RE technologies suitable for local conditions Information and
awareness
Lack of sufficient information and understanding of possibilities for EE and RE investments
Behavioral Inertia of consumer decisions and installer practices Bounded rationality (e.g., constraints on time) Sources: [8, 10, 12-15].
According to some scholars many of the above-mentioned barriers are typical for free markets and they argue for the necessity of government action for overcoming the respective barriers in a cost- effective manner [13]. This approach is based on the following reasoning: a) existing informational barriers which consumers face are normal for markets in general and not unique to the energy field;
b) a higher rate of return on investment in energy measures is expected in view of uncertainty in energy prices; c) the implementation gap for EE and RE measures is inevitable in view of the heterogeneity of consumers (i.e., technology may be cost-effective in general, but not necessarily for each single case); d) from the perspective of individual stakeholders, it is logical to postpone the investment in view of constant technological improvements (i.e., greater savings and economic returns may be achieved by postponing the implementation of EE and RE measures); e) the quality of service provided by EE and RE technologies may be perceived differently by consumers compared to the conventional technologies (e.g., quality of light or indoor air, different ambient temperature) [13].
3 In addition, some EE and RE measures are not yet cost-effective, but may be required in order to achieve energy policy targets.
21 However, the current trends in adoption of EE and RE technologies do not allow to conclude that leaving energy transition to the free market would solve the existing environmental problems in the upcoming decades, if ever. And government action is often advocated in order to overcome the barriers to implementation of EE and RE solutions [8, 13, 16].
Against this background, an important challenge is to ensure good EE and RE governance leading to the implementation of adequate and complementary policies that allow to achieve EE and RE policy targets across the multiple and heterogeneous energy consuming sectors [8].
2 Policies to promote energy efficiency and renewable energy use
2.1 Energy policies
The era of EE and RE policies started in 1970s in response to the oil crises [17]. Since then, multiple policy instruments have been developed and put into practice, resulting in the continual decline in energy intensity over the past 30 years [17]. Since the 1990s most industrialized nations have intensified their efforts to promote EE and RE technologies in order to reduce their greenhouse gas emissions and to mitigate impacts on climate [17]. Among the milestone agreements are the Kyoto Protocol of 1992 [18] and the Paris Agreement of 2018 [19].
A variety of policies can be put into place to promote EE and RE technologies (Table 3) [8, 12, 14, 15, 20-22].
Table 3 Policies used to promote EE and RE
Policies Elements a
Regulations and control Standards (e.g., minimum energy performance, renewable portfolio)
Compulsory activities (e.g., energy audits, energy management)
Obligatory energy saving, CO2 reduction targets (e.g., on private companies, obligatory utility programs)
Pricing, fiscal measures and incentives
Tariffs (e.g., progressive variable tariffs, feed-in tariffs) Taxes (e.g., on fossil fuels, CO2 emissions)
Tax incentives (e.g., for EE and RE investments)
Financial incentives (e.g., grants, subsidies, rebates, direct procurement, interest-free loans)
Market transformation and capacity building
Public awareness campaigns
Appliance labeling and building certification Training for professionals
Creation of energy service companies (ESCOs)
Innovation Development and demonstration of EE and RE technologies
a A policy element can be used as a policy instrument on its own or be a part of a wider policy instrument (see example in section 2.2).
Sources: [8, 12, 14, 15, 20-22].
22 2.2 Energy programs
Energy programs are policy instruments that combine a variety of energy policy elements to foster the adoption of EE and RE technologies by providing support to end consumers and contractors, including financial incentives (subsidies, free of charge equipment and installation services, rebates), information and communication (awareness campaigns) and capacity building support (training for installers, energy managers and other contractors) [13, 23-29].
EE and RE programs exist in many locations, including the United States, the EU Member States, South Korea, Brazil, South Africa, Australia, India, China and other locations [12]. The design of the energy programs varies across the locations, depending on the drivers and barriers, the (non- )existence of EE and RE targets , the local economic structure, the respective state of the building stock and infrastructure and as well as the local market context. For example, in some cases, the programs are operated by government agencies, in other cases – by utilities on obligatory (EE and RE targets set by the governments) or voluntary (integrated resource planning strategy) basis [12].
Utilities may be disincentivized to run the energy programs, because their energy sales might decrease as a result of improved EE and increased implementation of distributed RE [12]. In these cases, the governments (from national to local) may develop sets of measures to remove or mitigate these disincentives (for example, decoupling mechanism or shareholder incentives) [12]. The funding practices also differ significantly: financing from general government budget, grants from government agencies, energy or environment taxes, public benefit charges, licensing and permitting fees, donor funding and international co-operation and fee-for-service arrangements [8].
There are different views on the effectiveness and utility of the energy programs. The arguments against this policy-instrument include: a) the possible high rebound effect; b) the economy-wide effects eroding energy savings (i.e., increased consumption due to additional revenue); c) the fact that EE and RE will be naturally implemented as a consequence of technological advancements and rise of energy prices; d) free-rider effect; e) low effectiveness of price-related incentives as a consequence of low price elasticity of energy use; f) costs of ratepayer – or taxpayer-funded energy programs for non-participants and low-income households (distributive effects); g) less actual savings and higher actual costs of energy programs compared to the estimates used in program design (low cost- effectiveness); h) difficulty to measure the real effects of the energy programs on technology uptake and behavioral change [13, 30-33].
Nevertheless energy programs are generally recognized to be effective policy instruments when they target high quality EE and RE technologies with a small market share [12]. The support provided by
23 energy programs facilitates the implementation of EE and RE technologies and thereby helps the market to mature and attract private investment [12]. The programs can be seen as complementary measure to mandatory standards and labeling policies as well as to pure market-driven changes, as they accelerate market penetration of technologies that are more advanced than those required by the existing minimum standards or dominating industry practices, and can prepare the market for more coercive policy approaches in the future [12, 34].
3 Case study of Switzerland
3.1 Swiss energy sector and policy targets
In Switzerland, the energy policy efforts can be separated into two categories: electricity and fossil fuel use, with only the latter being linked to climate policy targets.
The electricity sector in Switzerland has low CO2 intensity due to high share of hydropower (57%) and nuclear power (34%) in the generation mix (Figure 2) [35]. Therefore, electricity-related EE and RE solutions are not officially accounted as CO2 abatement measures. However, improving efficiency and integrating renewables in Swiss electricity generation is extremely important and urgent, given the announced to phase out nuclear power: the existing five nuclear power stations are to be shut down without replacement at the end of their technically safe operating life (currently approx. 34%
of total power generation, Figure 2) [35-38]. Further drivers for EE and RE are the potentially increased use of fossil fuel-based combined heat and power as well as electricity trade which implies that some power generated from fossil fuels (esp. coal-based power from Germany) is ultimately used in Switzerland instead of its currently largely CO2-free power mix [37].
Fig. 2 Electricity generation in Switzerland by energy source, TWh [35]
Carbon emissions originate mainly from transport (32% of overall emissions), buildings (26%) and industry (22%) (percentages for 2017; see Figure 3) [39]. These sectors are highly dependent on fossil
24 fuels (oil and natural gas), which are 100% imported [40]. The country has adopted the target of 20%
carbon emissions reduction by 2020 compared to 1990, with a reduction by 40% in buildings, 15%
in industry, 10% in transport and 10% in other sectors [41-43]. By 2017, overall carbon emissions had decreased by only 10% compared to 1990, with reductions by 23% in buildings and by 16% in industry, while emissions in transport and other sectors increased by 3% and 2% respectively (Figure 3) [39].4 Against this background, achievement of the announced policy objective for the post-2020 period is a significant challenge: 50% reduction of carbon emissions in 2030 compared to 1990 [43, 45, 46].5
Fig. 3 Carbon emissions in Switzerland by sector [39]
3.2 Swiss energy policy instruments
Swiss energy policy for the electricity sector is defined on the federal level. It is guided by the Energy Strategy 2050 and is based on four pillars: energy efficiency, renewable energies, replacement and construction of new large electrical power stations and foreign energy policy [47]. The revised Energy Act was approved by the Parliament in 2016 and by a federal referendum in 2017 [47, 48]. The new legislation enters into force in 2018-2020 and will entail the amendments to various federal laws and have impact on the cantonal laws [47].
The policy on carbon emissions is defined both on the federal (i.e., emission reduction targets, national-level policy mechanisms) and the cantonal level (i.e., policy measures in heating sector).
4 The data is not corrected for climate. The climate correction factor for 2016 relative to 1990 is 0.996.44. FOEN. Tableau 3.
Répartition par agent énergétique des combustibles déterminants pour le calcul du montant de la taxe sur le CO2. 2018; Available from: http://www.bafu.admin.ch/klima/13879/13880/14486/index.html?lang=fr.
5 Currently under discussion in the parliament, namely with regard to the share of CO2 emissions reduction that can be achieved overseas (through purchase of international CO2 certificates) 46. The Swiss Parliament, Objet du Conseil Fédéral 17.071 Révision totale de la loi sur le CO2 pour la période postérieure à 2020. 2019, The Swiss Parliament:
https://www.parlament.ch/fr/ratsbetrieb/suche-curia-vista/geschaeft?AffairId=20170071..
25 The policy is guided by the CO2 law that is currently under revision, and by the cantonal energy laws [41, 42, 46, 48].
The major policy instruments with regard to electricity sector and carbon emissions are summarized in Table 4 [46-50].
Table 4 Energy policy instruments in Switzerland Axes Policy instruments Description
Energy Efficiency
Tax incentives for retrofit of buildings
Tax deductions for energy efficiency investments in buildings (including building demolition).
Network surcharge refund
Lower prerequisites for refund to companies with high electricity consumption.
Competitive tenders Auctions for financing energy programs and projects (subsidies) to support more efficient electricity consumption in industry, the services sector and households.
Financed by the grid surcharge that electricity consumers pay. Foreseen to be terminated by 2030 at latest.
Smart metering Obligation to install smart meters in buildings.
Labeling Energy efficiency labeling of appliances, building energy performance certificates.
Renewables energies
Feed-in
remuneration system
Feed-in remuneration for electricity production from solar, wind, geothermal and biomass energy sources. Financed by the grid surcharge which electricity consumers pay. Subsidies for new installations previewed to have limited duration (foreseen to be terminated by 2022 at latest).
Investment subsidies One-time subsidy for renewable electricity generation installations (all photovoltaic, large hydro-electric, including new, renewals and extensions).
Financed by the grid surcharge that electricity consumers pay. Foreseen to be terminated by 2030 the latest.
Support for existing large-scale hydro- electric power plants
Market premium for electricity produced by large-scale Swiss hydro-electric power sold for less than the cost of production. Financed by the grid surcharge that electricity consumers pay. Total available financial resources limited (foreseen to be terminated by 2022 at latest).
The national interest Production of renewable energy is recognized as a matter of national interest and is given equal weight in court of law as the protection of nature and the landscape.
Approval procedures
Simplification and time constraints for the approval procedures for the new electricity generation installations based on renewable energy sources.
CO2
emissions
ETS National emissions trading scheme for big industrial consumers.
CO2 levy CO2 levy imposed on final consumers of fossil fuels for heating purposes.
Possibly the rate could gradually increase.
Building Program EE and RE program aiming to support reduction of energy consumption and CO2 emissions in buildings (by means of subsidies for implementation of insulation, renewable heating and energy management measures). Financed by the Federal Government (through CO2 levy) and the cantons. Foreseen to be terminated in 2025, possibly extended to 2030.
Target agreements for companies
Exception from CO2 levy for companies not participating in ETS in exchange of commitment to reduce own CO2 emissions.
Obligations for buildings
Possibly maximum emissions levels for buildings from 2030 (mandatory energy efficiency improvement or implementation of renewables).
CO2 emission standards for motorized vehicles
Tightening of CO2 emission limit values for all new passenger vehicles on the road, extension of specifications on delivery vehicles and light articulated trucks.
CO2 taxes for transport
Taxes and fees on transport fuels and vehicles.
26
Compensation obligations for transport fuels
Emission compensation obligations for importers of transport fuels and electricity generators.
Nuclear power
Ban on new nuclear power plants
Ban on new nuclear power plants or any basic changes to existing nuclear power plants. Phase-out of existing plants by the end of their lifetime.
Ban on the reprocessing of spent fuel
Ban on the export of spent fuel rods for reprocessing.
Other measures
Network surcharge Network surcharge for promotion of electricity from renewable energy, energy efficiency and quality improvement of water bodies.
Measures with respect to electricity grids
Acceleration of the legal processes for upgrading and renewal of the distribution networks.
Auto-consumer communities
Possibility for neighbors to form groups of renewable electricity producers, allowed own consumption and access to free electricity market.
SwissEnergy program
Information, networking, coordination and exchange platform for the actors involved in energy transition process (the federal government, the cantons, the communes, enterprises, environmental, consumer organizations, citizens).
Pilot, demonstration and beacon program
Financing of pilot projects and demonstration programs for the new technologies and system solutions.
Research Funding provided by Swiss Competence Centres for Energy Research.
The Confederation as an energy role model
An engagement by the Federal Administration and the companies close to the public sector to act as a model role in implementation of energy efficient solutions.
Sources: [46-50].
Many cantons are currently developing and coordinating policies on sustainable energy supply (including efficient use of energy, waste heat and renewable energy), energy planning and energy- efficient mobility [51]. Twenty two out of twenty-six cantons have legal and financial (budget) prerequisites for complementary cantonal energy programs [51]. Some publicly owned utilities run local energy programs, too [52, 53].
A number of studies have evaluated the Swiss energy policy (mainly focusing on CO2 emissions), but it is widely acknowledged that it is difficult to evaluate the effects of individual policy instruments due to existing overlaps (i.e., when multiple instruments target the same type of consumers and carbon emissions) [49].
3.3 Debate on the role of the energy programs in Switzerland
Nowadays there are controversial opinions on the utility, benefits and costs of the energy programs for Swiss energy transition. On the one hand, the Confederation has officially recognized that the energy programs are essential for exploiting the major energy efficiency potential in the existing building stock as well as the potentials for renewable energy [51]. The programs do not only contribute to reduction of upfront costs and payback period, but also address non-financial barriers by providing training and information support, facilitating changes in building owners’ investment behavior and by improving consumer and installer practices (Table 2, section 1.2). On the other hand,
27 the Energy Strategy 2050 and the related legislation preview termination of the federal energy programs in 2025-2030 (Table 4), giving preference to free market mechanisms, with possible support of regulations (e.g., eventual emission limits for buildings) and taxation (e.g., eventual CO2 tax increase) (section 3.2) [43, 45, 46, 54]. The main argument is that energy programs are considered to have high costs to society (as they require public funding, a part of which is used for administration).
Given the ambitious policy targets and the current trends in energy consumption and emissions (section 3.1), it is an open question whether the foreseen policy measures will be sufficient, or whether, for example, a stronger role of the energy programs will be required to address the barriers to energy efficiency and renewable energy investments that are hardly addressed by other policy mechanisms, including regulatory and taxation [55].
4 Thesis aims and structure
4.1 Research objectives
This thesis focuses on energy programs for buildings in Switzerland, covering energy efficiency and renewable energy measures, related to heating and electricity consumption. The research questions addressed in the thesis are:
1) Do the energy programs represent more costs or benefits to the Swiss society?
2) Is it advisable to use the energy programs as complementary approach to other policy mechanisms?
3) How can energy programs be designed to increase their effectiveness and benefits?
The research explores and applies different analytical tools and evaluation methodologies, including macro-economic, cost-benefit, investment analysis, qualitative social sciences methods and literature review. The research represents a contribution to the current body of knowledge on the energy programs, because - despite the abundant literature on energy policy -, the design and the use of the incentive mechanisms has not been comprehensively studied, especially with regard to specific design and mechanisms for acceleration of market penetration of residential appliances and equipment [12].
4.2 Structure of the thesis
The chapters II-V are each based on one scientific article addressing the following issues:
28 II. “Contributing to a green energy economy? A macroeconomic analysis of an energy efficiency program operated by a Swiss utility” provides an evaluation the impacts on GDP and employment of Swiss energy programs, based on a case study of Geneva’s energy program portfolio éco21 operated by the local utility;
III. “Cost-effectiveness of energy efficiency programs: how to better understand and improve from multiple stakeholder perspectives?” presents cost-effectiveness analysis of energy efficiency programs in Switzerland, based on the case study of éco21, considering perspectives of the following stakeholders: program participants, energy consumers, program administrator, utility, geographic jurisdiction territory and society.
IV. “Carbon tax and energy programs for buildings: rivals or allies?” analyses whether it can be advisable to use carbon tax revenue for financing EE and RE programs in Switzerland, as a complementary policy measure;
V. “How to improve effectiveness of renewable space heating programs by better understanding homeowner – installer interactions. General insights and focus on heat pumps.” focuses on the role of installers and the energy programs in adoption of renewable space heating technologies, based on the insights from the literature review and a case study of single-family house owners that took part in Geneva’s energy program, éco21.
Based on the results of the chapters II-V, recommendations for design of energy programs are elaborated. The summary and conclusions are provided in section VI.
29
II. Contributing to a green energy economy? A macroeconomic analysis of an energy efficiency program operated by a Swiss utility
6A. Yushchenko () Tel.: +41 22 379 06 51 E-mail: [email protected]
M. K. Patel Tel.: +41 22 379 06 58 E-mail: [email protected]
Energy Efficiency group, Institute for Environmental Sciences and Forel Institute, University of Geneva, Uni Carl-Vogt, 1211 Genève 4, Switzerland
Abstract In order to enhance energy efficiency as a pillar of transition to a green energy economy it is important to understand whether and under which conditions energy efficiency programs could have positive economic and social impacts. There are a growing number of studies on macroeconomic impacts of energy efficiency programs for various countries and regions. However, in Switzerland only few evaluations have been performed. The present study evaluates the impacts on GDP and employment of Geneva’s energy efficiency program portfolio éco21 which is operated by the local utility. Two programs aiming for electricity savings in the residential sector are analyzed: Eco-sociales targets social housing and Communs d’immeubles focuses on common spaces in buildings.
An input-output model is developed, based on the Swiss input-output table, program administrator data, Swiss, and European statistics.
Both impacts of initial expenditure and energy cost savings are evaluated. We estimate and compare the impacts of the two programs and discuss factors that cause differences. Our results show that energy efficiency programs can have positive impacts on GDP and employment. According to our estimates, each Swiss Franc (CHF) spent within the energy efficiency program creates approximately 0.2 CHF of additional GDP compared to the reference case scenario. Net impacts on employment are approximately 0.7 and 1.6 additional jobs in full-time equivalent for 1 million CHF of expenditure driven by Eco-sociales and Communs d’immeubles respectively, compared to the reference case scenario. However, the results strongly depend on several hypotheses, including the impact of energy savings on the domestic energy sector, the import share in consumed goods and services, electricity prices, lifetimes of energy efficiency measures, and the assumed expenditure patterns. Based on our results we provide recommendations on measures for improving the macroeconomic impacts of energy efficiency programs: a preference for expenditure on local goods and services, maximization of cost effectiveness of energy efficiency programs, and their integration with energy supply planning. We conclude that energy efficiency programs and policies should be well coordinated with other policies in practice, the roles of stakeholders should be clearly defined, and all stakeholders should be provided with necessary instruments and powers.
6 Published: 56. Yushchenko, A. and M.K. Patel, Contributing to a green energy economy? A macroeconomic analysis of an energy efficiency program operated by a Swiss utility. Applied Energy, 2016. 179: p. 1304–1320.
30 Keywords Green economy Energy efficiency program Macroeconomic impacts Input-output GDP Employment
1. Introduction
In a green economy, growth in income and employment are driven by investments that reduce negative environmental impacts while enhancing energy and resource efficiency [57]. Therefore, the transition to a green economy can be seen as a way to address the modern environmental, economic, and social problems in a harmonized way. However, there is still a lack of understanding on how green economy may be implemented in practice [58].
Green energy policies and programs are considered as an important pillar of transition to a green economy [57, 59], and are currently among the key energy policy priorities in Europe [60] and other regions [61]. In this context, it is necessary to better understand whether and under which conditions green energy policies and programs could have positive impacts on the economy as a whole [62]. For example, energy efficiency programs may stimulate employment in the sectors related to energy efficiency products and services. They can lead to energy cost savings that can be spent on other goods and services. However, investing in energy efficiency means diverting money from other spending options which may offer higher or lower economic growth and employment than the energy efficiency measures (further referred to as EE measures). Such effects can be analyzed by means of macroeconomic models.
The research base on macroeconomic impacts of green energy economy policies and programs is currently growing, especially in the United States [62-74]. In Europe, most studies focus on renewable energy [75-82], while the number of studies in the field of energy efficiency is much more limited [83-87]. In Switzerland there are hardly any publicly available studies in this domain [88].
Meanwhile, the results of macroeconomic studies highly depend on the content of energy policies and programs, and the structure of the economy [84]. Therefore, it is impossible to predict macroeconomic impacts for one location based on evaluation performed for another location.
There are different methods for performing macroeconomic studies, and they are in general well- described in the literature (see section 2). However, for a number of reasons there is need for further development in the case of green energy economy policies and programs. Firstly, many researchers focus on estimating the impacts of a particular policy or program rather than on developing strategies for achieving certain macroeconomic objectives. And while the majority of studies conclude that the resulting macroeconomic impacts are positive, there are also examples of negative impacts, both for
31 energy efficiency [66, 74] and renewable energy [77, 78, 80] policies and programs. This does not mean that in such cases the respective policies and programs should not be implemented. It rather demonstrates that focusing uniquely on estimation of macroeconomic impacts is not sufficient.
Instead, it is important to understand how to achieve and enforce positive impacts of green energy economy policies and programs [73]. Secondly, when modelling macroeconomic impacts of energy efficiency policies and programs, it is important to clearly understand all the income impacts of energy savings. This includes not only stakeholders who save energy by implementing EE measures, but also ratepayers and utilities. Existing studies do not always discuss these aspects in detail. For example, it is argued in the studies for Vermont [67] and Texas [68] that energy savings may lead to a decrease of electricity tariffs, but the underlying assumptions are not explained. And even if this statement is true for these particular cases, in other cases energy demand reduction may lead to tariffs increase as explained by Croucher [89]. Detailed information on the model choices regarding the interrelation of income changes among the stakeholders involved would not only ensure a better understanding of the results of the study in question, but also assist other researchers in their model development.
Against this background it is the objective of our paper to contribute to the growing body of knowledge on macroeconomic evaluation of green energy economy policies and programs at the example of energy efficiency programs. In particular, we aim to understand the principles that could allow achieving and enforcing positive impacts of energy efficiency programs on employment and GDP in Switzerland. The present work is based on a case study of the Geneva energy efficiency program portfolio éco21. We evaluate the impacts on GDP and employment of two programs aiming for electricity savings in the residential sector, Eco-sociales and Communs d’immeubles (section 2).
We provide a detailed methodology, including on modeling of income impacts of energy savings (section 2). We compare the results of the two programs and analyze which factors cause the differences (section 3). Finally, we propose measures for improving the macroeconomic impacts of energy efficiency programs (section 3).
2. Methodology and data used
2.1 Case study
Case studies have become widely used in evaluation research [90, 91], including in the energy domain [92-95]. As mentioned in section 1, our work is based on a case study of the Geneva energy efficiency program portfolio éco21. Éco21 was started up in 2006 and became fully operational in 2009. The
32 program administrator is the publicly-owned utility Services Industriels de Genève (SIG) which runs the electricity saving and CO2 reduction program portfolio éco21 according to the agreement with the local authorities. The chosen case study is of special interest for Switzerland because éco21 is one of a few examples of utility-led energy efficiency programs in the country [96]; in contrast, most energy efficiency programs are administered by state, the cantons and municipalities (for example, electricity-saving federal program ProKilowatt [97]). There are no energy efficiency obligations imposed on Swiss utilities, and the legal foundation for voluntary energy efficiency programs operated by utilities is underdeveloped [98]. Defining the role of utilities with regard to energy efficiency policy is one of the major topics of current political debate in Switzerland.
Figure 1 presents the functioning of the program portfolio éco21 which is similar to other ratepayer- funded energy efficiency programs [65]:
1. Ratepayers pay their energy bills to the utility.
2. The utility transfers a part of the revenue from the energy bills (i.e., energy efficiency surcharge) to the program administrator (e.g., éco21 department of SIG).
3. A part of the energy efficiency surcharge is used to finance EE measures. The financing is used for full or partial coverage of the cost of energy equipment and its installation, training activities for installers, and energy advice for consumers. This is done through financial incentives for program participants or direct payments to contractors.
4. Another part of the energy efficiency surcharge is used to cover program administration costs.
5. In some programs third parties take part in financing EE measures (e.g., municipalities).
6. Participants pay the difference between total costs of EE measures and the part of costs covered by the program administrator and its partners.
7. The participants’ energy costs decrease due to implementation of EE measures.7
7 However, reduction in energy demand may lead to correction of electricity tariffs (see section 2.5).
