Rewarding energy efficiency for energy system services through markets: Opportunities and challenges in Europe

Energy efficiency provides value to energy systems in many ways. It reduces energy costs, avoids the need for costly capacity, lowers carbon emissions enabling environmental standards to be met more cheaply, avoids or defers the need for costly network upgrades and allows heating and cooling systems to be used more flexibly. These diverse value streams are often not recognised, with energy efficiency providers under-rewarded for the services they provide. As a result, fewer energy efficiency measures are undertaken, energy systems cost more to maintain, bill payers are worse off and, because of the non-energy benefits that energy efficiency provides, the wider society suffers. This report examines the mechanisms that are in place in the United States (U.S.) and Europe to reward energy efficiency as an energy system resource and draws conclusions for the focus of future efforts in the European Union (EU)