Saving energy: bringing down Europe's enery prices

摘要

In June 2011 the European Commission proposed a new Directive on Energy Efficiency. Its purpose is to put forward a frameworkudto deliver the EU’s target of reducing its energy consumption by 20% by 2020. Currently, the EU is only on track to achieve halfudof those savings.udApart from the environmental benefits -notably, reducing greenhouse gas emissions- energy savings have significant economicudbenefits for European economies: (1) they reduce the amount of money businesses and consumers need to spend on energy, (2)udthey have positive effects on employment and (3) they decrease dependency on fossil fuel imports.udBut the actual scale of the benefits is often underestimated. In this paper, we show that energy savings do not only bring directudcost savings; they also indirectly reduce energy prices. Real cost savings resulting from meeting the 20% savings target are likelyudto be considerably higher than figures commonly cited. In other words, consumers would use fewer units of energy, and the priceudof the units they do use would be lower than they would otherwise be.udEnergy savings can reduce energy prices in the following ways:ud1. Decreasing fossil fuel prices: international fossil fuel markets are under pressure because there is little reserve productionudcapacity. This means prices are very sensitive to changes in energy demand. Because energy savings in Europe and theudspillover effects of this action in other world regions will reduce global demand, we expect significant reductions in futureudenergy prices.ud2. Decreasing electricity prices: cheaper fossil fuel prices will reduce electricity prices (because roughly 50% of the EU’s electricityudis produced from fossil fuels). In addition, a lower demand will impact the fuel mix in electricity production: it will occur moreudoften that lower-priced fuels determine the marginal costs.This will have an additional reduction effect on electricity prices.ud3. Decreasing energy prices in the longer term: meeting the EU’s 20% by 2020 energy saving target is expected to save tensudof billions of Euros per year due to avoided investments in energy infrastructure (power generation and transmission, fueludimport and storage facilities). Since it is usual practice to pass on investment costs to energy consumers, a reduction in theseudinvestments will lead to an additional cost saving.udOn the basis of the evidence examined in this report, we estimate that the indirect impact on energy prices will be of the sameudorder as the direct impact of the energy savings. Put simply, for every €1 of energy cost saving, an additional €1 could be saveduddue to lower energy prices.