Energy Training Week 2014 7 April (16:00-17:30) Course 2: Energy Efficiency Governance Robert Tromop and Sara Bryan Pasquier
Outcomes of Good EE Governance Implementation authority is clear Accountability is established Political consensus is built Implementation partnerships are created Resources are mobilized Oversight arrangements are in place
Enabling frameworks Laws and decrees Strategies and action plans Funding mechanisms
Energy Efficiency Laws and Decrees Give direction to government action Provide statutory basis for regulations and market mechanisms Assign responsibility for implementation Specify funding mechanisms for EE implementation Set oversight arrangements Legal Frameworks Promoting Energy Efficiency 25% 23% 37% 17% 31% 8% 19% 26% 24% 25% 23% 23% A specific law focuses on energy efficiency Energy-sector laws include energy efficiency Worldwide 23% 8% 4% 15% 12% 8% 3% 12% 17% 8% 8% Energy efficiency No legal framework Tax legislation Other included within the laws of other sectors IEA EBRD Latin America Non-IEA Asia, MENA and Africa
Issues to consider in formulating laws and decrees Scope: Comprehensive or Narrow? Comprehensive laws can take years to enact Narrow laws can be quickly enacted but have less impact Soft law hard law Soft laws articulate objectives without specifying policies Hard laws convey authority and specify obligations Avoiding implementation delays Balancing carrots and sticks Carrots include incentives & market mechanism Sticks include rules & regulations Both are needed Assigning implementation responsibility Resources and capacity building must accompany responsibility Taking on difficult sectors (transport, public sector)
Strategies and Action Plans Importance Place EE policy within the broader policy context; Prioritise energy efficiency policies; Capture synergies between policies; Engage stakeholders and build consensus; Assign responsibility & establish accountability Guidelines for effective strategies & action plans Take a long-term, high-level viewpoint Have a strong analytic foundation; Incorporate specific time-bound targets; Be comprehensive and consider all sectors Prioritise the most-promising sectors and policy measures; Identify the resources needed to turn strategy into action;
Flash quiz 1. Do you have an energy efficiency strategy or action plan in your country? 2. Describe it: Comprehensive or narrow? Carrots or sticks? Who is responsible? Is it working?
EE Funding Mechanisms Reliable and adequate funding is essential No coincidence: countries with well-developed EE industries have effective EE funding mechanisms Key considerations for effective funding include: Adequacy - funding should be sufficient to finance policy implementation costs Stability funding should be steady and predictable Autonomy funding should be under the control of the implementing agency. Origin the funding source should be credible and contribute to overall EE policies.
EE funding good governance Funding mechanism Funding good governance score Government budgets Grants from other government agencies Adequacy Stability Autonomy Origin Distortive Effect Energy or environmental taxes (if earmarked) System public benefit charges Stimulus funds Licensing and permitting fees Carbon finance Donor funding Fee-for-service arrangements
Guidelines for EE Funding Funding from budget appropriations puts EE implementation at risk of short-term fluctuations Earmarked energy/environmental taxes and system public benefit charges pay a double-dividend: generate revenue; discourage energy consumption by raising prices. A mix of different funding sources contributes to overall funding reliability System public benefit charges (such as in Brazil) are a close-to-ideal funding mechanism
Flash quiz How are energy efficiency programmes funded in your country? 1. List the main programmes 2. List the sources of funding 3. Does this funding approach satisfy the good funding governance criteria? 4. Bonus questions: Have there been ups-and-downs in funding? How could more funding be mobilized?
Institutional arrangements Implementing agencies Resourcing requirements Role of energy providers Stakeholder engagement Public private sector cooperation International assistance
Implementing agencies Two-thirds of countries recently surveyed indicated a government-sponsored EE agency in place, defined as a body with strong technical skills, dedicated to implementing national energy efficiency policy. There is considerable variety around the world
Establishing EE Implementing Agencies A statutory basis conveys status and permanency Many organizational types from which to choose Generalized government energy agencies Specialized government EE agencies Combined EE/clean energy agencies Independent authorities and state-owned corporations EE NGOs EE public/private partnerships. EE institutional design should reflect implementation requirements and target sectors. New types of EE institutions are emerging
Choosing an implementing agency Organizational Type Advantages Disadvantages Government energy agency Government energy efficiency and clean energy agencies Independent energy efficiency and clean energy Statutory Authority or Corporation Energy efficiency and clean energy Public/private partnership Energy efficiency and clean energy NGO or public benefit organization Access to decision-makers Influence on policy & legislation Credibility with other public agencies Ability to specialize and focus Often have a firm basis in law Cultural benefits Linkages to private sector Access to multiple public & private funding sources Independence and autonomy Firm basis in law Cultural benefits Independence and autonomy Access to private sector resources, Cultural benefits Independence and autonomy Credibility with stakeholders and consumers Cultural benefits Limitations on salary and staff Difficulty in taking decisions Must compete for attention Turnover of officials Limitations on salary and staff Potential opposition from elsewhere within government Cannot directly access donor funding Only indirect access to policy makers Difficulty in policy coordination May not be permanent arrangement Only indirect access to policy makers Must compete for resources Lack of authority Difficulty in policy coordination May not be permanent arrangement
Energy Providers as Implementers Advantages: Ready access to capital Commercial relationship with end users A familiar brand name Widespread service and delivery network within their jurisdiction Responsible for meeting energy demand growth. Disadvantages: Overlap in commercial and societal interests Incentive to sell, not conserve, energy Need for regulatory oversight
Other institutional arrangements Stakeholder engagement Useful in building consensus Improves policy quality Often leads to energy efficiency legislation Public-private cooperation Public-private partnerships Voluntary energy efficiency agreements ESCOs International donor assistance Useful in creating interest in energy efficiency Creating regional networks is an effective approach Creating sustainable results
Flash quiz: Institutional arrangements Which is the most common type of EE implementing organization in your country? What role do energy utilities play and could they do more? How about new types of EE organizations?
Coordination Coordination mechanisms Targets and goals Evaluation
Coordination Mechanisms Intra- Governmental (Horizontal) Cooperation among national government ministries and agencies Useful horizontal coordination Internal coordination Inter-agency agreements Coordinating committees Inter-Governmental (Vertical) Useful vertical coordination One Several Many Number of institutions with energy efficiency responsibilities Partnerships Cooperation across levels of government, including national, regional and local government entities Demonstrations Programmatic (Block Grants) One Several Many Levels of Government or number of Government Entities
Flash quiz How is energy efficiency policy coordinated in your country?
Targets and goals Value of EE targets Motivate, challenge and direct EE policy Facilitate results monitoring & policy adjustments A concrete basis for planning programs, mobilizing funding, & staffing-up agencies. Targets should be carefully developed and formulated Strong analytic foundation Should not stretch credibility Should not be too long-term w/o interim targets
Formulating EE (or Carbon) Targets Type of Target Defined improvement Intensity Elasticity Description Aggregation Time frame Energy consumption or emissions (GWh, MtCO 2 ) Energy consumption or emissions per unit of economic activity Ratio of growth in energy consumption or emissions to growth in GDP or output Jurisdiction Sector Industry Enterprise Facility End-use Long term Medium term Short term Benchmark Energy consumption or emissions relative to others Transactional Buildings weatherized or CFLs installed
Issues and complexities Political utility Mobilising stakeholders Creating accountability in government Target horizon balancing ambition and practicality without straining credibility Proven approach: long-term goal accompanied by interim targets Economy vs. sector targets Variations in efficiency improvement potential and costs across sectors Proven approach: Economy-wide goals with sectoral targets
Flash quiz Do you have energy savings or GHG emissions reduction targets in your country? How are they expressed? How is progress towards the target measured?
Evaluation Evaluation is crucial as EE impacts are difficult to measure Evaluation is important in all phases of EE policy: Learning from previous EE policy and programs Process and market evaluation during implementation helps assists EE managers to make needed corrections; Checking progress towards overall targets and goals Although critically important, evaluation is often not done Evaluation remains superficial in most countries Evaluation and data collection capacity is critically low Evaluation is often considered an overhead cost
Evaluation Success factors: Include evaluation within policy & program design Adopt and require common methodologies and protocols Invest in accurate data and statistics Assure adequate funding, including evaluation set-asides Develop and retain high calibre staff Create an evaluation culture Require evaluation as part of oversight arrangements Adopt good governance especially for evaluation: Data credibility Independence and objectivity of analysis Transparency of results
EE governance elements interact EE Governance Mechanisms Confer authority Build consensus EE Governance Outcome Objectives Assign Establish responsibility partnerships and create accountability Mobilise resources Establish oversight of results Laws and decrees Strategies and action plans Funding mechanisms Implementing agencies Resourcing Role of energy providers Stakeholder engagement Public-private sector co- operation International assistance Governmental co-ordination Targets Evaluation
Small Group Exercise: Formulate an energy efficiency law You have been assigned to develop an energy efficiency law Discuss and decide what are the three most important things to include in your law Which sectors would your law target? What type of policies would it include? List the steps required to enact the law Who should be consulted in developing the law? Report out to the entire class
Group Exercise: Design an energy efficiency agency You have been assigned to establish a new energy efficiency agency in your country Discuss and decide: What functions would the agency perform? What kind of institution would be most effective? Where should your agency be located? What kind of institution would be most effective? Discuss: Which other agencies would you need to coordinate with? What would be a a stable funding mechanism? Report out to the entire class
Small group exercise: Establish an energy savings target and tracking mechanism What purpose would a target serve? Which agency should take the lead to develop a target? How would you express the target? Energy, GHG Target year and baseline year Sectoral or economy-wide? How would you measure progress? What data would you collect? What if progress falls short of the target? Report back to the entire class