Let’s first set the scene with kerosene. On a daily basis worldwide, millions of people light up their kerosene lamps to work, do homework, and complement daily activities from eating to play. Typically, just 2% of the energy intrinsic to kerosene is converted to light when it is burned in a lantern with a wick; the rest is lost as mostly useless heat.
This scale of inefficiency goes some way to explain both why the world’s unelectrified poor spend from 50 to well over 100 times more per unit of light than do people who are grid-connected and why the off-grid solar products market is growing rapidly.1
Yet, the transformative effect of energy efficient technology extends beyond this market. Efficiency gains are being made everywhere, from the flight patterns of modern aircraft to the manufacturing of microchips. In fact, as we project in our Energy Transition Outlook, the energy intensity of the global economy will improve more quickly than the rate of global economic growth in the next three decades. As a result, global energy demand will peak and flatten for the first time in our post-industrial history.
It isn’t one specific technology like the vast solar parks and the great powerlines that are spearheading the transition.
It is the combined impact of several technologies in all sectors contributing to the invisible, intangible phenomenon of energy not used that is the most dramatic feature of the transition unfolding today
Drivers motivating energy efficiency
- Money. Global spending on energy is close to USD 5 trillion per year, around 3.6% of global GDP. Naturally, nations, organizations and individuals wish to reduce their own spending, and that will remain the main incentive for improving energy efficiency.
- The environment. Wasting resources is bad for the environment. Energy consumption, much of it wasteful, represents around 60% of the overall global environmental footprint of human activity. Policies promoting energy efficiency typically pursue the co-benefits of economic, human and planetary health, and as such often win strong public backing.
- Energy security. Improving energy efficiency acts as a brake on the amount of energy that an energy-importing country must secure. Energy efficiency ambitions, in combination with domestic renewables, build energy independence for more countries by reducing their reliance on other countries and multinationals.
- Technology development. Anticipated efficiency gains are explained by the electrification of energy end use and the increasing share of renewables in the power mix. In a progressively electrifying energy system, there is a steady reduction in conversion losses, wherefore less energy is needed to produce the same services. Energy intensity benefits from there being lower losses in power generation from renewables than from fossil fuels.
- Policies. Regulations and guidelines mandating and/or facilitating energy efficiency currently cover around one third of global energy use. Examples are standards for fuel efficiency, building insulation, and minimum energy performance standards (MEPS) for industrial equipment. Policies force change where market forces do not suffice.
- Business model changes. New business models such as the sharing and circular economies will enable more efficient use of resources and further boost energy efficiency. Urban ‘mobility-as-a-service’ with ride-sharing is one example; another is new service-based models, enabled by digital technologies, such as energy service companies (ESCOs) providing services to reduce energy consumption rather than units of delivered energy.
- Consumer awareness. Attitudes impact behaviour. Hence, environmentally conscious consumers boost energy efficiency by behavioural changes such as energy saving actions, switching to electric cars, or undertaking a transport-mode shifts altogether.