For a variety of reasons -- whether it be mitigating climate change, enhancing security, increasing economic incentives or even improving the health of indoor living -- countries around the world have been investing in ways to boost energy efficiency. Worldwide, that market of cutting back on energy waste is growing and is now worth at least $310 billion, reports the International Energy Agency.
"For many years, it's been called the 'fifth fuel' because it came after oil, gas, coal and electricity," said Hans Nilsson, a Swedish board member of the European Council for an Energy Efficient Economy, of which the IEA is a member. "But first of all, it is bigger and it's cheaper, so the IEA last year switched it around and called energy efficiency the 'first fuel.' It's a very good twist. Now, they are reiterating that and saying it with precision."
Indeed, the IEA evaluated 18 countries and found that "investment in energy efficiency was larger than supply-side investment in renewable electricity or in coal, oil and gas electricity generation, and around half the size of upstream oil and gas investment," the report stated. The results of these investments helped drop the total final energy consumption by 5 percent between 2001 and 2011.
"Energy efficiency is the invisible powerhouse in IEA countries and beyond, working behind the scenes to improve our energy security, lower our energy bills and move us closer to reaching our climate goals," IEA Executive Director Maria van der Hoeven said in Verona, Italy, as she launched the "Energy Efficiency Market Report 2014."
"The 2-degree-Celsius targets can be met by profitable energy efficiency. For that reason, targets should be set much higher by countries and the E.U.," Nilsson told ClimateWire. By "increasing energy efficiency 40 percent by 2030, we gain in using less energy and paying less, but the GDP will actually grow and unemployment will shrink, which is amazing. ... By scratching ourselves on the back with energy efficiency, we can cut unemployment."
Growing out of a niche market
In the last three years, the IEA has seen hints that financing for the energy efficiency market is not only growing, but also accelerating. Recognition of the social benefits, such as for employment, help to better coordinate among investor, policy and financial communities, says the study.
In Canada, an estimated 100,000 workers directly involved in improving energy efficiency -- designing or managing equipment, products and technologies -- represent 0.6 percent of the total workforce and earned an estimated $7.7 billion in 2011. Those wages are expected to grow to an estimated $8.27 billion in 2014.
Just how much and where IEA countries are focusing their investments, however, depends on their energy-consuming needs. "Fuel efficiency in passenger vehicles, for example, is an area where many countries have high standards," Philippe Benoit, a Paris-based analyst for IEA, told ClimateWire. "Historically, less attention has been paid to freight trucks and heavy vehicles, and now the United States, Japan and others are increasingly looking at efficiency in regard to those vehicles."
Overall, the market of energy efficiency needs to double by 2035, Benoit added. The trend is there, but coupled with population growth and an increasing energy demand, the ability to increase energy productivity to 40 percent will require on average $600 billion per year between now and then -- or about $13 trillion.
"It's a market with the potential to expand, and we need it to expand. We need to see continual increase up to those levels in order to achieve the reduction in greenhouse gas emissions from the energy sector that we want to see," Benoit said. "Key to getting to that kind of increase in investment are government policies."
"Energy efficiency is moving from a niche interest to an established market segment with increasing interest from institutional lenders and investors," van der Hoeven said. "As energy efficiency is essential to meeting our climate goals while supporting economic growth, the increasing use of finance is a welcome development. To fully expand this market, initiatives to continue to reduce barriers will need to strengthen."
Japan's incentives linked to LED growth
When it comes to lauding the growing market for energy efficiency, nothing says 'job well done' like a Nobel Prize. Tuesday's award in physics recognized the inventors of blue light-emitting diodes (Greenwire, Oct. 7).
The LED market in Japan grew to $5.2 billion in 2013. "In Thailand, it more than doubled from $15 million in 2011 to $38 million in 2013: still smaller than Japan, but impressive growth nonetheless," Benoit noted.
The reason for Japan's growth in the LED industry stems back to its support from 1998 through 2002 of $48 million for research into white LEDs and new semiconductor materials.
In December 2005, Japan introduced a tax incentive for businesses and organizations to replace incandescent lighting with LEDs. By 2008, Japan was working on a goal to have manufacturers stop producing incandescent bulbs by 2012. A $10.9 billion stimulus package in 2009 helped encourage the switch, and by 2011, a total of 450,000 consumers were redeeming gift certificates or points earned in the eco-program, through home-improvement purchases, for LED lamps, worth a total of $46 million.
Electronics retailers and home appliance makers are now in the process of reducing their production and sales of incandescent bulbs. "Japan has announced a target of 100 percent energy-efficient lighting sales by 2020, and by 2030 Japan intends its entire stock to be composed of energy-efficient lighting," according to the report.
Want to read more stories like this?
E&E is the leading source for comprehensive, daily coverage of environmental and energy politics and policy.
Click here to start a free trial to E&E -- the best way to track policy and markets.