Energy E!iciency 2019Energy Efficiency 2019The IEA examines the full spectrum of energy issues including oil, gas and coal supply and demand, renewable energy technologies, electricity markets, energy efficiency, access to energy, demand side management and much more. Through its work, the IEA advocates policies that will enhance the reliability, affordability and sustainability of energy in its 30 member countries, 8 association countries and beyond. Please note that this publication is subject to specific restrictions that limit its use and distribution. The terms and conditions are available online at iea/t Zakia Adam; Simon Bennett; Joel Couse; Laura Cozzi; Mafalda Da Silva; Chiara Delmastro; Peter Fraser; Tim Goodson; Timur Guel; Nick Johnstone; Ebio Junior; Peter Levi; Luis Lopez; Francesco Mattion; Luis Munuera; Araceli Fernanadez-Pales; Leonardo Paoli; Faidon Papadimoulis; Jungyu Park; Roberta Quadrelli; Andreas Schroeder; Paul Simons; Victor Garcia Tapia; Jacob Teter; Dave Turk; Laszlo Varro and Tiffany Vass. Timely and comprehensive data from the Energy Data Centre were fundamental to the report. The IEA Communication and Digital Office (CDO) provided production and launch support. Particular thanks to Jad Mouawad and his team: Astrid Dumond, Chris Gully, Katie Lazaro, Jethro Mullen, Julie Puech, Rob Stone, Sabrina Tan and Therese Walsh. Andrew Johnston edited the report. The report was made possible by assistance from the Ministry of Economy, Trade and Industry, Japan. The IEA would like to thank Alexandra Albuquerque Maciel (Ministry of Mines and Energy, Brazil); Kok Kiat Ang (National Environment Agency, Singapore); Peter Bach (Danish Energy Agency); Steven Beletich (4E TCP EDNA); Bob Blain (Natural Resources Canada); Alexandria Boyd (Natural ResourcesCanada); Juan Igancio Del Castillo (Permanent Delegation of Spain to the OECD); (Aneta Ciszewska ( Ministry of Energy, Po land); Russell Conklin (US Department of Energy); Jelte de Jong (Ministry of Economic Affairs and Climate Policy, Netherlands); Shubhashis Dey (Shakti Sustainable Energy Foundation); Gabby Dreyfus (ClimateWorks Foundation); Bilal Dzgn (Ministry of Energy and Natural Resources, Turkey); Wolfgang Eichhammer (Fraunhofer ISI); Mark Ellis (4E TCP); Mariangiola Fabbri ( Buldings Performance Institute E urope); Ryosuke Fujioka (Ministry of Economy, Trade and Industry, Japan); David Gierten (OECD); Donald Gilligan (NAESCO); Jessica Glicker (Buildings Perfomance Institute Europe); Philip Harrington (Strategic Policy Research); Stephen Hibbert (ING Commercial Banking); Gerben Hieminga (ING Commercial Banking); Takashi Hongo (Mitsui); Humin Hu (Climateworks Foundation); Rod Janssen (Energy in Demand ); Rashmi Jawahar Ganesh (IPEEC); Paul Kellett (UN Environment); Benjamin King (US Department of Energy); Kristina Klimovich (EuroPACE); Roufaida Laidi (CERIST); Benoit Lebot (IPEEC); Molly Lesher (OECD); Pengcheng Li (China National Institute of Standardisation); Amory Lovins (Rocky Mountain Institute); Jean-Jacques Marchais (Schneider Electric); Eric Masanet (Northwestern University); John Mayernik (US Department of Energy);Cathy McGowan (Department of the Environment and Energy, Australia); Vincent Minier (Schneider Electric); Rob Murray -Leach (Energy Efficiency Council); Steve Nadel (ACEEE); Clay Nesler (Johnson Controls); Ryan Ng (National Environment IEA. All rights reserved. IEA. All rights reservedEnergy Efficiency 2019 Acknowledgements PAGE | 5 Agency, Singapore); Alan Pears; Carlos Pires (Ministry of Mines and Energy, Brazil); Kasia Poplawska (Natural Resources Canada); Kasper Poulsen (Danfoss); Loic Renier (Schneider Electric); Marc Ringel (Nuertingen Geislingen University); Ana Lucia Rodriguez Lepure; Koichi Sasaki (IEEJ); Sandra Schoonhoven (ING Commercial Banking); Kosuke Suzuki (Ministry of Economy, Trade and Industry, Japan); Samuel Thomas (Regulatory Assistance Project); Joe Wang (Natural Resources Canada); Kyota Yamamoto (Ministry of Economy, Trade and Industry, Japan) for their support, review and comments. The individuals and organisations that contributed to this study are not responsible for any opinions or judgements it contains. Any error or omission is the sole responsibility of the IEA. For questions and comments, please contact EEfD (energy.efficiencyiea). IEA. All rights reservedEnergy Efficiency 2019 Table of contents PAGE | 6 Table of contents Executive summary. 9 I. Demand and energy intensity . 13 Highlights . 13 Primary demand . 13 Primary energy intensity . 15 Final demand . 17 Final energy intensity . 20 References . 21 II. Why are energy intensity improvements slowing? . 23 Highlights . 23 Introduction . 24 Recent changes in industry and exceptional weather compounded longer-term trends . 26 The impacts of improved technical efficiency are being blunted by other factors . 26 Are our “digital lifestyles” more energy intensive? . 36 References . 39 III. Technical efficiency progress in 2018 . 43 Highlights . 43 Introduction . 44 Policy drivers of efficiency . 47 Finance and investment . 54 Efficient technologies . 62 References . 68 IV. Emerging trends: Digitalisation . 73 Highlights . 73 Introduction . 74 How can digital technologies combine to improve energy efficiency?. 75 Impacts of digitalisation . 84 How digitalisation is changing energy efficiency . 88 How policy can harness digital technologies for energy efficiency . 91 References . 98 Annexes . 103 Annex A: Definition of factors included in decomposition analysis . 103 Annex B: Efficiency policy types monitored by the IEA . 105 Glossary . 106 List of figures Figure 1.1. Changes in global primary energy demand, 2011-18 . 14 Figure 1.2. Global primary energy demand growth by fuel and leading regions, 2017-18 . 14 Figure 1.3. Primary energy intensity improvement . 15 Figure 1.4. Decomposition of changes in global primary energy demand (left) and changes in global electricity use by generation source (right), 2014-18 . 16 Figure 1.5. Change in global final demand, by fuel, 2011-18 . 17 Figure 1.6. Global production of crude steel, 2010-18 . 18 IEA. All rights reservedEnergy Efficiency 2019 Table of contents PAGE | 7 Figure 1.7. Average daily US natural gas and crude oil extraction, 2016-18 (left) and growth in US petrochemicals and manufacturing gross value added, 2011-18 (right). . 19 Figure 1.8. Monthly temperature anomalies (compared with 1910-2000), by region, 2018 . 19 Figure 1.9. Europe and China monthly electricity consumption and US monthly gas consumption, 2016-18 . 20 Figure 1.10. Final energy intensity improvement . 21 Additional economic value from energy intensity improvements, actual and if the energy intensity improvement rate had stayed at around 3% . 24 Contribution to global economic growth and final energy intensity improvement . 25 Decomposition of final energy use in the worlds major economies, 2009-18 . 27 The combined impacts of technical efficiency improvements and structural effects on demand, annually, 2012-18 . 28 The impact of technical efficiency improvements as a share of sectoral final energy demand . 29 Structural impacts on demand, as a share of sectoral final energy demand . 29 Factors influencing passenger transport energy use, 2015-18 . 30 Average fuel consumption and diesel market share of newly registered vehicles for selected European car markets, 2010-18 . 32 Factors influencing freight transport energy use 2015-18 . 33 Factors influencing residential buildings energy use, 2015-18 . 34 Average residential per capita floor area versus GDP in selected countries, 2010-15-18 . 35 Average household size versus GDP in selected countries, 2010-15-18 . 35 Ownership of cooling devices and GDP per capita in selected countries, 2010-15-18 . 36 Global digital devices and connections, by type of device, 2015-2024 . 37 Impact of technical efficiency on primary energy intensity improvement (2011-18). 44 Energy-related GHG emissions, actual, without technical efficiency improvements, and avoided from technical efficiency improvements, 2015-18 . 45 Avoided oil and gas imports in 2018 due to technical efficiency gains since 2000 . 46 Avoided expenditure on energy due to efficiency improvements since 2000, by sector . 46 Annual additions to the percentage of global energy use covered by mandatory energy efficiency policies and regulations, owing to new and existing policies. 50 Efficiency Policy Progress Index (EPPI) and annual changes in mandatory policy strength, 2000-17 . 50 Final energy use coverage of energy efficiency obligations, by country/region . 52 Government incentives for energy efficiency by type of incentive. 53 Average size of incentive received by individual recipients by type of incentive programme (weighted by incentive type) . 54 Energy efficiency investment by region, 2014-18 (left) and by sector in 2018 (right) . 55 Global ESCO market growth 2015-18 . 56 Global green bond growth 2014-18 . 58 PACE lending in the United States, 2014-2018, annual and cumulative . 59 Estimated steel production from scrap in electric arc furnaces, by region, 2010-17 . 65 Figure 4.1. How digital technologies, when combined, could boost energy efficiency . 75 Figure 4.2. Global annual Internet traffic . 76 Figure 4.3. Smart meter deployment, cost and penetration, 2000-17 . 77 Figure 4.4. Example of how digitalisation leads to a more efficient energy system . 89 Figure 4.5. Policy principles comprising the Readiness for Digital Energy Efficiency framework . 93 List of boxes Box 2.1. Voluntary agreements delivering energy efficiency improvements in US broadband devices . 38 Box 3.1. In Europe, efficiency incentives deliver results . 53 Box 3.2. China: The story of an evolving ESCO market . 57 Box 3.3. Cooling as a Service (CaaS) innovation in efficiency financing . 60 Box 3.4. The Efficient World Financing Forum . 62 Box 3.5. Chinese homes switch to more efficient heating . 63 Box 3.6. Benchmarking industrial energy intensity in G20 countries . 66 IEA. All rights reservedEnergy Efficiency 2019 Table of contents PAGE | 8 Box 4.1. Sensors, connectivity, and automation for energy-efficient freight transport . 76 Box 4.2. Could blockchain support greater end-use efficiency? . 78 Box 4.3. Interfaces can streamline data collection to meet efficiency regulations . 79 Box 4.4. From traditional to intelligent building energy management . 80 Box 4.5. 3D printing in the construction sector from virtual to real energy efficiency . 82 Box 4.6. Virtual assistants and smart speakers an interface for more efficient household energy use . 83 Box 4.7. The “social licence” to leverage automation . 95 List of tables Table 3.1. Status of key buildings sector end uses . 64 Table 3.2. Progress of energy-intensive industry sub-sectors against the IEAs Sustainable Development Scenario . 65 Table 3.3. Status of key transport sector end uses with impacts for global energy efficiency . 67 Table 4.1. Possible global benefits of digital technology . 86 Table 4.2. Residential buildings: Possible benefits of digital technology . 86 Table 4.3. Industry: Possible benefits of digital technology . 87 Table 4.4. Transport: Possible benefits of digital technology . 88 Table A.1 Sectors and indicators included in the IEA decomposition analysis . 103 IEA. All rights reservedEnergy Efficiency 2019 Executive summary PAGE | 9 Executive summary Energy intensity improvements continued to slow in 2018 In 2018, primary energy intensity an important indicator of how much energy is used by the global economy improved by 1.2%, the slowest rate since 2010. This was slower than the 1.7% improvement in 2017 and marked the third year in a row the rate has declined. 1 It was also well below the average 3% improvement consistent with the IEA Efficient World Strategy. The slowdown represents a lost opportunity. For example, although the 1.2% improvement in energy intensity meant that the world generated USD 1.6 trillion (United States dollars) more GDP for the amount of energy used compared to 2017, this figure would have been USD 4 trillion, an amount close to the size of the German economy, had energy intensity improved at 3% every year since 2015. A range of short-term factors contributed to the slowdown in global energy intensity improvement. On the demand side, energy-intensive industries in the Peoples Republic of China (“China”) and the United States (amongst others) increased their share of industrial production and pushed up demand for all primary energy fuels. Weather also played a role: In the United States, a cooler winter and a warmer summer drove up energy use for both heating and cooling. In Europe, a milder winter cut gas demand for heating, a major factor behind a 2% improvement in energy intensity, up from 1.4% in 2017. On the supply side, after three years of flat growth or decline, coal power generation increased in 2017 (3%) and 2018 (2.5%) to supply stronger electricity demand growth. More fossil fuel-based electricity generation increases primary intensity because energy is lost when these fuels are converted from primary to final energy. Longer-term structural factors are also playing a part in the slowdown. While technologies and processes are becoming more efficient, structural factors are dampening the impact of these technical efficiency gains on energy demand, and slowing global energy intensity improvements. In industry, the impact of structural change away from energy-intensive industries, has gradually weakened since 2013. In 2018, structural change in industry actually added to energy demand. In transport, despite improvements in vehicle efficiency, energy intensity is worsening because sales of new, more efficient vehicles have slowed, consumers are preferring larger cars, and typical vehicle occupancy rates have fallen. In residential buildings, structural changes, such as increased device ownership and use, and a significant growth in average per capita residential floor area in all economies, have consistently matched or outpaced efficiency gains since 2014. If these structural trends continue, technical efficiencies will need to increase much more rapidly to achieve a level of energy intensity improvement consistent with meeting global climate change and sustainability goals. 1 Energy intensity is the amount of primary energy required to produce one unit of gross domestic product (GDP). In this report, energy intensity is said to “improve” when less energy is needed for a given activity. An energy intensity improvement is expressed as a positive number, while a worsening of energy intensity is expressed as a negative number. IEA. All rights reservedEnergy Efficiency 2019 Executive summary PAGE | 10 Technical efficiency improved in 2018, but significant potential remains The impact of technical efficiency improvements has been slowing down. The annual impact of technical efficiency improvements on demand has almost halved between 2015 and 2018, fro