SIEMENS

The energy equivalent of 0.19 liters – an ordinary glassful – of oil is needed on average in the world today to produce a commodity with a value of one U.S. dollar. In 1990 a quarter of a liter was required. Today, a further reduction of what is referred to as energy intensity is considered one of the keys to reaching a goal set by the European Union: to reduce CO₂ emissions by 80 percent by 2050 as compared to 1990. And in fact considerable progress has been made. In Germany it has been possible to reduce energy intensity from 0.17 to 0.11 liters since 1990. This excellent figure has been exceeded by only a few countries, (e.g. Spain), which in some cases have a more favorable climate. China has also made significant progress. In spite of all the criticism of its immense energy demand, China’s energy intensity has decreased from 0.72 to 0.27 liters since 1990.

According to the International Energy Agency (IEA), between 1980 and 2010 energy intensity decreased by one percent per year worldwide – mostly due to technological innovations. For example, the introduction of electronically controlled permanent magnet motors has improved the efficiency of electric motors by up to 95 percent. But despite all the advances, worldwide primary energy use has increased by over 50 percent since 1990. It’s true that during the same period the world’s population grew by a third to 7.1 billion people – but the situation is still sobering.

The basic reason for the problem can be reduced to one word: comfort. Today people all over the world require more living space than they used to, and in developing and emerging countries people are driving more and more cars and can now afford things they would never have dreamed of having in the past. But now, according to the World Energy Outlook 2012 of the IEA, all of the key energy-hungry countries have laid out ambitious plans to increase their energy efficiency. If these countries take their plans seriously, energy intensity should decrease by 1.8 percent per year between 2010 and 2035, for a total reduction of 36 percent. In order for this to happen, a worldwide annual investment of $158 billion will be necessary.

Are such predictions realistic? Certainly. The Fraunhofer Institute for Systems and Innovation Research in Karlsruhe stated as much in a report to the German Federal Environment Ministry. According to the report, by 2050 the European Union’s energy requirements could be 57 percent lower than they were in 1990. Around €500 billion in energy costs per year could be saved – in other words, just over 90 percent of the necessary investment could be recovered. Improvements in buildings offer the most potential for increased efficiency. The study shows that the energy needs of buildings could be reduced by 71 percent, mainly through better insulation of existing buildings, modern building technology, and energy-efficient heating and hot water systems. Potentially, energy savings of 53 percent are possible in transportation – thanks to improvements in traffic management, more energy-efficient driving, and improved logistics. Industrial energy demand could also be reduced by 52 percent by 2050. Three fourths of these savings are achievable through improvements in steam generation and electric motors.

However, in business and industry the goal is not only energy efficiency, but also cost savings. In the manufacturing sector, materials make up the largest portion of production costs, at over 40 percent. In a survey of almost 1,500 businesses that was carried out for the Federal Ministry of Economics and Technology, the Fraunhofer Institute for Systems and Innovation Research came to the conclusion that around seven percent of material costs could be saved, according to the surveyed companies’ own estimates. That would be a cost reduction of €48 billion per year, mostly in auto and machinery manufacturing, the electronics industry, and the food industry.

Reducing energy demand in spite of economic growth – is that possible? It is – under specific conditions. For example, since 1990 Denmark has reduced its energy demand by 18 percent while increasing its gross domestic product by 41 percent. As early as the 1990s the Danes forged ahead with the construction of natural gas-fired power plants that produce district heating as well as electricity and have an overall efficiency of up to 90 percent. In parallel, the Danes expanded their production of wind energy. Now, businesses are required to use energy more efficiently. Danish power companies are required to become 2.6 percent more efficient every year between 2013 and 2015. And beginning in 2015 they will have to become 2.9 percent more efficient annually. A catalogue of recognized measures defined by the authorities is available to help firms reach these targets in close cooperation with their customers. According to previous experience, this relationship with customers is an important competitive advantage.

The EU, which has oriented its Energy Efficiency Directive along the lines of the Danish model, requires power companies to achieve a much more modest 1.1 percent annual improvement in energy efficiency. Therefore the efficiency scenario of the EU’s “Energy Roadmap 2050” utilizes only 72 percent of the savings potential estimated by the Fraunhofer Institute. There is still great potential for energy savings, particularly in industries and private households, say the authors of the study. Nevertheless, the EU is still the international trailblazer. Only a few European countries and a states in the U.S. and Australia have enacted binding regulations for energy efficiency.

However, these regulations do not consider so-called “rebound effects.” If the money saved on electricity from the installation of a heat pump, for instance, is spent on air travel or the thermostat is simply turned up, the improvement is meaningless. Rebound losses of ten to 30 percent were revealed in an EU study. In research done by the Wuppertal Institute for Climate, Environment and Energy, economist Tilman Santarius says this figure could be as much as 50 percent in the long term.

There are no clear ideas on how this can be avoided. Even in Denmark, the lack of better ideas means that progress is ultimately limited to appeals to individuals to become more environmentally conscious and change their behavior. This takes some of the wind out of euphoric predictions about the future. That’s why futurologist Jorgen Randers, in his prognosis for the Club of Rome for 2052, expects only a one-third reduction in energy intensity compared to 2010. That would be more or less a continuation of “business as usual.” Randers believes it isn’t realistic to expect more than this as long as effective incentives – such as a meaningful carbon dioxide tax – aren’t politically feasible. Consumers play a key role in this situation. Through their purchasing decisions, they influence the manufacturing industry. And here there’s cause for cautious optimism. According to a survey recently conducted by the Federal Association for Information Technology, Telecommunications and New Media, 81 percent of consumers said they were prepared to pay more for electronic devices that save energy and resources. Somewhat more than half actually said that they were willing to pay an extra five percent or more.