The European Court of Auditors scrutinizes cost-effectiveness of energy efficiency investments

The court’s special report #21 assesses the implementation of the EU’s energy efficiency policy. It was adopted by the second chamber of the financial court under the presidency of Mr. Harold Noack and drafted under the supervision of Mr. Harold Wögerbauer. It was presented to the press in Luxembourg on January 14, 2013.

Energy efficiency policy part of EU cohesion policy

The Court of Auditors examined programmes from the period 2007 to 2013. More precisely, auditors looked into 4 operational programmes and 24 projects, i.e. only part of the 5 billion-euro energy efficiency investment loans offered by the EU. These programmes were carried out in three countries which have largely benefited from funds provided by the Cohesion Fund and the European Regional Development Fund under the EU’s cohesion policy: the Czech Republic (942 million €), Italy (828 million €) and Lithuania (370 million €). By way of comparison, France was granted 291 million € under the same programmes.

What can be learnt from this report on the profitability of energy efficiency investments ?

The report’s first conclusion is about energy efficiency targets, and it is rather alarming. While the EU wishes to reduce primary energy consumption by 20% by 2020, the 2007/2013 programmes are only expected to yield a 9% reduction. More alarming, however, is the following statement in the press release: “In 18 out of 24 audited projects actual energy savings could not be verified since they had not been reliably measured”. While 17 billion € could be allocated for energy efficiency measures during the 2014/2020 period, the report shows that “only 20% of allocated funds were actually used to save energy, while the remainder was spent on refurbishing buildings and improving comfort”. Finally, payback periods are too long, over 50 years and sometimes up to 150 years.

Recommendations to improve cost-effectiveness of energy efficiency investments

Given these observations, the Court “recommends that the Commission make the cohesion policy funding for energy efficiency measures subject to a proper needs assessment, regular monitoring and the use of comparable performance indicators as well as the use of transparent project selection criteria, […] with a maximum acceptable simple payback period.”

In its reply to the report, the Commission “acknowledges that the current legal framework for cohesion policy does not prescribe the type of indicators to be used for monitoring purposes”; however, it is “working towards the improvement of programme performance” for the period 2014 to 2020. It has proposed common indicators such as the number of households with improved energy consumption classification, the decrease of primary energy consumption of public buildings and the number of additional energy users connected to smart grids.

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