EU

DIRECTIVE

1. PRIMARY ENERGY EFFICIENCY LAW

Directive 2012/27/EU of the European Parliament and of the Council of 25 October 2012 on energy efficiency ("Directive 2012/27/EU"), amending Directives 2009/125/EC and 2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC Text with EEA relevance.

This directive establishes a set of binding measures to help the EU reach a twenty percent (20%) energy efficiency target by 2020. All EU countries are required to use energy more efficiently. This encompasses all stages of the energy chain from production to final consumption.

EU Member States were required to adopt the following provisions into national laws by 5 June 2014.

2. SPECIFIC PROVISIONS OF THE LAW

-Energy distributors or retail energy sales companies have to achieve one point five percent (1.5%) energy savings per year through the implementation of energy efficiency measures;

-EU countries can opt to achieve the same level of savings through other means, such as improving the efficiency of heating systems, installing double glazed windows or insulating roofs;

-the public sector in EU countries should purchase energy efficient buildings, products and services;

-every year, EU governments will carry out energy efficient renovations on at least three percent (3%) of the buildings they own and occupy by floor area;

-empowering energy consumers to better manage consumption. This includes easy and free access to data on consumption through individual metering;

-national incentives for Small and Medium Enterprises ("SME") to undergo energy audits;

-large companies will make audits of their energy consumption to help them identify ways to reduce it; and

-monitoring efficiency levels in new energy generation capacities.

3. OBLIGATIONS

To achieve the twenty percent (20%) reduction, energy distributers must achieve a one point five percent (1.5%) energy reduction every year from 1 January 2014 to 31 December 2020. This obligation contributes significantly to the reduction, but does not cover the full extent of the reduction.

According to Article 7, Paragraph 4, each Member State is required to ensure that all energy companies comply with the Energy Efficiency Obligation based on objective and non-discriminatory criteria. However, there is an exception for small retail companies to avoid disproportionate administrative burdens.

Member States are required to regularly report progress to the EU Energy Commission by 30 April. Every three (3) years, States have to submit National Energy Efficiency Action Plans that cover significant energy efficiency improvement measures and expected and/or achieved energy savings.

On 30 November 2016, the Commission proposed an update to Directive 2012/27/EU containing amendments related to Article 7, along with an evaluation report of Articles 6 and 7.

Alternatives if energy companies do not participate:

-energy or CO2 taxes that have the effect of reducing end-use energy consumption;

-financing schemes and instruments or fiscal incentives that lead to the application of energy efficient technology or techniques and have the effect of reducing end-use energy consumption;

-regulations or voluntary agreements that lead to the application of energy efficient technology or techniques and have the effect of reducing end-use energy consumption;

-standards and norms that aim at improving the energy efficiency of products and services, including buildings and vehicles, except where these are mandatory and applicable in Member States under EU law;

-energy labelling schemes, with the exception of those that are mandatory and applicable in Member States under EU law; and

-training and education, including energy advisory programmes, that lead to the application of energy efficient technology or techniques and have the effect of reducing end-use energy consumption.

There is no legislation in place under the 2012 Directive for sanctions if Member States do not meet their targets. The Member States will be referred to infringement proceedings if they do not meet their obligation deadlines. Article 24, Paragraph 10, allows for the Commission to propose more aggressive proposals if they will not meet their 2020 targets.

4. MANDATORY AUDIT OF LARGE INDUSTRY

Member States can have programmes to support energy audits, but the expectation is that companies pay for their own audits. The rationale is that companies will ultimately profit from energy efficiency, and the audit will pay for itself.

There are no established parameters for how large an industry must be in order to be audited. These will be set by Member States. The Commission states that the industry should be larger than an SME which is a company with less than 250 employees, a turnover less than EUR 50 million and a balance sheet total of less than EUR 43 million.

There is no obligation to implement recommended measures from an audit, but it is contemplated that the potential savings identified through such an audit will be enough to convince companies to invest in energy efficient measures.

5. STRATEGIES

Long-Term Renovation Strategies

Article 4 calls for Member States to establish long-term renovation strategies to provide a well-planned and ambitious approach to revitalise low renovation rates and to significantly reduce energy consumption of building stock by 2050. Member States must have drafted their national renovation strategies by 30 April 2014 and must update these every three (3) years as part of their National Energy Efficiency Action Plans ("NEEAPs").

This Article gives no specific timeline, but the Commission published the Energy Roadmap 2050. As stated by the Commission: "The EU is committed to reducing greenhouse gas emissions to eighty to ninety five percent (80-95%) below 1990 levels by 2050 in the context of necessary reductions by developed countries as a group. In the Energy Roadmap 2050 the Commission explores the challenges posed by delivering the EU's decarbonisation objective while at the same time ensuring security of energy supply and competitiveness. The Energy Roadmap 2050 is the basis for developing a long-term European framework together with all stakeholders."

Member States are not specifically obliged to implement the long-term renovation strategy. However, these strategies will help Member States reach their 2020 targets; therefore, there is an incentive to implement these strategies.

Public Sector Energy Efficiency

Article 2 does not provide definitions for central government, which complicates the measure to increase public sector efficiency. The EED states, "The obligation to renovate floor area of central government buildings should apply to the administrative departments whose competence extends over the whole territory of a Member State."

Member States are obliged to renovate three percent (3%) of the building stock annually. Renovations must be completed even if they go beyond the 2020 target date.

6. TARGETS

This Directive only sets an indicative energy savings target for 2020, unlike targets set for climate change and renewable energy. These targets are binding for Member States.

The three main cross sectoral targets are:

-twenty percent (20%) EU energy savings target. Defined in Article 3.1(a) as a maximum of 1,474 Mtoe (million tonne of oil equivalent) primary energy or 1,078 Mtoe final energy consumption in 2020. The energy savings gap under current policies is estimated to be around 190 Mtoe;

-The indicative national efficiency targets. Defined in Article 24.7. Member States must set their own energy efficiency targets that are at least as efficient to achieve the twenty percent (20%) reduction by 2020. This will be assessed by the Commission, and will then consider proposing a binding target; and

-The national binding target for end-use savings. Defined in Article 7, sets a general binding target to deliver one point five percent (1.5%) cumulative annual energy end-use savings.

Relevant National Laws are analysed in the respective country chapters.