Experts continuously insist that Egypt’s energy woes would be reduced significantly if the nation became more energy efficient. This could be accomplished mostly by reducing energy subsidies, so they stress, but decades of failures to decrease the subsidies significantly do not give hope that it will happen soon. However, experiences of other countries indicate that besides reducing subsidies, there are several other measures that can boost energy efficiency (EE). This article reviews a few successful EE policies, with particular attention on the lessons that could be learned from other MENA countries.
Tunisia: Comprehensive Long-Term Pursuit for Energy Efficiency
According to the Regional Center for Renewable Energy and Energy Efficiency (RCREEE) for Arab countries, Tunisia has the lowest energy intensity among its 13 member states. Already in 2000, Tunisia’s energy intensity was lower compared to Egypt’s. Recent years have widened the difference to above 40% since Tunisia’s energy intensity has fallen, whereas that of Egypt has increased.
Energy Efficiency Agency
Tunisia’s success in decreasing energy intensity is mostly attributed to its highly qualified EE agency, the National Agency for Energy Conservation (ANME) established in 1986. Its current responsibilities include conducting and supporting research, proposing legislation, participating in the creation and implementation of national EE programs, and managing the country’s EE fund. ANME employs about 135 people.
Thanks to ANME, EE measures have been continuously developed and implemented in Tunisia over decades. In 1993, EE equipment that does not have locally manufactured equivalent was exempted from VAT and its import duty reduced to 10%. There also is no VAT for domestically produced EE equipment.
Voluntary Industry Agreements
Another significant breakthrough was the 2004 law dedicated solely to EE that sets a comprehensive framework for decreasing energy intensity through various measures in all sectors of economy. From that year, Tunisia also has multi-annual national EE programs that set improvement targets.
Tunisia introduced a number of policies in 2004 for improving EE in the industrial sector, including the system of mandatory energy reporting for large energy consumers. “Such reports enable to monitor energy consumption, do benchmarking within each industry and set EE targets for each industry based on the best performers,” explains RCREEE’s Policy Analyst Nurzat Myrsalieva. “As the next step, funding schemes were introduced to help companies reach the targets.”
Between 2000 and 2012, industry groups and the government signed 490 bilateral agreements for voluntary reduction of energy consumption.
Also other countries, Australia for example, have achieved success with such measures whereby only the assessment and reporting of energy use, not its reduction, is mandatory for companies. The success is based on the fact that energy auditing makes companies discover options for saving energy and once they know such options, they often act voluntarily to make use of these in order to lower their energy bills, explains IEA.
Energy Efficiency Fund
Since 2005, Tunisia provides financing for EE measures via the National Fund for Energy Savings. Its revenues come from taxes on the first registration of cars as well as on import and manufacturing of air conditioners, from the savings achieved by EE activities, and from private donations.
The fund subsidizes measures such as energy audits, power and heat co-generation and substitution of natural gas. It also assists in meeting the minimum EE specifications for residential and administrative buildings that were set in 2008-09.
Switch to Efficient Lighting
Tunisia’s government has more capacity to invest in EE thanks to its fossil fuel subsidies being relatively low. Besides saving money for the state, low fossil fuel subsidies motivate Tunisians to save electricity and fuel. As an additional measure for saving electricity, Tunisia in 2011 banned the sale of incandescent light bulbs with power above or equal to 100 watt and voltage above or equal to 100 volt.
RCREEE highlights Tunisia’s efforts to periodically monitor, adjust and tighten EE requirements. Such progress is set to continue. Among new measures, the government plans to set minimum EE performance specifications for hospitals and hotels.
Main differences between EE policies in Tunisia and Egypt
Designated agency for EE
Mandatory energy audits
Yes for large energy-consuming facilities
Regulatory phase-out of inefficient lighting technology
EE fund and subsidies
VAT benefits for EE equipment
Exempted from VAT
Electricity price subsidies
Average residential implied subsidy 25 % and industrial 16 % in 2011
Average residential implied subsidy 84 % and industrial 75 % in 2011
Jordan: Gradual Removal of Electricity Subsidies
A good example of how to gradually remove energy subsidies can be observed in Jordan, informs RCREEE’s Policy Analyst Nurzat Myrsalieva. This country recently adopted an electricity tariff schedule for 2013-17, which foresees that the tariffs will increase up to 15% annually depending on the type of consumers, so some prices will be as much as 75% higher within five years. “This is a good policy because it gives consumers, especially large consumers such as industries, time to adjust to the forthcoming changes, to integrate EE measures into their activities and pursue self-generation of energy from renewable sources,” explains Myrsalieva.
Sudan, Palestine: Prepaid Electricity Meters
In Sudan, a successful EE measure is the use of prepaid meters for electricity. “This is similar to prepaid mobile phone services: households pay in advance for the electricity they plan to use,” elaborates Myrsalieva. “This makes them careful not to exceed the planned amount because it would mean cut of electricity supply.” She adds that customers can of course buy additional credit, but at a higher rate. The process of buying credit has been made very convenient. “For example, a customer can request distribution company to send the code number directly to his mobile number; in this case, money will be deducted straight from the customer’s bank account,” explains Myrsalieva. A similar system exists in several jurisdictions, including Palestine.
Morocco: Cash Award for Electricity Savings
Morocco has a special tariff called 20/20 for motivating households to reduce electricity consumption. “20/20 tariff incentive awards households that reduce electricity consumption by 20% compared to the same month in the previous year with an additional 20% of the value of the saved consumption,” explains Myrsalieva. Accordingly, a 20% reduction of consumption will slash electricity bill by 40%. No wonder that consumers have made use of the tariff and thousands of gigawatts have been saved as a result. However, as Myrsalieva points out, “In general, price-based EE schemes only have significant impact if electricity prices are high enough, which is not the case in Egypt.”
Libya: 24-Hour Electricity Indicator on TV
Libya offers a good example of how to raise awareness about EE. “There is an indicator displayed on the coroner of TV screen on the national television showing the current electricity load in the plants for 24 hours. This indicator shows the actual electricity consumption in Libya at the time as well as generation,” explains Myrsalieva. “Another tool is a line that appears at the bottom of the TV screen. This line presents key messages and advices to citizens such as turning of the electricity when leaving the house.” At times of high load, the indicator changes from green to orange. When consumption exceeds generation capacity, it turns red to inform that people should reduce their electricity consumption immediately to avoid complete power cuts. “It is difficult to achieve any significant energy savings with such a measure in Libya where electricity prices are even lower than in Egypt, but at least this measure made people discuss the topic,” noted Myrsalieva.
Turkey: Energy Managers for Buildings
The EE law adopted by Turkey in 2007 stipulates that industrial plants and large residential units must appoint or contract an energy manager to ensure that efforts to save energy are undertaken, informs IEA. The government, universities, as well as companies organize programs to train and certify energy managers. Turkey also implements many other measures that promote energy conservation such as the annual EE week for increasing public awareness, and overall liberalization of markets that increases competition and hence the motivation of companies to save energy.
Thailand: Funding Efficiency With Petroleum Taxes
Also Thailand has undertaken significant effort to increase EE, notes University of Oxford energy expert Justin Dargin. It includes a fund financed by taxes on petroleum products that offers credit lines to local banks for giving loans to EE projects. To encourage the banks to familiarize themselves with these kinds of projects, the credit lines were initially offered at no interest. Energy savings worth dozens of millions of dollars have been achieved annually thanks to this measure, informs the World Resources Institute. Thailand’s EE development plan 2011-30 expects particularly large savings from a switch to more energy efficient air conditioners and states that introduction of air conditioning by solar energy (solar cooling) should be considered.
US: Keeping It Simple With Energy Star Label
Some jurisdictions such as the UK have mandated the public sector to take into account life-cycle costs when choosing which products to purchase, so that energy efficient products would not be in a disadvantaged position compared to cheaper but more wasteful goods, informs the European Council for an Energy Efficient Economy. But for an individual it can be difficult to determine which products have high EE. To overcome this challenge, the US government in 1992 launched the voluntary standards and labeling scheme Energy Star. Products can earn the Energy Star label by meeting the specifications set by the US Environmental Protection Agency. By now the program covers over 60 product categories, even whole buildings can earn Energy Star certification. Appliances with Energy Star label can be easily found in many countries, including Egypt, and some jurisdictions outside the US such as the EU, Japan, and Australia have adopted the scheme officially.
Italy, France, UK: White Certificates’ Market
Some European countries like Italy, France and the UK have in recent years introduced White Certificates schemes to boost EE. These programs oblige electricity and gas distribution companies to reduce energy consumption of their customers by a predetermined rate each year by using measures of their own choice, such as building insulation programs and energy efficient lighting. White Certificates are given against energy savings achieved. If a company has not met the target, it can either buy the certificates from those who have over-achieved or must pay a penalty, informs the World Bank. The trading feature ensures that in principle energy savings occur where they are economically most efficient, explains IEA.
Japan: Standards above Best Performers’ Level
Japan’s Top Runner program sets EE standards for several appliances at higher levels than best-performing products, and obliges manufacturers to meet those standards in 3-10 years, informs IEA. This drives manufacturers to innovate. As a result, fuel efficiency of vehicles has improved by 50% from 1995 to 2010 and EE of refrigerators by 43% from 2005 to 2010, just to bring a few examples.
Tarek Tawfik, Vice President of the Federation of Egyptian Industries, recently said that Egypt could “theoretically avoid” blackouts this summer simply by educating the public on saving energy and fixing inefficiencies-which are caused by low prices-such as needlessly transporting power station fuel oils to Red Sea towns by truck, reports the International Business Times. However, especially given the de-motivating force of low energy prices, Egypt’s EE unit at the Council of Ministers Secretariat is far too weak to achieve that, considering that as per RCREEE’s 2013 report, it includes one person only. If Egypt really wants to see EE success and make constant summer blackouts and fuel shortages a phenomenon of the past, then based on experiences of other countries, as a first step it needs to set EE higher on its agenda and devote significantly more human resources to it.
By Laura Raus