Unlocking European Competitiveness Through Industrial Energy Efficiency

By Ma?lle Gomez , Catriona Campbell and Ramya Krishnaswamy

As the world grapples with energy challenges exacerbated by geopolitical events and climate imperatives, European leaders from both public and private sectors are emphasizing the critical role of energy efficiency in securing a sustainable and competitive future. This is underscored by the pledge taken by over 130 countries at COP28 to double the average annual rate of energy efficiency improvement by 2030. How can Europe deliver on this promise while enhancing competitiveness? Last week at EU Sustainable Energy Week, the European Commission, in collaboration with the World Economic Forum, co-hosted a panel to address exactly this question.??

These are our main takeaways from the discussion with a panel of distinguished guests from the European Union, International Energy Agency, and leaders from the private sector.?

Europe, and the wider global economy cannot reach the climate targets without energy efficiency?

Europe has set a target and is on track to deliver a reduction in energy consumption of 11.7% by 2030 as recalled by the Energy Commissioner. Europe is also increasingly cooperating with international partners and is mobilizing 2.3 billion euros for better resource utilization.?

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Energy efficiency can simultaneously build economic competitiveness and reduce cost?

Within Europe, attention is shifting from securing energy supplies following the start of the war in Ukraine, to building competitiveness in a new energy economy with higher prices and greater potential instability.??

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Delivery of energy efficiency improvement requires a diverse set of actions?

Energy efficiency is not one large project, but instead a disaggregated set of actions across all sectors. When combined, these can drive remarkable results?

• Replacing old electric motors: a study shows that replacing 800 motors with efficient ones would reduce energy consumption by 17.8%, equivalent to the energy use of 18,000 European households)?
• Using Industrial heat pumps as efficient alternatives to steam boilers in various industries, including paper, steel, and CCUS, to lower gas dependency and reduce CO2 emissions?
• Leveraging district heating through heat and waste recovery to enhance circularity?
• Electrification of heavy mobility to decarbonate logistics at scale?

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Despite the benefits, implementing energy efficiency actions faces headwinds?

While everyone is keen and has set targets, challenges lie in implementation and maintaining a long-term perspective is key. For example, the buildings sector face headwinds from rising interest rates, which limit the payback period for interventions such as retrofit at scale. Moreover, currently the clean energy and energy efficiency investments are concentrated in 3 main areas:? the EU, US and China (c.85%, limiting global knowledge sharing and progress. Also, addressing concerns about job losses to upskill workers and create new energy efficiency jobs, particularly in transport and buildings sectors is essential.?

Delivery at scale requires a systemic approach?

Delivery of change requires action across governments and borders, including through public-private collaborations. Additionally, supply and demand should be considered together, and efforts made to raise the profile of energy efficiency for both politicians and businesses based on the long-term competitive advantage it can build.?

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The European Commission has a key role to play?

To deliver energy efficiency in industrial sectors and beyond, the panel had four recommendations for the incoming energy commission:?

1. Unlock financing and access to funding: establish a clear and simplified framework to unlock funding access, making energy efficiency a key driver of innovation, job creation, competitiveness and grid stress reduction.??

1. Invest in new technologies while focusing on building European supply chains: sustain new technologies development and relocate supply chains to Europe to boost competitiveness, unlock know-how and export capabilities?

1. Improve grid resilience: upgrade grid to sustain massive electrification while fostering cooperation across value chains and public-private projects??

1. Transform energy Demand Management: align increased energy production with effective demand management to ensure investment needs, ensuring clarity on green practices.?

Delivering climate and competitiveness benefits through energy efficiency while solving many of these barriers can only be possible if several stakeholders acted together.??

As Paula Pinho, The European Commission’s Director at the Directorate-General Energy of the European Commission stated: "We witness an unprecedented momentum on energy efficiency. We should all ride that wave and look actively at all key sectors on how to make processes more efficient. For financiers, the business case is clear, so please invest. For companies: test more and innovate by adding more energy efficiency to your assets. To global organizations such as the IEA and the World Economic Forum: continue to unite different stakeholders around this crucial issue."?

As set out by the International Business Council (IBC), a group of 120 CEOs whose businesses represent 3% of global energy use, in their Transforming Energy Demand Initiative 1, there are many case studies2 of businesses rapidly decreasing their intensity through energy savings, energy efficiency, and value chain collaborations. A white paper published in January 2024 3shows that existing technology could be used to reduce energy consumption by up to 31% with no loss of economic output. If this were to be delivered by 2030, it would result in savings for the global economy of up to $2tn per year.?

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We would like to thank the European Commission and all our panellists for their invaluable contributions: Kadri simson, Energy Commissioner; Brian Motherway , International Energy Agency; @Paula Pinho, Director at the Directorate-General for Energy, European Commission; Monica Frassoni , President of EU Alliance to Save Energy and former EU Parliament member; Volker Ratzmann , Executive VP Corporate Public Affairs, DHL; Marco Baresi , Institutional Affairs and Marketing Director, Turboden part of Mitsubishi Heavy Industries Group; and Erich Labuda Labuda, President Motion Services Division, ABB.?

To learn more, watch the session recording?here ?and read the white paper "Transforming Energy Demand" from the World Economic Forum?here .?

Views expressed are our own, or those shared during the panel. The opinions expressed do not reflect the views of the World Economic Forum or PwC.?