London (Platts)--18Apr2012/804 am EDT/1204 GMT

The European Commission's directive on binding measures to ensure the EU meets its goal of boosting energy efficiency by 20% by 2020 is set to be seriously watered down by national governments, according to an internal EC analysis seen by Platts.

National energy and environment ministers are meeting this week in Horsens, Denmark, to discuss binding measures to meet the energy efficiency goal, which is currently only voluntary. The EC has forecast that without binding measures, the EU would only boost energy efficiency by 10% by 2020.

But the EC's initial analysis of the revised text preferred by the council -- which represents national governments -- would only bring about 38% of the energy savings targeted in the EC's original draft.

"The council's version of the Directive is thus estimated to reduce primary energy consumption by about 58.1 millions of mt of oil equivalent, while the commission's proposal would deliver a saving of 151.5 million mtoe, which is needed to close the gap ... to achieve the 20% target," the EC analysis states.

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The binding measures seek to boost energy efficiency between 2013 and 2020. They include an obligation on all energy suppliers to cut energy sales to end-users by 1.5% year-on-year and for the public sector to refurbish 3% of buildings by floor space to the highest energy efficiency standard each year.

SUPPLIER OBLIGATION CUT

But according to the EC analysis, the text being discussed by ministers would water down the obligation on energy suppliers to just 1% or 1.25% a year for four of the seven years up to 2020.

It would also allow suppliers to factor in some of their own energy savings, not just end-user savings, and it would exempt up to 40% of heavy industries covered by the EU emissions trading system, while allowing energy savings made already up to five years ago to be included. The EC said that together this would cut energy savings to just 29.1 million mtoe compared with 74.9 in the EC proposal. It also waters down the public buildings obligation, with national governments seeking to limit this just to central government buildings, cutting the projected energy saving to 0.4 million mtoe compared with 4.2 million mtoe.

Similarly, the EC proposal that energy efficiency must be considered in all public procurement becomes voluntary in the Council version and only applies to the largest contracts, cutting projected energy savings to just 0.6 million mtoe from 4.8 million mtoe. Other changes affect combined heat and power, which the EC wanted to make mandatory because of its greater efficiency -- potentially saving 25 million mtoe of energy over seven years. The version being discussed by ministers would require just a cost-benefit analysis rather than an obligation, which the EC says would save just 8.3 million mtoe.

But on the plus side, ministers have proposed an additional requirement to boost the efficiency of existing power plants, which could deliver further energy savings of 3.3 million mtoe. And they also want individual meters installed in apartment blocks that have communal metering.

National governments and the European Parliament need to agree on the proposals before they become law and the current Danish presidency, which represents national governments, is hoping to hammer out a compromise by June. It has started three-way talks with the EC and parliament representatives and these are set to continue in late April.

But the center-left group in the parliament has already slammed governments for their lack of ambition.

--Paul Whitehead, paul_whitehead@platts.com

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