Europe Adopts New Directive to Prioritize Energy Efficiency Across Member States

Francesca Rubbiani

Jul 27, 2023 • 5 min read

The European Union (EU) has recently adopted an "energy efficiency first" directive, which sets binding targets for consumption reduction and prioritises energy efficiency in policymaking, planning, and significant investments. The amended Energy Efficiency Directive requires member states to collectively reduce energy consumption by at least 11.7% at EU level by 2030. The directive also introduces an annual energy consumption reduction target of 1.9% for the public sector and promotes local heating and cooling plans in larger municipalities.

Under the recast directive, EU countries must achieve an average annual energy savings rate of 1.49% from 2024 to 2030, up from the current requirement of 0.8%, driving energy savings in critical sectors like buildings, industry, and transport. The legislation also defines energy poverty and compels EU countries to prioritise energy efficiency improvements for vulnerable customers, low-income households, and individuals in social housing.

The directive includes provisions for businesses operating in the EU to benefit from assessments of their energy use practices, with energy management systems becoming a default requirement for large energy consumers exceeding 85TJ of annual energy consumption. It will be subject to mandatory audits in the event of non-compliance. Enterprises with an energy consumption above 10 TJ must perform an energy audit and prepare an action plan for the different recommendations. The agreement also introduces a reporting scheme of energy performance in large data centres, promoting transparency and optimising energy efficiency potential.

The directive supports energy efficiency financing provisions to facilitate investments, including from the private sector, which has a crucial role given the limited public resources available for the clean energy transition. EU countries are tasked with promoting innovative financing schemes and green lending products, ensuring more comprehensive access through transparent investment. Enhanced reporting on energy efficiency investments will improve accountability and transparency.

The EU has concluded inter-institutional negotiations on the enhanced legal framework for energy efficiency, setting binding targets for consumption reduction with "efficiency first" as a legal standing for the first time. The Council's endorsement follows the one the European Parliament gave earlier this month. It marks the final step in the legislative process that started in July 2021 as part of the "Fit for 55" package. The European Union (EU) has recently adopted an "energy efficiency first" directive, which sets binding targets for consumption reduction and prioritises energy efficiency in policymaking, planning, and major investments. The amended Energy Efficiency Directive requires member states to collectively reduce energy consumption by at least 11.7% at EU level by 2030. The directive also introduces an annual energy consumption reduction target of 1.9% for the public sector and promotes local heating and cooling plans in larger municipalities.

Under the recast directive, EU countries must achieve an average annual energy savings rate of 1.49% from 2024 to 2030, up from the current requirement of 0.8%, driving energy savings in critical sectors like buildings, industry, and transport. The legislation also includes the definition of energy poverty and compels EU countries to prioritise energy efficiency improvements for vulnerable customers, low-income households, and individuals in social housing.

The EU has concluded inter-institutional negotiations on the enhanced legal framework for energy efficiency, setting binding targets for consumption reduction with "efficiency first" as a legal standing for the first time. The Council's endorsement follows the one given by the European Parliament earlier this month and marks the final step in the legislative process that started in July 2021 as part of the "Fit for 55" package.The EU has adopted a new directive prioritising energy efficiency across all member states. The order sets binding targets for consumption reduction and establishes "efficiency first" as a legal standard for the first time. The amended Energy Efficiency Directive requires member states to collectively reduce energy consumption by at least 11.7% at the EU level by 2030, with a monitoring and enforcement mechanism to ensure compliance.

Under the new directive, EU countries must prioritise energy efficiency in policymaking, planning, and significant investments. They have also agreed to nearly double their annual energy savings obligation, requiring an average annual energy savings rate of 1.49% from 2024 to 2030. The legislation also includes a definition of energy poverty, which requires EU countries to prioritise energy efficiency improvements for vulnerable customers, low-income households, and individuals in social housing.

The public sector is expected to play a significant role in enhancing energy efficiency practices. The directive introduces an annual energy consumption reduction target of 1.9% for the public sector and extends the yearly 3% building renovation obligation to all levels of public administration. Energy Performance Contracts will be prioritised in implementing energy efficiency projects in the public sector, and public bodies will consider energy efficiency requirements when making decisions regarding purchasing products, buildings, and services.

Businesses operating in the EU will benefit from assessments of their energy use practices, with energy management systems becoming a default requirement for large energy consumers exceeding 85TJ of annual energy consumption. Enterprises with energy consumption above 10 TJ must perform an energy audit and prepare an action plan for the different recommendations. An obligation to monitor the energy performance of data centres has also been introduced, with data collection and publishing at the EU level.

The new legislation promotes local heating and cooling plans in larger municipalities and gradually tightens minimum requirements for a fully decarbonised district heating and cooling supply by 2050. EU countries are also tasked with ensuring that certification and qualification opportunities are available for energy efficiency-related professions.

The directive supports energy efficiency financing provisions to facilitate investments from the private sector. EU countries are tasked with promoting innovative financing schemes and green lending products, ensuring wider access through transparent investment. Enhanced reporting on energy efficiency investments will improve accountability and transparency.

The Council's endorsement marks the final step in the legislative process that began in July 2021 as part of the "Fit for 55" package. The Energy Efficiency Directive underwent significant amendments in 2018, introducing updated energy efficiency targets of at least 32.5% by 2030, based on 2007 projections. The Commission's proposal for a second revision of the Energy Efficiency Directive was put on hold in favour of this new directive.