Introducing Energy Efficiency 2.0: the electric grid of the future, built for renewables

Ahead of the COP28 climate summit in the UAE, major actors are calling for a tripling of renewables and a doubling of energy efficiency by 2030. While commitments to renewables regularly make headlines in the lead up to such events, this is relatively new territory for energy efficiency.

Commitments linked to energy efficiency are absolutely necessary in a world aiming to reach net zero emissions by 2050. But the thinking of many leaders around energy efficiency is still stuck in the fossil-fuel era. For these bold, forward-thinking commitments to drive real impact in the push to decarbonize, leaders must update their thinking around energy efficiency to reflect an energy grid based largely on renewables.

In a fossil fuel system, energy efficiency has been all about using less energy to achieve the same output, such as increasing vehicle fuel economy. And while this is still crucial, renewables produce electricity, not gas or coal. So, it’s time to rethink energy efficiency for an electrified energy grid.

To create an a highly energy efficient renewable grid, we must do four things: Electrify wherever possible; be more flexible; use hydrogen wisely; and integrate sectors.

Together, these elements make up a new understanding of energy efficiency shaped for the era of renewables. They are “Energy Efficiency 2.0”.

We are leaving the fossil fuel era, but we haven’t prepared our energy system for the future. Implementing Energy Efficiency 2.0 will require action on all fronts. Here’s how policymakers, lawmakers and businesses can act on the four elements of Energy Efficiency 2.0 to prepare for the full-scale transition to renewable energy:

By transitioning from a fossil energy system to a fully electrified one, we can cut up to 40% of final energy consumption. Electrification is itself a form of energy efficiency, as most electric technologies have a lower rate of energy loss while performing the same function as a fossil-driven equivalent. Think of heat pumps, which are three to five times more efficient than gas alternatives. Or electric vehicles, which have an energy loss of only 15-20% compared to 64-75% for combustion engine vehicles.

Reinventing energy efficiency is not only about using less energy, but also using the energy at the right time. The wind doesn’t always blow and the sun doesn’t always shine, so we must find ways to provide energy to homes and businesses when renewables aren’t producing electricity. The main tools for achieving this are demand-side flexibility technologies, which shave peaks in demand and automate energy storage for times of low supply.

Research by Danfoss found that by maximizing the potential of demand-side flexibility, the EU and UK can annually save 40 million tons of CO2 emissions. This is because saving one unit of energy during peak hours saves far more carbon that one unit saved during hours of low demand. On top of these environmental benefits, demand-side flexibility can bring annual societal cost savings of €10.5 billion by 2030, and households can save on average 7% on their electricity bills. There is no reason why this logic could not apply also to other electricity markets across the world.

Powering our future energy system with renewables will require a rapid scale-up of hydrogen, as it enables us to decarbonize hard-to-electrify sectors. However, hydrogen conversion requires incredible amounts of energy. In fact, by 2030, hydrogen production will require more than half the total electricity demand today. High-efficiency technologies for electrolysis will be essential to lower energy demand for hydrogen, ensure energy security and stabilize the grid.

Similarly, because hydrogen production is such an energy-intensive process, we must make sure we are using it for the right purposes. For example, using hydrogen to heat homes in the UK would require six times more offshore wind capacity than it would if we heated homes with heat pumps. Instead, hydrogen will be more effective in decarbonizing hard-to-abate industries, such as long-distance shipping, long-haul aviation and steel production.

Excess heat is the world’s largest untapped source. By strategically integrating sectors and deploying excess heat, we can ultimately lower demand on energy production and maximize efficiency. By 2030, up to 53% of the global energy input will be wasted as excess heat. However, this heat can be captured and reused to power machinery, as well as heat buildings and water through deeper sector integration.

Energy efficiency is not an afterthought to renewables. In the future energy system, energy efficiency must take centre stage. We must work in harmony with the build out of renewables and electrification to meet our climate goals, ensure energy security, boost the economy and fundamentally transform the way energy is governed and consumed. Energy Efficiency 2.0 is the fastest and most cost-efficient way turn a 2050 net-zero scenario into a reality.

The IEA is keenly aware of the need to build grids ready for the energy transition, and has warned that we have so far not acted quickly enough in this area. The good news, however, is that we already have the necessary technology. We don’t need magic, but we do need immediate political action to scale the solutions.