Investments in energy efficiency reach $560 bn in 2022: IEA

Smart building

Investments in energy efficiency – such as building renovations, public transport and electric car infrastructure – rose 16 percent to USD 560 billion in 2022, according to the IEA’s latest market report, Energy Efficiency 2022.

Energy efficiency actions have accelerated in 2022 as governments and consumers have turned to efficiency measures as part of their responses to fuel supply disruptions and high energy prices, IEA analysis found.

In 2022 the economy used energy 2 percent more efficiently than it did in 2021, a rate of improvement almost four times that of the past two years, and almost double the rate of the past five years.

Total energy bills in IEA countries in 2022 are set to be USD 680 billion less than they would have been otherwise – or around 15 percent of their total energy expenditure this year.

The energy crisis sparked by Russia’s invasion of Ukraine has escalated concerns over energy security and the inflationary impact of higher energy prices on economies and people’s livelihoods around the world.

This year’s improvement comes after Covid-19 led to two of the worst years ever for energy efficiency progress, with annual gains falling to around 0.5 percent in 2020 and 2021.

Key factors included a higher share of energy-intensive industry in energy demand as other sectors contracted and a slowing pace of retrofits and upgrades in buildings and factories. Energy efficiency progress had already slowed before the onset of the pandemic, with the global rate of improvement falling from 2 percent in the first half of the last decade to 1.3 percent in the second half.

Efficiency improvements need to average about 4 percent a year this decade to align with the IEA’s Net Zero Emission by 2050 Scenario. There are encouraging signs of progress. The electrification of transport and heating is accelerating, with one in every eight cars sold globally now electric, and almost 3 million heat pumps set to be sold in 2022 in Europe alone – up from 1.5 million in 2019 – as they become an increasingly cost-effective heating source.

Existing building codes are being strengthened and new ones are being introduced in emerging and developing economies, while a rising wave of energy saving awareness campaigns is helping millions of citizens better manage their energy use.

All governments in Southeast Asia, for example, are now developing policies for efficient cooling, vital for a region with one of the fastest rates of growth in electricity demand.

This year has been marked by several significant policy and spending announcements that point to continued efficiency investment and progress for years to come.

These include the Inflation Reduction Act in the United States, the European Union’s REPowerEU plan and Japan’s Green Transformation (GX) programme, which add up to hundreds of billions of dollars in spending on more efficient buildings, cars and industries over the coming years.

However, these packages – like much of energy efficiency investment more broadly – are concentrated in advanced economies, and much greater investment is needed in emerging and developing economies.