The Bright and Dark Sides of Energy Efficiency Obligation Scheme: The Case of Latvia

Abstract

Evidence collected by researchers over several decades suggests that the successful implementation of the Energy Efficiency Obligation Scheme (EEOS) may deliver significant, cost-effective energy savings over many years. However, before starting EEOS in Latvia, predictions by energy efficiency policy researchers envisaged that it is at high risk of savings shortfalls. This study aims to carry out an ex-post policy evaluation of EEOS in Latvia and assess its ability to deliver significant savings in the first phase of the new EEOS. This paper questions whether the new EEOS can reach savings goals without prior experience with voluntary agreement schemes and emulation of successful EEOS from other countries. The second goal of the research is to create a web-based optimization tool as an Interactive Learning Environment to help policymakers and EEOS-obliged parties to create goal-oriented strategies. The study has found that, contrary to expectations, Latvia has reached and even overfulfilled EEOS saving goals. Estimated cumulative savings obtained during the starting phase (329.2 GWh) are 68% higher than the cumulative savings planned by the policymakers for 2020 (234 GWh). This success is related to the enforcement of a stick-type approach in the policy. However, the study also revealed the dark side of EEOS implementation by discussing different types of energy efficiency measures applied by EEOS and the role of implementing and monitoring institutions. The ex-ante evaluation projected that 50% of the EEOS savings would be derived from information and education measures and 50% through contributions to the Energy Efficiency Fund or by implementing the most cost-effective energy efficiency measures. The ex-post evaluation shows that around 95% of savings are achieved through information measures and the rest by introducing energy efficiency measures on the consumer side. EEOS parties do not contribute to the Fund because the cost of information measures (on average 4 EUR/MWh) is significantly lower than the contribution to the Fund (70 EUR/MWh).