Energy Efficiency in Europe and Central Asia

The world depends on energy - for lighting hospitals, heating schools, and for providing gas, heat, and electricity for households around the globe. Yet nearly twenty percent of the world’s population lives without access to electricity and nearly forty percent depends on wood and other biomass for household fuel.

Energy is fundamental to sustained economic growth and crucial for reducing poverty and increasing shared prosperity. Business development, job creation, and income generation all require an adequate supply of energy that is both affordable and reliable. In many parts of the developing world, however, achieving a reliable power supply remains a constant struggle. Recent global initiatives, including Sustainable Energy for All, have outlined the importance of energy in the global fight against poverty and provide guidance on how policy makers around the world can solve the energy riddle.

With a potential energy crisis looming for countries in Europe and Central Asia (ECA), guidance and resources provided by these initiatives are particularly important for countries this region – one of the most energy intensive regions in the world. Technical losses during transmission amount to 13% and 15% in Ukraine and Macedonia, respectively, and are as high as 20% in Tajikistan. Poorly constructed buildings throughout the region provide low heating and increase energy consumption at schools, places of work, and homes. Furthermore, while the region accounts for just 12 percent of global greenhouse gas (GHG) emissions, this is twice the amount it should contribute, given its output. All of these factors contribute to an inadequate supply of affordable energy throughout the region – impacting households, especially poorer ones, in every country and prompting the need for action.

The Sustainable Energy for All initiative stands out as a strong example of what type of action is necessary to address energy concerns in the region. While two components of this UN-led initiative - increasing access to modern energy services and transitioning toward more renewable sources of energy - both present opportunities for countries in ECA to address their energy challenges, it is the third pillar of the initiative that presents the greatest opportunity for ECA: doubling the rate of improvement in energy efficiency.

Over the last decade, The World Bank Group has committed more than $3 billion to the region for energy efficiency activities –  helping countries like Belarus to reduce its energy intensity by 60% over the past 15 years and saving Uzbekistan 50,000 MWhs of energy that would otherwise be lost to inefficiencies. Total savings to the region from energy efficiency projects, programs, and initiatives over the last ten years are estimated at 42.5 TWh per year, or the total amount of power generated in New Zealand in 2010.

In addition to being one of the most cost-effective ways to increase energy, energy efficiency efforts also create opportunities for countries in ECA to reduce GHG emissions. Investments in the region are already saving an estimated 7.5 million tons of CO2 every year – supporting green growth in cost–effective ways. 

Going forward, however, these commitments will need to be scaled up to avert an energy crisis in the region. Investments of about $3.3 trillion – or 3% of Gross Domestic Product in the region – will be necessary over the next 20 years. While substantial, many of these investments can pay for themselves in a few years. Evidence from countries in the Balkans has shown that energy efficiency measures there typically save 30-45 percent per building and have payback periods of approximately 6-8 years. Furthermore, cutting energy subsidies, protecting the poor, and investing in energy efficiencycould mean that nearly half of the countries in ECA would gain more than 1 percent of GDP.   

Looking toward this future, The World Bank Group has recently renewed its commitment in this sphere with a call to scale up these initiatives according to the individual needs of countries in the region. Opportunities vary from country to country, but they include increasing the energy efficiency of existing infrastructure through rehabilitation, moderating demand for energy, adopting more efficient technologies, and making cities more energy efficient. These initiatives can help countries by simultaneously increasing their energy security, enhancing their economic growth, and reducing the environmental and social impacts of their energy sectors. By doing so, countries have the potential to increase industrial competitiveness, reduce the need for new power plants, and further forestall the impending regional energy crisis.