White Certificate Schemes Research Articles

Market-Based Instruments to Promote Energy Efficiency: Insights from the Italian Case

Market-based instruments such as white certificates offer the potential to increase efficiency gains, reduce primary energy consumption and make energy systems more resilient. The purpose of this paper is to provide insights into the white certificate scheme through a case study analysis. In light of increasing decarbonization and energy efficiency targets, it is important to rethink the role that policy instruments play in the energy transition, including the energy efficiency obligation schemes within which white certificate schemes fall. We focus on Italy’s white certificate scheme because it is among the longest-lived and has achieved notable results. The scheme is characterized by annually increasing energy savings targets, flexibility, the opportunity to include many interventions, and the role of energy services companies. We provide evidence based on an empirical survey and fill the research gap left by the latest updates to the scheme along with an appraisal of those updates, which covers prominent scheme innovations such as its stability mechanism. Our research can serve as a baseline for policymakers in designing white certificate schemes in countries with little related previous experience and provide useful information from countries where similar schemes have been implemented to fine-tune similar market-based mechanisms to improve energy efficiency.

Opportunity Cost of Carbon Pricing and White Certificate Programs: A Business Case

Carbon pricing aims to capture the external costs of emissions and link them to their sources through a price signal, while market-based policy tools support investments in energy efficiency, rewarding investors following certified energy savings. The interplay between the emission trading system and the white certificate scheme is complex, especially regarding opportunity costs and the efficiency of the two mechanisms combined in achieving environmental goals. Using monthly data covering six years, we analyze how carbon pricing and white certificate programs intertwine. We consider the opportunity cost as the savings from an energy efficiency intervention under the white certificate program in a firm covered by the emission trading system. We calculate the €/MWh savings corresponding to a one MWh reduction in energy consumption to assess the contribution of white certificates and the emission trading system as determinants of the savings induced by an energy efficiency intervention. We then simulate how the economic determinants of saving vary as the dynamics of the gas and emission permit markets change. The relative weight of the components on saving differs significantly according to the dynamics of the related commodity and environmental markets. Provided that the emission trading system is mandatory for certain industries while participation in a white certificate scheme is voluntary, we argue that the overlap between the two mechanisms can be effective. This is important for policymaking, periodic fine-tuning interventions to market-based mechanisms, and increasing flexibility. The paper also has business implications, given that energy managers may use this framework in building energy management strategies.

Supporting Residential Energy Conservation Under Constrained Public Budget: Cost-Effectiveness and Redistribution Analysis of Public Financial Schemes in France

In the context of tight public budgets and increasingly ambitious climate objectives, the performance of the support policies for residential energy conservation works needs to be assessed. We compare the performance of four types of support schemes in France, namely the income tax credit, a grant scheme, the reduction of the value-added tax, and the White Certificates scheme. The analysis employs a dataset covering close to 14,000 French households who conducted conservation works in France. To address self-selection bias and potential endogeneity concerns, we use a double-robust inverse probability weighting estimator, a method mostly used in epidemiology so far. We assess the effect of the adoption of each scheme on the funding acquired, the private investment, total investment and the reduction of the household energy expenses. We deduct metrics of cost-effectiveness, redistribution and the ability to trigger private investment and additional total investment in energy conservation works via the schemes. We find funding from the schemes to reduce energy expenses most cost-effectively via the White Certificates. Additional private and total investment is highest with the adoption of the VAT reduction. The redistribution of public funds to low-income households is highest with the grant scheme.

How Can Blockchain Technology Accelerate Energy Efficiency Interventions? A Use Case Comparison

This paper qualitatively evaluates the application of blockchain technology for three energy efficiency use cases. To achieve the Sustainable Development Agenda, energy efficiency improvements have to double by 2030. However, the adoption of energy efficiency interventions is slow due to several market barriers. Blockchain technology is a nascent technology with the potential to address these barriers or even fundamentally change energy system designs, by enabling transparent, decentralised, and tamper-resilient systems. Nevertheless, a blockchain application comes with trade-offs and needs to be considered on a case by case basis. In this paper, we examine the benefits and constraints of a blockchain application for three different approaches to achieving energy efficiency: (i) peer-to-peer (P2P) energy trading; (ii) White Certificate Scheme (WCS); and (iii) Energy Service Companies (ESCOs). For each of these cases, we apply a decision framework to assess blockchain feasibility and outline a potential blockchain-based design. The analysis shows that blockchain functions are case dependent and that an application creates different governance and system designs due to varying case characteristics. We discuss how the identified blockchain adoption barriers can be overcome and stress the need for policy action to advance the development of pilot studies. By decentralising system governance, blockchain enables innovative designs that can accelerate the implementation of energy efficiency interventions.

Evaluating the Polish White Certificate scheme

As one of many EU Member States, Poland introduced an Energy Efficiency Obligation (EEO) in 2012 to deliver its energy efficiency targets under Article 7 of the EU's Energy Efficiency Directive. The Polish EEO includes White Certificate trading as a key element making it one of the few EEOs in the world that include this feature. For the first time since its inception, this paper provides a systematic evaluation of the Polish EEO.After initial difficulties in the period 2012-mid-2016, the EEO has been fundamentally redesigned. The paper compiles a database of the 4620 projects delivered, compares the two periods of the EEO critically reviewing the rules of operation during the two periods, assessing the types of measures delivered and in which sectors, and estimating the energy savings as well as the costs of the EEO.We present a number of policy recommendations for improving the EEO derived from an assessment of the current programme architecture. The analysis shows that present levels of energy savings are insufficient to achieve the EU energy efficiency targets for 2014–2020 and post-2020. The paper also identifies a number of lessons learned that are applicable to countries considering the introduction or redesign of an EEO.

Blockchain in Energy Efficiency: Potential Applications and Benefits

Blockchain technology is ready to disrupt nearly every industry and business model, and the energy sector is no exception. Energy businesses across the world have already started exploring the use of blockchain technology in large-scale energy trading systems, peer-to-peer energy trading, project financing, supply chain tracking, and asset management among other applications. Information and Communication Technologies (ICTs) recently started revolutionizing the energy landscape, and now blockchain technology is providing an additional opportunity to make the energy system more intelligent, efficient, transparent, and secure in the longer term. The idea of this paper is to examine more closely the use of blockchain technology for its possible application in the energy efficiency industry and to determine how it could make energy efficiency markets more secure and transparent in the longer term. This paper examines in detail the key benefits and implications of using blockchain in the energy efficiency sector through the presentation and discussion of two case studies as possible blockchain applications—(i) the UK Energy Company Obligation scheme and (ii) the Italian White Certificate Scheme. We have presented how the key issues around trading energy efficiency savings—correctly estimating the savings, data transparency among stakeholders, and inefficient administrative processes—can be solved through the application of a blockchain-based smart contract system. Finally, this paper presents an implementation of a smart contract for trading of energy-saving certificates achieved via execution of smart contract transactions on the Ethereum blockchain.

A multi-stakeholder analysis of the economic efficiency of industrial energy efficiency policies: Empirical evidence from ten years of the Italian White Certificate Scheme

There is growing interest worldwide in more effective policies to promote industrial energy efficiency and mitigate climate change. The White Certificates Scheme is a market-based mechanism aimed at stimulating the adoption of Energy Efficiency Measures. The Italian White Certificates scheme - one of the most long-standing and articulated - is a successful example of industrial energy efficiency policies, considered an interesting and remarkable case by other countries, especially due to its robustness in terms of the volume of certificates traded. Despite the considerable interest in White Certificates, an in-depth analysis of the economic efficiency of the mechanism from the perspective of different stakeholders is still lacking. To address this gap, this study develops a cost-benefit evaluation framework and a multi-stakeholder economic efficiency analysis of the Italian White Certificates scheme focusing on the Italian State, utilities, players in the energy efficiency value chain, and energy users. Our findings (also corroborated with sensitivity analyses) show that the White Certificates Scheme has led to several positive impacts for almost all stakeholders involved, with the exception of energy utilities that have suffered a major economic loss mainly due to a reduction of energy sold to end users. Such loss is likely to promote a deep change in the role of utilities in the energy market in terms of the services they offer and their business models. Our findings, in addition to providing useful directions for future research, offer interesting insights and implications for policymakers who may take inspiration from the pros and cons of the Italian White Certificates scheme when promoting energy efficiency through incentive mechanisms.

Towards a territory-based economic model for regional energy efficiency programmes: Learning from past initiatives

Many Energy Efficiency programmes have been undertaken in the name of Energy savings and with a view to efficiency-cost assessment. Energy savings targets had to be met. In this case, the relevant question was to find the least expensive way of achieving this when considering a merit order on which EE actions are ordered given a ratio expressed in €/saved MWh. Many energy suppliers have been involved in this programme in order to meet their EE obligations (e.g. in a white certificate scheme) or in the frame of territorial industrial challenge (undersized energy transport or distribution network for instance). Yet such EE local programmes could be carried out in the frame of self-financed and economically viable activity. However, relevant economic models based on a territorial and multi-partnership approach must be identified. This paper is based on the review of several EE regional programmes with the insight of the economic model in order to identify key success factors to the development of such economic models. Findings underlined the crucial importance of the consideration of specific local challenge-beyond energy aspects-when designing an EE scheme, for instance, the problems raised by an aging local population or by increasing fuel poverty. The ability to manage deep partnership with an approach focused on functional sphere instead of driven by a traditional sector-based vision is a key point. For instance a comprehensive inter-mediation activity (technical, financial and professional) is a key added value source to monetize and to convert into financial flow. It is also important to develop a long-term relevant assessment procedure beyond traditional measurable effects (energy savings) and which encompasses intangible effects. These findings should complete popular business-model tools so that this functional sphere based vision can be embodied in a more comprehensive, sustainability and territorial-based economic model canvas!

White certificate trading: A dying concept or just making its debut? Part III: Future market potential in the U.S.

Challenges to white certificate markets are formidable, but they are not insurmountable, as demonstrated by successful white certificate schemes worldwide. This article discusses the future potential for these certificates in the U.S. A promising development that could affect implementation of a white certificate-type instrument is the inclusion of an instrument called an emission rate credit in the proposed Clean Power Plan. Other potential drivers include energy efficiency resource standards and voluntary markets.

Bridging the industrial energy efficiency gap – Assessing the evidence from the Italian white certificate scheme

The Italian white certificate scheme is the main national policy instrument to incentivise energy efficiency of the industrial sector, with savings from white certificates amounting to 2% of Italy's 2012 primary energy consumption. The mechanism sets binding energy-saving targets on electricity and gas distributors with at least 50,000 clients and includes a voluntary opt-in model for participation from other parties. This paper investigates and assesses the elements of the scheme that help overcome several barriers to deliver industrial energy efficiency. Results from a survey conducted among leading experts indicate that the Italian system provides a strong financial incentive to energy efficiency investments, covering a significant share of investment costs and thus reducing payback time. Moreover, the scheme fosters the development of energy service companies (ESCOs), which are key to developing, installing and arranging finance for projects on the ground. In conjunction with other policies, the mechanism also raises awareness of energy efficiency investment opportunities, thus helping overcome the market failure of insufficient information. Core challenges remain, including tackling regulatory uncertainty and improving access to finance.

Bridging the Industrial Energy Efficiency Gap: Assessing the Evidence from the Italian White Certificate Scheme

The Italian white certificate scheme is the main national policy instrument to incentivise energy efficiency of the industrial sector. The mechanism sets binding energy-saving targets on electricity and gas distributors with at least 50,000 clients and includes a voluntary opt-in model for participation from other parties. This paper investigates and assesses the elements of the scheme that help overcome several barriers to deliver industrial energy efficiency. Results from a survey conducted among leading experts indicate that the Italian system provides a strong financial incentive to energy efficiency investments, covering a significant share of investment costs and thus reducing payback time. Moreover, the scheme fosters the development of energy service companies (ESCOs), which are key to developing, installing and arranging finance for projects on the ground. In conjunction with other policies, the mechanism also raises awareness of energy efficiency investment opportunities, thus helping overcome the market failure of insufficient information. Core challenges remain, including tackling regulatory uncertainty and improving access to finance.

Why some electricity utilities actively promote energy efficiency while others do not—a Swiss case study

Electricity utilities are key players for promoting energy efficiency (EE) because of their close link to consumers. Utility-centered EE policy frameworks, such as white certificate schemes coupled to saving obligations, have been shown to be both effective and efficient in several US states and various European countries. In Switzerland, where such a policy framework is absent on a national level, large differences occur among utility providers in their activities to promote EE. This study sheds light on this issue, using data from a survey of Swiss utilities (N = 114). A two-step cluster analysis was used to identify three groups of utilities. It is based on these utilities’ evaluation of 20 incentives and constraints for promoting EE. An analysis of variance found significant differences between the clusters regarding size (number of employees), share of production, number of large clients, and—most importantly—level of activity in implementing EE programs. The most active cluster comprises mainly larger utility companies, which primarily see the incentives of promoting EE. The passive cluster consists of small companies, focusing primarily on constraints. There is also an ambivalent cluster. It includes middle-sized companies, which see both clear incentives and many constraints – mainly a lack of human and capital resources—for engaging in EE. Based on our analysis, we conclude that due to the large heterogeneity of Swiss utilities, there is a need for contextualized policies targeting different types of utilities in order to effectively promote EE.

Applicability of Energy Saving Obligations to Indian electricity efficiency efforts

This paper investigates end-use electricity efficiency policies and DSM related aspects within the Indian electricity sector. This work also identifies lessons for India from White Certificate schemes and Energy Saving Obligations in the UK, France and Italy. These two analyses aim to identify lessons which are applicable for a utility based energy saving obligation scheme within India. Most relevant results and recommendations are that an obligation is suggested, that no elements should be simply copied and that standardization could offer benefits to the Indian context. However, a number of steps would be required prior to introduction of such obligation.

Special Issue on Challenges and Opportunities in the 21st Century Energy Infrastructure

Special Issue on Challenges and Opportunities in the 21st Century Energy Infrastructure

Ex-Ante Assessment of the Implementation of an Energy Efficiency Certificate Scheme in Chile

AbstractEnergy efficiency (EE) policies are primarily implemented in developed countries. However, the benefits of implementing them in developing countries may be quite large. In this article, the potential implementation of an EE certificates scheme in Chile is studied. In particular, the white-certificate mechanism (which is a credit-based trading mechanism) used in Italy to promote EE is studied and its implementation in Chile through an ex-ante simulation is considered. The purpose of this mechanism is for the regulation authority to set a fixed amount of energy savings (which minimizes the total cost of producing the needed energy supply) and obligate gas and electricity distribution companies to obtain enough certificates to reach that target. Several benefits of reducing energy consumption is studied using a social-economic project assessment methodology. As a result, large economic benefits of implementing a white-certificate scheme in Chile were found.

The costs and benefits of white certificates schemes

White certificate schemes mandate energy companies to promote energy efficiency with flexibility mechanisms, including the trading of energy savings. A unified framework is used to estimate the costs and benefits of the schemes implemented in Great Britain in 2002, in Italy in 2005 and in France in 2006. Negawatt-hour cost estimates reach €0.009 per kWh saved in Great Britain and €0.037 per kWh saved in France, which compares favourably to energy prices in those countries. Moreover, the benefits of reduced energy bills and CO2 emissions saved exceed the costs, thus white certificate schemes pay for themselves. Overall, the policy instrument is cost-effective and economically efficient. A closer look at the differences among countries provides general insights about the conceptualization of the instrument : (i) compared to utility demand-side management, to which they are related, white certificate schemes provide more transparency about energy savings, but less transparency around costs ; (ii) the substantial efficiency discrepancy between the British scheme and its French counterpart can be explained by differences in technological potentials, coexisting policies and supply-side systems in these countries ; (iii) the nature and amount of costs influence compliance strategies. Notably, if energy suppliers are allowed to set their retail price freely, they tend to grant subsidies to end-use consumers for energy efficient investments.

Cost-effectiveness of energy efficiency programmes—evaluating the impacts of a regional programme in France

This paper presents the evaluation of a regional energy efficiency programme implemented in two “departements” of France. Electricite de France (EDF), a French energy company, provides refurbishment advice and financial incentives to end-users in the residential sector as well as specific training courses and certification to local installation contractors and building firms. Refurbishment measures analysed in this paper are efficient space heating equipment (condensing boilers, heat pumps and wood stoves or boilers), solar water heating systems and the installation of double-glazed windows. A billing analysis based on a survey of programme participants’ energy consumption is used to calculate the energy savings attributed to the programme. In order to receive an economic feedback of this demonstration programme, the evaluation of both saved energy and programme costs is of importance. Detailed knowledge of the programme’s cost-effectiveness is essential for EDF to achieve the saving obligations imposed by the French White Certificate scheme at the lowest cost. Results of this evaluation can support the development and implementation of further energy efficiency programmes with similar characteristics in other regions of France. The cost-effectiveness is determined from the perspective of the programme participant and the society as well as the energy company in charge of the programme. All cost and benefit components are calculated in Euro per kilowatt-hour, which allows a direct comparison of levelized costs of conserved energy with the avoidable costs of the energy supply system.

Consistency of the French white certificates evaluation system with the framework proposed for the European energy services

According to the directive on energy end-use efficiency and energy services (ESD), the European Member States shall adopt a national indicative energy savings target of 9% (or beyond) in 2016. The issue of the energy savings evaluation is crucial for its implementation. The French White Certificates (FWC) scheme is one of the important measures for France to fulfill its ESD target. However, the accountings of energy savings in the FWC scheme and in the ESD are different. Therefore, an analysis of the consistency of the two systems is needed. A concrete example of actions on residential buildings is used to illustrate the challenges for policy marker and stakeholders to set harmonized evaluation rules. The FWC and ESD calculations appear to be consistent from a physics point of view, as long as calculations are well-documented. But due to differences in the policy objectives, calculation routines may be necessary to convert national energy savings unit (e.g., kWh cumac) into supranational energy savings unit (e.g., ESD kWh). Finally, the work done to establish a transparent evaluation system brings additional benefits (e.g., increased visibility and quality of the actions), which will improve the results of the energy efficiency policies on long term.

Energy supplier obligations and white certificate schemes: Comparative analysis of experiences in the European Union

A number of Member States of the European Union (EU) have introduced market-based policy portfolios based on quantified energy savings obligations on energy distributors or suppliers, possibly coupled with certification of project-based energy savings (via white certificates), and the option to trade the certificates or obligations. The paper provides an up-to-date review and analysis of results to date of white certificate schemes in the EU. In the EU supplier obligations and white certificate schemes have delivered larger savings than originally expected with obliged companies exceeding targets and, in some cases, at cost below what policy makers have anticipated. Supplier obligations foster the uptake of standardised energy efficiency actions often targeting smaller energy users (residential sector), lowering the transaction costs and contributing to market transformation. The role of certificate trading is more ambiguous. Trading can bring benefits where the target is set sufficiently high with respect to the energy-saving potential in the sectors covered. Theoretically trading may be better suited for broader systems with comprehensive coverage, but even in smaller schemes trading may reduce the transaction costs of compliance for obliged actors without sufficient expertise on end-use energy efficiency. Yet, trading increases the administrative cost ratio of energy-saving obligations.

A multi-criteria evaluation framework for tradable white certificate schemes

Recent years have witnessed regained political momentum on energy efficiency and interest in establishing markets is growing. As a result, Tradable White Certificate (TWC) schemes of differing design have been implemented in Great Britain, Italy and France. Much attention is being paid to justifying and evaluating such schemes. In this paper, we develop and apply a multi-criteria framework for evaluating TWC schemes—an approach that attempts to cover their individual design features. A broad evaluation is conducted regarding energy-saving and environmental effectiveness, economic efficiency, cost-effectiveness, transaction costs, political feasibility, administrative burden and technical change. The results show the design and performance of TWC schemes to be case and context-specific, and generalisations are thus inappropriate. This evaluation supports the cost-effectiveness modelled for the British scheme and the assumption that a TWC scheme is an economically efficient policy instrument. For the other, more complex TWC schemes, more data and experience are needed to judge their ex-post merit. On the whole, the proposed multi-criteria evaluation requires considerable data and complementary methods. However, the framework improves the understanding of the broad effects and attributes of TWC schemes. It deals with various empirical and normative aspects that can be applied in their evaluation.