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The value of the global ESCO market grew to nearly USD 27 billion in 2016, with the most activity in China, where government incentives have spurred market growth, and in the United States, where ESCOs are often part of utilities. |
ESCO financing can be attractive for industrial firms, as it means that some capital expenditures can be kept off a company’s balance sheet, reducing overall levels of debt and liability. |
The ability of a company to use off-balance sheet finance is determined by accounting principles of the country in which the company operates. |
Governments have a role to play in providing a framework and support for existing business models while also helping emerging funding mechanisms flourish, for example by: Ensuring regulations such as building codes are implemented and enforced consistently to ensure a level playing field. |
Energy efficiency needs to be supported by strengthening capacity to design and implement policy frameworks, particularly in emerging economies. The nature of energy efficiency policy with the mixture of standards regulations and incentives means that without careful design implementation and adequate enforcement policies will not deliver cost-effective results. |
Importantly areas of institutional capacity building include: Training for good policy design Support for effective policy and programme implementation Techniques and programmes for effective monitoring verification and enforcement procedures Incorporating the emerging role for digitalization in policy design implementation and MV&E. Training for policy evaluation. |
For countries with little experience of designing and setting up energy efficiency programmes it can be useful to learn from what has and has not worked in other countries as part of institutional capacity building. |
These have now been developed further as online courses (e.g. for energy efficiency indicators and statistics), which will mean a much wider audience for such material and more effective learning opportunities for policy professionals. |
Even the best policy will need considerable implementation and enablement support programmes to achieve impacts at scale in a cost-effective and sustainable manner. |
Some economies may be at the early stage of developing and implementing energy efficiency programmes. Some may be able to make use of climate finance or development monies (e.g. through development banks), coupled with international support, to initialise their energy efficiency programmes. |
Increased focus on monitoring, verification and enforcement (MV&E) of energy efficiency policy is needed as is the accompanying capacity building required. Investment in MV&E is highly effective in ensuring energy savings in the short term and essential for success of policy measures in the medium to long term. |
Digitalization is a powerful tool to achieve a myriad of energy efficiency policy objectives and it can help improve the policy-making process. |
Improved energy statistics. Collecting and analysing digital data has the potential to revolutionise understanding of energy consumption patterns. |
Data on energy efficiency standards for appliances. MEPS for appliances, buildings and vehicles have proven to be among the most cost-effective measures used by governments around the world to improve energy efficiency. |
Perspectives for the Energy Transition: The Role of Energy Efficiency confirming the benefits of energy efficiency policies and programmes, making energy efficiency evaluation methodologically difficult and costly. In addition, good policy evaluation is further hindered by a lack of evaluation protocols, available data, databases and data collection frameworks. |
The IEA recommends these elements for developing policy evaluation guidelines for energy efficiency organizations: Integrate evaluation into good energy efficiency governance. Information and insights gained from good evaluation are vital for improving energy efficiency policies and programme activities, and for communicating the results of energy efficiency efforts to policy makers and stakeholders. |
Evaluation results increase credibility, foster innovation and help build consensus on future energy efficiency efforts. Tailor evaluation approaches to policy and programme design and objectives . Care must be taken when formulating evaluation objectives and needs should be considered early on in the policy and programme development process. |
An effective and efficient ex-post evaluation should be specified well in advance of implementation. The evaluation plan should be a collaborative effort between policy makers, programme designers and implementers, and the evaluation community. |
Build ancillary capacity for evaluation. A strong evaluation framework relies on access to transparent, well-documented, accurate databases that are periodically reviewed for quality and consistency. These databases, depending on the type of energy efficiency scheme, can include energy and peak savings data, persistence data, product and market data, and consumer information. |
Establi sh evaluation protocols. Governments must invest in developing evaluation protocols that reflect specific country, local and sector contexts and establish broad guidance and standards. Such protocols are an invaluable tool for evaluators and energy efficiency practitioners; they also form the basis for training new programme evaluators and provide an as-needed resource for implementers, administrators, regulators and policy makers. |
Adopt good governance rules. There are three main points to remember when establishing good governance rules for the evaluation process: data credibility, independence and objectivity of analysis, and transparency of results. Addressing these issues can help to embed evaluation in the policy process. In turn, this can lead to more effective energy efficiency policies. |
A strategic approach to energy efficiency requires a deep understanding of the interplay between policy instruments and their potential to drive energy-efficient technologies. |
This chapter provides an overview of the key findings from the analysis of the role of energy efficiency in the transition to a low-carbon economy. |
Energy efficiency is critical for achieving this goal, as it can reduce energy demand, lower greenhouse gas emissions, and help mitigate climate change. |
The remainder of this chapter will explore the strategic approach to energy efficiency in more detail, highlighting the key policy instruments that are necessary for achieving significant energy savings. |
By addressing these challenges and opportunities, a strategic approach to energy efficiency can support the transition to a low-carbon economy. |
Further development of the structure and identification of core elements of the draft initial International Maritime Organization (IMO) strategy on reduction of GHG emissions from ships, OECD, Paris. |
Shared Mobility: A Sustainability & Technologies Workshop: Definitions, Industry Developments, and Early Understanding, University of California Berkeley, California, US. |
A retrospective investigation of energy efficiency standards: policies may have accelerated long-term declines in appliance costs. Environmental Research Letters, Vol. 9. |
The IEA makes no representation or warranty, express or implied, in respect of the publication’s contents (including its completeness or accuracy) and shall not be responsible for any use of, or reliance on, the publication. |
Unless otherwise indicated, all material presented in figures and tables is derived from I EA data and analysis. |
This publication and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. |
In support of its presidency of the G20 in 2017, the German government requested the International Energy Agency (IEA) and the International Renewable Energy Agency to explore how an energy transition to address climate change might look. In this follow-up study, the IEA takes stock of progress towards a low-carbon energy sector and provides further insights into the fundamentally important role of energy efficiency to achieve a clean energy transition. |
This report: Reviews recent progress with regards to the clean energy transition and the role of energy efficiency. Explores two clean energy transition scenarios to assess the contribution required from energy efficiency to achieve the goals of the Paris Agreement and the energy-related objectives that the international community has set with the United Nations 20/30 Agenda for Sustainable Development. |
The IEA examines the full spectrum of energy issues including oil, gas and coal supply and demand, renewable energy technologies, electricity markets, energy efficiency, access to energy, demand side management and much more. |
Through its work, the IEA advocates policies that will enhance the reliability, affordability and sustainability of energy in its 30 member countries, 8 association countries and beyond. |
In 2012, the International Energy Agency (IEA) released the first in-depth study of Iraq’s energy sector. We had an exceptional opportunity to engage with Iraq and produced a unique perspective on the country’s outlook, covering the role of energy in Iraq’s economic and social development as well as the increasingly important role that Iraq was set to play in global energy affairs. |
Since that study, Iraq has managed to increase its oil production by nearly half. This is an enormous achievement at a time when Iraq was battling ISIL and contending with a period of volatile oil prices that severely affected its economy. |
Our updated report underlines that Iraq will continue to be central to the stability of global oil markets. We also analyze the potential for Iraq to use its natural gas wealth much more productively than it has until now. |
Improving the security of electricity supply by reducing the blackouts suffered by most Iraqi families is one of the most urgent challenges facing policymakers. |
I am convinced that the positive convergence of a number of factors, not least of which is the major improvement in the security situation, offers Iraq a huge opportunity to remedy these issues. |
My sincere hope is that the findings in this report will help Iraq build a productive and vibrant society on the foundation of reliable, affordable energy. |
This special report was produced under the leadership and with the close personal attention of IEA Executive Director Dr. Fatih Birol. |
This work would not have been possible without the support and close co-operation it has received from the Government of Iraq. We are particularly grateful to H.E. Thamir Ghadhban, Iraq's Deputy Prime Minister for Energy and Minister of Oil, and H.E. Luay Al-Khatteeb, the Minister of Electricity. |
Iraq's energy sector is facing significant challenges as it seeks to meet growing demand while maintaining a fragile economy. |
The country's oil and gas sector has historically been the mainstay of its economy, but declining production rates and limited investment have led to concerns about the sector's long-term sustainability. |
Electricity demand is expected to continue to grow, driven by population growth and economic expansion, with peak demand projected to reach around 25 gigawatts by 2030. |
The government has set ambitious targets for increasing electricity generation capacity, but achieving these goals will require significant investment in new power plants and grid infrastructure. |
Iraq's energy sector faces a range of challenges that must be addressed if the country is to achieve its economic and development aspirations. |
The oil and gas sector is critical to Iraq's economy, but it also poses significant environmental and social risks that must be managed carefully. |
Electricity demand is expected to continue to grow in the medium term, driven by population growth and economic expansion, with peak demand projected to reach around 25 gigawatts by 2030. |
Addressing these challenges will require a comprehensive approach that takes into account the complex interplay between energy, economy, and society. |
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A changing context for Iraq's energy outlook: A changing global energy system is posing critical questions for Iraq. The shale revolution in the United States, technological change, the drive for greater energy efficiency and the long-term response to environmental challenges all imply sustained pressure on development models that rely heavily on hydrocarbon revenues. |
Iraq also faces a profound need to develop its domestic energy infrastructure, in particular in the electricity sector. The task of doing so has been complicated greatly by the war against ISIL and by the rollercoaster ride in oil prices since the last Iraq Energy Outlook was published in 2012, and the squeeze that these factors have exerted on state capital expenditure. |
The reform agenda for producer economies is much broader than energy, but relies on a well-functioning energy sector. For Iraq, maintaining upstream investment and the advantages of a large, low-cost resource base are vital, but so are pricing, efficiency and a host of changes in the electricity sector. |
Iraq makes the third-largest contribution to the increase in global oil supply in the period to 2030. |
Iraq is not short of natural gas, but it continues to use gas far less – and far productively than most of the countries in the region. Rising oil production has meant an increase in gas flaring to some 16 billion cubic metres (bcm) per year. |
In our outlook, Iraq's marketed gas production increases to around 50 bcm over the next decade. Given that Iraq's associated gas is ethane-rich, progress in the upstream could support a significant expansion in petrochemicals output as well. |
Constrained budgets and damage wrought by war mean that Iraq is not producing enough electricity to satisfy demand. Rising demand is widening this gap, with Iraq's population growing at a rate of over 1 million per year. |
The International Energy Agency has carried out an in-depth analysis to identify short-term and medium-term measures that can alleviate the most immediate pressures in the electricity sector. |
The most severe and immediate shortfalls in supply can be mitigated by: the rapid initiation of network maintenance, targeting a small number of high-impact upgrades; the rapid deployment of new mobile power units; the upgrading of some existing power plants; and the enforcement of tariff regulations for all neighbourhood generators. |
There is huge potential to cut network losses, which are among the highest in the world: reducing these losses by half would help to improve dramatically the efficiency of grid supply, effectively increasing available capacity by one-third. |
On the supply side, more gas needs to be captured and put to use in efficient power plants. And, last but not least, Iraq needs to take advantage of its abundant renewables potential and increase the share of solar photovoltaics (PV) – in particular – in the power mix. |
Bringing the share of renewables up to 30% of electricity supply by 2030 would bring environmental gains without increasing total costs for electricity supply. |
Make an efficient, well-functioning energy sector the bedrock of a more diversified and prosperous Iraq, based on: the revenues from adequate and timely investment in the upstream; a much more productive use of the nation’s gas resources; and a step-change in the affordability, reliability and sustainability of electricity provision. |
Expedite the development of projects that can deliver water to the southern fields for oil recovery, notably the Common Seawater Supply Project, while encouraging companies to enhance efforts on produced water reuse and recycling . |
Push for full implementation of gas flaring reduction projects over the next two years. Clarify ownership of produced gas and responsibilities for its productive use; develop mechanisms to monetise ethane. |
Expedite full restoration of the Baiji refinery, which would increase Iraq’s operational refining capacity by 30% and reduce the USD 2-2.5 billion bill for annual oil product imports. |
Take four measures to enhance the immediate resilience and operational performance of the electricity system: |
Increase tariff collection for network connections, and reform grid and neighbourhood tariffs to incentivise more efficient use of electricity and bring down peak demand. |
Develop a renewable energy industry, starting with a first round of solar PV and wind projects to build confidence, and then build on proven successes. |
Iraq has a central role in global energy markets. The most comprehensive review of this role and Iraq’s immense potential for economic and social development following decades of conflict was developed by the International Energy Agency (IEA) and published in Iraq Energy Outlook 2012. |
Notably, the rollercoaster ride in world oil prices has severely affected Iraq’s fiscal revenues and its ability to progress its long-term economic development plans. In the same period, Iraq had to divert considerable attention and resources to fighting a war against ISIL. |
Considerable progress has been made in a number of areas since 2012. In the oil sector, production has increased by half, to reach almost 5 million barrels per day (mb/d) by end-2018, propelling Iraq to the status of the world’s third-largest crude oil exporter. |
As well as serving as an update to the Iraq Energy Outlook 2012, this report highlights and evaluates the various options available to policymakers to strengthen the prospects for Iraq’s energy sector. It provides recommendations for the government’s consideration in pursuit of its immediate, medium, and long-term priorities. |
The energy sector is integral to the broader Iraqi economy. Oil and gas account for almost 60% of gross domestic product (GDP), 99% of export earnings, and 90% of government revenues. |
Government expenditure has closely tracked movements in oil prices, rising when they were high and falling when they were low. Such “pro-cyclical” fiscal policy has important implications for the economy as whole. |
At the low point in the recent oil price cycle, Iraq’s monthly oil revenue fell to less than US dollars 2 billion, while fiscal obligations (e.g. salaries, pensions, social spending) were more than USD 6 billion per month, leaving a USD 4 billion deficit to honour basic spending (discounting any expenditure on capital projects). |
Iraq financed the deficits through a mixture of increased borrowing (including from international financial institutions) and tapping its international reserves , which fell by USD 33 billion in 2016 compared with 2013 levels. |
Government spending patterns have been closely correlated to oil price movements. Between 2009 and 2013, when oil prices were rising, the size of the federal budget doubled as the state increased employees and raised public sector salaries. |
The inability of the government to provide fiscal stimulus during the period of relatively low oil prices hit domestic consumption, and economic growth fell from an average of 7.6% in 2013 to just 0.7% in 2014. |
The energy sector portfolios have not been immune to this fiscal retrenchment. The annual capital budget allocated to the Ministry of Oil, which is charged with remunerating international oil companies, was one-fifth lower in the 2015-18 period than in 2013, thus affecting Iraq’s ability to pursue its long-term oil and gas development targets. |
The Ministry of Oil has maintained a relatively healthy capital budget through the oil price downturn, but spending has fallen sharply in the electricity sector. |
In the first 11 months of 2018, the Iraq government spent five times more on salaries, pensions and social welfare than it did on capital projects. The USD 10 billion it disburse d for capital projects represents only half the amount allocated in the 2018 budget. This illustrat es not only that allocation is diminished, but also that it is unable to efficiently spend available capital. |
Since the Iraq Energy Outlook in 2012, the population has expanded by over 5 million and is now growing at a rate of 1 million per year. More than 40% of the population is under the age of 14. |
This young and growing population could provide the vitality needed to propel innovation and economic growth, though this is contingent on an economy that is able to create productive jobs in accord with demand. This has not been the case so far, as the rapid growth in the population of working age has not been matched by growth in private sector job creation, and instead, Iraq has relied on the public sector to keep a lid on unemployment. |
Many of the jobs created in the public sector do not add to economic productivity, contributing to a significant decrease in labour productivity over the last five decades, with productivity now at around half the level it was in 1970. |
Iraq has suffered significant environmental degradation over the span of several decades. Water shortages, exacerbated by rising domestic demand, poor water management (especially in agriculture), aging infrastructure, a changing climate and the construction of dams upstream have become a key constraint to economic development and one of the leading causes for public disquiet in recent years. |
Roughly 70% of Iraq's water supply originates from neighbouring countries. The Ministry of Water Resources estimates that Iraq's river levels have fallen by up to 40% in the last 20 years. The quality of the water available is also deteriorating, placing further constraints on available ground and surface water supply. |
The energy sector contributes directly to the environmental challenge. Gas flaring alone releases an estimated 30 million tonnes of carbon-dioxide emissions into the atmosphere (see Box 1 in Chapter 2). In Baghdad, the levels of fine particulate matter (PM2.5), considered to be particularly damaging to human health, are more than seven-times the maximum recommended levels established by WHO standards. |
Security In addition to the movements in the price of oil, the most significant variable affecting Iraq's energy outlook since 2012 has been the evolving security situation. Terrorist attacks were a frequent feature in many of Iraq's main cities in 2012, reaching a crescendo in mid-2014 with the capture and occupation of Mosul and large parts of the north and west area by ISIL, which at its height was in control of around one-third of Iraq's territory. |
The full liberation of Iraq in 2017 came at a considerable cost in lives and infrastructure. An estimated 4.5 gigawatts of generating capacity suffered damage and around one-fifth of the transmission network was rendered inoperable in the war. Iraq's largest refinery at Baiji (310 000 barrels per day of capacity) was severely damaged in 2014, but has since been partially rehabilitated. The security and political instability in the north also affected operations in Kirkuk, Iraq's oldest oil field, as control of territory passed from central government to the Kurdistan Regional Government (KRG) and then back again. |
Recently the security situation has improved dramatically; by end-2018, the monthly average of civilian casualties fell to its lowest level since 2003. Political accommodation between the central government and the KRG has, for the time being, been found. For example, the two authorities have agreed a revenue-sharing deal in the federal budget in 2019 that also commits the KRG to contribute 250 thousand barrels per day (kb/d) of its oil production to federal exports. |
There has been a substantial transformation in the security situation across the country, with civilian casualties now at the lowest levels in years. |
Iraq could not provide the levels of capital needed for the targeted production growth, particularly at a time when the state needed to substantially increase defence spending for the war against ISIL. |
As a result, Iraq negotiated down the plateau targets for a number of its most prominent producing fields, reducing the overall production level to 6.4 mb/d, 40% below the original agreement. |
Today around half of Iraq’s oil production is operated by IOCs, down from around 65% in 2012. The IOCs have tended to be replaced by national oil companies from China and Russia that operate internationally or by Iraqi national oil companies, the largest of which is the Basra Oil Company (BOC). |
Both the low oil price environment and increased competition for international capital in oil projects with the rise of US tight oil production (among other prospects) also led Iraq to explore options to modify its technical service agreements (TSAs) to better align the state’s interests with those of the companies. |
To help address this issue, the Petroleum Contracts and Licensing Directorate of the Ministry of Oil offered a new contract as part of its 5th bid round in April 2018. This contract established a link between the prevailing oil price and the remuneration offered. |