A call to action on efficient and smart appliances

The IEA has modelled a pathway for the world to reach Net Zero Emissions by 2050. Despite an overall decrease in global energy demand, the Net Zero Emissions by 2050 scenario sees global electricity demand more than double between now and 2050. In 2021 alone, electricity demand is set to increase by almost 5%. Much of the long-term growth will be through the electrification of end uses and sectors that are not currently reliant on electricity, such as transport and heating in homes and industry. But a large share of current and future demand is accounted for by a set of more familiar products and equipment types.

Lighting, refrigerators, air conditioners and industrial motor systems – commonplace items in our homes and businesses – are an important focus for efficiency efforts because of the scale of their use. Together these account for over 40% of global electricity demand and over 5 Gt of global CO₂ emissions a year – roughly equal to the United States’ current total CO₂ emissions. Levels of ownership and use are set to grow as the world gets wealthier, warmer and more populous. Global energy demand for cooling could triple between 2020 and 2050, for example, driven mainly by growth in emerging economies, as air conditioning becomes more affordable to greater numbers of people.

Energy efficiency policies can successfully move appliance markets away from less efficient products and towards more efficient ones. Minimum energy performance standards, for example, set a threshold for energy efficiency for specific products sold in a market. Energy labels, meanwhile, help consumers to choose more efficient products.

Together, energy efficiency standards and labelling programmes have been cornerstones of many countries’ energy efficiency policy for several decades. Over 120 countries have implemented or are developing mandatory standards and labels for key appliances, including many household appliances as well as industrial electric motors. For example, over 80% of global energy use for air conditioners and refrigerators is currently covered by minimum energy performance standards. However, in the markets where growth in ownership of air conditioners is fastest, such standards are often absent. Furthermore, to increase the energy saving impact of such standards, energy efficiency requirements can also be raised over time.

When designed well, standards and labelling programmes increase efficiency in highly cost-effective ways. A recent assessment conducted by the IEA with the 4E Technology Collaboration Programme showed that in 2018, in the nine countries or regions for which there were data, including the People’s Republic of China (“China” hereafter), the European Union and the United States, standards and labelling saved over 1 500 TWh of electricity consumption. This is equivalent to the total electricity generation of wind and solar energy in those jurisdictions during that year.

Because these products account for a significant proportion of total electricity use, making them more efficient can have a strong impact on total electricity demand. The countries with the longest history of applying minimum energy performance standards have achieved electricity savings of around 15% of total electricity consumption per year. Savings increase each year as older, less-efficient stock is replaced with equipment that meets higher efficiency standards. 

In countries with advanced programmes, such standards have reduced national energy-related CO₂ emissions by 7-10%.

One of the most common concerns about applying such standards to appliances is that they will raise the purchase price for consumers. However, the data show that those countries with long‑running appliance standards in place have actually seen the average purchase price of these appliances falling steadily, by around 2-3% per year. This means consumers are benefiting from lower purchase costs and lower running costs.

For example, in the United States such programmes delivered annual electricity cost savings of USD 40 billion in 2020, which translates into an annual reduction in the average household energy bill of around USD 320.

These benefits demonstrate the value of appliance efficiency policies beyond saving energy and reducing emissions. Falling consumer prices for appliances suggest that more ambitious policies could reduce CO₂ emissions even further while consumers would still benefit from lower overall costs.

Standards and labelling programmes have been the backbone of the most successful appliance efficiency policies, but they can have highest impact as part of a more comprehensive policy package. For example, a high-efficiency performance standard can define a threshold above which a product is identified as highly efficient (often by carrying an endorsement label, such as the ENERGY STAR in the United States). The sale of highly efficient products and equipment can then be promoted via policies or other initiatives:

• Financial incentives for consumers, such as subsidies or rebates, reduce the costs of highly efficient products.
• On-bill or on-wage financing make it easier for consumers to buy highly efficient products by spreading the purchase cost over many energy bills or salary deductions. The ECOFRIDGES programme in Ghana is an example of on-wage financing.
• Technology product lists provide consumers with information to help them make decisions about highly efficient products. In many places they are associated with incentives such as preferential taxation and loans.
• Procurement schemes allow governments to create markets for highly efficient products or encourage private sector investment in efficient products. Initiatives such as the EP100 group demonstrate private sector commitments to purchasing highly efficient products.
• Technology awards, such as the Global Cooling Prize, reward leading-edge innovation efforts to increase efficiency and reduce costs.

The IEA has developed a simple tool, the energy performance ladder, for developing and implementing these different policies under a single consistent set of performance thresholds. For a given product, ladder steps equate to efficiency levels defined using a standard test procedure. Governments can then set policy thresholds (such as minimum energy performance standards, labels and high-efficiency performance standards) at different steps on the same ladder, and also set years in which the thresholds will move up the ladder.

The framework not only allows a clear trajectory for increasing ambition but also enables performance to be compared across markets while allowing policy to be set according to local market conditions. Where standards are harmonised across a region, the ladder also helps to create larger markets, which can decrease barriers for industry by making it simpler to comply with regulations, and increase the customer base for high-performance products, while reducing their costs.

In addition to policy packages that focus on improving appliance performance, the rapid growth of internet-connected digital devices is opening a new frontier for efficiency policy as the scale and scope of what is achievable is redefined and a new market rapidly emerges.

Connected sensors and automated controls can enable people and facility managers to reduce energy consumption by optimising heating, cooling and lighting much more effectively. Home energy management systems and commercial building energy management systems use more efficient equipment and a variety of smart automated appliances, sensors, controls and software to allow building users to monitor and control usage.

Installed along with efficient new appliances, home and building energy management system retrofits can enable energy savings of 20% to 30%. With the benefit of dynamic electricity pricing and time-of-use tariffs, connected appliances also allow users to reduce energy costs and shift the timing of their energy use to coincide with periods that benefit the wider energy system, such as times of maximum renewable energy generation. Together, this new wave of technologies and applications is changing the scope of efficiency policy and the scale of benefits that it can achieve. It opens up a new way of thinking about efficiency in a much more systems-oriented perspective, rather than just energy as an end use in itself.