The savings of energy saving: quantifying interactions between energy supply and demand side policies for Portugal

Defendants of energy efficiency have argued that policy-makers focus excessively on the “trendier” energy supply and not enough on end-use energy efficiency. Focusing on supply side energy policies, as is the case of supporting large renewable electricity generation plants, without looking at the same time for the opportunities in the demand-side, may generate avoidable costs. This paper addresses the interactions between energy supply and demand side policies, by estimating the gains of end-use energy-efficiency & renewable applications in terms of (i) avoided electricity generation installed capacity, (ii) final energy consumption, (iii) share of renewables in final energy, as defined in the EU "Climate action and renewable energy package", and also, (iv) reductions of greenhouse gases (GHG) emissions. The Portuguese energy system is used as a case-study, and the linear optimization technology TIMES_PT model is used to generate four scenarios up to 2020 corresponding to different levels of penetration of efficient equipments, particularly in the commercial and residential sectors. In the two business-as-usual scenarios, the replacement of equipments from 2005 to 2020 follows the 2000-2005 trends and the National Energy Efficiency Action Plan targets. In the efficient scenarios all equipments can be replaced with more efficient ones. Results show that aggressive industry, residential and commercial demand-side measures can make unnecessary to increase the renewable electricity installed capacity in approximately 4.7GW as currently discussed by policy-makers, in order to meet the 31% target of share of renewables. These measures lead to a reduction of only 0-2% of total final energy, but this represents reduction of 11-14%in the commercial sector, and 1-4% in industry, with savings in total energy system costs of approximately 3000 M Euro - roughly the equivalent to 2% of the 2005 GDP.