The Energy Efficiency Directive has been approved: A legal basis has been established for the fundamental principle of “energy efficiency is a priority.” A target of 11.7% reduction in final energy consumption compared to 2020 has been set by 2030.

The Energy Efficiency Directive, officially approved on July 24, 2023, reflects the significant importance the EU places on energy efficiency. This Directive establishes the fundamental principle of “energy efficiency first” in EU energy policy, highlighting its vital role in the implementation of energy policies and investment decisions.

As a crucial part of the European Green Deal, this Directive is a recast version of the Energy Efficiency Directive proposed by the European Commission in July 2021.

The Directive sets a target of an 11.7% reduction in final energy consumption by 2030 compared to the 2020 reference year and introduces a range of measures to accelerate energy efficiency practices.

The most notable change is the legal basis provided for the “energy efficiency first” principle, making it a legal obligation for EU countries to prioritize energy efficiency in policy-making, planning, and significant investments.

Furthermore, EU countries have agreed to nearly double their annual energy savings obligations in the coming years. According to the recast Directive, EU countries must increase their average annual energy savings rate from the current 0.8% to 1.49% from 2024 to 2030. This aims to enhance energy savings in critical sectors such as buildings, industry, and transportation.

For the first time, the legislation also includes a definition of energy poverty, obligating EU countries to prioritize energy efficiency improvements for vulnerable customers, low-income households, and individuals living in social housing, all of which are now included in the energy savings obligations.

The recast Directive strengthens the exemplary role of the public sector in advancing energy efficiency practices. An important development is the introduction of a 1.9% reduction target in annual energy consumption for the public sector as a whole. The requirement for public institutions to renew 3% of their buildings annually, based on floor area, has also been expanded to include local and regional public institutions.

The public sector will also play a driving role in the development of the energy services market. Energy Performance Contracts will be given priority whenever possible in the implementation of energy efficiency projects. Public institutions will continue to consider energy efficiency requirements in their decisions regarding the procurement of products, buildings, and services, thereby promoting systematic improvements.

The Directive also imposes obligations on private sector organizations operating in the EU. All businesses, including SMEs, with annual energy consumption exceeding 85 terajoules (TJ) must implement an energy management system. Businesses not implementing an energy management system and with annual energy consumption exceeding 10 TJ will be subject to energy audits.

Considering the importance of digitization and data centers, the Directive introduces an obligation to monitor the energy performance of data centers. A database at the EU level will collect and publish energy performance and water footprint data for data centers with significant energy consumption.

The new legislation also promotes local heating and cooling plans in large municipalities. Additionally, based on the efficient district heating and cooling definition included in the Directive, minimum requirements will gradually be tightened in the coming years to achieve fully carbon-neutral regional heating and cooling supplies.

With reference to the importance of equipping the workforce with relevant skills to successfully achieve improved targets, EU countries are obligated within the Directive to provide certification and qualification opportunities for professions related to energy efficiency.

Finally, energy efficiency financing arrangements to facilitate investments, including those in the private sector, are supported. In this context, EU countries are tasked with promoting innovative financing schemes and green credit products.

The Directive will come into effect 20 days after its publication in the Official Journal of the European Union.

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