The world’s energy efficiency market is an “invisible powerhouse” worth up to $360 billion

Ilario D'Amato
Reading time: 6 minutes
10 October 2014

LONDON: Energy efficiency saved US$743 billion in 2011, with investments in the sector worth between US$310-360 billion in 2012. These findings come from the just released Energy Efficiency Market Report 2014, by the International Energy Agency (IEA).

From energy-saving LED lights to smarter homes, appliances and cars, energy efficiency is a booming market.

The IEA calculates that in 2012, investments in this sector were worth at least US$310 billion, up from the US$300 billion estimated for the previous year. In the 11 countries scrutinized in IEA’s second annual report on the subject, energy efficiency spending totaled more than US$38 billion in 2012.

LED lights in particular are one of the most promising markets that make up the emerging sector. In Japan, LED sales reached US$5.2 billion last year, representing almost one third of all bulbs sold in the country, while India is forecast to have a cumulative total of almost 34 million LED bulbs by the end of this year.

IEA states the growth in the energy efficiency market is partly due to investments through public finance, especially in Germany, as well as development aid programs. The segment is also benefiting from specific instruments such as climate bonds and energy service companies, the latter of which totaled US$12 billion in China last year.


The report also calculates that the energy savings of the 11 countries from the 1970s to 2011 was 1,337 million tons of oil-equivalent (Mtoe). This figure is more than half (59%) of the total final consumption (TFC) of all fuel sources in all 11 countries.

In fact, the total avoided energy use is higher than the TFC of any single fuel source. In the same time span, these countries consumed 1,202 Mtoe of oil, 552 Mtoe of electricity and 509 Mtoe of natural gas.

From a regional point of view, the energy efficiency savings were larger than the TFC of the European Union or Asia, excluding China. Energy efficiency was 80% of TFC in China, and 87% in the US.

Maria van der Hoeven, Executive Director, IEA, explained energy efficiency is now becoming an established market, at the launch of the report in Italy this week: “Energy efficiency is the invisible powerhouse in IEA countries and beyond, working behind the scenes to improve our energy security, lower our energy bills and move us closer to reaching our climate goals,”

Graph: Energy efficiency savings compared to TFC in selected regions and countries, 2011. The 11 countries evaluated are Australia, Denmark, Finland, France, Germany, Italy, Japan, the Netherlands, Sweden, the UK and the US. Image courtesy of International Energy Agency, from Energy Efficiency Market Report 2014


The report also analyzes energy demand in 18 IEA countries, which together make up one third of global TFC. From 2001 to 2011, the TFC of these 18 countries was reduced by 5% largely due to energy efficiency, saving 1,731 Mtoe in just 10 years. On the contrary, without energy efficiency the TFC would have increased by more than 11%.

Graph: Hypothetical energy consumption without energy efficiency for a set of 18 IEA member countries, 2001-11. Image courtesy of International Energy Agency, from Energy Efficiency Market Report 2014

In the residential sector in particular, despite a fast-growing global population, efficiency helped cut energy demand 5% over 10 years through measures like improving space heating and better lighting.

On top of curbing problems relating to surging energy demand, the energy saving potential of efficiency is also crucial at a time when fuel prices are rising around the world, with costs jumping as high as 52% from 2001-2011 in the US.

Graph: Increase in the weighted price of one unit of energy for individual consumers in 18 IEA member countries, 2001-11. Image courtesy of International Energy Agency, from Energy Efficiency Market Report 2014

However, expanding the research beyond the 18 countries evaluated can give a clearer identification of intervention areas - which can help governments to frame better policies and investors to unveil new markets.


The biggest and most promising market in the energy efficiency sector is small cars, known as ‘passenger light duty vehicles’. So far, it accounts for over 60% of all incremental investments, at US$80 billion per year.

Within this segment, most investments are directed toward implementing new standards to reduce fuel consumption. According to the study, the rules will save between 3.9 liters to 6.7 liters of gasoline equivalent per 100 kilometers, and save between US$40 billion and US$189 billion annually by 2020.

The large gap between minimum and maximum projected figures is due to uncertainty about future policies, which underlines again the importance of governments in designing the future framework of a low carbon, energy efficient economy.


Thankfully, several countries are backing the energy efficiency market, says IEA. In particular Italy has implemented a 55% tax reduction for energy savings investments - increased to 65% in some cases from next year - leveraging more than US$29 billion investments between 2007 and 2013.

In China, owing to the Five-Year Plan of 2006 to 2010, these investments exceeded US$100 billion and are forecast to grow US$200-270 billion between 2011 and 2015.

Even sub-national governments are boasting sustained energy savings, especially in Canada, where the 10 provinces and three territories have implemented over 200 programs and policies as of 2011.

By Ilario D'Amato

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Spotlight on: LED lighting

Did you know lighting accounts for nearly 6% of global CO2 greenhouse gas emissions, or 1,900 million tons of CO2 per year? That's the equivalent of CO2 emissions from 70% of the world’s passenger vehicles. So it's clear we can make a considerable dent in carbon emissions if we make lighting more energy efficient.

Light-emitting diode (LED) lamps, combined with smart controls, can cut CO2 emissions 50–70%. LED outdoor lighting also reduces costs, enhances public safety, minimizes light pollution and makes public spaces friendlier at night. In 2012 we called for all new street lighting to be LED (or as efficient) by 2015, and all street lighting the same by 2020.

Find out more about our LED program.

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