Why Electrification Will Cost More Without Energy Efficiency
Energy Transition Perspectives
Energy Transition Perspectives
Energy Transition Perspectives is an Econoler expert insights series exploring the challenges, opportunities, and emerging issues shaping the energy transition. In each edition, one of our experts shares a perspective grounded in professional experience, technical expertise, and lessons learned from working across markets and sectors.
In this edition, Alberto Bernardini, Climate and Clean Energy Investment Expert at Econoler, reflects on why energy efficiency remains one of the most overlooked levers of the energy transition — and what needs to change if countries are to accelerate electrification without unnecessarily increasing infrastructure and investment needs.
Electrification has become one of the defining themes of the energy transition. Replacing fossil fuel technologies with electricity reduces emissions and, in many applications, significantly improves efficiency. Yet, electrification cannot be considered in isolation. Successful electrification depends on the faster deployment of renewable energy, stronger electricity grids, and measures that reduce the energy required to deliver the services that people and economies need.
At COP28, countries agreed to work toward doubling the global average annual rate of energy efficiency improvement to around 4% by 2030. More recently, representatives of the incoming COP31 presidency announced an ambition to increase the share of electricity in global final energy demand to 35% by 2035. These objectives are closely connected: the more efficiently electricity is used, the less generation, grid capacity, storage, and capital is required to support electrification.
This connection is increasingly significant as countries seek to expand electricity access, electrify transport, buildings, and industry, as well as invest in new energy infrastructure. The question is not simply how quickly we can electrify, but how efficiently we can do it.
A perspective shaped by experience
Over the past decade, I have viewed the energy market through several lenses: as an international organization promoting renewable energy, an investor assessing risk and return, a utility navigating changing markets, and now as a consultant supporting public and private sector actors through the energy transition.
Throughout most of that journey, renewable energy deployment received the greatest attention. Energy efficiency was familiar to me, but it generally remained in the background — recognized as useful yet rarely treated as a strategic priority.
My experience at Econoler, where energy efficiency is at the center of the work, has changed that perspective. It has made me recognize the many missed opportunities and potential gains that could have been captured in my previous professional experiences.
These ranged from policy discussions that afforded limited attention to simple energy efficiency measures capable of generating rapid savings to investments in rooftop solar assessed mainly through the cost of each kilowatt-hour generated without first analyzing whether existing energy consumption could be reduced. The same applies to large-scale renewable energy plants connected to congested systems for which current investment in grids, transmission, and demand management remained insufficient.
Even after becoming fully immersed in the subject, I realized how difficult it remains to place energy efficiency among the highest priorities of governments, companies, and investors.
Why has this been the case? What has been missing?
I do not want to generalize across every organization or market, but energy efficiency is still frequently treated as a useful optional practice rather than as a central part of energy planning and investment. It is often considered only when someone has the time, budget, or interest to examine it.
One reason is that energy efficiency is less visible than a new solar plant, wind farm, or transmission line. It is also less straightforward to communicate about, and energy efficiency practices are more difficult to standardize across sectors.
But the scale of the challenge means that this approach is no longer sufficient.
The gap between ambition and implementation
Global energy efficiency progress remains too slow.
The recent IRENA Transitioning Away from Fossil Fuels report notes that global energy intensity improved by only approximately 1% in 2023–2024, compared with the 4% annual rate associated with the COP28 doubling objective. According to IRENA, a minimum 5% improvement per year is now needed through 2030 because of this delay.¹
Nonetheless, energy efficiency is increasingly appearing in national climate commitments. Just over 50 countries submitted concrete, quantified energy efficiency targets in their updated Nationally Determined Contributions (NDCs). Of the more than 128 countries that had submitted updated NDCs, nearly all mentioned energy efficiency, and around two-thirds reiterated the COP28 doubling objective.²
This shows that awareness is increasing. But ambition is not yet consistently being converted into implementation.
Many targets remain insufficiently quantified, while major gaps persist in mandatory standards, regulations, and enforcement. In many markets, institutions also lack the capacity and workforce skills needed to develop, implement, and monitor energy efficiency policies and investments.
For fast-growing and emerging economies, the challenge is particularly significant. Countries such as India, Indonesia, Viet Nam, Nigeria, and Egypt must respond to rising energy demand associated with urbanization, industrialization, and expanding access to electricity while also developing new buildings, cooling systems, transport networks, and industrial infrastructure.
Furthermore, they may face constrained grids and public finances as well as limited access to affordable long-term finance.
The objective of energy efficiency, therefore, is not simply to reduce energy consumption. It is to manage the growth of energy demand while economies and energy systems continue to be expanded.
Technologies are advancing faster than regulation
One of the challenges I see repeatedly is that energy efficient technologies are improving faster than the pace of regulations governing them.
The technologies needed to improve energy performance already exist across many sectors. Yet, markets do not automatically adopt the most efficient options.
The International Energy Agency notes that many products sold today are only around half as efficient as the best available models. Without strong performance standards, market incentives, and effective enforcement, technological progress alone does not guarantee improvements in the average efficiency of equipment deployed at scale.
This is why mandatory energy performance standards, building codes, appliance standards, labelling requirements, and other regulatory instruments matter. They help shift entire markets rather than relying solely on individual consumers or businesses to identify and finance the most efficient options.
However, establishing standards is only part of the process. Institutions need the capacity to implement, monitor, and enforce them. Regulations also need to evolve as technologies and markets change.
💡 Stronger performance standards, national energy efficiency investment plans, and effective enforcement mechanisms are essential to turning ambition into measurable progress.
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We also need to get better at recognizing energy efficiency as an investment
Another issue is how energy efficiency is defined and assessed.
In a recent project in the Bahamas, I was reviewing an energy efficiency investment strategy, and I realized that no projects identified at the time were actually energy efficiency investments. Discussions with banks, utilities, regulators, and other stakeholders also revealed considerable uncertainty over what qualifies as energy efficiency and how such investments should be identified, assessed, and financed.
The same challenge exists in the financial sector. Even among major banks, investment firms, and asset managers, energy efficiency is sometimes treated as an emerging investment theme rather than as a mature market opportunity.
This is striking when we consider that the modern energy service company (ESCO) model originated in the United States in the early 1970s following the oil crisis. Yet, decades later, ESCO markets remain underdeveloped in many countries, and both public institutions and financiers are often unfamiliar with how these models work.
There is clearly a need to build greater awareness and capacity — not only among policymakers and technical professionals, but also among financial institutions and investors.
The value of efficiency goes far beyond kilowatt-hours saved
One of the most persistent misconceptions is that energy efficiency should be assessed only through the monetary value of the kilowatt-hours saved.
This captures only part of the return.
The full value of energy efficiency also includes lower operating costs, improved productivity, greater energy security, avoided investment in generation and grid infrastructure, improved tenant comfort and working conditions, and reduced carbon emissions.
Many of these benefits can be quantified, but they are still often excluded from conventional investment assessments.
This matters even more as electrification is accelerated.
Without energy efficiency, electrification will require more generation, more grid capacity, more storage, and more capital than would otherwise be necessary.
Energy efficiency may be the least visible aspect of the energy transition, but it can help determine the overall scale and cost of that transition.
Efficiency and renewables should not be competing priorities
Energy efficiency investments should, therefore, be mainstreamed in the same way as renewable energy investments.
The two should not be viewed as competing priorities. When combined, energy efficiency and renewable energy reduce the overall investment required to achieve climate and development objectives.
This is particularly relevant for developing economies.
One of the major issues raised during recent COP discussions has been the insufficient flow of capital from the Global North to the Global South. Energy efficiency cannot replace the need for more affordable and accessible climate finance. It can, however, help ensure that the capital available is used more effectively.
In a context with limited financial resources, doing more with less is not simply an environmental objective. It is an economic necessity.
💡 Dedicated credit lines, guarantees, concessional finance, and project preparation support help turn energy efficiency opportunities into feasible projects.
What needs to change?
Over the past few years, while advising public and private institutions in developed and emerging markets, one point has become increasingly clear to me: many organizations still struggle to define energy efficiency, identify appropriate measures, and determine how to implement or finance them.
The solutions themselves are not new. What is needed is greater coordination between the different tools available.
Stronger and enforceable performance standards create demand for more efficient technologies, while national energy efficiency investment plans serve to translate policy ambitions into clear sectoral priorities and project pipelines.
Dedicated credit lines, guarantee facilities, and concessional finance can be used to address financing barriers that prevent viable projects from moving forward, particularly in developing economies.
Moreover, project preparation support and technical assistance are needed to turn technical potential into bankable investments. Standardized audits, contracts, and measurement protocols provide both clients and financiers greater confidence in expected savings.
Clear ESCO and energy performance contracting frameworks help allocate performance risk and mobilize private expertise, while aggregating small projects into large portfolios reduces transaction costs and attracts institutional capital.
Public sector retrofit programs can also play a catalytic role by serving to create scale, demonstrate results, and help local market development.
None of these measures is sufficient on its own. They need to work together.
Capacity building is part of the solution
One aspect that I believe is vital to achieving faster progress is capacity building and awareness raising.
According to the UNFCCC 2025 NDC Synthesis Report, 84% of the Parties referenced capacity building in their new NDCs, while 66% stated that implementation was fully or partly dependent on receiving capacity building support. These figures relate to NDC implementation broadly rather than to energy efficiency alone, but the connection is highly relevant.³
Policies need institutions capable of implementing and enforcing them. Financial mechanisms need people who understand how to structure and assess energy efficiency investments. Project pipelines need technical professionals who can identify opportunities, prepare projects, and measure results.
Capacity building is, therefore, not simply a complementary activity. It is part of the implementation infrastructure required to transform ambition into results.
From ambition to measurable value
The first step is not necessarily a large investment.
It can consist of a clear assessment of where energy is being wasted and which policies, financing tools, and delivery mechanisms can be used to convert that waste into measurable savings and thereby create value.
Effective national energy transitions and efficiency improvements require more than technology. They need strong regulatory foundations and capable institutions that can implement, enforce, and coordinate such initiatives across sectors.
At Econoler, I have seen this need across different markets and types of intervention — from supporting green credit lines and energy efficiency investment funds to conducting industrial decarbonization assessments and strengthening regulatory frameworks.
- For example, through the SUNREF Ghana Green Credit Line, Econoler provided technical assistance related to financing renewable energy and energy efficiency investments. Our work supporting the African Energy Efficiency Fund has similarly been focused on strengthening the conditions needed to mobilize energy efficiency investment.
- In the industrial sector, Econoler has conducted industrial decarbonization baseline assessments in three countries, helping establish the information needed to identify and prioritize opportunities for reducing energy use and carbon emissions.
- At the policy level, Econoler supported the drafting of the Grenada Energy Efficiency Act, contributing to the regulatory foundations needed to support energy efficiency improvements.
These experiences reinforce a lesson that I have increasingly come to appreciate: energy efficiency is not simply about finding technical savings. It is about creating the conditions that enable energy efficiency projects to become financeable, implementable, and scalable.
A personal challenge
The most personal recommendation I can offer to colleagues and readers is simple: step outside your comfort zone and take a genuine interest in energy efficiency.
Energy efficiency often reveals opportunities, business models, and practical solutions that are easy to overlook. It can also change our understanding of what can realistically be achieved.
If we want electrification, renewable energy deployment, and climate finance to deliver more with limited resources, energy efficiency needs to be moved from the background to the center of energy planning and investment.
The technologies are available. Many of the solutions are well understood.
The challenge now is to convert ambition into enforceable policies, bankable projects, and project implementation at scale.
That is where the next phase of the energy transition will be won or, at the very least, where much of the cost will be determined.
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Author
Alberto Bernardini
Climate and Clean Energy Investment Expert, Econoler