Definition of “Efficiency 1st” (EE1st)
The Efficiency 1st principle, also known as energy efficiency first, originated within the European Union’s energy policy framework as a response to the pressing need to decarbonize energy systems while ensuring cost effectiveness and security of supply.
It was formally established in the Governance Regulation (EU) 2018/1999 and reinforced in the Energy Efficiency Directive (EED) recast 2023/1791. The European Commission and initiatives like ENEFIRST and EEFIG (Energy Efficiency Financial Institutions Group) were key drivers in shaping and operationalizing the concept.
Historical Context: When and Where It Emerged
- First introduced in EU legislation in 2018 as part of the Governance Regulation.
- Strengthened through Article 3 of the EED (2023), making it a binding principle for member states.
- Backed by think tanks, research projects, and coalitions advocating sustainable energy transitions.
Who Founded and Promoted It
- European Commission (DG ENER): main legislative driver.
- EEFIG: financial institutions providing frameworks for sustainable investment.
- ENEFIRST projects (H2020): provided methodologies and tools to make EE1st actionable.
Pillars of Efficiency First
- Prioritize demand side solutions over supply side expansion.
- Integrate multiple benefits (health, jobs, air quality, resilience) into cost benefit analysis (CBA).
- Avoid stranded assets by investing in efficiency before new infrastructure.
- Embed EE1st in planning, regulation, and financing decisions at every level.
Key Characteristics
- System wide perspective: applied in electricity, heating, cooling, and transport.
- Cross sectoral: relevant for buildings, industry, and networks.
- Legally binding in the EU, with clear obligations under Article 3 of the EED.
- Decision making tool: ensures efficiency is not “an afterthought” but the first filter in energy planning.
Legal Framework: EED 2023/1791 and Governance Regulation
Article 3: Obligations for Policies, Planning, and Investments
Under the EED recast 2023/1791, Article 3 requires governments, regulators, and investors to systematically evaluate energy efficiency options first before approving new supply investments.
Recommendation (EU) 2021/1749 and Practical Guidelines
The European Commission issued Recommendation 2021/1749 and detailed guidance documents on:
- Applying extended CBA with multiple benefits.
- Ensuring transparent and consistent criteria across member states.
- Monitoring and reporting obligations to the EU.
Benefits of Prioritizing Demand Side Solutions
Avoiding Stranded Assets and Optimizing CAPEX
Investing in efficiency first reduces the risk of over investing in supply infrastructure (like oversized grids or power plants). This prevents stranded assets and saves billions in capital expenditures.
Multiple Benefits in the CBA
- Economic: lower system costs, energy bill savings.
- Social: healthier homes, job creation in renovation sectors.
- Environmental: reduced emissions and improved air quality.
- Resilience: improved flexibility and security of supply.
How to Apply Efficiency 1st Step by Step
Methodology: Extended Cost-Benefit Analysis
A proper CBA under EE1st includes not only direct system costs, but also non energy benefits (health, comfort, productivity).
Criteria for Comparing Demand vs. Supply Options
- Does efficiency reduce the need for new infrastructure?
- Are multiple benefits quantified and monetized?
- Does the decision align with NECPs (National Energy and Climate Plans)?
Checklist for Decision Makers
✔ Screen efficiency options first
✔ Apply extended CBA
✔ Consider system-wide impacts
✔ Document and report the rationale
Countries and Organizations Implementing Efficiency First
EU Member States and NECPs
All EU countries must integrate efficiency first into their NECPs. Countries like Germany, France, and Denmark have advanced frameworks embedding EE1st in infrastructure and renovation policies.
Global Organizations and Initiatives
- ENEFIRST & ENEFIRST+ (H2020 projects): developed methodologies and tools.
- EEFIG: brought financial institutions into the efficiency first logic.
- IEA (International Energy Agency): promotes EE1st globally as a key driver for net zero.
- NGOs and coalitions: such as the Coalition for Energy Savings amplify awareness and implementation.
Real World Adoption
- Grid operators applying EE1st before investing in reinforcement.
- Building renovation programs prioritizing efficiency before adding renewables.
Integration in Planning and Finance
NECPs and Infrastructure Planning
NECPs must now demonstrate how EE1st has been applied in scenarios for electricity, heating, cooling, and mobility planning.
Sustainable Finance and EEFIG Lessons
Financial institutions use EE1st to assess risk and ensure energy efficiency is prioritized in green finance frameworks, preventing greenwashing.
Sectors and Examples of Application
Buildings and Renovation
Efficiency first means deep renovation comes before new energy supply expansion.
Industry and Demand Side Management
Factories apply load shifting and process efficiency before new capacity is built.
Networks and Generation
Grid operators assess if demand response or storage can defer network upgrades.
Monitoring and Indicators
Institutional Roles and Reporting
Member states must designate responsible authorities for EE1st monitoring and report results to the Commission.
Key Indicators
- Energy demand avoided
- Investments redirected to efficiency
- CO₂ savings attributable to EE1st decisions
Resources and Tools
Official Legislation and Guidance
- Energy Efficiency Directive 2023/1791 (Article 3)
- Recommendation (EU) 2021/1749
- European Commission Guidelines on EE1st
Research and Projects
- ENEFIRST / ENEFIRST+ methodologies
- EEFIG reports on finance and implementation
FAQ on Energy Efficiency First
What does Article 3 of the EED 2023 require?
It requires governments, regulators, and investors to prioritize efficiency in all policy and investment decisions.
How are multiple benefits integrated into CBA?
By quantifying impacts on health, jobs, environment, and resilience alongside direct energy savings.
How does EE1st avoid stranded assets?
By ensuring efficiency measures reduce the need for new, costly infrastructure that might become obsolete.
What role do NECPs play?
They are the national roadmaps that must show how EE1st is integrated in planning and investment.
