Minimum energy performance standards (MEPS)

Product-specific regulations aim to remove the least energy-efficient models from the market and to increase the energy efficiency of products. Sometimes they also strive for more ambitious goals.

Worldwide implementation status
Most developed countries have some sort of MEPS programme. Some developing countries also introduced energy efficiency standards but they are not widespread (especially in non OECD Asia, South America, Africa and the Middle East) (World Energy Council 2008).

Governance level
In most cases, MEPS were introduced at national level. In some cases, the same standards were implemented in a group of several countries at the same time (e.g. the European Union unifies 27 countries).

In principle the sectoral focus is unlimited. MEPS were primarily introduced to regulate energy-using products. This includes household appliances, but also commercial products and office equipment. Products range from consumer electronics like TVs to washing machines and industrial ovens.

Related sectors

• residential: MEPS were primarily introduced to regulate energy-using products.
• industrial: In principle the sectoral focus is unlimited and MEPS were also introduced to regulate commercial products
• services: The service sector can also be a sectoral focus.

Due to the limitation of bigEE, appliances (only) are considered in this section. In most countries, MEPS were primarily introduced for room air conditioners, refrigerators and lamps. Washing machines, dryers and water heaters were also often covered by standards. The range of products is unlimited in principle. However, it must be possible to define standardised units of systems with a standard test procedure for energy consumption or efficiency.

Related target groups

• Manufacturer
• Wholesale company

Direct beneficiaries

• Investor

  Direct beneficiaries are the investors . They save directly on their energy expenditure.

• User

  Another beneficiary are end users. They save directly on their energy expenditure.

Indirect beneficiaries

• Manufacturer

  Manufacturers benefit indirectly. They can improve their competitiveness.

Relevant barriers

• Knowledge and information barriers: Sometimes actors may not be informed about possible options for energy-efficiency improvement. This barrier can be overcome by excluding the least efficient products and practices from the market.
• Lack of interest and motivation in energy efficiency-improvement: There is a tendency that companies focus on their core activities only. For the vast majority of actors, the costs of energy are so small compared to their total (production or consumption) costs that energy-efficiency improvement is not even taken into consideration.
• Economic and financial barriers: If compliance can be ensured, MEPS will achieve a minimum level of energy efficiency and reduce market complexity and transaction costs for investors. Depending on the requirements set by the government it can be expected that the policy is cost-effective.
• The investor-user barrier: The investors may not be the one who has the financial benefit (i.e., the user of an office is not the one who pays the energy bill). Therefore there are little incentives for investors who do not directly benefit (e.g. through cost savings). Standards guarantee a minimum efficiency level of energy-using products for all products on the market (standards are also mandatory for actors, who have no direct financial benefit).

Relevant incentives

• Directly increasing earnings or profits for actors on the supply side: The price premium or additional investment in energy efficiency means increased turnover for the suppliers, which may give rise to higher profits too.
• Saved energy costs: After a period of time, the upfront costs, which are normally higher for energy-efficient products compared to their less-efficient counterparts, are amortised due to lower running costs.
• Contribution to protection of the environment: This is a motivation for any actor and especially for governments as they have often set defined energy savings targets.

MEPS work perfectly in combination with voluntary and mandatory energy labels, information and motivation campaigns, and financial incentives where the latter are appropriate. These instruments are still needed to promote the most energy-efficient appliances and increase their market share.
In practice, MEPS usually focus on removing the least energy-efficient products from the market. If they are based on an analysis of life-cycle costs or existing energy-efficient products, however, they could also move the market to the highest available energy efficiency levels in one step. Such cases are still the exception but do exist. Examples are: the Japanese top-runner standards, the EU Ecodesign requirements for standby power and circulation pumps, and the new refrigerator standards in the USA. Additional instruments such as those mentioned above can prepare the markets for such strict MEPS; in other cases, they are essential to drive the market towards best available technology and thus prepare next steps in making MEPS dynamic. There is no attention to consumers and their potential to influence the market in MEPS. The additional instruments, such as energy labels, product databases, financial incentives, and public and co-operative procurement, can close this gap. Furthermore, it is essential to inform the different target groups. Are the actors sufficiently skilled to implement the standard? Possible methods are information campaigns, demonstration projects, technology awards, feasibility studies and training programmes.

Structural pre-conditions are a standard test procedure and testing laboratories for energy consumption or efficiency and a market surveillance (monitoring) scheme.

Agencies or other actors responsible for implementation
An agency or similar organisation is necessary to guarantee market surveillance and monitoring and to ensure compliance.

Funding
A funding scheme should be established to publish a preparatory study and to guarantee the successful implementation and to establish a compliance regime. Generally speaking, the experience has shown that performance standards are cost-effective for end-users, policy operators and for society and can ensure low-cost energy savings (IPCC 2007).

Test procedure
A test procedure is necessary to calculate the standard energy consumption and to define energy efficiency classes.

The process starts with a (preparatory) study to analyse the technical potentials and country specific circumstances (stock, sales, consumer behaviour and specific standard and real-life energy consumption). Next will be the definition of the standard test procedure for energy consumption or efficiency, unless it already exists. To define the requirements, a statistical approach is often used: The energy efficiency of the appliances already on the market is used as a basis and the standard is drawn up so as to improve the energy efficiency of the average appliance on the market by e.g. 10 or 20%. Another method is regulations that are based on a cost benefit evaluation and the study of the energy efficiency level with the least lifecycle cost, such as in the EU or the USA. Impact Assessments and discussions with relevant stakeholders follow as the next step. Depending on national circumstances the regulation must be adopted by public authorities to realise binding requirements for products, which are placed on the market. Implementation of a monitoring system finalises the implementation process.

Quantified target
The policy can and should have quantified targets. Targets should be the energy savings per year and the impact on innovations (development of the market).

Co-operations of countries
Several countries worldwide have already introduced minimum energy performance standards. Therefore co-operations are helpful for countries, which plan the introduction of a standard. Advantages and disadvantages can be exchanged to make it easier to transfer the policy in accordance with national circumstances.

Monitoring
Monitoring for MEPS can have two subjects: (1) compliance and (2) impacts (particularly energy savings) and costs.
Compliance monitoring is essential for the instrument to function. If a large number of products, which are not compliant with the MEPS, remain on the market, this will undermine the effectiveness of the instrument both directly (because of higher than targeted energy demand from the non-compliant products) and indirectly, because manufacturers will not trust the MEPS and try to circumvent them as well. Information on an effective compliance regime can be found in a IEA publication (IEA 2010).
Energy agencies or research institutions can carry out the monitoring of MEPS impacts. Based on the identified information, the impact of the instrument can be quantified and evaluated. It is essential to calculate energy but also cost savings and to evaluate barriers and incentives for future policies.

Evaluation
Key evaluation information sources are the changes in product range suppliers, number, variety and (additional) costs of energy saving measures and the development of the market. The counterfactual i.e., the hypothetical market share and average energy consumption level of inefficient appliances that would have remained on the market without the MEPS, should also be estimated. Energy agencies or research institutes can carry out parts of this evaluation.

Relevant individual dynamics and side-effects

• Dynamic market transformation and/or innovation: In principle, minimum energy performance standards will stimulate innovation towards improved energy efficiency within the appliance industry. Ambitious requirements are necessary in combination with regularly updates. To be effective, performance standards must be open-ended i.e. regularly revised and upgraded. There is no or little incentive for manufacturers to go beyond this where no stricter standards have been planned for the future (or that incentive must be created by other instruments).
• Avoiding lost opportunities: By setting minimum energy performance standards, MEPS avoid that consumers buy energy-wasting appliances (which would be a lost opportunity for saving energy).
• Minimising rebound effects: To minimise rebound effects, it is essential to combine the regulations with educational and information campaigns. Furthermore, voluntary and especially mandatory labelling schemes work perfectly with efficiency standards.
• Minimising snap-back effects: To minimise snap-back effects, the standard should be open-ended and regularly updated.
• Minimising free-rider effects: Free-rider effects are likely to be small
• Creating Spill-over effects: The instrument can become the basis of other energy efficiency policies such as labelling schemes, voluntary agreements etc.

Sustainability aspects
Other sustainability aspects and environmental impacts can (and should) be a part of the regulation e.g. health aspects or other resources (e.g. refrigerants in cooling, mercury in lighting). That is why a preparatory study with a life cycle analysis is essential to cover all relevant aspects and to enlarge the focus (not only energy efficiency).

• Delays in development of calculation method.
• Delays in legislation and or weak MEPS requirements due to political processes and lobbying.
• Lack of compliance and/or resources for ensuring it.

Depending on product specific requirements (are they ambitious?) high energy savings can be realised. MEPS can just follow the market trend i.e. they exclude products from the market that had fallen to a very small market share anyway. Or they can achieve almost 100 % of the potential by making the highest available energy efficiency levels the standard. Standards have, therefore, a variable impact depending on the efficiency level imposed. Dynamic MEPS requirements, moving to lower levels of standard energy consumption over time at regular intervals, are essential to realise long-term targets in accordance with market development.

Generally speaking, the experience has shown that performance standards are cost-effective for end-users, policy operators and for society and can ensure low-cost energy savings (IPCC 2007).

If a minimum energy performance standard is based on a life-cycle cost (LCC) calculation and then set at levels of least the LCC, it will lead to a net benefit.