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Let’s ditch energy efficiency by Dr Steven Fawkes

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Written by Dr Steven Fawkes and kindly republished with his permission.

For more fantastic articles on energy efficiency/productivity and finance check out Steven's blog onlyelevenpercent.com where this article was originally published. 


 For those of us who have worked in energy efficiency a long time it sometimes seems as if the moment has come, the moment when the world has finally recognized the value of improving efficiency, the fact that there is huge potential which is economic today using today’s technologies with no subsidies, and that improving energy efficiency brings with it massive non-energy benefits such as job creation, productivity and improved health and well being.  All, and I say all lightly as it is no small task, we need to do now is work out how take advantage of that huge economic potential that we know is out there.  We are advancing quickly on that journey with projects like the Investor Confidence Project, the continuation of the work of the Energy Efficiency Financial Institutions Group (EEFIG) on establishing a common under-writing framework for energy efficiency (supported by the EU), and new business models.  An increasing amount of capital is committed to finding ways of investing into efficiency – now we just need to make if possible for that investment to flow by breaking down the institutional and cultural barriers.

In the UK the energy policy reset has dealt with supply options (mainly promoting new nuclear and shale gas) but remains silent on efficiency.  For the record I am against new nuclear (especially with unproven French or Chinese technology) because of cost and security concerns.  I am in favour of shale gas on energy security grounds assuming we can exploit it cheaply.  In any event, these supply options will take at least a decade (almost certainly more in the case of new nuclear) to take effect.  Meanwhile we are sitting on a huge reserve of very cost-effective energy efficiency potential that is not being exploited and which could be unlocked very quickly.  Almost every day we see cases of buildings, in some cases very new buildings, making savings of 10 to 30%, often with little or no investment.  Everyone talks about the declining cost of solar but we also need to recognize the declining cost of delivering efficiency.  We need to build on that base of activity and accelerate demand, supply and financing of efficiency and hence rebalance the emphasis on supply options.

One way of doing that may be to stop using the term energy efficiency all together. Having worked in the field for so long, and finally having the subject get more recognition, this may seem like a strange proposal but energy efficiency has all kinds of problems as a label.  It is a confusing technical term, it is boring to most people, it still has negative connotations of saving and getting by on less, it threatens energy suppliers, it is invisible, it does not lend itself to photo opportunities and big political announcements, and it leads to all kinds of pointless, endlessly resurfacing, debates based on the Jevons paradox.

We need to truly reset energy policy and focus on energy productivity –the amount of value we create out of a given amount of energy (GDP/energy input).  Productivity is positive.  Improving productivity generates wealth.  No-one can be against improving productivity.  Of course for any particular country energy productivity is made up of two elements, the overall structure of industry and the economy, and the level of actual energy efficiency. 

In the UK tackling the country’s poor productivity record is core to the Chancellor’s economic strategy – we need to make sure energy productivity is part of that discussion and so far it clearly isn’t.  

In July the Treasury published a document, “Fixing the Foundations: Creating a More Prosperous Nation”.  Chapter 6 is called “Reliable and low-carbon energy at a price we can afford”.  This does start by talking about “improving productivity in energy generation, production, supply and usage” (a good start).  It then goes on to talk about more competitive markets and introducing the ability to switch suppliers within 24 hours.  Competitive markets are generally good but the problem we have is that energy efficiency cannot compete with energy supply – there is no market for efficiency, only markets for stuff that results in efficiency.  We now have the technology to meter efficiency and California is moving towards a market where efficiency can be measured, metered and truly compete in the energy market.  We are developing new business models based on this idea.  Personally I fail to see how 24 hour switching contributes to productivity.   The rest of the points in this chapter mention supply, oil and gas, shale, new nuclear, and the EU’s Energy Union.  In a strange final bullet point printed in red the now on-going review of business energy tax was flagged.  It is almost as if they ran out of ideas and this chapter wasn’t quite finished. 

 So, apart from the statement “improving productivity in energy generation, production, supply and usage” there is no mention of productivity and no linkage to overall energy productivity – and no mention of energy efficiency.  Efficiency is mentioned in the chapter on Planning and housing – flagging the decision not to proceed with zero carbon homes and saying they will keep energy efficiency standards under review.  The energy chapter is the old 1970s style supply side dominated model in new clothes - “the economy will grow and we will provide whatever energy we need” – rather than focusing on improving energy productivity.

 We need to start talking about energy productivity at the macro and the micro level, recognize the economic benefits that come from improved energy productivity (arising from energy cost savings, improved energy security, improved health, reduced need to invest in new supply options etc etc), and set national targets for energy productivity.  To support that we need to aggressively promote energy efficiency (that is to say energy productivity at plant and building level) and really start to exploit the massive cost-effective energy reserve the efficiency potential represents, a reserve which is cheaper than any supply-side option, faster to bring on-stream, and by far cleaner than any other option.  

 So maybe we shouldn’t forget about energy efficiency all together, just rename it energy productivity.


 

Fixing the Foundations can be found at:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/443897/Productivity_Plan_print.pdf

Information on the Investor Confidence Project: europe.eeperformance.org

The EEFIG report can be found at:

http://www.unepfi.org/fileadmin/documents/EnergyEfficiency-Buildings_Industry_SMEs.pdf

 

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Comments

  • Guest
    Brendan Coyne Wednesday, 13 January 2016

    Good piece Steve. What's next from ICP perspective?
    Brendan Coyne
    Energyst Media

  • Guest
    Jeremy Nicholson Friday, 15 January 2016

    Efficiency and productivity are two sides of the same coin, of course - but I think this is a good suggestion. Investors and managers are accustomed to focussing on capital, labour and raw material productivity. If a change in terminology might ultimately result in them achieving better results, why not?

  • Guest
    Charles Bradshaw-Smith Tuesday, 19 January 2016

    A thought provoking piece as ever Steve. I agree with the rationale for renaming EE. My one concern with Energy Productivity is that it sounds a bit corporate and not as if it is meant to be owned by the citizen. "Productivity is someone else's job..." may be the instinctive thought of consumers and so they don't join in just as EE is getting traction. Is there a way we can personalise it more so it works for businesses and individuals? "Energy Value" for instance may appeal (and could also apply to supply side as well)?
    Charles Bradshaw-Smith, CEO SmartKlub

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