Shining a Bright Light on Energy Efficiency

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by: Joel Makower

Energy efficiency came back into the limelight this week, a seemingly rare but welcome occurrence. Given the magnitude of our climate and energy challenges, the opportunities to use energy more efficiently and effectively have remained largely unexploited, as I've noted in the past. In our gadget- and gizmo-obsessed culture, in which status is expressed by what we can show for ourselves, not necessarily by what we do, being energy efficient is a decidedly tough sell.

Example: We'll spend irrationally on solar panels, whose economic payoff may be years away, if ever, but whose existence offers a "Hey, look at this" opportunity for both individuals and institutions. But we'll shun smaller investments that have more immediate economic and environmental payoffs: insulating buildings, installing devices that ration energy use to the times and places it's actually needed to provide comfort or service, and upgrades of appliances and other energy hogs with the latest models that do the same job with far fewer tons of coal, barrels of oil, and the like.

True, it's hard to get green cred for bragging about your company headquarter's R-34 insulation, but that may well be the wiser choice from an economic and environmental perspective.

It's not either/or, of course — we need both clean energy and efficiency. It's simply that one of those two seems to have a much better press agent.

So, it was gratifying to see two significant developments this week that gave energy efficiency its rightful place in the sun. The first was the launch of the Clinton Climate Initiative's global Energy Efficiency Building Retrofit Program, which brings together four of the world's largest energy service companies, five of the world's largest banks, and sixteen of the world's largest cities to reduce energy consumption in existing buildings.

Under the program, four big energy technology and service companies — Honeywell, Johnson Controls, Siemens, and Trane — will conduct energy audits, perform building retrofits, and guarantee the energy savings of the retrofit projects. Groups like the American Society of Heating, Refrigerating and Air-Conditioning Engineers and U.S. Green Building Council will help the cities develop programs to train local workers on the installation and maintenance of energy-saving and clean-energy products. Meanwhile, Citibank, UBS, Deutsche Bank, ABN AMRO, and JP Morgan have agreed to provide $1 billion each in financing for both public- and private-sector building owners to undertake these retrofits at no capital cost. The resulting $5 billion kitty effectively doubles the existing global market for building energy retrofits.

This is no small matter. Buildings are responsible for roughly half of greenhouse gas emissions in most cities, and over 70 percent in older cities such as New York and London. And most buildings, large and small, leak heating in winter and cooling in summer, among other wastefulness. A handful of basic activities and technologies, along with a modicum of changed habits, can slash energy use between 25 and 50 percent. The Clinton Initiative's short-term financial injection can go a long way toward growing markets for building efficiency technologies and services, not to mention helping to make energy-smart buildings the rule rather than the exception.

The need to do so was highlighted by the week's other energy-efficiency development: the results of a first-time survey of 1,250 North American business leaders on attitudes and trends in energy efficiency. The study, commissioned by Johnson Controls, examines how companies are responding to rising energy costs, what sort of payback they expect from investments in energy efficiency, and to what extent investments in energy efficiency were motivated by concerns about the environment versus economics, among other things. It is intended as an annual exercise, so this year's survey serves as a baseline against which to measure changes in attitudes and actions.

Earlier this week, I moderated a webcast originating from Johnson Controls' Milwaukee headquarters. It included presentations of three companies' energy-efficiency efforts as well as the release of the Energy Efficiency Indicator research findings. (Johnson Controls is a major sponsor of Greener World Media, the company that produces and, of which I am co-founder and executive editor.)

The survey found that executives indicate they expect energy prices to continue to rise and plan to invest in energy efficiency measures to help fight rising costs. However, climate and other environmental issues notwithstanding, executives cite a desire to decrease energy costs within their organizations as a greater motivator than reducing their environmental or climate impacts. Overwhelmingly, the survey found, companies are seeking investments with relatively quick paybacks — usually between two and five years — and economic concerns haven't yet been sufficient to motivate companies to try more adventurous energy efficiency measures.

None of this is particularly surprising, though the Johnson Controls report portrays the energy-efficiency landscape more comprehensively than had previously been done. In most companies, energy costs (and climate emissions) have yet to be seen as sufficiently strategic or burdensome to require more than a handful of low-cost, quick-hit investments. That will likely change as energy prices remain stubbornly high and greenhouse gas emissions start to have a tangible cost in the form of carbon caps or taxes.

What's significant in the week's events is that energy efficiency appears on the verge of becoming a more significant global market than ever before, with billions of new investments and valuable new research revealing both the challenges and opportunities of market uptake of efficiency solutions.

The time, and the climate, may be right for efficiency to take its proper place in the hierarchy of business energy strategy.

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