Let’s ditch energy efficiency

Monday 14 December 2015

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 it 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

Comments

There are 10 comments on “Let’s ditch energy efficiency”:

Michael Gell on December 14th, 2015 at 9:52 pm said:

Productivity is the appropriate way to view this. In moving to the low carbon economy, every enterprise will need to reassess how it uses resources. Knowing the productivity of resources – from energy productivity, materials productivity, water productivity, through to more sophisticated forms such as knowledge productivity, will provide the astute business with new forms of competitive edge and collaborative advantage. Moving to the new economy will demand greater levels of ingenuity and innovation. Knowing how to measure and compare the productivity of every resource is central to success. Resource productivity, such as energy productivity, through the supply chain is now available in such a way that energy productivity at every site (there may be tens of thousands of them in the supply chain) down to the equipment level can be readily evaluated. This opens the way to huge reductions in energy demand (about 40% global industrial demand) as the whereabouts and levels of low productivity are made visible.

In the early part of the 20th century, Ford and Taylor started a productivity revolution in manufacturing. Those same concepts of productivity and useful work can be applied to every resource that a business uses.

Juan Pablo Garcia on December 15th, 2015 at 10:11 am said:

Hi Steve: I think this paragraph sums up all the usual concerns “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.” and I agree 100% with it. What I don’t clearly see is how to measure “energy productivity” at smallest levels (like a building or a system inside a building): if people is rejecting to meter energy waste or doing it only when there is no alternative, how will they meter output against energy usage? What is the “product” of an office building? Maybe we can get into darker waters than the plain old energy efficiency if not in normal industrial sites where units/energy is a common measure. I ignore if there are any standards to compare yearly energy usage per surface area of an office building. If this exists, can’t it be used to legislate and “force” efficiency? Sorry about this last question, I’m not an expert on that.

Matthew Gordon on December 15th, 2015 at 7:20 pm said:

I thoroughly agree with Steven. I have been promoting energy efficiency for 20 years and found that the biggest barrier is apathy.
In the business world, waste is a bad thing, which is to be eliminated, thus increasing productivity, profitablility and all things good. If our energy is not being used efficiently, it is being wasted.
Energy is a valuable and finite resource. We should not waste it. Failing to capture “free” energy from the sun, wind, tide etc is also waste.
As we move from reckless (low efficiency) burning of fossil fuels to capturing weather derived energy, we move from being in control of supply, to needing control of demand. Until energy policy makers move from the “supply to satisfy any amount of demand” to a “sharing out what is available” approach, little progress will be made.

McGee Young on December 16th, 2015 at 2:16 am said:

I love this idea. I wrote an essay on Medium not too long ago making the same point about conservation. When you are a consumer trying to conserve or to become more efficient, you are denying yourself the use value of the commodity. But when you are a producer of efficiency, you obtain value from the act itself. Becoming more energy productive puts the value proposition in the hands of the end user rather than the utility. Perfect.

Chris Lamb on December 16th, 2015 at 1:46 pm said:

Very good article Steve and I think you are right about making a name change to Energy Productivity. Reminds me somewhat of when we started to talk about NegaWatts !

Will Efficiency Retrofits Be Sexier in 2016? on December 16th, 2015 at 10:32 pm said:

[…] in 2016 whether its renaming “energy efficiency” to “energy productivity,” cool new technology like LEDs, or utility and Federal incentives being enhanced, […]

Charlie Knaggs on December 17th, 2015 at 4:49 am said:

Thanks Steven, interesting post. We are seeing the energy productivity agenda gain traction in the US and, albeit more slowly, here in Australia.
I broadly agree with everything in your article except for the final sentence. Energy productivity and energy efficiency are not the same, and we should not use the terms interchangeably. There are subtle differences (which, to be fair, you acknowledge earlier in your article). In particular, I see energy efficiency as one of many contributors to energy productivity (along with energy generation, supply, retailing, etc.).
The risk of simply renaming EE as EP is that we miss the opportunity to tell the broader, more compelling story about EP.
Cheers
Charlie

Colin Genge on December 17th, 2015 at 5:41 am said:

I like your change in nomenclature from “energy efficiency” to “energy productivity”. You are correct in that no one gets excited about efficiency.

That term could be extend to “materials productivity” – how much benefit we get from raw materials used in products. Hopefully that will identify cheap good that last for two weeks and “materially unproductive”.

We tend to only value labor but not materials that are in some cases irreplaceable or in cases of fossil fuels, create negative wealth when they are used. The Equation could be”
cost of material replacement of manufactured item including it’s lifetime energy need + cost of material disposition (such as burning or final disposition) + labor – cost paid by consumer = unpaid cost burdened on planet. Something like that?

Five ideas for Greg Clark | Only Eleven Percent on July 25th, 2016 at 3:12 pm said:

[…] narrative around energy and energy efficiency to one of energy productivity. As I have argued in previous blogs energy productivity is a powerful organizing theme for energy policy. It is also really hard to argue against improving […]

EP100: Why Energy Productivity is the New Efficiency [WEBINAR] | DEXMA on June 12th, 2017 at 6:41 am said:

[…] too long ago, energy policy expert Dr. Steven Fawkes suggested that it’s high time we ditch the term “energy efficiency” […]

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