Thursday 28 May 2020

The limits of my language mean the limits of my world.

Ludwig Wittgenstein

I have been in the energy efficiency business long enough to witness several waves of interest and activity around energy efficiency.  Right now we are definitely in an up-wave which is good for business and good for the environment.  As part of a recent assignment to research global energy efficiency as a service markets I found myself having a discussion about the definitions and language around energy efficiency – which is always a good start to improving thinking and communication. 

In 2015 I suggested that perhaps we should ditch the phrase energy efficiency and switch to using energy productivity.  That suggestion was mis-understood in some quarters as some people thought I meant stop doing energy efficiency. In fact it was quite the opposite – it was about using a different term to help increase activity and investment that would improve overall efficiency. I still think this is a good idea but perhaps the moment has passed and here’s why.

The meaning of energy efficiency is changing. In fundamental terms it is still about getting more from less i.e. reducing the input of energy, but increasingly it is being used to cover a whole range of technologies and business models including: demand response, distributed generation, behind-the-meter energy storage, virtual power plants, micro-grids, building-to-grid, industry-to-grid, vehicle-to-grid etc. At one level I object to this slippage in the meaning of the phrase, but I think we are stuck with it and I think it is positive for two reasons. 

Firstly, all of these areas do increase overall energy efficiency somewhere in the system.  Generating power locally through CHP reduces primary energy use, using solar eliminates it altogether. Transmission and distribution losses are also reduced. They all contribute to reducing the input of primary energy to produce a given level of services or output.  

Secondly, the term ‘energy efficiency’ is now being adopted by investors to mean all the things mentioned above, even if many are still coming to grips with the subject.  A decade or so ago some of us started talking about how to make energy efficiency an asset class, thinking it was about pure efficiency. Now it is an emerging asset class with growing interest from investors looking for investments that have a positive impact on the environment. That is something to celebrate.

Now all we need to do is ensure there is a flow of high quality projects at scale to satisfy investor demand.

The Great Wave off the Coast of Kanagawa, Hokusai 1831

Tuesday 21 April 2020

“Phaedrus, however, because of his training in logic, was aware that every dilemma affords not two but three classic refutations, and he also knew of a few that weren’t so classic, so he smiled back.” Zen and the Art of Motorcycle Maintenance

For the last few years there has been a lot of discussion about how to decarbonize heat in the UK. The argument is presented as: do we go down the heat pump route or the hydrogen in the gas network route. These two choices are presented as an either/or and both have their issues – they are the horns of a dilemma.  In a blog last year I came out in favour of ‘electrify everything’ – which caused a surprising amount of reaction and even amusement from followers and friends. It just seems clear to me that electrifying everything is the right way to go. Rather than just ‘reinventing fire’ we should be eliminating it. As my friend and veteran energy guru Walt Patterson said, leaving fire behind may determine our future on earth. 

I first started studying hydrogen and the promise of the hydrogen economy in the late 1970s, and researched hydrogen as an aviation fuel as an undergraduate dissertation in 1980. Much as I like the idea of the ubiquitous hydrogen economy, probably inspired by my interest in space exploration and the use of liquid hydrogen as rocket fuel, hydrogen has some serious technical issues. Using it for domestic heating frankly makes no sense for several reasons including those set out by David Toke. Using hydrogen in the gas grid is an understandable effort by the gas industry to maintain their position, typical behaviour of proponents of the status quo when the tectonic plates of a paradigm shift are in motion.  Having said that the possible roles of hydrogen for transport and industrial use such as steel production are developing and a number of demonstration projects show real promise. Use of green hydrogen generated from off-shore wind with storage in salt caverns is also being actively developed in Denmark and elsewhere. Some of these projects will probably form part of Europe’s green response to the COVID-19 crisis and we are pleased to be associated with some of them.  However, the hydrogen economy will be more specialised and fragmented than the technological dreams of previous decades when electricity generation was still high carbon and electricity storage was ‘not possible’ other than through pumped hydro-electric stations. 

But on the other side of the dilemma heat pumps are unlikely to suit all situations, particularly in retrofit situations, and the overall seasonal performance is still not necessarily as good as advertised. Changing over to heat pumps in all buildings is just not going to be possible.   

But as Phaedrus, the alter ego of the protagonist in Robert Pirsig’s excellent ‘inquiry into values’, ‘Zen and the Art of Motor Cycle Maintenance’ pointed out, every dilemma affords not two but three ways out.  You don’t have to choose to impale yourself on one of the horns.

In heating the third option that has been overlooked, and one that is looking increasingly interesting, is localised power to heat transfer with thermal storage.  Using electricity to provide heat with thermal storage allows low and zero carbon heating and can provide the large amounts of flexibility to the power system that an increasingly renewable power system needs – a double win. Examples include storage technologies from SunAmp, and Pumped Heat and on a larger scale there are examples in Danish district heating schemes.

These ‘cross vector’ technologies are starting to enable new services such as Virtual Power Plants and managed energy services for households and businesses of all types.  It is very unlikely that the energy system of the (near) future will be an either/or type of system – it is more likely to be a patchwork quilt of local solutions that make economic sense by providing multiple sources of value.

When confronted with the horns of a dilemma be sure to look around the bull to see a way out!

Stay safe, social distance and wash hands frequently.

Wednesday 12 February 2020

In an earlier blog I referred to leadership as the missing element in the drive towards net zero. Now we are seeing leadership on the issue emerging, both nationally – in some countries a lot more than in the UK I have to say – and in the corporate world. Real leadership however goes beyond setting the target, it has to include driving the development of realistic, deliverable plans to achieve the target, and then driving delivery.

Achieving ‘Net Zero’ is a very clear objective, as long as a timescale is incorporated, somewhat like “land a man on the moon by the end of the decade and return him safely to earth”. Clear objectives are always useful – they can’t be fudged – you either achieve them or you don’t and as someone once said; ‘objectives are optional, constraints are obligatory’. Once leadership sets, or even considers, a net zero target the organisation has to quickly move into formulating a realistic plan of action which sets out the path to overcome the constraints and achieve the objective, otherwise it is just an aspiration. John F. Kennedy provided the leadership to get to the moon by setting the clear target but NASA drove the plan to overcome the many constraints that existed back in 1961 and marshalled the resources to achieve the target.  So what are the elements of a coherent plan for achieving net zero?

Of course the first step is to ascertain the current situation, the base line.  Any plan should start with a sound baseline covering Scope 1, 2 and 3 emissions.  Clearly Scope 3 emissions are more difficult to quantify for many organisations and a degree of uncertainty is understandable in this area. For instance, how does a University measure travel of students?   Pragmatic judgements based on what is possible and what isn’t need to be made.

Then a range of possible projects or interventions need to identified. Here creativity techniques like brain storming and lateral thinking can be useful.  Techniques such as integrated design are critical for making major breakthroughs in energy performance and emissions rather than mere incremental gains. We need to think outside the box of conventional solutions. Once identified project concepts need to be assessed technically, economically and financially, and contextually. 

Technical assessments need to consider the state of technology development and evaluate the reality which is sometimes obscured by hype. It would be unusual for many organisations to take technological development risks, for those that do the decision must be explicit with a full understanding of the risks and not implicit. Technological development is always risky.

Financial and economic evaluation needs to consider all the benefits and not just energy cost savings or reductions in emissions. Benefits with strategic value can include market positioning, publicity, an increased ability to recruit the best employees etc. and can be far more valuable than cost savings. A systems thinking approach is needed to identify and value benefits. Ultimately any plan must be financeable which requires understanding both the organisation’s own resources and its ability to utilise external finance. If external finance is to be utilised the plan has to meet investor requirements.

Contextual analysis is a vital but often neglected stage in capital project development. It is necessary to check for interactions both between projects and with other internal and external factors, for instance the long-term future of a site or a product needs to be properly considered if there is a proposed project to reduce its energy use and emissions. Some combinations of projects are additive whilst some conflict. For complex long-range plans there may be many interactions with both internal and external factors to be considered at different levels.  Technical, economic and contextual evaluations themselves will often interact in an iterative process.

Any plan needs to consider risks. This should include the risks of inaction as well as the risks of action. It should start with the risks of climate change, the main parameters of which are well known at high level but as far as possible these should be localised to recognise actual risks on the organisation, physically and financially. The risks of action and inaction on all stakeholders including shareholders, employees, customers, and the supply chains should be considered.

Following concept creation and development with a sufficient degree of robust technical, economic and contextual evaluation, supported by risk analysis, a practical portfolio of projects and actions with costs and timings needs to be assembled, a process that may need many iterations. Then the plan should be stress tested before moving into delivery.

To achieve net zero definitely needs vision and leadership, but it also needs a realistic, well developed plan. Developing such a plan is far from trivial.  To then deliver the plan requires hard work and long-term commitment, effective delivery may require changes in remuneration structures to drive the right kind of behaviour throughout the organisation, a change that needs to be driven by strong leadership backed by shareholder pressure.  

As Dwight D. Eisenhower said; ‘Plans are nothing, planning is everything’. If your organisation needs assistance with developing a comprehensive net zero plan, and then implementing it, contact me or Alex Rathmell at EnergyPro.

General Dwight D. Eisenhower addresses American paratroopers on eve of D-Day. Source: National Archives (111-SC-194399)

Thursday 19 December 2019

Things have been very busy recently and so I haven’t been able to produce a new blog to mark the Christmas season.  So instead here is an old favourite from December 2015.  It may be time to update some of them.  Have a great Christmas and a healthy and sustainable 2020 from me and the team at EnergyPro.

The end of the year always brings the pressure of whether or not to write something seasonal.  This year I thought I would do something different by formulating my Laws of Energy Efficiency.  Sir Isaac Newton and the great Arthur C. Clarke stopped at three Laws so I apologize for coming up with 12.  They echo some of the themes I have covered in the blog over the last three years.

  1. Energy efficiency is boring and seriously uncool to most people most of the time.
  2. Never talk about energy efficiency without mentioning the non-energy benefits which can be seriously cool.
  3. Talk about energy productivity and not energy efficiency.
  4. If you are supposed to be an energy journalist never headline a story about renewables with something about “energy efficiency”.
  5. If you put ten people from ten ESCOs in a room there will be 15 different definitions of what an ESCO is.
  6. If you have five energy auditors survey any building you will end up with reports in five different formats with savings calculated five different ways, even if they are all recommending the same measures.
  7. Energy Performance Contracts and ESCOs are not the magic bullet some enthusiasts and failed investment bankers looking for the next big thing think they are.
  8. Never call energy efficiency a “no brainer” or “low hanging fruit”.
  9. An exciting energy or energy efficiency discovery in a lab somewhere is not the same as a viable technology, which is not the same as a commercial product, which is not the same as a successful product that has meaningful impact in the world.
  10. Any politician who finishes an energy speech by saying “and don’t forget energy efficiency” will promptly forget it the next time he or she meets an energy supply lobbyist.
  11. Energy forecasting is easy, getting it right is difficult.  The corollary to this law is that prices can go down as well as up – never forget that in 1986 oil went below $10/barrel oil only months after oil industry bosses said “oil will never sell for less than $20/barrel again” and “our doomsday forecast is $20-25 a barrel”.
  12. When a distinguished but elderly economist says “what about the Jevons Paradox”, ask him or her if they think improving productivity is a bad idea.

Thanks for reading

Thursday 5 December 2019

On the 15th November I was privileged to be in the opulence of the Taj Mahal hotel in Delhi with several hundred honoured guests, delegates and entrants gathered from all over the world for an event that addressed one of the biggest drivers of how our climate future turns out, the growth of demand for cooling and how to meet that demand sustainably. 

It is only in the last few years that the importance of cooling has been recognised by energy and climate professionals, that solving the sustainable cooling problem is absolutely critical if we are going to successfully address climate change.  Several mega-trends are in play.  Population growth, income growth, urbanisation and a warming planet will lead to an increase in cooling demand that multiples by four by 2050 under BAU.  Sales of Room Air Conditioners (RACs) are growing at 10 to 15% per annum which means that by 2050 the number of RACs in the world will go from 1.2 billion today to 4.5 billion. At current efficiency levels the additional electricity demand from this growth would be equivalent to the current demand from the US, Germany and Japan combined.  Cooling also increases peak demand which traditionally drives investment in new generating capacity.  In emerging economies, many of which are in hot climates, the demand for space cooling increases with increasing wealth.  Urbanisation is increasing, 68% of the global population is expected to live in cities by 2050, up from 55% today, which will increase the heat island effect.  Space cooling is not just an issue of comfort, it is increasingly a matter of life and death. Already, 30 percent of the world’s population is exposed to potentially dangerous heat conditions; by 2100, up to three-quarters could be at risk. Affordable and sustainable cooling is a global necessity, allowing for increased productivity, positive health outcomes, and accelerated economic development. As well as more demand for space cooling increasing wealth brings it with an increased use of cold chains.

The problem is best illustrated by India which was the first country in the world to devise a national Cooling Action Plan.  The BAU scenario shows that national cooling demand will grow 8 times by 2037/38 with building sector cooling demand growing nearly 11 times. The incremental energy usage just for RACs would be 247.5 TWh (for comparison UK power usage in 2018 was 333 TWh), requiring construction of many new power stations. This is not sustainable in terms of the environment or capital requirements.  India also graphically shows the issue of cold chains, only 4% of food produce is transported in cold chains whereas in the UK it is over 90%. This leads to c.£13 billion worth of vegetables, meat, fish and dairy products being wasted, contributing to food shortages and reduced farmer incomes.  As well as improving food supplies cold chains improve health through preserving medicines.  With its national Cooling Action Plan and heavy involvement in the Cooling Prize, India really is ‘ground zero’ for addressing this problem.

So how do we address the problem? Business As Usual won’t do it and innovation is sorely needed.  The air conditioning industry has always focused on reducing capital costs and there have been incredible achievements in cost reduction but unlike other consumer products such as TVs, cars, and communications, there has been no disruptive innovations in air conditioning since the development of vapour compression cycle technology and the first air conditioning installation in 1902 by Mr Carrier. The Global Cooling Prize, initiated by Rocky Mountain Institute (RMI) is supported by a range of organisations including the Government of India, Mission Innovation, several foundations and the Indian Alliance for an Energy Efficient Economy amongst others. It was designed to find and support disruptive innovation.  The target was to find new cooling technologies with very specific, and very demanding targets – starting with a reduction in overall global warming impact by a factor of five, as well as much lower power demand and lower water use.  

Over 2,100 registrations were received from 96 countries and 139 detailed technical submissions were received from 31 countries.  Eight finalists were unveiled at the November meeting.

The prize offered up to $200,000 per finalist for development work and up to $1m for the final winner (to be announced in November 2020).  As Iain Campbell of RMI, one of the driving forces behind the Prize said, the announcement of the finalists moved the process from “tell me what you can do” to “show me what you can do”.  The selected finalists will now have to produce prototypes that will undergo a rigorous testing process in India, including in actual apartments.  The eight finalists have a range of technologies, some of which were based on existing technologies and some on completely new technologies.  Entrants ranged from consortia including some of the world’s biggest air conditioning manufacturers, to start-ups and University spin-offs.  

The Kigali Amendment to the Montreal Protocol aims to reduce the use of hydrofluorocarbons (HFCs) by 80% over the next 30 years and if fully implemented the Amendment would reduce carbon emissions from air conditioning from c.5 Gt to c.3 Gt.  If the Cooling Prize targets were achieved it could reduce that to c.1Gt.  This would be equivalent to making the European Union carbon neutral tomorrow.

The Global Cooling Prize is a great project and like the X Prizes for spaceflight and other areas it shows the power of prizes.  To quote Iain Campbell again, “the beauty of prizes is that instead of looking for a needle in a haystack the needle comes to you”.  It is likely that many of the finalists, and other entrants, may end up with viable products, not just the final winner.  We clearly need to ensure that multiple solutions are in development and that there is an eco-system of early stage capital and mentorship for the early stage businesses, as well as scale-up capital when needed.  We should all follow the Global Cooling Prize with great interest.

Ms. Geeta Menon speaking at the Global Cooling Prize event in Delhi, 2019

Dr Steven Fawkes

Welcome to my blog on energy efficiency and energy efficiency financing. The first question people ask is why my blog is called 'only eleven percent' - the answer is here. I look forward to engaging with you!

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