Monday 18 February 2013

We know that buildings use about (40)% of all energy use and we also know that the energy efficiency of buildings can be greatly improved, often just by better monitoring and controls with low capex and fast paybacks. Savings of 20% or more can often be achieved by better control strategies and recommissioning. New design techniques such as integrative design of whole building retrofits can produce much larger savings. The UK spent about £42 billion on energy in buildings in 2011, about £29 billion in the domestic sector and the rest in non-domestic buildings. Assuming we can save 20% in non-domestic buildings, which is an achievable target, the value opportunity on offer is about £8 billion per annum, potential savings that could produce an investment return and reduce operating costs for businesses and householders alike.


So what needs to happen before we can really exploit this huge opportunity? Lots of it can be achieved with simple, well proven techniques of energy management and application of existing well proven technology. We do need, however, some innovation in process, finance and technology – all of which is highly doable with the right kind of leadership from government, industry and the finance community – and all of which is emerging now.


Let’s start with process. Most importantly we need to standardise the evaluation of energy efficiency measures, the documentation of projects, the measurement and verification (M&V) of savings and commissioning processes. All too often different energy assessors end up with different results. Standardisation will help build confidence amongst energy users considering making investments as well as outside investors. A good example of standardisation happening elsewhere is the Investor Confidence Project (ICP) in the USA.


We also need to get transparency of building energy consumption in the non-domestic sector. This has been proven to be very powerful in places like New York and Charlotte. Companies like Energy Deck and Honest Buildings are offering on-line transparency of energy use and retrofit project opportunities.


The ideal structure for a large scale retrofit programme would be to combine transparency of energy consumption, some upfront technical assistance to help clients go through the retrofit process, standardised processes from survey to commissioning to Measurement and Verification, and access to finance.


On finance we need access to long term, low cost debt – something that is hard to source from banks at the moment. When there is sufficient volume and standardisation the kind of long term income thrown off by energy efficiency projects will be of interest to income and bond investors. As well as the issue of standardisation referred to above we have to have scale to reach the income and bond investors, they typically can’t invest in amounts under £100m and as we know energy efficiency projects are usually quite small on this scale. We need to find ways to rapidly build volume by aggregating and warehousing projects. Another US example is in Pennsylvania where the state government is putting together a warehouse for energy efficiency loans and when there is sufficient scale they will issue bonds. In the UK Birmingham City Council is working on something similar.


On the technology front we need innovation around better modelling of retrofit options as well as tools for rapidly assessing buildings. We are beginning to see these technologies emerge in companies like Sefaira and kWHOURS. We also need new technologies including, super thin insulation, adaptive materials such as low cost electrochromic glass – such as being developed by companies like Soladigm – and the application of sensors and communications to all building systems as being developed by companies like Enlighted.


The energy efficiency policy framework in the UK is becoming more positive and it appears that the value of efficiency has finally been recognised. If we can ensure that the demand side if fully recognised in the Electricity Market Reform we will see even larger opportunities for energy efficiency project developers to pull together large-scale projects covering cities or regions. We either have, or can see on the near-horizon, the techniques, processes and technologies we need to radically improve energy efficiency in buildings. Now we just need to get on with it – at scale – by thinking big.

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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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