The Institute of Directors recently issued a new report, ‘Getting Shale Gas Working’, which outlines the benefits that shale gas exploitation could bring to the UK economy (http://www.iod.com/influencing/policy-papers/infrastructure/infrastructure-for-business-getting-shale-gas-working). There is little doubt, despite the controversy that fracking creates, of the potential for shale gas change the UK energy picture, just as it has in the US. Shale gas, particularly if combined with aggressive energy efficiency policies, could secure UK’s energy future for the foreseeable future and significantly help in resolving the policy ‘trilemma’ of balancing the needs for improved energy security, reduced energy costs and reduced environmental impacts.

I do find it interesting, however, that one of the key issues is cited as establishing ‘an acceptable tax regime’ for which I read some kind of generous tax break. We also saw in the government’s 2013 Budget a promise to introduce a shale gas field allowance and other support. The fossil fuel industry in the UK and globally is receiving massive tax breaks and subsidies, something like $1.9 trillion a year globally according to the IMF. Meanwhile, improved energy efficiency, which has been proven to be cheapest, cleanest and fastest to deploy energy resource we have, receives very little if anything in tax relief or subsidies.

We need to deploy shale gas for sure, but we also need to put all energy resources including energy efficiency on an equal tax basis and eliminate tax breaks and subsidies for fossil fuels – in the UK and everywhere.

The City of Chicago, (my all time favorite US city and one that is well worth visiting), is a leader in the US and the world on promoting energy efficiency and sustainability generally. Chicago has a unique history in buildings, the skyscraper was invented there, and as well as many historic buildings it still has some of the tallest buildings in the world in the form of the Willis Tower, (formerly and still to most people the Sears Tower,) and the John Hancock tower.

The city, whose official motto is ‘Urbs in Horto’ or ‘city in a garden’, has the aim of being more liveable, more competitive and more sustainable. It has had sustainability programmes for a number of years and has achieved the following:

• been voted ‘most sustainable large community’
• number 1 in number of LEED certified buildings
• has the largest urban solar capacity (10 MW on brown field site)
• number 1 in green roofs, with more than 5 million square feet
• has the 3rd largest concentration of green jobs in the US
• has recently shut down two urban coal fired plants, thus improving air quality.

The city’s sustainability efforts have been accelerated under the leadership of Mayor Rahm Emmanuel and the city has 24 goals for 2015 in 7 key areas (‘24/7’) with 100 specific activities being monitored. Number 2 in the 7 key areas is ‘Energy efficiency and clean energy’. It is refreshing to see that the order is energy efficiency first, rather than clean energy. Energy efficiency also clearly links in with number 1, creating jobs, and number 7, addressing climate change.

The city undertook a study of energy use split into census blocks and the numbers show that there is $3 billion a year spent on energy in 600,000 buildings and that 71% of Chicago’s carbon dioxide emissions come from buildings. This realization led to the creation of the Retrofit Chicago programme which has three sub-programmes, one for public buildings, one for commercial buildings and one for the residential sector.

In the public sector the City set a target of reducing energy use by 20% in its 10 million square feet of facilities. Recognizing that finance could not come from public funds the City created the Chicago Infrastructure Trust which is designed to bring in multiple, private sector finance partners to invest in infrastructure upgrades. Although less than a year old, and still, as the Deputy Mayor described it at the recent ACEEE Financing Forum, an ‘infant that has probably got too much attention’, it is working on financing energy efficiency retrofits in buildings, large pumping stations and schools.

The Commercial Buildings Initiative (CBI) was launched as a voluntary , opt-in, programme. It initially had 14 million square feet of buildings owned by major real estate companies signed up but now has 32 buildings with 28 million square feet. It both “makes it easier” for building owners to have a retrofit and provides recognition. Interestingly enough finance is not considered a barrier in the CBI as these are major buildings owned by large real estate companies.

The Residential Partnership used the data on energy use at a census block level to identify twelve zones with a high potential for energy efficiency. This information is available through the city’s information portal and the city is encouraging people to come up with new ways of using the data. After less than a year 1,300 retrofits have now been undertaken with a total of 2,600 across the city (including areas outside the twelve zones). As in other residential retrofit schemes a critical issue is accelerating demand and the city uses an out-reach team using various techniques including house parties.

For more information on Chicago Retrofit see here.

Many US cities are doing really interesting and effective things to improve energy efficiency but ‘the windy city’ is definitely up there amongst the leaders and worth studying.

This is the text of the speech I made at the International Energy Research Centre’s 2013 Conference in an enjoyable debate over whether we should commit public and private resources to energy supply or energy efficiency. Needless to say I argued in favour of energy efficiency.

Good afternoon everybody. I am here to make the case for investing in energy efficiency over energy supply.

The first thing I want to cover is just how big the efficiency resource really is – and we do need to think of it as a resource like any other.

The University of Cambridge a few years back came up with these numbers:

• We use 475 Exajoules of primary energy, that’s oil, coal, gas, solar, nuclear, and out of that we get a 55 Exajoules of useful energy services, so that is heat, cold, motion and sound.
• That is 11% efficiency – with all of our advanced technologies we get an overall efficiency of 11%, which means we waste 89% of all that primary energy, even after allowing for some of that we can never use, it is still pretty pathetic.
• Out of the 6 trillion or so dollars we spend on energy, something like 5 trillion is wasted. By the way, onlyelevenpercent.com is my blog – so now I have the commercial out of the way!

So, now we are talking about money we’re going to look at some big numbers. I don’t see many £50 notes but interestingly enough they have Boulton and Watt on who made their fame and fortune by selling energy efficiency in the form of long-term shared-savings contracts. Most people think James Watt invented the steam engine, he didn’t – he invented a more efficient steam energy and sold them on the basis of energy savings.

So let’s compare renewables with efficiency. In the power game the common denominator is Levelized Cost of Energy (LCOE). Let’s look at LCOEs for renewable technologies using some numbers from the Fraunhofer Institute which is pro-renewables.

The LCOE for the existing grid – that is fossil fuels and nuclear – is in the range 30 to 75 euros per megawatt hour, so that is the bench mark.

First, we look at onshore wind. Fraunhofer says the LCOE is 60 to 75 euros per megawatt hour.

Large scale solar PV has a LCOE of 110 to 140 euros per megawatt hour.

Small scale solar PV has a LCOE of 125 to 250 euros per megawatt hour.

Now offshore wind, which the UK is putting an awfully large bet on, has a LCOE of 125 to 175 euros per megawatt hour.

The UK says that the cost of offshore wind can be reduced to 100 pounds per megawatt hour compared to a wholesale electricity price of 50 pounds per megawatt hour. That is if everything goes to plan and the industry can deliver 100 pounds per megawatt hour, and many people think that is a very big ‘if’, the cost will still be twice the current wholesale price.

Finally let’s look at tidal power which has huge potential. Now if the cost-down curve for tidal is achieved, the LCOE is 250 to 350 euros per megawatt hour.

So now let’s look at energy efficiency. By the way, one of the other problems with energy efficiency is that it isn’t photogenic!

Work by the American Council for an Energy Efficient Economy looking at all the energy efficiency programmes supported by American utilities came up with a LCOE of 20 to 45 euros per megawatt hour.

Now I have thrown a lot of numbers out so let’s summarise here:

• Fossil fuel/nuclear – €30 to €75/MWh
• On-shore wind – €60 to €75/MWh
• Large scale PV – €110 to €140/MWh
• Small scale PV – €125 to €250/MWh
• Off-shore wind – €125 to €175/MWh
• Tidal stream – €250 to €350/MWh
• Energy efficiency – €20 to €45/MWh

We can see that efficiency, which we saw at the beginning is a huge resource, is also by far the cheapest resource.

Now let’s look at a very famous building which is now an icon for energy efficiency: the Empire State Building. As has been well reported some clever holistic engineering as part of a major refurbishment led to 38% savings with a three year payback period on the incremental capital. Tony Malkin, who owns the Empire State Building is an environmentalist but he is also first and foremost a New York property magnate. He only invests if there is a three year payback period and he forced his supply chain to do it right and because of the financial results now every other New York property owner wants to do energy efficiency, and it doesn’t matter if they believe in climate change or not. So energy efficiency is an environmental activity that isn’t controversial. And of course it does not need any subsidies whatsoever.

And now another thing: the LCOEs we quoted before don’t take account of the additional costs that low-carbon generation impose on the grid. I am not going to go through the numbers from this research by OECD but you can see that, depending on the degree of market penetration achieved, the additional costs on the grid for wind and solar can range from 20 to 80 dollars a megawatt hour, that’s on top of the LCOE numbers we have already looked at.

On the other hand, energy efficiency brings with it additional benefits rather than additional costs. This work by ConEd in New York shows the additional benefits that come from a commercial lighting retrofit in terms of reduced need for investment in transmission and distribution, avoided line losses and capacity savings. Even excluding the energy savings and the environmental benefit, a kilowatt of lighting retrofits can save 1400 dollars.

Now let’s talk about jobs, a critical subject everywhere but particularly in Ireland. Work by ACEEE has shown that energy efficiency generates 21 jobs per million dollars compared to 10 in the energy generation industry and 17 in the general economy. So if you take one million dollars revenue out of the energy industry by saving a million dollars you lose 10 jobs but you generate 17 jobs in the economy as a whole and if you spent a million dollars on energy efficiency you generate 21 jobs.

Two more points: one looking forward and one looking back. Looking forward, decarbonisation through renewables just does not look plausible. This chart from a recent report by Liberum Capital shows the scale of growth we need in renewables in the UK to meet our targets. Quite frankly, these growth rates in wind and nuclear are just not plausible. Doubling the amount of nuclear power in 17 years, 2013 to 2030, is quite frankly a joke when it takes years and years just to get to a decision and every comparable nuclear project everywhere is way behind schedule and over budget.

Now if we look back at the last 40 years, and this chart shows US data but the same is true everywhere, we see something really quite interesting. The top lines show what energy use would have been if we had stayed at the same level of efficiency the US had in 1970. The total would have been 203 to 210 Quads but in reality the US now uses about 100 Quads. So if you look back at the last 40 years, energy efficiency has delivered more energy services than any other source of energy, coal, gas, nuclear, renewables, by a very long way. And we did that without trying except for a 10-year period between the mid-1970s and the mid-1980s.

So to sum up:

• Energy efficiency delivers much lower cost per megawatt hour than any other energy resource.
• It is a very large resource.
• It does not require subsidies.
• It brings with it additional system benefits in the electricity network unlike renewables which bring additional costs.
• It generates more jobs per million dollars than energy generation and the economy as a whole.
• Decarbonisation through renewables is not plausible.
• Over the last 40 years energy efficiency has delivered far more energy services than any other source of energy – without really trying.

So just think about what we can do if we really try!

Thank you to all at the IERC for inviting me to speak and organising such a great conference. Thanks also to my fellow debaters on both side of the argument and to the audience for their contributions.

I had a great trip to Ireland recently, speaking at the IERC conference and getting updated on the various private and public energy efficiency initiatives. Ireland is really making impressive strides to improve energy efficiency.

In February the government published its second National Energy Efficiency Action Plan (NEEAP) which highlighted the potential benefits to Ireland, a country that imports c.88% of its energy and has ageing power infrastructure. In the first NEEAP in 2009 the government estimated that by implementing the NEEAP Ireland could save €2.36bn, generate 5,000 jobs, a critical issue in Ireland, reduce energy use by 32,000 GWh and reduce emissions by 7.7 mt of GHG emissions.

The NEAAP set a target of 20 per cent savings across the economy and a target of 33 per cent saving in the public sector by 2020. The plan includes 97 specific actions and these include: obliging the public sector to address consumption, procurement and reporting of energy use, writing guidelines on Energy Performance Contracts (EPC), the establishment of an €70 m energy efficiency fund with €35 m being invested by the government, and establishing a domestic and non-domestic Pay as You Save (PAYS) schemes.

Another interesting initiative is the International Energy Research Centre (IERC), based at the Tyndall National Institute in Cork. IERC is a vehicle for co-operative research backed by an impressive number of large multi-nationals including United Technologies, General Motors, IBM, Alcatel-Lucent and HSG Zander and local companies such as Bord Gais. The IERC brings together industrial partners with academic institutions to undertake collaborative research in integrated sustainable energy system technologies. The IERC is already supporting a number of collaborative, industry-academia research projects driven by real industrial needs and has recently attracted additional support. The idea is to carry out research, use Ireland as a test bed and then use the technology developed in international markets.

Ireland is a small country at the edge of Europe but judging from the National Energy Efficiency Action Plan and other initiatives such as IERC it is quietly taking a leadership role in Europe in energy efficiency.

The New Buildings Institute (NBI) in the USA turned 15 years old in April. The NBI is a non-profit ‘working to improve the energy performance of commercial buildings. The NBI has two very interesting initiatives that deserve wider attention, ‘Getting to 50’ i.e. achieving savings of at least 50 per cent compared to current building code (regulations) and ‘Zero Energy’, which is about getting to net zero energy buildings, i.e. buildings that consume no more energy in a year than they produce. Even the ‘getting to 50’ is an ambitious goal, getting to net zero even more so. So on their 15th birthday it is interesting to look at how things are going with both of these really useful initiatives but particularly net zero energy.

A recent report released by the NBI summarized the progress on net zero buildings and took a first look at costs and features of these buildings. The report covered 21 buildings with sufficient data to analyze, 15 of which had actual results and 6 with modeled consumptions. They covered most climate zones in the US and a wide range of buildings including offices, schools and sports facilities. They were small, generally less than 15,000 ft2 but this is representative of the US building stock. The total number of net zero energy (or zero energy capable) buildings in the US is expected to reach 100 by the end of 2013.

The average Energy Use Intensity (EUI) for US commercial buildings is 93 kBTU/ft2. The least efficient of the 21 buildings had an EUI of 35kBTU/ ft2 – i.e. 62% less than the average. The most efficient achieved EUIs of about 10% of the average – i.e. energy consumptions 90% less than the average.

The techniques used included; integrated design, extensive use of day lighting, high efficiency envelopes, high efficiency glazing and advanced heating and ventilating systems and all the buildings included photovoltaic solar systems. All the technologies used were widely available and not particularly innovative in themselves. As energy used for heating and lighting is reduced, the proportion used for plug loads is increased and more effort is then needed to reduce this through both design and better operations.

Measuring incremental costs of buildings is notoriously difficult but it is possible to measure actual costs and compare them to other buildings. The NBI concluded that incremental costs were in the range of 0 to 10% but less than the modeled costs, with paybacks less than 11 years. It is likely that more experience in design teams and the supply chain will reduce costs and there are now plenty of examples where integrated design can reduce total costs.

The NBI’s programmes and reports show that designing and building real buildings with net zero, or close to net zero energy use is possible and possible at low (or possibly even zero) costs. What is needed to make it happen more widely is more clients who see the possibilities and the advantages in reduced life cycle costs, and designers schooled in integrated design and appropriate technologies. More aggressive improvements in building codes (regulations) would of course have a major part to play.