In my job I still hear the question: If energy efficiency is so profitable, why isn’t it happening?

Every time I hear it I think it’s completely the wrong question! It’s the question asked by people who aren’t out there in the market. Energy efficiency is happening. And it’s happening in a big and rapidly growing way.

So what are the right questions? The first one is: How do we accelerate the uptake of energy efficiency? The second one is: How can we embed it into our systems and processes so that it is a permanent and normal part of management and everyday life?

These questions should be the concern of governments, as well as industry and commerce, householders and NGOs. Accelerating the uptake has been proven to provide multiple benefits in terms of reduced costs, reduced impact of energy price volatility, less need to invest in energy supply infrastructure, increased energy security, job creation and reduced global and local environmental impact. Governments, working with each industry sector and sub-sector, need to work out what are the enabling conditions that will lead to an increase in demand for energy efficiency. They need to find out how to increase the supply of energy efficiency goods and services and the flow of investment into energy efficiency.

Embedding energy efficiency processes is essential so that the current wave of activity is maintained and built upon. This will be vital if we do have lower prices as a result of shale gas. Note, however, that most energy efficiency investments can still be very profitable even at energy prices that are lower than we have today. McKinsey’s 2008 global study (The Case for Investing in Energy Productivity) showed the effect of investing $170 billion per annum with an average IRR of 17% at an oil price of $50 per barrel. At today’s c.$100 per barrel the average IRR will be much higher than 17% and the frontier of the potential is now also so much bigger. We don’t want to build up lots of productive energy management capacity and then lose it all just because energy prices come off a bit for a few years. Improving energy efficiency needs to be a long-term activity. That is why standards such as the ISO50001 Energy Management standard and The International Performance & Measurement Protocol are so very important.

Personally, having lived through the 1980s boom in energy efficiency, or ‘conservation’ as it was incorrectly called back then, I am optimistic that this time it is different and that we are embedding efficiency into the energy mix to a greater extent than ever before. My optimism is based on the following five factors:

• Growing interest in energy efficiency within the investor community
• The realisation that this efficiency is a huge and valuable opportunity
• The VC and PE investments in EE that have been made over the last five years
• The growing range of cost-effective efficiency technologies in all sectors
• Environmental and sustainable development pressures

I know that every time someone says ‘this time it’s different’ it turns out not to be – witness the dot com boom of the 1990s and the debt bubble of the 2000s. Of course, only time will tell. Personally I am optimistic that this time energy efficiency will become recognised as the cheap, clean and fast energy resource it really is and we will achieve levels of efficiency far greater than our current official energy scenarios show. As Winston Churchill said: ‘For myself I am an optimist – it does not seem to be much use to be anything else.’

The Green Deal – A Big Green Secret?

Evidently, according to press reports in the UK, no one knows about The Green Deal. It’s a big, green, energy efficiency secret. Since its announcement only five households have signed up and according to a YouGov poll for uSwitch, four out of five people in the UK have never heard of the government programme, which is not a good start for a scheme designed to help more than 14 million homeowners and businesses to increase their energy efficiency.

In response to the poll, Greg Barker, the climate minister, told the Guardian newspaper that the findings were not surprising. “We’re right at the beginning of the green deal journey, and the uSwitch report is right to identify there is relatively low consumer understanding around the green deal. It’s as you’d expect, as it’s yet to be rolled out. I expect that to change over the coming year. It’s not going to be an overnight success, it’s going to build steadily, strongly over the years.”

The Green Deal is extremely ambitious. It aims to capture £14 billion of private finance over 10 years and an additional £13 billion of Energy Company Obligations (ECO) money will go towards the Green Deal. The not-for-profit Green Deal Finance Company (GDFC) established under the Energy Act 2011 includes some extremely high-profile members including Goldman Sachs, PwC, HSBC, British Gas, RWE npower and E.On.

The first main challenge that the Green Deal will face is now becoming pretty clear: customer up-take. But this is no surprise. The problems with all energy efficiency schemes, even ones where there are no upfront costs like the Green Deal, are various. First, energy efficiency is not a physical object. It’s not like walking away with a new car or a new TV. Yes, you might get a new piece of kit like a smart meter, a new boiler or new double glazing but there is not that emotional response you get when you buy something big, bright and shiny. It’s just not very sexy.

Then there is the issue of trust. Energy suppliers are some of the least trusted UK businesses. They have, rightly or wrongly, had a bad press. The general opinion is that they make mistakes on bills and put prices up even when wholesale costs are falling. The other major issue is that it’s a big hassle having the energy efficiency technologies installed in your home. Builders, mess, disruption, days off work. The final issue is a human behaviour one. For some reason, it’s very hard to give things away for free – ‘it is too good to be true’.

All this aside, what concerns me the most is not necessarily customer up take – it’s not a good start and I think the government and its partners need to do much, much more targeted marketing and work to understand customer demand, but I do think that take up will improve over time. The main issue is the modelling used to assess savings. Models used in California for assessing energy saving have turned out to have a 50 per cent error in 25 per cent of cases. There have been cases here where large property portfolio owners have had widely differing EPC (Energy Performance Certificates) for very similar buildings. Re-visiting them using the same software and the same assumptions results in a much tighter spread. So if funding is going to be made based on certain modelling tools the government, and the investors, need to ensure that these are accurate or we’re throwing money in the wrong direction. What’s more, if the savings turn out to be less than estimated and lower than the repayments will consumers have grounds for compensation.

Welcome to my new website and blog!

It’s called ‘Only Eleven percent’ because, despite all our centuries of technological progress, we’ve reached the stunning global energy efficiency of about 11 per cent! In anyone’s books this is pretty poor progress. But it’s not so surprising when you think about how we built industrial society on cheap energy. What’s more most things are designed in a very traditional way and bought on lowest-first cost rather than lifetime costs. There are of course limits to how efficient we can make real machines but 11 per cent really is poor. The effects of this are huge; billions of pounds wasted (trillions globally); additional environmental impacts; the need to import more fuel which means less energy security; and big health effects in poorly heated, inefficient houses.

On this site I want to try to expand on what I think about energy efficiency; where we are; what the big stories really mean; what has worked elsewhere; what the future holds and why we should be bothered at all. I’m not an evangelist and I’m a pretty grounded person so you won’t find any sweeping statements or weird ideas. But because I’ve been in this industry a long time, I’ve got a great deal of information in my head that’s useful; I’ve got a good overview of the issue and challenges, technologies and processes, and the advent of the internet now means I can pass some of that on.

Improving energy efficiency, and specifically the rate of improvement, has so many advantages for individuals, organisations and nations, that it is sometimes hard to see why it is not given greater attention and resources than it currently receives. Energy Efficiency is important. It’s vital to all of us and it’s going to become more so as time goes on. The good news is that we can do something about it. We all have a choice about how energy efficient we are, our technologies, our organisations and our societies are – it is not out of our control. I hope that this blog will add to the debate, offer my opinions and perhaps help individuals and businesses, policy makers and stakeholders take a fresh look at energy efficiency and see how exciting the future could be.