By Janine Kubert
We’ve made great strides with improving the efficiency of refrigerators over the past 30 years, cutting their energy use in half. According to Carl Blumstein, the Director of UC’s Cal Institute of Energy and Environment, we’ve done great with incentivizing energy efficiency in widgets generally. But at the CleanTech Open last month, there was general agreement among the panelists at the Energy Efficiency session that we haven’t done a good job of improving the efficiency of complex systems like homes or the energy grid.
What is keeping us as a nation from moving forward with that?
1) Regulatory problems.
Regulating our power utilities so that the sale of power is de-coupled from profits, and instead incentivizing them to promote efficiency has been a major driver of increased energy efficiency for the state of California. Devra Wang, the Director of the California Energy Program for the NRDC says that now we need other states to take the same path. She emphasizes that policies should be clearly articulated, and incentives should be performance based.
2) The principal/agent problem in commercial buildings.
It is hard to get a energy efficiency retrofit contract signed because of the focus on payback instead of return on investment. Zachary Gentry of Adura Technologies, which specializes in lighting technologies and energy management dashboards, says the payback time demanded by companies today is 18 months. However, over the ten year life of an asset such as new lighting, companies can realize up to a 50% return on investment or more. But often the decision makers are not the building owners; they are facility or property managers focused on annual expense management who are usually distrustful of the energy savings promised by building technologies.
3) Access to capital.
The sales velocity and deal flow is very slow in the energy efficiency space. This all makes it hard to be a start-up. Venture capitalists aren’t interested in funding firms that only provide energy efficiency consulting. However, if your company can find the funds to endure the wait for a deal to close, the payoff is large. For example, Gentry says that movement to electronic ballasts from magnetic was slow, but now everyone has the electronic ballasts. He predicts the same massive sea change from fluorescents to LED lights in the next five years.
4) The residential consumer value proposition.
It seems that the lure of saving money on energy bills isn’t enough to convince residential consumers to get a whole-house retrofit. Other benefits such as a quieter, less drafty, warmer home, with better air quality that will cure your child’s asthma, will help make the sale. Still, panelist Cisco Devries of Renewable Funding worried that businesses in the energy efficiency space were going to “throw a party and no one would come.” Consumers just don’t seem inspired to buy.
One way to motivate them would be through certifications and building labels, which are helping to identify and raise property values for home and building owners that invest in energy efficiency. The other approach would be to use the stick instead of the carrot, and require energy efficiency standards in building codes. (My musings during this discussion: it is interesting to note that consumers are required to have a smog check on their cars annually, but no home inspection is required except at time of re-sale. Perhaps home insurance companies should tie in annual or bi-annual energy efficiency inspections to insurance rates.)
This article was reported from the 7/22 CleanTech Open Panel on Energy Efficiency. Panelists included: Karen Zelmar, Senior Manager, Product Lifecycle, PG&E; Carl Blumstien, Director, UC California Institute for Energy; Cisco Devries, President, Renewable Funding; John Gajan, Operations Director, Chevron Technology Solutions; Zachary Gentry, Chief Strategy Officer, Adura Technologies, Inc.; Jennifer M. Owen, Associate, VanNess Feldman; Devra Wang, Director, California Energy Program, NRDC
Janine Kubert is Director of Operations for iReuse, a sustainability consulting and software company founded in 2005 that serves organizations interested in reducing their operational costs and environmental impact. iReuse software and services provide organizations with a clear sustainability roadmap to achieve measured results.