Navigant Research Blog

Is Energy Efficiency the Rodney Dangerfield of the Energy Business?

— January 26, 2011

Rodney Dangerfield is famous for his line, “I don’t get no respect.” It’s not that energy efficiency doesn’t get any respect at all, but it’s clear that it doesn’t get the full coordinated attention it deserves.

A recent report published by the World Economic Forum (WEF) titled Energy Efficiency: Accelerating the Agenda starts with the assumption that the world can’t continue to grow its use of energy at the current rate. Energy demand is projected to increase 40% by 2050. The capital that would be required to meet projected energy demand through to 2030 is a cumulative $26 trillion. That’s almost twice the GDP of the United States. The report quotes US Energy Secretary Steven Chu as saying, “Energy efficiency is not just low-hanging fruit; it is fruit that is lying on the ground.” However, the report’s premise is that capturing this “low hanging fruit” is not as easy as some assume.

My colleagues at Pike Research and I have written in our reports and on our blogs of the many financial, policy-related, and structural barriers to achieving the potential of energy efficiency. Compared to the WEF report, however, we’ve been pointing out minor impediments. The report lays out some real big-picture roadblocks.

  • ”Institutional and market failures are preventing the private sector from implementing and investing in energy efficiency at scale.”
  • ”Energy efficiency initiatives are not yet mainstream in all sectors and developing the investment case for efficiency projects at scale remains difficult.”
  • “While they are independently taking various steps, the public and private sectors are not recognizing and acting on each other’s needs effectively.”
  • “Policy is not always being implemented. The International Energy Agency (IEA) points out that of its 25 policy recommendations only 57% have been fully implemented.”

So why is so much fruit still on those low branches, or even lying on the ground? The WEF report boils much of that list of macro factors into a couple of basic statements.

  • Businesses and consumers need more incentives to invest in energy efficiency.
  • Companies and individuals tend to invest in assets and products they can see, feel and touch, which energy efficiency is not. They have other investment opportunities that are more tangible.

The WEF report recommends three areas of near term activity for a public-private energy efficiency initiative.

  • “Develop a comprehensive energy efficiency ecosystem within and across the main emitter countries by developing a platform that brings together key public, private, and expert actors from across the value chain to co-design scalable projects, programmes and policy enablers as well as common metrics and standards.”
  • “Create a set of action-oriented private sector networks within some key industry sectors, each focused on developing a set of specific actions during 2011 and delivering on them, so as to create a step change in energy efficiency outcomes within their particular sector.”
  • “A public-private initiative led by international organizations/NGOs and academia to develop for the corporate sector during 2011 a set of harmonized international standards on measurement and reporting for energy efficiency that can sit alongside carbon emissions reporting.”

Now, not to demean the good efforts of some very well meaning and hardworking people (and those consultants who came up with the wording for those three bullet points), but I’d guess that many people find it quite difficult to relate to the kinds of big picture recommendations that come out of Switzerland based international organizations. Europe certainly has been able to take many such programs to heart and create frameworks for them through the European Union, though implementation success at the national level varies greatly. However, here in the US and throughout most of the rest of the world, we’re not sure what to make of these kinds of initiatives.

Will the US government be a willing party to these efforts? Will the developing nations such as China, India, and Brazil participate as full partners, or look for ways to justify exemptions? How many of the major multinational companies in those “key industry sectors” will put resources into creating and supporting “action-oriented private sector networks”?

So, I sit here conflicted. Do I support these global efforts but not know what to do about them other than say, “I support you?” Or, do I wish the folks in Geneva well and continue about my business, fighting in the trenches, so to speak, for energy efficiency? The way I worded those choices leaves me the option to do both, so both it is.

In the meantime, I leave you with the wisdom of Rodney Dangerfield’s father who, unknowingly, long ago foretold of global warming. Rodney recalls that “I asked my old man if I could go ice skating on the lake. He told me, ‘Wait til it gets warmer.’”

 

The Institute for Building Efficiency: Expanding the Pie

— January 12, 2011

One of the things they taught us in Marketing 101 involved basic market strategy.  The main goal, it is said, of smaller and startup companies is to take market share away from existing players.  However, a key element of a market leader’s strategy should be to grow the entire market.  It is better to maintain a strong share of a growing pie than fight over pieces of the existing one.

Johnson Controls is clearly a leader in the Building Efficiency industry.  The company’s heritage traces back to Warren Johnson’s 1883 patent for the “electric tele-thermoscope,” which came to be known as the electric room thermostat.  The Corporate Headquarters campus just north of Milwaukee, Wisconsin boasts four LEED platinum certified buildings.  The company’s systems help manage 1.5 billion square feet of commercial real estate around the world.  Its fiscal 2010 revenue in the Building Efficiency market was over $12 billion.

Johnson Controls has a strong commitment to sustainability within its own company and, for obvious business reasons, its customers’ facilities.  In addition, it seeks to educate people and organizations around the world on energy efficiency and clean energy and how to achieve these benefits.  (I’ll leave to the business ethicists the question of whether this is being done for altruistic reasons or simply to act like a market leader and grow the market for its products and services.  What is important is the result.)

Last week Tom Mahowald, Pike Research’s VP of Global Business Development, and I visited Johnson Controls in Milwaukee.  One of our meetings was with Kelly Smith and Julia Currie of the Institute for Building Efficiency.  Johnson Controls established the Institute about a year ago to provide “information and analysis of technologies, policies and practices for efficient, high performance buildings and smart energy systems around the world.”

The Institute not only has a sizeable staff, but also has recruited a Network of Experts and Advisors to collaborate on a variety of projects.  Each member of this small but influential network is a leader in his or her field.

One of the Institute’s main activities is market research.  The Institute has taken over Johnson Control’s partnership with the International Facilities Management Association (IFMA) to conduct the annual Energy Efficiency Indicator, a wide-ranging research project to examine the attitudes, priorities, practices and investment plans related to energy management among decision makers across the world.  Not only does the Indicator provide valuable information, but Pike Research and others have been able to use insights gained from this study as starting points for additional analysis.  This is exactly the kind of result the Institute is hoping for.  The 2010 study surveyed 2,800 people responsible for managing commercial buildings and their energy use.  The reach of the 2011 Indicator may be even more extensive.

The Institute also seeks to be a clearing house for information, research and informed reporting on the topics of Building Efficiency and Clean Energy.  This large and growing library of reports, case studies, presentations and interviews covers areas such as Existing Building Retrofits, Smart Grid, Financing Clean Energy, and Energy & Climate Policy.  All of this material is available for free from the Institute web site.

In addition to taking a look at the materials the Institute already has available, Smith and Currie encouraged us to sign up for the Institute’s RSS feed so that we can keep up with new developments.  I’m sure they wouldn’t mind if I suggest that you consider doing the same.  Pike Research is going to be looking for ways to work with the Institute in the months ahead.  I look forward to telling you more about our efforts.

 

DC Power: Not Just for the Energizer Bunny

— January 10, 2011

During the late 1800s Thomas Edison and George Westinghouse were engaged in an intense industrial rivalry. Edison’s electrical inventions ran on DC (direct current). Westinghouse tried to convince governments and business that AC (alternating current) was the way to go for the development of large-scale power distribution systems. In their book American Entrepreneur: The Fascinating Stories of the People Who Defined Business in the United States, Larry Schweikart and Lynne Pierson Doti retell how the battle got pretty nasty.

“Edison’s company enthusiastically publicized accidents from AC voltage, to the point of conducting experiments in which cats were electrocuted to show its dangers. Newspapers cooperated with stories whose headlines read ‘Electric Wire Slaughter’ and ‘Another Lineman Roasted to Death.’ After the State of New York adopted electrocution (using AC) as its means of capital punishment, Edison officials referred to it as ‘Westinghousing’ the condemned.”

“Then in 1892, Westinghouse’s company won the competition to provide the lighting for the Chicago Columbian Exposition, proving to the world the safety and efficiency of AC power. That was the break that Westinghouse needed, and contracts to provide electricity to homes and businesses flooded Westinghouse Electric.”

Throughout the twentieth century, AC transmission and distribution systems spread around the world and DC power, when required to operate something, was either provided through the use of a power-consuming transformer or by a relatively small DC storage device – a battery. In recent years, though, DC has been coming back into prominence.

• The major renewable energy technologies, photovoltaic solar and wind, produce DC power.

• DC-based options tend to be at the forefront of possibilities for local power storage.

• Microgrids, which produce, store and consume electricity locally, may be dominated by DC.

• Rapid charging of electric vehicles (EVs) with DC power is looking to be an important facilitator of EV acceptance. (A number of previous Pike Research blog postings include discussions of this topic.)

Another important trend has been the increasing importance of DC power within buildings This is especially true in offices for computers, monitors, servers and all of those other devices that have transformers. The transformers are those little bricks that convert the AC power coming from the outlet to the DC power that the devices require. These boxes feel warm to the touch because the conversion process is not totally efficient and some electricity is lost as heat.

In addition, lighting, the largest single use of electricity within buildings, is starting to move toward solid state technology. LEDs are DC powered devices and the conversion of AC line power to DC involves some power loss.

A number of companies recognized this trend toward DC demand and, in 2008, joined together to form the EMerge Alliance. The Alliance’s membership includes major energy service and product companies, as well as many of the major lighting and lighting control vendors. (Hubbell, founded by the inventor of the original two-pin plug and socket, just recently joined.) EMerge has two primary goals:

• Reduce or eliminate conversions where practical with AC-DC hybrid microgrids.

• Connect DC sources directly to DC loads.

The Alliance’s mission is “developing standards leading to the rapid adoption of DC power distribution in commercial buildings.” The standards would help eliminate much of the inefficient conversion of AC to DC between power sources and digital devices. The Alliance states that this will also facilitate the use of the most up-to-date, energy efficient products and controls by easing their installation.

One of the most intriguing drivers behind the work of the EMerge Alliance is the need to better integrate on-site renewable energy generation into the rest of the building’s or campus’ power supply. Normally, the solar photovoltaic or wind power is converted to AC by an inverter and fed into the local grid. Some installations have been designed to charge batteries, making the power available for later use, though the battery power is often converted to AC first. There are places where the solar PV or wind DC power is used directly to power DC devices such as large motors or drives, but this is only practical in a limited number of facilities that already are using a large amount of DC power. In the EMerge Alliance vision, even an office building would be able to make direct use of on-site renewable energy. The Electrical Power Research Institute (EPRI) estimates the efficiency gain for use of on-site renewable energy without conversion to AC at 10-15%.

The EMerge Alliance’s first standard, released during October 2009, defines a 24-volt DC microgrid for use in commercial interiors (Occupied Space). A standard for Data Centers is under development and expected to be released during 2011. Other standards for Building Services (larger building loads such as HVAC and industrial processes), and Outdoor (outdoor lighting, signs and EV charging) are also planned.
One of the EMerge Alliance’s biggest challenges is overcoming the perceived safety issues associated with DC power (an interesting twist from Edison’s early attacks on AC). The specified use of class 2 circuits, as defined by the National Electrical Code, provides acceptable protection from electrical shock and fire hazards. In fact, such 24 Volt DC power is said to be significantly safer than the power at 120 Volt AC wall outlets.

Another approach to ensuring both safety and reliability has been to develop a list of EMerge Alliance Registered Products. The California Lighting Technology Center evaluates products to ensure compliance with the standard. The first registered products were announced at Greenbuild in November.

There have already been a number of installations using the Occupied Space standard, plus some pilots of the Data Center standard. The EMerge Alliance recently announced that Intel Labs is planning to install systems using both of these standards at its New Mexico Energy Systems Research Center. The project will include solar PV, a world-class PUE (power usage effectiveness) data center, energy storage, office lighting, and electric vehicle charging.

Over there in West Orange, New Jersey, the spirit of Thomas Edison is probably quite pleased.

 

IECC 2012: The 30% Solution

— December 22, 2010

Buildings account for about a third of the world’s energy consumption and as much as 40% of all of the energy consumed in the United States. Moreover, unlike a car or an appliance, most buildings stay around for a very long time once they’re constructed. While there are ways to make buildings more efficient after the fact, it’s much less expensive and much easier to do it right the first time. Unfortunately, there are all sorts of reasons, both financial and otherwise, that newly constructed buildings aren’t as energy efficient as they could be.

Therefore, governments interested in improving the long-term efficiency of buildings have added energy codes to the set of building codes that have been in place for some time. (Others involve electrical, mechanical, fire, etc.) In the U.S., the International Code Council (ICC, though the “international” is more aspirational than factual), is the primary body that develops model energy codes. Its International Energy Conservation Code (IECC) is a common baseline for states that adopt commercial and residential energy codes. The IECC is updated on a three year cycle.

A couple of years ago, during the process of developing IECC 2009, a number of organizations got together to form the Energy Efficiency Codes Coalition (EECC). The primary objective of the Coalition was to have IECC 2009 represent a 30% improvement in energy performance over IECC 2006. When all was said and done, however, only changes that would represent about a 15% improvement were accepted by the voting membership. This set the stage for a push to get the rest of the changes into IECC 2012.

The “Final Action Hearings” for IECC 2012 were held in Charlotte, NC at the end of this past October. The bottom line outcome was that the EECC and its supporters achieved their 30% Solution goals. The New Buildings Institute (NBI) called it “the largest single step efficiency increase in the history of the national, model energy code.”

Some of the changes to the residential code include:

• Ensure that new homes are better sealed to reduce heating and cooling losses,

• Increase insulation in ceilings, walls, and foundations,

• Improve hot-water distribution systems to reduce wasted energy and water in piping, and

• Boost lighting efficiency.

Some of the changes to the commercial energy code include:

• Continuous air barriers,

• Daylighting controls, and

• Commissioning of new buildings.

If you’re interested in more information about these changes, NBI and the American Institute of Architects prepared a good overview presentation of the proposed changes to the commercial code and a two-page summary of the proposal package.

However, not every organization is pleased with the changes, and these gains were not achieved without some controversy. One of the major objectors to many of the new provisions is the National Association of Home Builders (NAHB). NAHB holds that the “changes will result in significant added cost to a new home buyer, with little hope of a reasonable and timely payback in energy savings.” I haven’t been able to find any information on the NAHB web site to back up this statement and a call to their building codes contact hadn’t been returned by the time I submitted this posting. (The only commentary I’ve been able to find from the NAHB regarding this issue was in their November 8, 2010 Monday Morning Briefing. Scroll down to the second item. I will provide an update if I receive additional information.)

In contrast to this position, a study by U.S. DOE’s National Renewable Energy Laboratory found that an average home that’s 30% more energy-efficient returns $511 a year in energy savings to homeowners after taking into account the small mortgage payment increase needed to pay for the efficiency improvements.

The controversy is related to the attendance at the Final Action Hearings. Only ICC members (code officials, governmental representatives and other specific qualified parties) who are present at the time a vote is called are eligible to vote. Clearly, what is or isn’t accepted into a new version of a code is highly dependent on which side turns out the vote. For the IECC 2006 Final Action Hearings, for example, most state and local code officials were unable to travel to Minneapolis for the four days of meetings due to budgetary constraints. Therefore, there weren’t enough people on the pro energy efficiency side of the votes.

NAHB points out that this year there was a NASEO (National Association of State Energy Officials) National Building Energy Efficiency and Codes Strategy Workshop taking place October 27-30, at the Westin Charlotte Hotel. The Westin Hotel was also the “host hotel” for the IECC meetings that were taking place across the street at the Charlotte Convention Center. The Workshop agenda was even scheduled around the IECC meeting agenda. Moreover, NAHB maintains that the NASEO members and other groups were using federal funding that they receive to promote energy efficiency codes to pay the travel expenses for the Charlotte trip. This would go against the spirit (and possibly the letter) of ICC guidelines to eliminate third party funding of travel expenses for its governmental members to attend code hearings. NAHB states, “With this one-sided representation, the hearing results were preordained.”

It’s unlikely that there will be any real attempt to reverse the IECC 2012 votes, though. The updated model code will be up for adoption by states and localities across the US in the coming months and years. The process is different in each state. In Connecticut, for example, the legislature already passed a bill a year ago that the state building code should be revised to incorporate IECC 2012 within 18 months of its publication. Other states, however, are still are using older versions of the code, and some haven’t even adopted a mandatory energy code. The Building Codes Assistance Project maintains information on the status of energy codes across the U.S.

 

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