Cleantech Market Intelligence
Barriers to Achieving Energy Efficiency
There are estimates that at least half of the electricity the world consumes for lighting could be saved through wider implementation of existing, well-established lighting technologies. While the percentage that could be saved with other types of available and proven energy efficiency technologies might not be as high as half, it’s safe to assume that current technologies are capable of providing tremendous energy savings. This would include use of products such as variable speed drives and high efficiency motors (see my recent blog posting on motors), building automation systems, and low-tech approaches such as insulating and weather-sealing homes.
The reasons why all of this low-hanging fruit remains unharvested are many. Here are the ones that appear to get the most attention:
• Initial cost – Despite the longer term savings, the need to outlay money up front is often a serious hurdle to overcome.
• Capital not available – All entities have some limits on the availability of capital. In recent economic conditions, borrowing funds has often been difficult. Even when internal or borrowed funds could be available, other projects may have higher priority.
• Strict ROI thresholds – Many organizations have very strict ROI or payback requirements. Just because a project has a positive net present value doesn’t mean it will be funded.
Just look at some of the programs in place to overcome these financial barriers:
• Tax credits and utility rebate programs – Absolutely help the need for faster ROIs. Most utility sponsored programs strongly favor approaches with clear paybacks, such as lighting retrofits. It’s no coincidence that 80% or more of utility rebates are going toward basic lighting upgrades.
• Government grant programs to localities for energy efficiency upgrades or residential weatherizing.
• Government spending, especially at the Federal level, to upgrade the efficiency of buildings owned by or used by the government.
• New financing models – Address the capital constraints by recognizing that there is real benefit over time. PACE bonds, expansion of the ESCO model of performance contracting (still difficult in the private sector – see Jevan Fox’s recent blog entry), shared savings contracts, vendor financing.
However, there are a number of other barriers to achieving the energy efficiency available with today’s technology. For example:
• Decision makers lack information regarding available alternatives– Energy efficiency is not the primary responsibility of most business managers, or even facility managers. They need to rely on information provided by others in their organizations (who also don’t necessarily have complete information) or by suppliers who only have certain solutions to sell.
• Perceived risk – Even if a solution has existed for a long time, if it hasn’t been implemented in the exact same conditions there is often perceived risk that it won’t work. Decision makers may also find themselves weighing risk (sometimes to their personal status) against potential benefits that may accrue to others.
• Split incentive problem – Leases are often written so that tenants pay for utilities, so property owners don’t have incentive to invest in energy efficiency improvements.
• Shortage of qualified implementers – Some systems, such as lighting controls, must be carefully designed and then properly installed and commissioned in order to achieve savings. In many cases, there are simply not enough of the right skills available to take advantage of existing solutions. This problem is exacerbated by the frequent lack of standardized installation and start-up processes.
• Disruption of normal activity during retrofits – Organizations cannot afford major disruptions of ongoing business activities that might be required by major system retrofits.
• Inefficient distribution channels – Existing distribution channels were often designed to support products that were introduced long ago and make it difficult for other solutions to find their way to end users on a large scale.
• Codes and regulations geared toward old paradigms – Building codes have been developed over a long time to take into account well-understood best practices. It is often a difficult and lengthy process to bring about changes in codes to allow for alternate approaches. This could be due to either perceived or actual problems that need to be studied. (The prohibition of waterless urinals in many jurisdictions is an example of this challenge.) Also, even when codes are updated, enforcement may be lax due to limited code official knowledge, or nonexistent because of policy choices made.
• Facility developers and owners with short investment horizons – Developers may not see the benefit of implementing more efficient, though more expensive approaches that will increase the price of the property when they go to sell it. Also, many owners of commercial property have not planned to keep the property long enough to benefit from the long-term payback of an investment in energy efficiency. (One reason for requiring short payback periods.)
• Lack of data on performance of energy efficiency technologies – This is due to multiple technologies being implemented at once making it difficult to determine which savings are due to each, to lack of sufficient sub-metering or other measurement capabilities, or to too much variability in the environment to separate the effects of improvements from other changes in inputs, outputs or processes.
• Energy efficiency legislation – Many utility rebate programs are driven by state or PUC rules that emphasize verifiable savings and don’t allow for investment in “market transformation” programs that may address some of the other barriers.
• Behavior changes required – “Well, we’ve always done it this way…”
Quite an imposing list of barriers hindering the adoption of energy efficiency products and systems, isn’t it? I’m sure others could be added.
Now, there is tremendous investment going into improving technology. Not that these investments are bad or misguided, but are the non-financial barriers described above are being addressed? In some cases, incremental advances to existing technologies may make installation simpler. Wireless lighting controls are one possible example (though some will say a wireless system is more complex and difficult to implement). Compare this, though, to the drive for higher lumen per watt performance in LEDs. What impact will that really have on adoption in the near to intermediate term?
I think it’s safe to say that the lion’s share of outside investment in energy efficiency is going toward either developing new technologies or buying down the cost of implementing existing ones. While the other barriers are not being ignored, are they getting sufficient attention?
I was recently speaking with Charles Hunt, an engineering professor at UC Davis and affiliated with the California Lighting Technology Center. He’s also Director of the Lighting Research Center at IREC (Catalonia Institute for Energy Research) in Spain. The initiative he’s involved in that interested me most, however, was one that is funded by the European Union to find ways to get existing efficient lighting technologies more widely adopted in Europe. Not advancing technology, not necessarily buying down the cost.
Here are some other examples of efforts to address the barriers that are not directly related to funding:
• Private foundation grants to support the development and adoption of increasingly stringent energy codes. Related efforts provide for code official training and push for more consistent enforcement.
• Government, utility and foundation grant support of training programs, such as Building Operator Certification, to improve people’s abilities to implement energy saving technologies and obtain benefit from them on an ongoing basis.
• The U.S. Department of Energy’s Gateway and CALiPER programs that are providing laboratory and real world data on performance of LED lighting products. Cree’s LED City® program was set up to share experience among cities trying out LED lighting. It has now joined with the DOE’s Municipal Solid-State Street Lighting Consortium to continue and expand this effort.
• There are a range of nonprofits working on the policy front and supporting market transformation programs. The primary objective of all of these organizations is to promote energy efficiency as the cleanest and least expensive energy resource by supporting a variety of initiatives that address the wide range of barriers to energy efficiency implementation. The American Council for an Energy Efficient Economy (ACEEE) and the Alliance to Save Energy (ASE) are leaders in this regard. There are also a set of regional nonprofits doing great work on state-level policies and programs. Prior to joining Pike Research, I worked for the Midwest Energy Efficiency Alliance (MEEA). There is also the Northwest Energy Efficiency Alliance (NEEA), the Northeast Energy Efficiency Partnerships (NEEP), the Southeast Energy Efficiency Alliance (SEEA), and the Southwest Energy Efficiency Partnership (SWEEP). Outside the U.S., is the Canadian Energy Efficiency Alliance, and organizations such as the China-U.S. Energy Efficiency Alliance are being formed. (Check out your local alliance and see how you can get involved!)
• Industries and associations are taking steps, too. The Illuminating Engineering Society, with the help of the Lighting Controls Association, is producing a design guide that will provide practical guidance on how to commission lighting and control systems. This is pretty basic information, but putting it together clearly and in one place should have great value.
• The Behavior Energy and Climate Change conference took place last month in Sacramento. It was described as, “a conference focused on understanding the behavior and decision-making of individuals and organization and on using that knowledge to accelerate our transition to an energy-efficient and low-carbon future.” If I wasn’t spending the week at Greenbuild here in Chicago, it would have been interesting to see what other kinds of solutions could help accelerate the transition.
In summary – There are lots of barriers to implementing existing, proven energy efficiency measures and these reach into almost every element of the business decision-making process. Lots of money is being put toward the financial barriers, but that isn’t sufficient. More concerted attention is required to address the somewhat “soft,” but very real impediments to achieving the potential that energy efficiency can bring.