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Despite EU Revisions, Energy Efficiency Will Thrive

— June 29, 2012

The status of one of the European Union’s keystone energy efficiency laws, the Energy Efficiency Directive, has been in flux over the last few months, as my colleague Eric Woods discussed in a recent blog.  The Energy Efficiency Directive, launched a year ago, gave legal teeth to the EU’s 20-20-20 targets, by obliging energy retailers to reduce their sales by 1.5% per year, among other measures.

That provision has been under revision over the last few months through amendments proposed by the European Council.  Most of the proposed amendments have focused on exempting certain customers or sectors on the basis that existing energy efficiency rules, such as the EU Emissions Trading Scheme, are already in place.  The effect has been an erosion of the original 20% energy reduction goal.

On one hand, this could be viewed as a considerable setback that will reduce the potential for energy efficiency activity in Europe.  To some extent, it will – as Eric wrote, the law is likely to result in an energy reduction by 2020 of only 17%.  And future amendments are by no means out of the question – in fact, the Energy Efficiency Directive itself was a replacement for erstwhile policies such as the Energy Services Directive, which encompassed similar but less aggressive energy efficiency goals.

On the other hand, the amount of energy efficiency investment over the next decade is expected to grow steadily.  As described in our recently published report, “Energy Efficiency Retrofits for Commercial and Public Buildings,” the market for energy efficiency retrofits, including energy services, HVAC and lighting system upgrades, and a range of other services, will grow from $35 billion today to over $55 billion by 2020.


Energy Efficiency Retrofit Revenue, Western Europe, 2011-2020

(Source: Pike Research)


Regulation plays an important role in driving investment in energy efficiency in Europe, and the Energy Efficiency Directive is one of many policy instruments at both the EU and national levels that are promoting energy efficiency improvements in buildings.  However, the market is also further bolstered by necessary building renovations, which virtually always yield more efficient building performance, as well as voluntary efforts by public and private organizations to reduce their energy consumption through efficiency.

Moreover, as standards such as the ISO 50001 energy management standard become more commonplace, the industry as a whole will shift its focus from building efficient new buildings to making existing buildings more efficient, leading to growing opportunity for the energy efficiency business.  So despite the dilution of the Energy Efficiency Directive, there is good reason to expect an expanding market for energy efficiency services in Europe.


Gripped by Heat, New Yorkers Stay Cool with a New Energy Efficiency Program

— June 27, 2012

The heat wave that is gripping the Mountain West and the Great Plains is expected to move east this week, bringing sweltering temperatures to the East Coast, including New York City.  That means all those window unit air conditioners in Manhattan will be working overtime – and consuming huge amounts of energy.

But with an energy usage program introduced last year by Con Edison in partnership with ThinkEco, called the coolNYC program, Manhattan residents are more easily and automatically able to control the energy use of their window ACs.  They will be able to do so by using ThinkEco’s smartAC kit, consisting of a modlet (an intelligent device that monitors the energy usage of appliances and can automatically control their settings) that plugs into an existing outlet and a smartAC thermostat.  The smart thermostat can automatically turn the AC unit on and off, based on the resident’s desired temperature settings, by sending a signal to the modlet.  The modlet, meanwhile, communicates wirelessly through ZigBee technology with the resident’s home computer so that energy usage can be tracked and monitored by the user remotely and in real-time.  The modlet has an internal memory and can store up to 10 days’ worth of energy use data.

Residents can purchase this smartAC kit at various Best Buy stores throughout the city for $69.99 and receive a $25 rebate upon setting up their smartAC account.  Every summer thereafter they receive an additional $25 in the form of an e-gift card if they continue to participate in the program.  (Because each modlet and smartAC thermostat works as a pair, users need these devices for each air conditioner.)

Besides being able to view their current room temperature, change the temperature for the room, or simply turn the window AC on/off from any smartphone or browser, users can preset on/off schedules for their unit through any web browser, so that their room is cooled only when needed.  In this way, the AC becomes a smart, networked device enabling residents to manage their energy usage, while at the same time saving money.

The coolNYC program is not only benefitting New York City residents, but it also allows Con Edison to execute its demand response programs by reducing electricity during peak times when the reliability of the grid is threatened.  With over six million window ACs in the utility’s service territory – many of which operate when residents are not home – it is important that Con Edison has the ability to manage peak demand by adjusting AC temperatures remotely and automatically – especially if New York is hit by another record heat wave like last summer.

Program participants will be notified a day ahead of any DR event, giving them an opportunity to opt in or out each time.  Con Edison expects, however, that such “emergency” events will not occur more than a few times each summer, and the utility adjusts the thermostat only to a slightly higher temperature, it says.

Con Edison and ThinkEco aim to achieve smart AC control through the smartAC kit on 10,000 New York City air-conditioners, in order to get 5 megawatts of demand reduction, which is enough power for 5,000 homes.  Con Edison plans to distribute the kits this summer in large apartment buildings throughout New York City, working with building owners and tenants to install the energy saving devices.


With New Energy Efficiency Directive, the EU Makes Sausage

— June 26, 2012

The remark often attributed to Bismarck, that the making of laws, like sausages, is not a pretty sight, seems particularly relevant to regulation in the European Union.  The EU’s 20-20-20 targets for 2020 are rightly considered to have established a world-leading benchmark for energy policy and the reduction in greenhouse gas emissions, but maintaining real commitment to that policy across 27 nations is a constant political struggle.

Of the three key targets set for 2020, the reduction in energy consumption has proven the hardest goal, with member states likely to achieve 9% efficiency gains by 2020 on current activities, instead of the targeted 20%.  This has led to renewed pressure for the EU to provide a tougher approach to ensuring that member states meet the required targets.  However, reaching agreement on how tough the new Energy Efficiency Directive should be has also proven far from easy.

Advocates of a stronger approach to energy savings had hoped that enforceable energy efficiency targets could be applied for each country, an approach that has been successful in driving forward renewable energy programs across the EU.  Government leaders, though, have resisted any significant move in that direction.  Instead, the new directive details measures that EU countries must adopt but does not provide specific targets for each country.  Those measures in turn have been the focus of difficult negotiations.

A number of countries have resisted important elements of the proposed new directive, including the United Kingdom and, more surprisingly, Germany.  Nevertheless, an agreement was finally reached earlier this month.  The result is a half-full or half-empty glass situation depending on your perspective.

The focal point of the new directive is the requirement for energy retailers to reduce energy consumption (in terms of their volume of sales) by 1.5% by 2020.  This proposal was watered down to allow about a quarter of that reduction to be achieved by other means, and so the actual reduction is closer to 1.1%.  In addition, the requirement that 3% of public building stock should be renovated annually to meet energy efficiency standards will now only apply to central government buildings.

These and other measures are estimated to provide a 17% saving in energy efficiency by 2020.  For some that’s enough to claim a victory, particularly as this is a minimum requirement and there will be a further review of progress in 2014 and 2016, with the possibility of introducing further measures as necessary.

The state of the European economy, of course, loomed over the discussions.  Critics of stronger measures claimed that it is the wrong time to put additional requirements on businesses, while others pointed to the overall net value of the measures to the European economy.   The Energy Efficiency Directive is estimated to cost €24 billion ($33 billion) a year until 2020, but it will save companies and consumers €44 billion ($61 billion).  The European Commission also estimates that the Directive will lead to an increased GDP in EU of €34 billion ($47 billion) in 2020, along with 400,000 new jobs.

As Europe’s countries struggle to resolve the financial and political issues around the eurozone crisis, the goal of achieving a low-carbon Europe is one of the few positive long term visions.  The struggle over the Energy Efficiency Directive, however, indicates that getting there will require a lot more sausage-making.


Eaton-Cooper Deal Marks Maturation of Smart Energy

— May 23, 2012

The steady waves of consolidation within the smart energy sector produced a major deal this week with Eaton’s planned $11.8 billion acquisition of Cooper Industries, one of the largest to date.  If anyone thinks energy management or the broader clean technology market is fading, think again.

It’s easy to think of both Eaton and Cooper as big old industrial companies, and in many ways they are.  Most commentary on the acquisition has focused on improved brand and global reach, business diversification, and favorable corporate tax treatments in Ireland, which is where the combined company will be headquartered.  This is all true enough.  But one does not need to look far to see the evolution of smart energy as a major underlying rationale for this combination.

Eaton already has been positioning its technology across the power, hydraulics, aerospace, truck, and auto industry segments as an enabler of energy efficiency gains.  As an example, Eaton is already an established leader in commercial and industrial power systems, data centers, and electric vehicle (EV) charging, all key systems associated with smart buildings, green data centers, and EV infrastructure.

Cooper has been focused on similar power management issues, mostly matching up on either end of where Eaton is today.  Cooper is a leading vendor of utility-focused distribution and substation automation technology, expanding the portfolio with acquisitions including Cannon, Cybectec, Cyme, and niche AMI startup Eka Systems.  This theoretically links up well with Eaton’s existing strength in heavy-duty commercial and industrial power distribution capabilities.  At the end-use level, Cooper’s lighting and controls strengthen Eaton’s reach into the smart buildings area, leveraging at least a dozen different Cooper acquisitions in this space over the last eight years.  As is so often claimed in these deals, end-to-end solutions are now possible.

Leaving aside the usual (and substantial) practical integration issues, the acquisition places Eaton in a unique position to drive convergence of smart grid, smart buildings, and smart transportation, with significant links also into the smart energy and smart industry domains.  This corresponds exactly with the overall “smart energy ecosystem” upon which we here at Pike Research are focused.  Though we are fully aware of the challenges facing the smart energy evolution and convergence, we also see clearly the many opportunities.  Eaton now has the chance to join an elite group of companies, including Siemens, GE, and perhaps most closely, Schneider Electric, that have the scale and breadth to address the full waterfront smart energy opportunities.

So just as the cleantech hype of recent years is subsiding, combinations such as this remind us that cleantech is really just growing up, and that as for all the college graduates hitting the streets during this season, the future is really just starting.


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