Having moved the clocks forward for Daylight Saving Time (DST), I thought it would be interesting to revisit the energy impact of DST.  I expected to find a plethora of data extolling the virtues of DST.  Instead I found a mish-mash of data and opinions.

DST was first adopted in the United States during World Wars I and II, but it wasn’t until the energy crisis days of the 1970s before it was widely adopted across the country.  A 1975 study by the U.S. Department of Transportation investigated the energy impact of DST and found that it reduced the country’s energy use by 1% each day.  A more recent 2008 U.S. Department of Energy (DOE) study found that extending DST to the second Sunday in March through the first Sunday in November reduced electricity use by 0.5% each day during the added DST weeks.

I also found some state-specific studies, most notably this 2007 California Energy Commission study that found starting DST early in California had no significant energy impact and this 2006 National Bureau of Economic Research study from Indiana that found DST actually increased energy use for Indiana residents by 1% to 4%.

Looking at other countries’ research produces even more conflicting information on the subject.  With so much contradictory information, isn’t it time we re-evaluated this practice as a country?

Wake Up

It’s questionable to use a 40-year old study as the validation for any practice.  Energy-use profiles have certainly changed from the 1970s to today.  One of the biggest changes is the increased use of air-conditioning across the country.  Sure enough, the 2008 DOE study said that Southern states saw the least impact from the DST extension, likely due to air-conditioning.  Undoubtedly, other factors like increased appliance penetration and plug loads have changed how we use energy compared to 40 years ago.

By no means am I saying we should abandon DST.  However, as DST also comes with a lot of headaches (and at least one night of interrupted sleep), we should really have a better grasp of why we’re doing it.  It’s been over 40 years since we had a thorough, nationwide study on the impact of DST.  For a country whose government is going through a budget crisis, we owe it to ourselves to know if a practice first started in 1918 is still delivering value.

Two recent acquisitions by lighting company giants reveal an important trend in the broader lighting industry.  In late November, General Electric acquired Colorado-based Albeo Technologies, a manufacturer of LED lighting with a focus on integrated wireless controls.  In early January, Acuity Brands purchased California-based Adura Technologies, a startup company specializing in wireless lighting control.  As detailed in Pike Research’s 2012 report on Intelligent Lighting Controls, all of the major lighting companies have made one or more acquisitions in the last few years that give them access to new and innovative means of controlling the lighting products that they already offer.

It’s no secret that the rapidly dropping cost of LED lighting is proving to be a major disrupter in the lighting industry.  While actual adoption rates are still modest, the promise of a lamp type that will be more efficient as well as fully dimmable, easily controllable, and mercury-free has resulted in a focus on the technology that far exceeds current sales.  R&D dollars are shifting and product lines are quickly expanding, as no big lighting company can afford to ignore the light source that is broadly acknowledged to represent the future.

The Larger Threat

The acquisition of companies that are focused on controls, however, exposes a larger and much more challenging threat to big lighting companies: the overall pie is shrinking.  As Pike Research forecast in our 2011 report, Energy Efficient Lighting for Commercial Markets (update coming in March 2013), global revenue from the sales of lamps and luminaires in commercial buildings is expected to drop significantly in the coming decade, from a peak $54 billion in 2012 down to $30 billion by 2021.  This decline will be primarily driven by the much longer life of newer fluorescents and LEDs.  While revenue from LED sales will increase, those sales will not even come close to offsetting the inexorable contraction of the market.  So, for big lighting companies, updating their product lines with new LED lights will not be enough.

Seen in this light, the frequent acquisitions over the past couple years of startups that focus on lighting controls is an indicator of a long-term shift in strategy.  General Electric and Acuity have traditionally been known for lamps and luminaires, not for lighting controls.  But these big players can no longer afford to simply maintain their traditional roles in a changing industry.  Expanding to new types of products and revenue streams has become a necessity, and lighting controls are the logical choice.

This promises to be a boon to the wide range of new and innovative methods for controlling lights, from the local strategies of providing just the right amount of light based on current occupancy and daylight levels, to the networked strategies of providing detailed analysis and complex control to building managers in remote offices.  The shift will surely be challenging for the big lighting companies; but it’s an exciting signal for the broader adoption of smart lighting control strategies that can be expected to ensue.

Hurricane Sandy, which brought devastation to New York, New Jersey, and large sections of the East Coast, resulted in significant losses to businesses in the area that are home to 85 Fortune 500 headquarters experiencing power outages for many days, if not weeks.  The total number of business establishments was nearly 750,000.  With more severe storms, flooding, and droughts predicted, companies are taking steps to reduce their own carbon emissions.

According to a recent supply chain study by Accenture in collaboration with the Carbon Disclosure Project (CDP), about 51% of the respondents in the study of 2,415 companies stated that extreme weather is already having an adverse effect on their business or is expected to in the next 5 years.  Nearly three-quarters (73%) of the companies that have implemented carbon emissions programs believe that climate change presents a risk to their operations.  This sense of business risk is a major catalyst for businesses to take action to mitigate their carbon footprint –a much stronger driver for carbon emission reduction than any government policy and regulation.

What’s most disturbing about the findings of this research, which focuses on corporate supply chains, is the significantly lower level of commitment among suppliers to reduce emissions compared to their clients or purchasing companies.  For example, only 38% of the suppliers have adopted carbon emission reduction targets, compared to 92% of their purchasing organizations.  Although 69% of their clients have taken action to reduce their carbon footprint, only 27% of the suppliers  have done so.  Similarly, only 29% of the suppliers versus 63% of their clients have been able to achieve year-over-year carbon reduction results.

This chasm between companies and their suppliers highlights the challenge of being able to manage climate risk in the global supply chain.  Unless businesses can influence their suppliers to follow their example, they will not be able to achieve their overall emission reduction goals.  As Accenture points out in this report, it’s essential for businesses – like Starbucks and DuPont, which have already embarked on programs to reduce carbon emissions across their products’ full lifecycles –  to actively engage suppliers in a discussion about climate change and the potential risks it entails. With increased awareness and understanding of these risks, suppliers are more likely to implement carbon reduction.

This has been a tough year for the U.S. biofuels industry: drought curtailed corn starch ethanol production and investment in the industry shrank to its lowest level in nearly a decade.  Headed into 2013, though, industry momentum appears to be regaining steam.  Led by advanced biofuels, the potential for expanding biofuels production has improved dramatically as Washington offers clarity on key policy issues.

Last week, in a vote on partisan lines, the U.S. Senate extended support for the military’s efforts to scale up advanced biofuels production.  As reported in Biofuels Digest, it approved an amendment offered by Senator Kay Hagan of North Carolina to repeal a section of the annual Defense appropriations bill that would have prohibited “the Secretary of Defense or any other official from the Department of Defense (DoD) from entering into a contract to plan, design, refurbish, or construct a biofuels refinery or any other facility or infrastructure used to refine biofuels unless such planning, design, refurbishment, or construction is specifically authorized by law.”

Over the past year, the U.S. military has emerged as a key torchbearer leading the commercialization of advanced biofuels.  Spearheaded by the Navy, which signed a Memorandum of Understanding (MOU) with the U.S. Department of Agriculture (USDA) and Department of Energy (DOE) to develop cost-competitive advanced biofuels, the DoD has been a lone bright spot for an industry that has suffered from press blowback and investor retrenchment in recent years.

Only $84 Billion to Go

Prior to the Hagan amendment, the Senate approved another amendment, offered by Senator Mark Udall of Colorado, to repeal section 313 of the annual Defense appropriations bill.  Offered by Republican Senator James Inhofe of Oklahoma, Section 313 would have prohibited the DoD from procuring alternative fuels if they cost more than their conventional counterparts.  The section was introduced in response to the U.S. Navy’s highly criticized purchase of advanced biofuels from firms like Solazyme and Dynamic Fuels for its “Great Green Fleet” exercises off the coast of Hawaii, at an estimated price-tag of $15 per gallon.

These bills are expected to facilitate public-private partnerships and funnel much-needed capital to support advanced biorefinery construction within the United States.  In our Industrial Biorefineries report, Pike Research forecasts that at least 13 billion gallons of advanced biorefinery production capacity will come online over the next decade in the United States.  Although that falls short of the 21 billion gallons of advanced biofuels carved out under the EPA’s Renewable Fuel Standard (RFS), more than $60 billion will be invested over that same period.

With the minimum cost of scale-up to meet RFS’s advanced biofuel production mandate estimated at $84 billion, the industry still has significant ground to make up.  Although continued federal support will help assuage investor fears, uncertainties around feedstock supply and production profitability persist, translating into high levels of risk for investors.

Advanced biofuels, which address these concerns at least in part, have enjoyed a rising tide of policy support in recent months from Washington.  In August, Congress allocated $170 million to support the development of military biofuels and other defense initiatives, voted to extend key tax credits for advanced biofuel producers, and granted algae producers tax credit parity with other feedstock pathways.  Meanwhile, the recent commissioning of first-of-kind facilities from advanced biofuel producers KiOR and INEOS Bio are strong indicators of a maturing cellulosic biofuels industry.