The real impact of energy efficiency on the bottom line

20. April 2011 16:21

Dr. Dan Vermeer, who is the Executive Director of the Center for Energy, Development, and the global environment, within Duke University’s Fuqua School of Business, outlined the barriers and some of the solutions to improved energy efficiency.

Dr. Vermeer explained that by 2030, our insatiable appetite for energy will have increased by 45 percent, i.e., increasing by 1.6 percent per year between now and then.

He said that to curb this demand we are all agreed that we need to increase our energy efficiency, but despite our convictions many of us fail to implement solutions.

He pointed out that industrialist often give the same reasons for their failings in energy efficiency improvements as we give for not improving the energy efficiency in our homes. These arguments are familiar to us all:

  • Energy costs are not high enough to justify the expense of improved energy efficiency
  • There is insufficient cash available
  • It’s not worth the investment
  • Don’t trust the data on payback time
  • The installation process will be disruptive
  • And current technology may soon become out dated

Vermeer explained that we have a good track record on improving energy efficiency, but these efficiency gains are not keeping up with the growth in our energy demands. It has been predicted that the rate of energy consumption, if unabated, will result in carbon emissions that will cause a 2-9 degree increase in the average global temperature by 2100.

He told us that our current energy systems were complex and wasteful, amounting to about 56 percent energy wastage in the US. But 52 percent of our energy usage could be saved through energy efficiency improvements. So what can we do to ensure changes are implemented?

Although energy is consumed by all sectors, residential, commercial and transportation, industry is responsible for about a third of all energy usage. Since the implementation of change would involve a few key players, change in this sector was likely to be more easily achieved. He suggested the catalyst for energy savings in this sector were likely to be:
  • Increased regulation
  • Cost savings
  • Risk mitigation
  • Brand positioning (to enhance competiveness)
  • Innovation

He highlighted some companies that were already making energy savings, such as AT&T, which have 4,200 energy efficiency projects that generate approximately $44 million worth of energy savings. He explained that the secret to their success was to have a dedicated energy manager.

He explained that a cultural change was required in order to remove some of the organizational barriers that prevent increased energy efficiency. Often energy efficiency gains were hindered by split incentives, ie, between the equipment purchaser and the equipment user, or a strong focus on productivity and growth, with no incentives given for increasing energy efficiency. He suggested a more holistic approach was required in order to gain the full benefits on energy efficiency in industry. However, he did warn of the pitfalls, which he referred to as the “rebound effect”, whereby increased energy efficiency results in increased usage, ultimately negating the environmental and resource conservation gains. He explained how energy efficiency gains in car engines had resulted in bigger more powerful cars that consume overall the same energy as the smaller less efficient cars manufactured in the past.

 

Comments (1)

New!New commentN.N.Wednesday, 27. Apr 2011 19:06

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