It’s Time to Show Energy Efficiency the Money
Pratima Rangarajan, CEO OGCI Climate Investments being interviewed by Amy Francetic of Energize Ventures
Last month Clean Energy Trust hosted Co_Invest Cleantech – an annual event centered around clean energy and resource efficiency technologies. One of the highlights of the day was the unveiling of Clean Energy Trust’s most recent seed investments in innovative young startups from the Mid-Continent region of the United States. Equally exciting, though, were some of the ideas shared by our speakers.
It was made clear that there is an abundance of new and exciting initiatives underway by corporations large and small to adopt sustainable business practices. Mindy Lubber, CEO of Ceres, described her organization’s success when partnering with large corporations and the capital markets to tackle climate risks in business. Jennifer Rumsey, Chief Technology Officer of Cummins, a Fortune 500 industrial company, highlighted the proactive steps her company is taking not only to rethink their product offerings but also to drive towards less energy intensity in their business operations.
It was Dr. Pratima Rangarajan, the CEO of OGCI Climate Investments, however, who really caught my attention with her focus on the need for massive investments in energy efficiency in both the built environment and industrial processes.
Central to her argument was the fact that almost two-thirds of electricity generated is lost and never put to work, largely due to heat loss at conversion as well as losses incurred in transmission and distribution. Recent data by Lawrence Livermore National Laboratory (LLNL) backs up her point. In 2018, 38.2 Quads of energy were used to generate electricity in the United States yet only 12.9 Quads were ultimately consumed by the residential, commercial, and industrial sectors. The rest, 25.3 Quads, was lost!
As the saying goes, the best (and most economical) kilowatt is the one you don’t use. Research from LLNL and ACEEE have shown that the cost of energy efficiency averages ~$0.03/kWh, far below the cost of electricity from other sources of capacity. These facts are not lost on utility program administrators implementing integrated resource plans and energy efficiency incentive programs.
If energy efficiency upgrades make so much sense, why aren’t more companies and building owners aggressively pursuing them? Cost is certainly one key reason. Energy efficiency requires upfront capital investment and there is fierce competition from other projects and initiatives for scarce investment dollars. Energy efficiency is often put head-to-head against other projects that might be more core to a business’ operations (e.g., expanding production or buying a new MRI machine, etc.)
The good news is that the first cost hurdle is an eminently solvable problem through innovative financing solutions like Efficiency Service Agreements (ESAs). After all, if a kWh saved creates economic value, can’t this economic value be used to help pay for projects? And, if these “negawatts” are leveraged to finance retrofit projects with little or no upfront investment, thereby freeing scarce capital for other opportunities, isn’t this win-win?
The event made this point clear to me: It’s time for corporate and institutional energy managers and building owners to accelerate their adoption of new, energy efficient technologies to achieve deep and persistent long-term savings. With innovative financing solutions to surmount the first cost barrier, all the tools are now in place.
