Although you wouldn’t immediately think of sexy when talking about energy efficiency, energy efficiency is exciting, appealing and a win-win for everybody. Here are five reasons why we think energy efficiency is sexy:
1. because it makes lots of money
Energy efficiency is a great investment. McKinsey and others have estimated that in the coming 20 years at least $37 billion worth of energy efficiency investments have to be made on a yearly basis, using available technology that will produce high financial returns. That number goes up every day as the economy grows and better technologies are developed. Most organizations can make efficiency improvements that will cut their energy bills by 10-30% and pay back the cost of the upgrade in three to five years, sometimes much faster. That’s an annual return on investment (ROI) of 30% or more in many cases. Regardless of the other benefits of efficiency, it simply makes good business sense. Energy efficiency investments often outperform stock market returns in the first place!
The best news of all? The returns from efficiency are protected from the volatility of the economy. Implementing an efficiency project means installing new equipment that makes buildings smarter consumers of energy—like lights, boilers, and control systems. Once installed, they save energy and money regardless of what happens in the economy.
2. because there is a huge opportunity for impact
The promise of energy efficiency goes far beyond financial savings. Implementing efficiency will yield local, national, and global benefits and help avert two of the most pressing crises of our time.
First, energy efficiency is the most cost-effective path to energy security. Spain is the country that is heavily dependent on external energy, 73% of the energy consumed comes from abroad, only surpassed by Italy with 80%, and far from the European average of 53%. But when energy prices rise or political conflict threatens an energy-producing region, the entire economy feels the pain. The most straightforward way to reduce exposure to those risks is to consume less energy, which not only reduces the financial burden of rising fuel prices, but mitigates the risk of year-to-year variability in prices. It is estimated that non-transportation energy consumption could be cut by 23% by 2020 !!! In other words, energy consumption could be cost-effectively reduced by nearly one-quarter with the right investments in efficiency.
Second, energy efficiency is necessary for stopping the threat of climate change. Climate warming, which is driven largely by emissions from the burning of fossil fuels, poses a large economic risk to world at large. While the exact impacts of a given amount of warming are difficult to predict, most experts accept that without an urgent reduction in emissions, climate change could reduce global economic productivity by 5-20% or more over the coming decades.
There is a lot of discussion about making personal sacrifices and big expenditures to tackle climate change. However, we can get a good chunk of the way to solving climate change by making investments in efficiency that also make us richer in the short term and improve our energy security. That’s the definition of a win-win.
3. because it is a beautiful thing
Energy efficiency isn’t pretty on the surface. Only the most dedicated energy nerds are excited by boiler upgrades, performance benchmarks, and building automation systems. However, you do away with the jargon and think about what energy efficiency really means, it’s a beautiful thing:
Energy efficiency means buildings that intelligently respond to their occupants, adapt to changing environments, and evolve as human technology evolves.
Investing in energy efficiency is about helping your neighbours. Efficiency means vibrant communities in which our businesses, schools, and religious buildings spend less on energy costs and more on making us happier and healthier. When a local bakery spends less on keeping the lights on, they have more money to hire new employees, buy new equipment, or open a second storefront. When a local school cuts its heating or cooling bill by 40%, that money goes right to textbooks, after-school programs, and teachers’ salaries, lowering the school’s dependence on outside funding and increasing the resilience of our education system.
Energy efficiency means getting the most bang for our buck out of the finite resources of our planet. Whether you want to see world peace, bustling commerce, or a human civilization that ventures out to the stars, energy efficiency helps us think bigger by making the resources we have go further.
4. because there is a lot of it to be done
Hopefully we’ve convinced you why energy efficiency is important. Now here’s the kicker: despite an enormous opportunity to invest in efficiency across the economy, a huge chunk of potential efficiency improvements never happen. Everyone has their theories about why energy efficiency isn’t happening as fast as it should, and articles touting “Top 10” lists of barriers to efficiency are a dime a dozen.
Most energy efficiency projects don’t happen because organizations don’t have the money on hand to implement them, and they can’t borrow the money quickly, easily, and at reasonable rates. This is a problem particularly for smaller organizations like small businesses, churches, and schools. A local shoe store might love to implement a 70,000 euro boiler upgrade that will pay for itself in a couple of years, but that means 70,000 euro less available for the most important thing they do: selling shoes! These organizations can’t be faulted for prioritizing their core business over efficiency improvements. Joule Assets estimates that 67% of projects of less than 250,000 euros lack access to financing
5. because you can play an active role in it
Despite all this, Investment in energy efficiency has increased, with spending on more efficient products increasing by 80% between 2004 and 2010. There have been some truly exciting developments, like the launch of the European Energy Efficiency Fund (EEEF), Sustainable Capital LLP o SUSI Energy Efficiency, which have received between 100 y 300 MM€ from private investors. In Spain, SUMA Energy Efficiency Fund I has been selected by ICO to collaborate, and is being set up to start this summer. Proof again that professional investors are already starting to see the beauty of energy efficiency investments.
However, the bulk of the energy efficiency investment opportunity has yet to be captured, and current financing models are not going to be able to solve the problem alone. There is a large opportunity to earn a solid return, protect the planet, and put money back in the pockets of local businesses and communities.