Fast Company

Releasing the Energy Efficiency Floodgates

Looking for opportunity? Energy efficiency is hot and it's going to get a lot hotter. Here's why:

1. We waste billions of dollars on wasted energy in our buildings and transportation.

2. We know how to stop much of this waste today, saving homes and businesses billions of dollars to spend on other things.

3. People and businesses really want to save money, now more than ever, and energy efficiency is a great way to do it.

All in all, this spells a hot, hot, hot field to work and build a business in.

When it comes to simple cost effective energy efficiency measures like insulating homes, using cool roofing in commercial buildings, sealing air ducts, sealing cracks, and using efficiency lighting, we don't have to wait for new technologies to be developed; we have solutions that work today. There's still plenty of room for innovators to develop new and improved solutions for energy efficiency, but there's also plenty we can do right now without waiting.

If it's all so easy, why haven't we done all this already? There are a variety of reasons, which I'll describe below. The fact that we haven't fully addressed these problems just makes the opportunity all the greater though, like water building up behind a dam. What makes energy efficiency a particularly exciting opportunity at this time is that the floodgates are starting to swing open, releasing the potential of energy efficiency on a larger scale.

So why haven't energy efficiency measures been adopted in the past to the extent they might have? There are a few reasons I think, including:

1. Energy was cheap.

2. It costs money to invest in efficiency.

3. Efficiency wasn't too sexy, and out of sight is out of mind.

4. There was not a great deal of government attention to efficiency, generally.

All of these are changing. Here's how:

1. Energy gets more expensive:

When energy is cheap, people use it without worrying too much about how efficient they are; they do not have a strong incentive to save. Over time this is changing. The cost of energy from your utility will steady rise, on average about 6% a year. Therefore wasting energy gets more and more expensive.

The cost of energy will also be impacted by action on climate change. Yes, this change will probably not be free, and the greatest impact will fall on the most inefficient users and greatest greenhouse gas emitters. Whatever action is taken on climate change, such as with legislation like the Waxman-Markey bill will probably make electricity from coal more expensive.

Additionally, the cost of oil will rise over time, impacting transportation costs. I'm not saying that the cost will go up next week or next month, but over the months and years ahead the long term increase in the cost of oil is virtually certain, driving increased efficiency in our transportation choices.

2. New programs help to reduce or eliminate the up-front cost of energy efficiency measures.

People expect a great deal from investments in energy efficiency. Imagine an investment on the stock market where you can achieve an annual return of 50% or more. That's what can be achieved with some of the easy, low-hanging fruit in energy efficiency like fixing air ducts, insulation, changing light bulbs, and weather-sealing buildings.

A variety of strategies can reduce or eliminate the cost hurdle that often holds back spending on energy efficiency. One is federal tax credits, which have been increased for a wide range of residential energy efficiency measures.

Another route involves strategies state regulators use with utilities, like those that have worked in California over the last few decades to encourage energy efficiency. When utilities are rewarded for energy efficiency rather than building new power plants, everybody wins.

Cities are also getting in the act, with programs like those being advanced or in place already in California cities like Palm Desert, Berkeley and San Diego. These programs are related to AB 811 allowing homeowners to pay for energy efficiency measures with special tax assessments that are paid back through their property taxes over a long period of time. The special advantages of this, particularly avoiding payment upfront, should eliminate the money hurdle holding back efficiency.

Similarly, another promising strategy called on-bill financing is helping small businesses in San Diego to adopt energy efficiency measures. With on-bill financing, the utility (SDGE in this case) pays for the cost of certain energy efficiency measures by qualified small businesses, and then the business pays back the measures through their utility bill. Since their energy costs go down, and there is no up-front cost to the business, there is really no down side for businesses that take advantage of this.

Programs like these are not available everywhere yet, but I would hope and expect to see them spread.

3. Energy efficiency is getting more attention

While energy efficiency has always had its advocates like Amory Lovins, for a long time energy efficiency received less attention than green energy sources like solar or wind. I suppose in part that a caulking gun was just not as sexy as a solar panel. It's hard to measure, but I do believe that the amount of media attention to energy efficiency is increasing, and the attention for other arenas such as government. Having a compact fluorescent bulb on the cover of magazines like Time (Jan 12, 2009) helps. I expect to see a great deal more of this as we all get turned on about this opportunity for businesses and consumers.

4. There is a great deal more government support on the way.

The US Government is fully on board with the idea that energy efficiency is the way to go and they are putting their money behind it. The stimulus package includes billions for energy efficiency, including weatherization of low income homes, research for energy efficiency, and energy retrofits of government and military buildings. Regulations for transportation have increased the fleet efficiency standards for cars recently, providing a boost for transportation efficiency.

Still to come? More states will alter their regulation of utilities to encourage and incentive energy efficiency. California has its own climate change regulation being implemented in AB 32, which will have to lean heavily on energy efficiency to reach the desired targets. US action on climate change would have a similar impact. The creation of a national renewable energy portfolio standard that includes energy efficiency would provide a big boost. National building standards that emphasize energy efficiency would provide yet a further boost. All of these will keep the momentum for efficiency moving forward.

Summing it Up

Ultimately, being energy efficient is not about giving up things. It's about getting more out of the resources we use. Being energy efficient does not mean we need to be sweaty in the summer and shivering in the winter. We can be comfortable in our homes and also more energy efficient, saving money. We can get where we need to go while consuming less fuel to do so.

Sometimes we will rethink our priorities and how we do things. Changing our thermostats a few degrees is often a good idea, to the extent that you are comfortable with this move. Hummers are out, and energy efficient smaller cars will increasingly be in. This is a matter of both economics and the environment. Green moves that fit in with economic choices, that have financial winds filling their sails, tend to be the ones that have the most staying power.

So get ready--the energy efficiency floodgates are opening. Those who create businesses to ride the wave forward are in for a great ride.

Glenn Croston is the founder of StartingUpGreen.com, helping entrepreneurs and small businesses to start and grow greener businesses, and delivering the Green BizBlast to connect those seeking and selling green products, services, events, and opportunities. He is also the author of "75 Green Businesses You Can Start to Make Money and Make a Difference", and the author of "Starting Green", a nuts and bolts guide to starting green businesses (Entrepreneur Press, September 2009).

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