We often think of the Internet as a way to cut costs. But, as I mentioned to business leaders at the United Nations Climate Summit in Cancun, Mexico yesterday, the Internet is 1,000 times less energy efficient than the human brain, according to Bell Labs. We could cut energy demand very significantly –- most business examples are in the 20% range –- by investing in technology that is already available today. All it takes is focus and a little brain power.
Energy efficiency is often called the fifth fuel but it should be considered the first, as it’s the most accessible and promising in terms of potential and return on investment. The efforts of the Alcatel Lucent led Green Touch consortium to catch up with the human brain notwithstanding, it’s clear that energy efficiency should be the first place we look to reduce our carbon emissions.
Information and data is the first lever. Analytics and other innovations can bring to life data that was always available but often ignored to create smarter buildings. We can we track, predict and correct energy use in buildings. And we can anticipate required changes in user behavior, allowing us to better balance demand and supply and significantly reduce consumption.
Retrofitting buildings is the next step: existing building stock represents more than 98% of the problem. Yesterday, Clay Nesler of Johnson Controls told us the story of Manhattan’s Empire State Building, where a refit will reduce energy use by 38% through a performance contract that includes new technology in insulation, cooling, heating and lighting. That makes it a landmark of another kind, a great example of progress applied to our existing infrastructure.
The benefits of these retrofits go far beyond energy efficiency. Overall living and working conditions are vastly improved ex-post: Our panel discussed how smarter schools have rejuvenated learning conditions and performance in countries like the Netherlands.
So what are the obstacles? No surprises that the lack of standards comes high up the list. A common way to measure and disclose energy efficiency is required, partly to provide the consistency that investors need to calculate market risk accurately, partly to facilitate governmental support by phasing out inefficient technologies.
Financial innovation is also needed to counter the way that investment is fragmented and split across millions of home and office building projects.
Above all, we all agreed that a long term approach is required. Today’s regulation and financial incentives don’t make it easy for business to invest in energy efficiency, despite the available solutions. That said, it also depends on the business model one chooses. One route is to lock yourself into a hardware vendor, pay the upfront costs for sophisticated technology and wait many years for the return. The other is to offload energy efficiency to a third party platform and apportion the costs over the long term while benefiting from returns in the 12 month to 3 year range.
Done the right way, energy efficiency is a means for businesses to save costs and improve cash flow. But as I reminded business leaders here at the climate summit, if initial investments put off decision makers, perhaps they should consider the lack of alternative options and apply the old grandmother’s maxim: ‘we cannot afford to be cheap’.
[Image by Mediaspin.com]