Investors are a bit like toddlers right now, grabbing for the next planet-saving energy technology. But the enthusiasm for offshore wind, electric batteries and green hydrogen has overlooked one very simple fact.
We can immediately cut carbon emissions and make money simultaneously simply by doing a better job of deploying the energy we already consume.
More than two-thirds of the energy used by the US in 2020 was wasted rather than employed productively, and the picture is similar in Europe and Japan. Capturing or redirecting this dissipation represents a huge opportunity when it comes to fighting climate change, buying time for more far-reaching innovation.
It also makes financial sense. While governments have had to use subsidies to tempt consumers to buy electric cars and heat pumps, corporate forays into energy efficiency can pay for themselves. Unlike carbon capture or industrial batteries, many of the improvements rely on technology that already exists. And the potential for monetary gain is only increasing as the prices of oil, coal and natural gas rise.
The scale of the wastage — and therefore the opportunity — is particularly large in the industrial sector, power generation and transportation, according to the US Department of Energy.
“There are profitable solutions you can do tomorrow. Not only does it save companies money and carbon, but . . . the wastage is a clue to why the west has a productivity problem,” says Jonathan Maxwell, who runs SEEIT, the UK’s first investment trust to focus on energy efficiency. It was promoted into the FTSE 250 last month with a £1.03bn market capitalisation.
SEEIT backs a wide range of projects, including some technologies that have been around for years. It recently took full ownership of a US power company that recycles energy wasted during manufacturing. Primary Energy operates several Midwestern facilities that are attached to steel factories. They use the excess heat and natural gas waste from steelmaking to drive steam turbines that generate electricity.
Although it has partnered with ArcelorMittal and other companies since the 1990s, the drive to decarbonise has ignited broader interest. The company is in talks with a cement group to expand into that industry. “We aren’t wind or solar and we’re not sexy. But we are what’s needed,” says Primary Energy president Mo Klefeker.
Indeed the gains from improving energy efficiency are so pronounced in some areas that companies have sprung up to offer conversions at no upfront expense.
Future Energy Solutions sells lighting as a service to more than 1,500 customers in Europe and the US. It organises the financing, installation and maintenance of high-efficiency LED lights for up to 15 years in exchange for a share of the energy savings. Clients range from individual Burger King franchisees to Q-Park garages in seven countries.
Lighting accounts for 5 per cent of global CO2 emissions, and Mordor Intelligence projects that the US lighting as a service market will quintuple by 2025 to $316m. “I can’t understand why everyone hasn’t converted” to LED bulbs, says Peter Hawksworth, FES chief executive. “But there’s so much more to go.”
It is tempting to dismiss efficiency gains as a short-term opportunity. Businesses can only switch to LED once and groups ranging from banks JPMorgan and Santander to supermarket Iceland have already done so.
But the experience at Roche suggests that playing the long game has advantages as well. The Swiss drugmaker started setting energy efficiency targets in 2006 and has cut its thermal energy and direct greenhouse gas emissions by more than half and its electricity use by 38 per cent since then. It now aims to cut consumption and emissions by another 10 per cent by 2025.
The company has gone way beyond lightbulbs to redesigning its buildings, labs and factories to prioritise energy savings. The facades on its new towers in Basel use four panes of glass with a space in between to keep heat out of cool areas and inside warm ones. Heating networks capture the warm air generated by chillers and use it to warm water and air.
In 2019, Genentech, the company’s US biotech subsidiary, shifted from distillation to cold-membrane filtering for the pure water used in its labs and factories, sharply cutting the energy involved.
Thomas Wolf, Roche’s chief environmental sustainability officer, says that on average, such energy conservation measures pay for themselves within seven years. Over the long-term they save the company 100 Swiss francs per tonne of CO2 emissions avoided.
“People talk about the low hanging fruit being gone, but I’ve been hearing that for 20 years now. Technology evolves and new solutions emerge while energy prices always continue to rise, making investments attractive,” he says.
Energy savings don’t simply appear out of thin air. Roche asks suppliers to develop equipment that exceeds conventional standards and promises to buy it once they do. US-based Stirling responded to the challenge with a new super-efficient ultra-cold freezer.
Roche’s experience is consistent with broader studies of the relative costs of cutting carbon emissions. More companies should follow their example. Sometimes it really is easy being green.
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October 27, 2021 at 11:00AM
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Sometimes it is easy being green (and lucrative, too) - Financial Times
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