The latest in a series of pieces derived from my 1985 PhD.

We often talk about adopting technology, but for all but the simplest of technologies the process is usually one of adaptation. Adaptation requires site specific engineering, the kind of engineering that is unspectacular but essential. Numerous site specific factors drive costs as well as savings, and therefore the economic viability, of any proposed measure. Therefore you cannot assume that a technology that works in one site will work in another site that is in the same sector, or even another site that is ostensibly similar.

The technologies referred to have moved on, (the original did not refer to LEDs but rather compact fluorescents so I have updated that), and the innovation literature references have probably been superceded but the principles remain the same. The fact that a company has not adopted an energy efficiency measure, does not indicate ‘sloth, bias or stupidity’ – even when the technology is regarded as a ‘no brainer’ or ‘low hanging fruit’. In addition, of course, different companies may have different financial criteria for their investments driven by factors such as differing economic performance, financial structure, strategy, shareholder preferences or management approach.

Adoption versus adaptation

In many studies the purchase of technology is often presented as a simple adoption process. In most, if not all, energy efficiency investments, (as well as other areas of technology), the process is more one of adaptation. Even when a concept is well proven and the basic hardware exists some adaptation work is necessary for all but the simplest technologies, to make a viable system in the particular site in question. This requires original, though not dramatic, engineering design work. The basic hardware may well be standard and simple but the system must be engineered to meet the technical conditions and the required economic return at each specific site. The difficulties this can present, and the effect of site specific technical factors on economic viability, have been neglected in the adoption literature.

There is a great variety of energy efficiency technologies available, ranging from LED lamps to sophisticated process heat recovery and electronic energy management systems. Each technique has a degree of adaptability, the inverse of which can be labelled specificity. At one end of the scale, with a high adaptability, would be LEDs which can plug straight into existing fittings. In more complex relighting situations, such as a warehouse where high pressure sodium lamps are to replace fluorescent tubes, considerable adaptation of the existing lighting circuits may be necessary.

A technique with a lower adaptability than low energy lighting would be heat recovery from boiler stacks using economisers. Ostensibly this mature technology (first patented in 1845) looks very adaptable as it can, in principle, i.e. technically, be applied to any gas fired boiler, or dual fuel boiler if a bypass is used during oil firing. Numerous site specific factors affect the financial viability of proposals for boiler economisers, including:

• physical space for the hardware
• load bearing supports
• quantity and quality of demand for hot water
• flue gas temperature and-composition
• boiler utilisation
• boiler load pattern
• time spent burning gas (for dual fuel boilers).

Total system cost, as in other heat recovery projects, is often three times the cost of the economiser or heat exchanger. At two brewery and one dairy sites visited during the research, economisers were not financially viable because of lack of space in the boiler house. Obviously it would have been technically feasible to extend the boiler house but the cost would have been prohibitive. Consequently, the technical potential for energy saving through the use of economisers at these sites is unlikely to be exploited at current prices until a new boiler installation is necessary for other reasons. Applications of commercially available hardware are rarely prevented by purely technical problems but by failure to meet economic criteria.

Specificity

Towards the higher end of the specificity scale, i. e. the least adaptable, would be a process heat recovery system. The number of technical factors affecting financial viability will be substantially higher than a simple boiler economiser.  The determinants of the adaptability are the sensitivities of capital costs and savings to variations in specific technical factors inherent in the technique and the site. The technique of heat recovery from malting kilns using air-to-air heat exchangers has a higher adaptability than say brewery effluent heat recovery systems because the technical factors that affect capital cost and savings, notably physical dimensions, air flow rates, temperatures, tend to be similar between sites. There are only a few basic designs of malting kilns.

On the other hand brewery effluent heat recovery systems have a low adaptability into other brewery sites because their viability is very sensitive to site specific factors such as plant layout and quantities and qualities of effluent (determined by the type and operating conditions of existing plant, as well as production levels and mix).

The importance of specificity is supported by several writers on innovation. Rosenberg (1982) stresses the importance of adaptation and the role of “unspectacular design and engineering activities“. He also notes that in the literature there is frequent preoccupation with what is technically spectacular rather than what is economically significant. Rosenberg also emphasises the importance of studies at the level of the individual firm. Rogers (1962) in discussing the adoption of innovations divides the “antecedents” to the innovation decision into two categories:

(1) perceived attributes of the innovation, and

(2) characteristics of the adopters.

Five attributes can be summarised for the first category:

• Relative advantage
• Compatability
• Complexity
• Trialability
• Observability.

Compatability, “the degree of fit of the innovation with existing norms and needs of potential users“, (Rogers, 1962), subsumes adaptability as well as other factors.

The importance of adaptability, or its inverse specificity (in connection with innovations) is also supported by Boylan (1977), who states:

“The number of firms in an industry which are potential adopters of an innovation, and the proportion of their output to which it might be applied, depends on the functional specificity of the innovation at successive stages of development as well as the range of relevant processes and products in individual plants. Hence, adoption rates cannot properly be compared with the total number of firms in, or the total output of, their common “industry” classification. Rather the progressively changing characteristics of the innovation in its various forms must be accompanied by changing measures of the array of economically feasible applications.”

Gold (1977) notes that it cannot be assumed that the expected benefits of an innovation are so clear that all potential adopters would assess them similarly or even that all potential adopters give serious consideration to the same innovations in any given period. Economic viability in one site does not automatically confer economic viability in a similar site because the costs of adopting the basic hardware into a system can make it not viable. This is true even assuming similar definitions of economic viability. Gold also suggests that:

“the criteria applied to the evaluation of available innovations may differ widely among firms, reflecting differences in their internal urgencies, resource availabilities and specialised expertise rather than deriving solely from the demonstrable benefits of the innovation itself.“

Gold goes on to state: 

“Instead of assuming ignorance, sloth, bias or stupidity as the causes of (such) restrained rates of diffusion, it would be more helpful to make field studies of the actual considerations and evaluations responsible for the decisions made.”

Bradbury (1978) observed that technology:

“is not something that can be bought off the shelf or stored in a bank vault“.

Components of systems may be bought off the shelf but an input or knowledge – engineering – is necessary to design financially viable systems, even where the concept has been used elsewhere.

In conclusion

Understanding technological change and how we use and adopt technology is important for policy makers and practitioners. We should not forget the degree of ‘unspectacular’ engineering that is necessary to adapt technology to a specific situation, and we should not forget the importance of relatively small-scale, unspectacular (and often unseen), incremental technical change – particularly in an age where we tend to focus on large-scale, spectacular innovation. Over time the cumulative effect of incremental technical change can be greater than that of spectacular innovations.

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References

BOYLAN, MG (1977) Reported economic effects of technological change in Research, technological change, and economic analysis.  ed. B Gold, Lexington Books, Lexington Mass.

BRADBURY, FR (1978) The Leverhulme Project at Stirling in technology transfer: implications for the Scottish Economy. TERU Discussion Paper No. 14, Proceedings of Conference held at the University of Stirling, 17 and 18 October 1978.

ROGERS, EM (1962) Diffusion of innovations. Free Press, New York

ROSENBERG, N (1982) Inside the black box: technology and economics. Cambridge University Press

On the 29th January EP co-hosted the Net Zero Finance Leadership Summit. This unique event, held in the Guildhall, was supported Under our Innovate UK (IUK) funded ‘Shift to Net Zero’ project, and brought together senior people from local authorities, financiers, investors, lenders and other stakeholders focused on increasing investment into local, systemic, place-based net zero projects.

The Shift to Net Zero project consortium is made up of EP, Ibex Earth, Kent County Council, Surrey County Council, Essex County Council, and Brighton & Hove City Council. The ideas behind it are developed from EP’s work over many years reviewing, and in some cases working on, examples from around the world where energy efficiency financing had successfully scaled. The project also builds on the various tools we had developed and deployed to help derisk and enable energy efficiency and net zero investment decisions including: the Investor Confidence Project Europe; the Energy Efficiency Financial Institutions Group’s Underwriting Toolkit; ESCO-in-a-box®; the EU Horizon funded CREATORS project tools for developing community energy projects; and the UNESCWA Toolkit for Energy Efficiency Financing Instruments for Buildings in the Arab Region. The idea for a dedicated Net Zero Delivery Vehicle, the NZDV, started with a small piece of work EP did for IUK at the end of 2021. Through 2022/23 further work on the idea was funded through the Greater South East Net Zero Hub and in 2023 IUK funded phase 1 of the Shift to Net Zero project in which EP, Ibex Earth, and the four local authorities identified potential investments of £46 billion and further developed the concept. That work led to the current project which is about building capacity and advancing the NZDV concept.

The aims of the Summit were:

1. to bring together local authorities and private capital – 2 groups that rarely come together and speak different languages
2. to increase knowledge and understanding of the Shift to Net Zero project
3. to advance EP’s proposed NZDV, a public-private vehicle designed to overcome the barriers to bringing in private capital to local place based NZ projects

Key take aways from the meeting were as follows:

1. the barriers are non-technical and are based around lack of capacity on both sides
2. addressing the problem requires a systems based approach, both technically and organisationally
3. local authorities and financial institutions are both committed to solving the problems to ensure more capital flows into these kind of systemic projects.
4. there is huge gap between what is often called pipeline and well developed bankable projects – much of what is called ‘pipeline’ is more aspiration than real pipeline
5. there is lack of capacity in local authorities to develop projects and access private capital.

The audience of c.80 were highly engaged throughout a packed programme of presentations and panels.

The Net Zero Delivery Vehicle is designed to be an equitable public-private partnership that brings together local authority project opportunities and capabilities, with private sector development expertise and some initial seed capital for development. It’s structure meets the needs of private investors and lenders, ensures good governance, enables the ability to aggregate projects to a scale that is meaningful for institutional investors, and satisfies public sector procurement rules. The next stage is to get seed funding to structure the entity with the initial founder local authorities (and other interested authorities) and start operations.


The Shift to Net Zero project has also launched a knowledge sharing platform which can be found on nzdv.co.uk

Later in the year the project will host a second meeting to move the NZDV forward. Any local authorities interested in participating in the NZDV should contact Leo Bedford at ep – leo.bedford@epgroup.com

Technical change – change in the technology we use to do things – is all around us and essential to achieving energy and climate goals, as well as to economic growth but we don’t often think about the process of change. Improving energy efficiency is a continual process of technical change. How does it happen?

There are three necessary conditions that have to be met before a technical change will occur. These are:

1) a TECHNICAL CONCEPT must exist, capable of being developed to the stage of achieving
2) an ADVANTAGE over alternative technical concepts and the status quo
3) the CAPABILITY of developing 1) to the stage of delivering 2) must exist.

All three conditions have to occur simultaneously and in the same place. An important modification to this is that it is more the perception of advantage and capability rather than any absolute values that motivate a ‘coupling agent’ to bring all three together and force a technical change. The coupling agent fulfills an entrepreneurial role even though in most cases of technical change around energy efficiency he or she is unlikely to be the classic independent entrepreneur, but rather an employee of an established organisation. The coupling agent can be motivated by many things, including: profit, position and profile, desire to change things for the better – perhaps best summed up by J M Keynes’ phrase ‘animal spirits’.

The technical concept may be a brand new idea, a new combination of ideas (old and/or new) or an old idea not previously developed because of lack of advantage or capability. The ease with which the concept can be turned into a commercially viable installation depends on the extent to which components of the concept are already embodied in available hardware. If the central concept is already embodied in commercially available hardware, then adaptation to fit the specific site – engineering – will be necessary. If hardware has to be developed, as in the case of an entirely new concept, or invention, more research and development work is necessary. Thus, there are different levels of research, design and development. Depending on the state of the concept it may involve R&D in the traditional sense, “experimental design” or more mundane “routine engineering design”. Most energy efficiency measures should ‘only’ involve routine engineering design, there is usually no need to develop new technologies with all of the risk that entails.

The advantage is usually, in the case of industry, an economic advantage. It may be an advantage over alternative concepts or over the status quo. Some advantages such as improved quality control or working environment may harder to quantify economically but may be considered strategic to the organisation. Measures judged to be strategic, for instance improving a product, or improving public perception of the company, are more likely to implemented than simple cost saving measures. An exception to purely economic and strategic drivers would be technical changes that are required to meet regulations e.g. emissions control.

Capability to develop the technical concept to the stage of achieving the required advantage over alternative concepts or the status quo may exist in either the potential host or a supplying organisation, or of course a combination of these. For most energy efficiency investments the basic hardware will already exist and the necessary capability will be the capability of adapting the basic hardware to meet the potential host’s technical and financial needs, essentially engineering work. The greater the level of research, design and development necessary to bring the concept to the hardware stage, the more important, and more difficult, it is to assess the capability of vendor companies and the host company itself. Undertaking projects that require R&D adds a significant extra uncertainty to the investment decision. For most energy efficiency investments, there isn’t a need for basic R&D, and in fact for most organisations undertaking such work would be inappropriate and far too risky.

To sum up, technical change occurs when a coupling agent, brings together a technical concept, perceived advantage and capability to deliver the change and achieve the desired advantage. This coupling activity is essentially entrepreneurial in nature and requires human energy applying development skills.

The latest in a series of blogs inspired by my 1985 PhD

There have been many, many studies over the years discussing the potential for energy efficiency, in fact there are almost as many studies on potential as there are on the barriers to energy efficiency. As I sometimes joke, if I had ten pounds for each of those I could probably retire. However, very few of the studies on potential really define potential.

The question of what is the potential for energy efficiency, both the meaning and the quantum, was an important element of my research which set out to review the feasibility of achieving a low energy future. As the work progressed, it became obvious that potential, when used in anything other than its pure physical science meaning, is a ‘soft’ concept that needs to be defined. Leach et.al., in their “A Low Energy Strategy for the UK’, along with many other studies of potential made no effort to different types of potential.

Potential is not static, it is continually being altered by technological and economic developments – it is a dynamic just like reserves and resources of oil and gas. At any time, and in any particular site, and site specificness is very important, there are the following types of potential.

• There is a totally theoretical potential based on the laws of physics without any consideration of practical available technology.
• There is the potential for improving energy efficiency that derives from the physics of the process or installation using known concepts i.e. not magic, which is also a theoretical potential. 
• A sub-set of this potential is the potential that can achieved by applying available, existing technology. 
• This sub-set, at any one time, is further divided into potential that is economic and potential that is not economic. 

It is the latter that is actionable by the firm. It can be defined as the potential resulting from those investment possibilities that:

• are capable of being developed and implemented by the host organisation (or householder) or vendor/supplier/contractor
• meet the financial criteria set by the organisation making the investment
• are appropriate in context i.e. other considerations at the time.

The schema of potentials can also be divided into that available from retro-fitting and that available from installing new plants or processes.

Obviously the size of the potential depends on judgements and decisions outside the usually accepted boundaries of energy management. Clearly two organisations operating similar facilities could have different investment criteria due to differing decisions on priorities for capital or differing return requirements by their owners, giving different potentials even if their underlying facilities are identical.

Furthermore, and overlaid on these potentials are the perceptions and performance of management.  Differences in perceptions may come from two sources, differences in the quality of internal and external information flows, and differences in the selective perception of information by actors in the process. Internal information includes energy performance information but also other information about the wider business. External information includes many things including information on the availability of technology and hardware, and views on future energy prices. For example, in one site the possibility of a certain energy efficiency measure may not be perceived at all due to a lack of knowledge. In another similar site that particular measure may be considered unrealistic because of a prior bad experience. Such ‘biases’ are important in determining what is considered achievable and appropriate by management. Perceptions filter objective reality. 

As prices and available technologies change, the potentials change. Thus any attempt to estimate or measure potential will always be fuzzy. A real measurement of potential requires blending detailed engineering work with management views and perspectives – sometimes called an Investment Grade Audit. Gathering this level of detail is an expensive exercise with an ephemeral result. It is only worthwhile going to the expense if management believe a measure is likely to be implementable and investable.   

The factors that influence the potential in any one site at any point are shown in the soft systems inspired diagram.

This analysis emphasises the fact that potential for energy efficiency is analogous to that for energy resources and reserves, something that I explored in this 2015 blog, ’Energy Efficiency as a Resource’

The next time anyone talks about or writes about the potential for energy efficiency ask what is their definition of potential.

I was shocked to be reminded that that 40 years have elapsed since I finished my PhD at the University of Stirling. The thesis title was the rather ponderous, ‘The potential for energy conserving capital equipment in UK industry’, and the general research objective was to test the thesis of Gerald Leach et. al., who in 1979 had published ‘A low energy strategy for the UK’. That book, like the parallel but better known ‘Soft energy paths’ by Amory Lovins in the US, published in 1976, received much criticism and opprobrium from the energy establishment, which was of course heavily supply side dominated at the time. The government forecasts had UK energy demand growing dramatically, by 64% between 1976 and 2000. Looking back it turned out that reality turned out much closer to Leach’s scenarios than those of the energy establishment. (See ‘Surprise, you are living in a low energy future…(almost)’). Economic growth pretty much matched the forecasts but energy use hardly changed.

I was fortunate in many ways as a series of seemingly ‘random’ events took me to Stirling after a year of working doing energy audits. I moved to Stirling which has one of the most beautiful campuses in the world in late 1981. I didn’t think it was such a good idea when the first winter arrived with a shock, it was one of the coldest UK winters on records, with temperatures down to minus 15^oC. The loch on campus froze over (see photo).

Having taken an unusual interdisciplinary degree about energy I continued my inter-disciplinary approach and my PhD was funded by a joint committee of the Science and Engineering Research Council and the Social Sciences Research Council. When doing a PhD the student-supervisor relationship is critical and my supervisor, Keith Jacques, was brilliant in many ways but eccentric. He had been an industrial chemist, developed some new materials and then somehow ended up as a school teacher and then University lecturer. He introduced me to soft systems thinking which was embedded into my research and I think has influenced nearly every project or job I have done ever since. For anyone not familiar with soft systems thinking check out ‘Systems Thinking, Systems Practice’ by Peter Checkland.

My work at Stirling was within the Technological Economics Research Unit (TERU), smaller but similar to Sussex’s SPRU, but with more emphasis on management of innovation and technology. A condition of doing my PhD was to take the taught part of the MSc Technological Economics so I spent my first 9 months in Stirling in a class of 12 students from 8 countries, (which was more unusual back then than it would be now), taking MSc courses similar to those on an MBA including Business Strategy, Operations Management, Statistics, Capital Budgeting, Accounting, Marketing etc and working on my PhD part time. Like most PhD students there were many, many times when I wondered what I was doing and considering going back to the world of work.

As my PhD evolved we settled on four industries to focus on – the ‘boozy’ ones of brewing, distilling, malting and dairies. The brewing industry had, and probably still has, the best industry wide records on energy performance and there is a close link between brewing and the study of energy. Joule’s discovery of the fundamental law that energy is always conserved was based on experiments undertaken in his father’s brewery. Sir Oliver Lyle’s classic work, ‘Efficient use of steam’, published in 1946, chose a brewery to demonstrate heat balances. Opening with the statement “The input of a brewery is cold water. The output is cold beer“, he then proceeded to examine why it is that a product which is as cold when it comes out of the brewery, as the water of which it is largely composed was when it went in, needs more energy than just the “necessary push to start things off”.

Much of my time was spent visiting many sites within those sectors with a strong emphasis on brewing – tough work but someone had to do it. You have to remember that in those days a) there were far more breweries than there are now, (excluding micro-breweries which hardly existed then) and b) it was not unusual to drink alcohol at lunch time even in production sites. I also spent an extended time working closely with the engineering team at Ind Coope Alloa which was a leader in energy management – led by the engineering manager Ray Banton. There I discovered that their innovative heat recovery system had been incorrectly installed and commissioned, and the team quickly put it right.

Much of my work focused on barriers to achieving the potential for energy efficiency, and how they could be overcome, something I still spend a lot of time thinking about and working on.

It also emphasized that many estimates of potential for energy efficiency under-estimated the specificity of each situation and the need to adapt a technology rather than just adopt it. Even off-the-shelf equipment has to be engineered to fit the specific application. For any particular technology, site specific technical, financial or management constraints will apply – even in something seemingly so simple as low energy lighting, which in those days did not of course include LEDs. This focus on the specificity and the importance of incremental technological change was recognised by the external examiner, the late Professor Chris Freemen of SPRU, as a major advance in innovation literature as well as energy efficiency literature. All too often talk of innovation focuses on the large, major changes as opposed to the less exciting, but often more impactful incremental changes and improvements.

Of course much has changed in four decades. First of all we have moved from talking about ‘energy conservation’ to ‘energy efficiency’. Secondly we have realized the threat of climate change and reduction of emissions has become a major motivator of investing in improving energy efficiency. There was no mention of carbon emissions reduction in the debate at all back then. We have had huge technological change, particularly around computing which was in its infancy in the 1980s, (I think my PhD was one of the last to be typed by a secretary as the University had only just adopted state of the art ‘word processors’). However, the fundamentals have not changed, the potential for cost-effectively improving energy efficiency remains similar in scale and energy efficiency is still insufficiently recognized in energy policy. Reducing energy costs remains important. Reducing reliance on imported energy is just as important. As I was reviewing some of the text for an update to my book ‘Energy Efficiency’ I thought I would explore some of the conclusions of my PhD and update them for today’s world in a mini-series of blogs to follow.