On the 15th January I chaired the 3rd annual Energy Institute conference “Accelerating energy efficiency”. I believe that we have now got to the point where the huge economic potential for improved energy efficiency is broadly recognized although the true value of the multiple co-benefits is only just being identified. What we haven’t yet achieved is the “main streaming” of improving energy efficiency. To resolve our energy cost, energy security and environmental problems we need to, and should, work to accelerate the rate of improvement of energy efficiency – hence the title of the event.

To accelerate energy efficiency we need to increase the demand for energy efficiency, increase the supply of energy efficiency products and services, and increase the flow of finance into energy efficiency investment, both internal and external investment. To do this requires a systematic approach and this year the Energy Institute conference covered more parts of the jigsaw than ever before. Lord Deben kicked off the event with a brilliant keynote in which he stressed four words; vulgarity, centrality, urgency and difference. I understood vulgarity to mean moving energy efficiency away from the deeply technical language only understood by experts to a more commonly understood language – a theme I have pushed for a while having come to the realization that energy efficiency is deeply boring and uncool (see the energy efficiency cool wall: http://goo.gl/TQZiQp). Centrality meant central to the energy and environmental issues, urgency meant in relation to climate change but I would also add urgency in terms of economic and geo-political energy security issues such as dependence on imported gas and oil. By difference I think Lord Deben meant diversity of solutions.

Following Lord Deben’s keynote there were presentations covering an update on ESOS from David Purdy of DECC and presentations on the different routes to ESOS compliance, ISO50001 and energy surveys. Bert Lunenborg, Production Manager at major energy user British Gypsum made the point that ISO50001 was powerful as it produced a system that is not dependent on individuals, and has a life beyond surveys. This cemented (no pun intended) my belief that government and other stakeholders concerned with improving energy efficiency should be promoting and adopting ISO50001. Wider adoption will better embed effective energy management into organizations which should improve the rate of improvement in energy efficiency and investment into energy efficiency measures. I would like to see a more positive commitment to ISO50001 from government, large organizations and industry associations alike to build capacity and capabilities. The public sector could accelerate its behavior by insisting on suppliers having it, just as they often do with quality and environmental ISOs.

A welcome addition to the programme compared to previous years, was the focus on behavior with several presentations on the theme including “Applying behavioural science to improve energy efficiency” by Phillipa Coan and “Energy management through people: the missing ingredient?” by James Brittain. James reported on an effective approach using low cost real time sensors and employee engagement to reduce energy use. The results from the Heathrow Terminal 2 building project where James’ company worked with restaurants and retail units to reduce installed capacity and energy use were particularly impressive.

In the afternoon the themes were finance and data. I introduced the Investor Confidence Project Europe (http://goo.gl/glbj5S) and then Nick Paget from Energy Works plc described the fully financed lighting as a service model Energy Works is providing to the SME market. Rajvant Nijjhar of i-VEES gave a great practical demonstration of the issues of measurement by getting six volunteers on stage to measure a piece of string. The range of answers was amazing. It was a great reminder of the fundamentals of measurement and the reality that every single measurement or data point concerning any parameter has a range of error attached to it – something we often forget in the digital age. Luke Nicholson of Carbon Culture described his work based on big data and open collaboration.
All the presentations are available at: http://goo.gl/AJSsZm

In conclusion, if we are to accelerate energy efficiency we need to work on all the pieces of the jigsaw simultaneously – not just the technology. Some of the pieces are well developed and understood such as Measurement and Verification (although they all need to be applied more), in others – particularly in the behavior and financial spaces – we are only just learning what to do. We need to continue to build the jigsaw and gather, maintain, improve and spread best practice in all these areas.

Henry Chesbrough, one of the great innovation thinkers who coined the term open innovation, said:

• a startup is a temporary organization in search of a repeatable, scalable business model.
• a corporation is a permanent organization designed to execute a repeatable, scalable business model.

which neatly summarizes the huge differences between the two types of organizations.
 
I was reminded of this quote during the 2 Degrees Live Energy Performance Summit on 12th December when I was part of a panel talking about the RBS Innovation Gateway. The RBS Innovation Gateway seeks to identify innovative companies (or concepts) that offer ways of reducing energy, water or waste in buildings. Unlike other corporate sponsored innovation programmes the Gateway actually offers the possibility of trialing the innovations within the extensive RBS estate.
 
Thinking about the quote from Chesbrough, and about RBS, which is a bank which has gone through massive changes in the last decade, the ambition of the RBS Innovation Gateway is particularly impressive. Here we have a big corporate – and a bank at that – deliberately putting itself out there to interact with innovative startups and SMEs in a programme with a business and social purpose. Well done to the RBS team for taking such a risk. The Gateway has attracted the innovative companies, now the next steps (currently underway) are to trial the innovations in the RBS estate and measure the results – both in terms of individual projects but also at the programme level. From here the programme could go in several directions including being opened up to other corporates (which is already happening), and maybe into some kind of fund structure.
 
At the 2 Degrees Live event I said “you have to be crazy to innovate” (speaking as someone who has innovated and loves innovation!) and the comment was tweeted. Someone from the US responded “you have to be crazy NOT to innovate”. As I said in my response to that tweet, that is one of the paradoxes of innovation. We need to innovate, we have the desire to change things hardwired into our genes and yet innovation is really difficult and at some levels we dislike change.
 
At the event I also used a few of my favourite quotes related to innovation which I try to bear in mind when looking at innovative companies. Here are some more of them.

Have a healthy and successful 2015.

On the 10th December I helped launch the Local Authority Energy Index at a reception in the House of Commons. The Index is a new initiative developed by EnergyPro Ltd (my company) in partnership with Knauf Insulation. It is a pilot project with the purpose of providing a measure of performance of authorities on the energy efficiency agenda and to provide examples of best practice that others can learn from. The Index can be found here: (www.laenergyindex.co.uk)
 
The initial Local Authority Energy Index covers 25 local authorities in England covering a range of geographies, authority type and socio-economic factors. It uses a range of quantitative and qualitative indicators and draws upon telephone interviews and consulting publicly available data. It looks at four areas that we think are important:

• energy management of the authority’s own property portfolio
• energy efficiency in the community (mainly non-domestic)
• energy efficiency in housing
• energy infrastructure.

We gave energy management of the authority’s own portfolio a high weighting as we consider it to be the foundation stone for implementing a broader energy agenda. It is important that authorities “walk the walk”, understand the processes of improving energy efficiency, and are convinced by the results. Important factors in this category included; having explicit targets and public reporting of progress, existence of Monitoring and Targeting systems, and the adoption of ISO5001.
 
We identified a number of concerns in this area including the fact that in some authorities the energy management team have been cut back, at a time when efforts should be increased. Also many energy managers, as in other sectors, are having to spend too much time completing data requests e.g. for CRC and not enough time developing investable projects. Also in some cases the carbon agenda had over-ridden energy management fundamentals and although carbon reduction targets existed energy reduction targets did not.
 
The energy efficiency in the community category covered factors such as whether the authority was proactively working to help building owners (and/or industry) to improve energy efficiency. This could be through programmes like Cambridge Retrofit or supporting grass roots initiatives.
 
Energy in housing remains a major issue, particularly given the persisting problem of fuel poverty with all of its attendant costs which appear in the benefit system and the health system. In this category we tried to measure how effective authorities had been in mobilizing funds such as those that were available through CERT and CESP. We did not include ECO as the programmes are still in the early stages and there was little data available on results. In future we will include ECO programmes.
 
The changes in the energy sector, which is moving towards decentralization and greater flexibility, coupled with the high levels of distrust of big energy companies, mean that there are opportunities for local authorities to become more directly involved in the energy system, even build their own infrastructure. This can take different forms including developing District Heating systems, Combined Heat and Power, local renewables and launching their own energy supply and energy service companies. The latter is a rapidly emerging trend with authorities such as Glasgow, Nottingham, Bristol and Peterborough all moving in that direction which promises to be a major disrupter of the energy market.
 
Finally in the index we also looked at overall indicators such as energy per capita and energy per Gross Value Added. Although these are affected by many factors completely outside the control of local authorities (including economic mix, type of building stock etc) in time these should be the variables we are all trying to influence.
 
Over the last few years the large potential for mitigating local and global energy problems through improving energy efficiency has been increasingly recognized but, despite being the cheapest, cleanest and fastest way of delivering energy services, the potential for improved energy efficiency remains under-utilized for a number of structural and historical reasons – some of which can be addressed by local authorities as they have many touch points with energy and can affect levels of energy efficiency in many ways. We believe that those authorities which proactively address this matter in a holistic way will reap great benefits through improved health and welfare, improved finances and local economic development, which will far outweigh the value of energy cost savings alone. Some local authorities in the UK have shown leadership in energy efficiency, either across the whole field or in specific areas, and we hope that the Local Authority Energy Index will help spread best practice and accelerate efforts to improve energy efficiency.
 
We welcome input and suggestions for improving the index and look forward to developing it in future – both to cover more authorities and to provide improved measures of performance.
 
Thanks to Knauf Insulation, Michael Floyd and the rest of the Energy Index team and our supporters including Dave Watts MP, Alan Whitehead MP, Dave Sowden of Sustainable Energy Association, Richard Griffiths of UKGBC and many others.

I have written before about how – if we are to really scale up the level of energy efficiency activity – we need to increase capacity in the demand side of energy efficiency, the supply side of energy efficiency and the finance of energy efficiency. All three aspects need to be worked on in a systematic way. Part of building capacity in the demand side i.e. amongst energy users, is developing new tools for developing and running more effective energy management programmes. This post is about a new tool inspired by the Innovation Matrix developed by Tim Kastelle¹.

Although energy efficiency had gone through periods where it received attention several times before – notably in the post-war period when fuel was short and the UK was in dire financial straits – energy management started to develop as a more professional discipline in the late 1970s after the 1973 and 1979 oil crises. Several management tools were developed, starting with what should be the foundation of any energy management programme, Monitoring and Targeting (M&T). M&T consists of agreeing a base line consumption, setting a target for consumption and recording progress against that target. Another tool developed in the 1990s, (originally by the Building Research Establishment), was the energy management matrix which is a way of measuring where organizations are in the different dimensions of energy management including; policy, organization, training, communication and investment. Despite being adopted (and adapted) in the UK, the US and Australia it never really caught on despite some having potential as a useful tool for agents of change to analyze where an organization was in energy management and what actions were required to improve performance. Fundamentally it didn’t go to the heart of the problem – effective action in energy management – like in innovation or just about anything else – needs two things; commitment and capability.

Having seen Tim Kastelle’s innovation matrix, which maps organizations according to their innovation commitment and capability, I thought about how to measure these two characteristics for energy management within organizations. Although energy management isn’t often thought of as innovation it really is a form of innovation or technical change – even if most of the innovation is incremental and utilises existing technology in a specific application or building where it has not been applied before rather than breakthrough, “first of its kind” type innovation. The two factors, commitment and capability, really are the two critical factors for effective change in area – you can have commitment without capability and you can have (and this is often the case in many organizations) real energy management capability at the technical/energy manager level without real top management commitment. Many energy managers would recognise that situation in their own organization.

Commitment by top management to energy management is vital to success just like it is to any activity within an organization. Without high-level commitment things don’t really happen – once that commitment is there they do happen – it is a fact of life.

So I started thinking about what characteristics demonstrate commitment and capability in energy management.

Commitment to energy management can be evidenced by the following:

• Having a board member responsible for energy management
• Regular reporting of energy management performance at board level.
• Reporting can be on different frequencies depending on the organization but it needs to happen and everyone in the organization needs to know that it happens.
• A public target for energy efficiency improvement, typically expressed in energy intensity but increasingly in absolute energy terms. This would often be included in a sustainability report.
• Energy efficiency built into management targets and bonus schemes. Unless management at all levels – and indeed even the shop floor employees – have energy efficiency targets the level of effectiveness of any programme will be hampered. Ideally responsibility for energy efficiency has to be passed to the lowest level of person who can have some influence over energy use – which is often everyone.
• At the end of the day commitment is evidenced by investment. It is hard to be certain what the right level of investment is, and this will vary by industry and organization, but back in the 1980s many examples from the public sector showed that it was possible to profitably invest an amount equal to ten per cent of energy spend into energy efficiency every year for many years.
• Real commitment to investment will be evidenced by use of a specific allocated amount for energy efficiency, possibly differential IRRs to other investments – reflecting the truly strategic nature of energy efficiency which is not always recognized, or the use of external third party funds through some kind of shared savings deal or bond issue such as that recently done by Sainsburys.
• Incorporating best practice, or beyond best practice, levels of energy efficiency into new product development or new buildings shows a high level of commitment. These major decisions always have to have high level support and often opportunities are missed in new building or product projects unless there is high level support, and perhaps even positive pressure, to utilize them.

Energy management capability is demonstrated by:

• Having a Monitoring and Targeting (M&T) system that demonstrates energy use, targets energy savings and records progress against targets for each building, factory or facility. M&T was developed in the 1980s and proven to be highly successful in all situations and sectors. Without M&T there can be no effective energy management programme.
• Having a full-time energy manager. Clearly this is related to the size of the organization and its energy spend. In smaller organizations this requirement could be relaxed but in those cases there should be access to the equivalent of an energy manager, possibly through retained consultants or an energy management bureau.
• The energy manager having a formal qualification in energy management. In the UK this qualification would be through the Energy Institute or in the USA it would be Certified Energy Manager through the Association of Energy Engineers. Energy management is now codified and practitioner should have appropriate qualifications.
• Responsibility for energy usage has been passed onto line managers. This is based on the principle that although specialized energy managers can run M&T systems and identify, develop and implement energy efficiency projects they cannot control energy use day by day, minute by minute, in every building or factory within their organization. Responsibility for energy management has to be passed onto those people who can control energy use and that is building, factory, line, cost-centre managers or even shop floor operatives. Many organizations still fail to do this – fostering the belief that energy management is something done by an energy manager or engineering support function.
• Staff engagement programmes have been found to be effective in improving energy efficiency. The existence of a staff engagement programme is evidence of further capability as they usually involve training and hence build capacity amongst all staff members. It is important, however, to remember that “awareness is not everything” – most research in the field shows that simply having more factual information about a situation influence peoples’ attitudes or action².
• Recent work by the IEA³ and others have documented the multiple benefits of improving energy efficiency. These are many and various but include, even at the level of the host organization, factors such as improved productivity, improved employee engagement, reduced sickness time and reduced need to invest in energy supply infrastructure. Work by Cooremans⁴ has highlighted that energy efficiency can be a strategic investment –but is all too often simply viewed as a cost saving investment which inevitably receives less attention than strategic investments. It is important that the strategic nature of energy efficiency investments, and as far as possible, all the co-benefits – are included in energy efficiency business cases. Forward thinking organizations such as Lego do this – even when quantifying benefits is difficult they recognize them and make reasonable, defensible estimates. Inclusion of co-benefits in business cases for energy efficiency is a measure of advanced energy management capability.
• ISO50001, the energy management standard, was introduced in 2011. Like all standards it has to be used with care. As someone said about the quality standard ISO9001 you could have ISO9001 for making concrete lifejackets as long as you made them to a consistent standard. However ISO50001 means that for the first time the management of energy is subject to a standardized process. It is based upon the PDCA approach – Plan, Do, Check, Act – and sets out processes for energy management systems that enable an organization to continually improve energy performance. Achieving ISO50001 demonstrates a high level of energy management capability (as well as commitment).

A truly effective energy management programme, one in which the organization consistently improves energy productivity by a combination of good control of day-to-day energy use, employee engagement, and continuous creation, development and implementation of viable energy efficiency projects, is likely to have high levels of both commitment and capability. Effectiveness will ultimately be shown by continuous improvement in energy productivity.

Some of the best management tools use 7 factors; “The McKinsey 7-S Model” by Bob Waterman, Tom Peters and Julien Phillips⁵, “Seven Deadly Diseases” by W. Edwards Deming⁶ and of course “The Seven Habits of Highly Effective People” by Stephen R. Covey but in this case a 7 x 7 matrix presentation didn’t really work so I came up with a 2 x 7 matrix. The final version of the matrix is shown below.

This new energy management matrix can be used by senior management, other agents of change, and analysts to determine where an organization is in both the important dimensions of energy management, capability and commitment, and where it can be improved. The ideal situation is to have a high score, ideally 7, on both scales. My hypothesis (based on years of observation and involvement in many energy management programmes) is that an organization’s overall ability to manage energy, its energy management effectiveness – as evidenced by improvement in energy efficiency over time – will be higher the higher the level of commitment and capability. Academic – or practical – research could test the hypothesis. It would be good to get feedback and hear of any results of applying the matrix.

One of the essential pieces of the jigsaw that we have to build to greatly accelerate investment into energy efficiency, particularly third party investment, is the standardization of project development and documentation. This is the area addressed by the Investor Confidence Project (www.eeperformance.org), an open-source initiative created by the Environmental Defense Fund in the USA which has created Protocols for developing projects in different categories of building and has considerable traction with banks, investors, the energy efficiency industry, and city and state programmes. As well as Protocols the Project has launched a Quality Assurance system called “Investor Ready Energy Efficiency SM” and an open data initiative. The Investor Confidence Project approach reduces due diligence time and cost, enables aggregation of projects and ultimately will facilitate a secondary market in energy efficiency finance such as the issuance of bonds. It also allow banks and financial institutions to build teams around standardized processes – no bank or investor can build a team around an ad hoc approach where every project is different which is the current state of affairs in energy efficiency.  In time it will allow the collection of standardized performance data which can be used by investors. All of these things are necessary to facilitate a thriving and much enlarged energy efficiency financing market as no financial product – or at least no financial product that is used at scale – can exist without commonly agreed standards. Think about the standardization behind mass-market financial products such as mortgages, car loans, credit cards etc, and the bonds being used to re-finance them which draw on the debt capital markets. Unless we can get to that stage with energy efficiency finance we can’t finance the huge amount of investment that we need to. The Building Performance Institute Europe estimates that between €500 billion and €1,000 billion needs to be invested in energy efficient renovation of Europe’s buildings by 2050. This level of finance can only come from the private sector.
 
The Investor Confidence Project Europe concept has had some great support, the EU and UNEP Energy Efficiency Finance Investors Group (EEFIG) in its report, “Energy Efficiency – the first fuel for the EU Economy,” specifically highlighted the Investor Confidence Project and said that “[Europe needs the] launch of an EU-wide initiative to develop a common set of procedures and standards for energy efficiency and buildings refurbishment underwriting for both debt and equity investments”. The International Energy Agency in its “Energy Efficiency Market Report 2014”, issued on 8th October said: “[Investor Confidence Project] will facilitate a global market for financings by institutional investors that look to rely on standardized products rather than project-specific structuring and due diligence.”
 
After many months of effort and work with the Environmental Defense Fund we have obtained funding and will be launching Investor Confidence Project Europe in Brussels on 5th November before the Renovate Europe event (http://www.renovate-europe.eu/reday2014/reday2014-draft-programme), and presenting at the BPIE Investor Day on 6th November (http://bpie.eu/investors_day.html). Building on the success of Investor Confidence Project in the US, the Investor Confidence Project Europe will bring together investors, banks, property owners and the energy efficiency industry to develop protocols to standardize the development and documentation of energy efficiency projects.  
 
It is important to understand what the Investor Confidence Project is not. It is not developing new technical standards – plenty of these exist, rather it is about using the available standards in a common way through the entire process of developing and documenting energy efficiency projects. It is not about limiting engineering creativity. It is not about standardizing contracts – there have been previous attempts at this in Europe particularly around Energy Performance Contracts. As I have said several times before we need innovation in contract form and the Investor Confidence Project approach can be used with any contract form, or any source of funds – including internal corporate funds (CFOs are investors too). Finally the Investor Confidence Project Europe is not about enforcing a US model – the process of developing a project everywhere goes through the same stages but uses different engineering standards. What will be common between the US and Europe is an approach, not specific standards or protocols. This is essential because the world of finance is international and many of the large institutional investors who want to invest in energy efficiency, but are currently constrained from doing so, operate on both sides of the Atlantic and indeed around the world.
 
We have built a powerful pan-European coalition of banks, development banks, investors, property owners, ESCOs, energy efficiency companies, government agencies, NGOs and others who are supporting the Investor Confidence Project Europe. We have a Steering Group (still a few spaces left if anyone wants to volunteer) and are recruiting a Technical Panel to contribute to and oversee the drafting of the protocols to ensure they can be readily used. We have a Project Director, Panama Bartholomy, (panama.bartholomy@eeperformance.org) who has a wealth of energy efficiency experience gained in Californian government but now lives in the Netherlands. We are looking forward to kicking off the project. We are looking to further engage with investors, banks, cities and regions looking to accelerate investment into energy efficiency.
 
To support this important initiative, please sign up as an Investor Confidence Project Ally at http://www.eeperformance.org/europe-allies.html, volunteer for the Steering Group, a national Steering Group or the Technical Panel.
 
Please direct any questions or suggestions to myself or Panama. We look forward to working with everyone involved and really helping to accelerate investment into energy efficiency.