I attended a smart cities seminar at Osborne Clarke on the 27th January. I have to say that I regard much of the talk about smart cities as simply that, talk with a lot of hype and not much reality (see my previous posts on the problems of hype here (http://www.onlyelevenpercent.com/innovation-hype-confusion-perfect-illustration/). Firstly as Alan Kell, a long term smart building and smart city pioneer says, we are really talking about smarter cities. “Smart” isn’t a point in time or a single fixed state. Secondly many of the technologies talked about in the smart cities conversation like energy storage, are either only in their infancy, not yet deployable at scale or depend on some regulatory changes that have yet to happen.
 
Anyway the seminar was based on some research by Osborne Clarke looking at barriers to smart cities. The report seemed to to conclude that finance was a barrier and that we needed some innovative finance. This reminded me of much of the discussion on energy efficiency finance and to my mind is misguided.
 
Simple availability of finance is not a problem in energy efficiency (EE) or smart cities, the problem is the lack of well developed bankable projects at the scale necessary to attract serious levels of investment and cheaper capital. In both EE and smart cities we don’t yet have the capacity (the know-how) to be able to develop large multi-building, city wide projects at scale. That lack of capacity sits on both sides, on the demand side the customers (cities) don’t have enough capacity to know what they want and how to get it (they need to become smarter customers). They are inundated with offers from suppliers, all with their own agenda of selling kit and services. On the supply side there is a lack of capacity to develop large projects, and a shortage of development funding to take concepts through to fully worked-up bankable projects. There is also a lack of clarity over business models for a lot of the smart city concepts.
 
We need capacity building for both the demand and the supply side of the equation. We also need development finance which may have to be public or soft money in the first instance abut ultimately can be paid back out of the implemented projects. We also need standardized ways of developing and documenting processes as well as gaining standardised performance data, something that in EE we are addressing through the Investor Confidence Europe (www.eeperformance.org/europe).
 
Interesting, unattributed comments I liked included the following:

• The DNOs are clear that the Low Carbon Networks programme has demonstrated that demand side activity can be more cost-effective than network upgrading. The issue here is that regulation still only encourages capital going into network upgrading. From the early days of the Electricity Market Reform some of us argued that we needed to change the regulations to incentivize DNOs to invest in demand side activities. Even though the RIIO (Revenues = Incentives + Innovation + Outputs) approach is an improvement it still isn’t sufficient.
• Very few elections change anything but the one in May will in the way that 1945 and 1979 brought in revolutionary changes, the welfare state in 1945 and Thatcherism in1979.
• The EU defines a smart city as a city that has done one smart city project. Smart is not a destination but a continuum.
• Smart city developments require new models of collaboration between cities, government and the private sector.
• The real barrier is the need for new business models. There is plenty of money around for well developed projects.

Thanks to Osborne Clarke for the research and hosting the event. More information can be found at: http://www.smartcities.osborneclarke.com.

In one of my presentations on the barriers to accelerating energy efficiency I talked about “the ribbon problem”, the fact that one of the barriers to energy efficiency is that it is invisible and not very photogenic, unlike renewables or conventional power stations, making it hard for politicians to be photographed cutting a ribbon or standing in front of some dramatic installation. Try searching for energy efficiency in any online photo library and there are very few images for energy efficiency, mostly there are low energy light bulbs, a box of some description or some kind of naff logo often including a hand grasping a lightning flash. Efficiency is also invisible because it is not metered. This invisibility problem also extends to the long-term effects of energy efficiency in the economy – despite the huge scale of the effects they can’t easily be seen and people rarely talk about them. Because of this energy efficiency is under-valued at all levels from policy makers down.
 
The latest excellent report from the Association of Decentralised Energy (ADE), formerly the CHPA, (http://goo.gl/h3Yg6x) is entitled “Invisible Energy” and does an excellent job of highlighting some of the benefits of energy demand side activities, what we christened a few years back D3, Demand Management (permanent reduction of demand), Demand Response (short term shifting of demand) and Distributed Generation. The rationale for the report was to clearly demonstrate and explain the multiple benefits of improving efficiency and related demand side activities, to celebrate the achievements and help to change the language around the demand side. (It was tempting to say shine a light on the benefits – an LED light of course).
 
I have written before about how the impact of improved efficiency was completely overlooked by the energy industry and policy makers in the 1980s (see Surprise! You are living in a low energy future…. (almost) http://goo.gl/16dJWL) The ADE report shows how the UK’s GDP has doubled since 1980 while energy use has remained largely flat or declined. If the economy had the same overall level of energy intensity as in 1980 the UK would be using twice as much energy as it actually does. The ADE report that this would require an additional 14 power stations and importing twice as much gas as we currently do. Consumers would be spending an additional £37 billion on energy compared to what they are currently spending.
 
Critics will say that some of this change is due to the change in industrial structure and offshoring and these are real factors – but a significant proportion was down to fundamental improvements in efficiency – a result that was achieved without, it can be argued, any real policy commitment to improving energy efficiency for much of the period, except for the decade or so between the mid-1970s and the mid- to late 1980s. As I have said before, just imagine what we could do with a real sustained and comprehensive policy commitment.
 
The ADE report also looks at the potential for improving the demand side up to 2020. It is clear from this and many studies in many countries and regions that the economic potential for improving efficiency remains large (even massive), even in a world with $50 (or less) a barrel oil. By valuing the energy savings and the co-benefits properly, investing to improve efficiency at a national and organizational level is a “no-brainer” and a much better (higher return, lower risk) option than investing in increasing energy supply. Improvements in efficiency will continue to occur, as they have done for decades, even without improved policy interventions and irrespective of the price of energy. The challenge for policy makers, and leaders in all organizations, is how to accelerate the rate of that improvement to address the serious challenges of energy security, costs and the environment.
 
Congratulations to ADE on the report and their new name.
 
PS I subsequently discovered a previous use of the title Invisible Energy – a book by David B. Goldstein of the Natural Resources Defense Council.

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.