I launched ‘Only Eleven Percent’ in 2013 as an outlet to write on energy efficiency, energy services and financing energy efficiency, and share ideas and experience. Since then I have written about 200,000 words across some 200 blogs, mainly focused on energy efficiency and the problems of financing efficiency, but also touching on some of my other interests including management and leadership; innovation; broader sustainability issues including biodiversity; space travel; aviation; and Formula 1.  I have also found it a useful outlet to express myself on a few personal subjects including the death of a dear friend.

Over the Covid period I decided to put together some of the blogs into one volume in order to make them more accessible to both existing and new audiences. It is arranged by subject matter, although there is some overlap, and fully indexed.  It is designed to be dipped into rather than read from beginning to end. I hope that you find it useful and interesting.

It is now downloadable here: Only Eleven Percent Book 2013_2022 Vol One and on www.epgroup.com.

As always I am happy to engage on any of the blogs or subjects they cover, and ep group continues to work on many of the topics covered.

I will continue to blog as and when I have something to say, so there may be a volume 2 someday.

The start of a new year is always a time of reflection and re-dedication. For me and ep group, 2022 is the year when we really start to multiply our impact in the areas that we care about.

When we consider what those areas are, we all think first about the obvious ones like climate change, the energy transition and the wider, urgent environmental problems such as the threat to biodiversity, all of which are pressing, critical problems.  The other area that is deeply important to us is the way that companies are run and managed, and the linkage between companies and the provision of capital. The dominant model of capitalism, with its emphasis on shareholder primacy, is undoubtedly one of the causes of the environmental problems we face. It is also a cause of problems, both at the social level such as extreme wealth inequality, and the level of individuals such as lack of purpose and sense of worth.

As with the solutions to environmental problems, the solutions to the problems of shareholder primacy capitalism are out there, they are just not widely distributed.  They are, however, growing fast. The rise of the B Corp movement, which we admire and support, is evidence of that.

And it is not just B Corps and other ‘alternatives’.  Blackrock’s Chief Executive Larry Fink recently wrote to CEOs of investee companies and amongst many other things said:

‘Putting your company’s purpose at the foundation of your relationships with your stakeholders is critical to long-term success’

‘we focus on sustainability not because we’re environmentalists, but because we are capitalists and fiduciaries to our clients’

‘our conviction at BlackRock is that companies perform better when they are deliberate about their role in society and act in the interests of their employees, customers, communities, and their shareholders’

Just over a year ago we decided to act on our beliefs around these issues and implement a form of ownership called steward-ownership, one that is not widely known but is more common than is generally appreciated. Steward-ownership is defined as follows:

The concept of “steward-ownership” harnesses the power of entrepreneurial for-profit enterprise while preserving a company’s essential purpose to create products and services that deliver societal value and protecting it from extractive capital.

Steward-ownership represents a viable alternative to shareholder-primacy ownership. In addressing fundamental structural deficiencies of our system, it retools the goals and incentives that guide decision making in companies in the corporate DNA. By doing so it has the power to transform the economy. Steward-owned companies are committed to two principles:

(1) Self-governance — Control remains inside the company with the people directly connected to stewarding its operation and mission. With the control of the company held in a trust, it can no longer be bought or sold

(2) Profits serve purpose — Wealth generated by these businesses cannot be privatized. Instead, profits serve the mission of the company, and are either reinvested in the company, stakeholders, or donated. Investors and founders are fairly compensated with capped returns/ dividends

What does this mean for ep group?

Firstly we are restructuring our various companies into a formal group and secondly we are re-writing the articles of the companies to reflect the principles of steward-ownership.  In parallel with those internal changes we are engaging with SMEs with services that support net zero and the regenerative economy, the kinds of companies that are the ‘picks and shovels’ of the transition, and who like the idea of coming together and building a larger steward-owned business rather than selling to extractive capital. Our intention is to bring these companies into the ep group through acquisition in a way that brings equitable rewards and balances a high degree of autonomy with support in key areas.  By aggregating these SMEs we can bring to SMEs the financial, impact reporting and marketing systems of a bigger company, as well as access to lower cost capital.  Furthermore there can be real synergies between the companies within the group.

In order to execute this strategy we are raising capital for the first time. The investors we want are impact driven investors who are committed to enabling the transition to a net zero and regenerative economy but also recognise that the structure of companies and their relationship to capital has to change.  If that description fits you and you are interested in joining us in this journey by investing please let me know and we will share more details.

Steward-ownership; ep group impact report

In my third retrospective blog in recent months I wanted to mark the 20^th anniversary of Enron’s collapse and draw some lessons for the transition to net zero.

I was only in Enron for the last 18 months of its existence but it was quite a ride.  When I first joined the London office it was a major shock as up until that point, I had largely worked for small organisations so walking onto what was the largest trading floor in Europe at the time was quite intimidating.  Truth be known I had no idea what was going on for the first few weeks at least! It was only when I got involved in developing a project covering a portfolio of several hundred buildings that I got fully engaged.  My experience in Strathclyde (see earlier blog) was helpful here, though in the end that particular project fell at the last hurdle.

Then the prospect of a project with the Guinness Park Royal brewery arrived which was perfect for me as I had spent most of my PhD working on energy efficiency in industry with a focus on brewing, malting and distilling, (it was tough being a student and visiting dozens of breweries and distilleries but someone had to do it).  The vision for the Guinness project was the purchase of all on-site utility plant and provision of all utilities on an ‘as a service’ basis, and after a long and complex development and negotiation process we were able to implement it, only for it to fall away a few months later when Enron went into administration. Fortunately I was able to save the deal and the team by pivoting it into RWE and we then repeated it twice more in Guinness breweries in 15 year term deals.  The Park Royal project turned the highly inefficient brewery to the best in class, reducing specific energy from 200 MJ/hl to 110 MJ/hl (the standard measurement in the UK brewing industry).

The innovative approaches pioneered by Enron included: bundling of energy supply and investment into infrastructure to reduce energy use and operational costs; right sizing of equipment of all types, risk assessment of energy efficiency measures, and aggregating loads for demand response.  The time has come to apply many of them at scale.  All of our legacy energy and utilities infrastructure, both in the energy grids and behind the meter in industry and buildings, is completely inappropriate for the new realities of climate change and the world of low-cost renewables, large-scale heat pumps, energy storage (power and thermal), flexibility and convergence of technologies.

Rather than tweak systems with marginal improvements we need to mobilize institutional capital in large-scale, multi-utility, integrated upgrades behind the meters of large industry and commerce. These kinds of investment can make the returns demanded by infrastructure investors, or better, and bring about significant reductions in emissions and multiple other benefits.  They will however require risk sharing in the development phase and in the long-term operation.

So what are the lessons from Enron?

• Organisations need to think big – really get behind their net zero targets and go for radical change to infrastructure and go for portfolios not just individual sites. The time for tweaking around the edges and small-scale pilots is over. This requires leadership pushing for ambitious targets and not accepting the established solutions.
• You need creative engineering and systems thinking – look for integration and right sizing opportunities and don’t just accept the standard solutions on offer from vendors and contractors.
• Look at the entire energy cost picture. Energy costs are more than just the cost of energy itself, they include O&M costs, capital requirements, compliance costs as well as the often hidden costs on people, working environment etc. All the costs and all the benefits need to be considered in the business case which needs to be linked to the organisation’s strategic goals and commitment to emissions reduction.
• Think long-term, these are long-term investments and need long deals, 10 or 15 years with the risks that entails. Net zero targets help here – aim for projects that meet or exceed 2030 and even 2040 targets as infrastructure installed in the next couple of years is likely to be still around at least into the 2030s.

What would an Enron-esque organisation be doing today for large corporates?  It would be a bespoke service company using a standardised process, and technical solutions would likely include offsite PV with private wires, energy storage, hybrid and integrated power and thermal systems, potentially becoming an energy hub for the neighbourhood, right-sizing, provision of grid services, and lots of connectivity and data providing carbon and wider impact reporting.  It would also have ready access to institutional, infrastructure type capital and packages of behind the meter utility infrastructure, beyond just roof-top solar and batteries, a potential new asset class for investors keen to invest in ways that support the transition to net zero. Finally of course it would need sound accounting practices, a lot more humility and a purpose / impact driven corporate culture.

We are starting to see more organizations look for this kind of service and growing interest from investors. Individual suppliers and contractors can provide parts of the solution but the missing pieces are often the development skills and risk capital, and the ability to integrate and stand behind the risks.

At ep group, if you want to explore these kinds of solutions we’d be happy to talk about our approach to enabling them and how we can assist.  For more information please go to: www.epgroup.com or you can contact us here.

We look forward to starting the conversation.

I founded EnergyPro, now re-branded ep consultancy and part of the ep group, in 2012, with the purpose of accelerating investment into energy efficiency in the belief that improving efficiency remains the best route to building a cleaner and fairer economy. Since then we have done a lot of work at every level from policy formation down to individual projects and sometimes it may be hard to see how these all fit together and support the purpose.  So in this blog I thought I would explain how the parts fit together.

The model that all of our work fits into is based on a consideration of what it means to increase investment into energy efficiency.  Increasing investment requires increasing the flow of viable, attractive and impactful projects through the development process from origination to financing to implementation and performance. Of course behaviour change is also important but the largest, longer-term impact comes from investment into physical projects.

The project development process, shown in Figure 1, starts with origination and then goes through development, business case, underwriting (decision making), financing, build, and finally performance.  As you move through any project development funnel the quantity of projects declines as some projects fall away, and for each individual project there is declining risk and increasing cost as more resources are spent on development.  An early-stage project concept has low-cost but a high risk of not happening, a fully-developed project has lower risk of not happening but getting through the development process inevitably costs money. This applies to all types of development – whether it is a building, a new product or a new company.  Of course in practice project development is not so linear, it has many loops and feedbacks as different ideas are worked-up and tested and barriers are encountered and over-come.

The quantity of energy efficiency projects being originated is driven by demand which is driven by several factors including: energy prices; regulation; carbon prices; how energy is viewed strategically within an organisation; available technology; the degree of creativity applied to problem solving; and the general ‘zeitgeist’ around energy efficiency. In recent years the zeitgeist around energy efficiency has improved as more people have recognised it as the most cost-effective way to reduce emissions and reach our climate targets, as well as the multiple benefits it can bring with it.

Figure 1. The energy efficiency project lifecycle

The various projects we have delivered or are working on support different parts of the project life cycle from origination, through building business cases, delivery and measurement is shown in Figure 2.

Figure 2. The energy efficiency project life cycle and ep’s work

Our policy related work for several governments helps build capacity amongst policy makers by informing them what is possible and providing decision tools. On some occasions we have helped write policy that strengthens the case for energy efficiency by introducing new regulations or strengthening energy efficiency institutions within government.

In project development, we initiated and implemented with support from the EC and a pan-European consortium, the Investor Confidence Project Europe, which is a set of Protocols that sets out how to develop and document energy efficiency projects in a standardised way. The Investor Confidence Project’s Investor Ready Energy Efficiency^™ certification system has been proven to reduce transaction costs and reduce project performance risks and is available for use by for any developer of efficiency projects across Europe.  As well as having launched the Investor Confidence Project in Europe, which helps build capacity across the market, we also get directly involved in project development for a number of clients.

Our work with the Energy Efficiency Financial Institutions Group (EEFIG) since 2016 covers pretty much the whole project development process from a financial perspective. Sub-projects such the first EEFIG Working Group on the Sustainable Finance Taxonomy and the recently launched Working Group on adopting Energy Efficiency First are focused on different aspects of financing and assisting financial institutions to build capacity in order to be able to deploy more capital into efficiency. The EEFIG Underwriting Toolkit, for which we were the primary author, directly addresses the underwriting stage and helps build capacity within financing institutions and provides the basis of a common language between financiers and developers.

As well as this general capacity building work through EEFIG and other channels we have advised a number of investors looking at energy efficiency, both at project level and company level, including UK listed and private funds, several European funds, and one of the largest Sovereign Wealth Funds. Our work helps them to understand the market size and trends, identify financing mechanisms, and understand and due diligence specific investment opportunities.

Our long support for, and recent work on the multiple benefits of energy efficiency, plays directly to building better business cases for energy efficiency. As Catherine Cooremans points out, the multiple benefits are usually much more strategic, and therefore interesting to decision makers, than simple energy cost savings. Properly identifying and valuing them is essential for building effective energy efficiency business cases, business cases that maximize the chances of approval.

In working with Recurve Inc to introduce metered efficiency and pay for performance models to Europe we are addressing fundamental problems with efficiency, which are that all too often its impact isn’t measured and its true value to the system is not rewarded. Measuring and metering efficiency and flexibility, and valuing and rewarding them both properly, represents a total paradigm shift that Europe has been slow to recognise. Implementing this approach would go a long way to increasing demand for efficiency by making it contractable and much more like energy supply in that if you don’t deliver it you won’t get paid.  In a pay for performance regime energy efficiency can finally become the resource we have talked about for many years.

Building on our work with investors we have advised several entities in UK and internationally, on the design of new finance instruments. Our focus is very much on the development stage as that is where there is a big gap.  There is an abundance of project money for well-developed projects but too few instruments to help get projects to that point.

Looking across the whole process we developed our ESCO-in-a-box business model which enables organisations such as local energy or economic development agencies to start-up and run successful local or regional energy service companies. The model is now being rolled out in the UK and also being applied in Kenya where we are also working on linking it to a finance instrument to close the loop and bring investment.  ESCO-in-a-box has also led us to work on ‘super-ESCOs’, or as we now prefer to think of them, ‘net zero development vehicles’ that can help bridge the development gap and mobilize a number of derisking tools and transaction enablers.

Hopefully that helps explain what we do and why we do it, at least on energy efficiency. If you are an energy user, a developer, or an investor, who wants to accelerate investment into energy efficiency and think we can help at any stage of the whole process of developing and delivering energy efficiency projects, we would be happy to talk.

Other parts of the ep group have different purposes and do different things: ep projects designs and develops net zero and regenerative projects in the built environment and ep asset management transfers energy transition technologies between UK and India.  The group itself uses its platform to bring investment and opportunity to SMEs which impact the transition to a net zero and regenerative economy.

www.epgroup.com

Glasgow, which is one of my favourite cities, is the centre of global attention at the moment. In my case, as well as looking forward to seeing what emerges from COP26, I was also remembering a period when Glasgow, and a large swathe of Scotland, led the world in energy management and climate action, (although we didn’t generally think of it that way back then). This reflection started when I was reminded that it was thirty years since I helped design and lead a very large energy management programme in Strathclyde Regional Council, back then the largest local authority in Europe. The project was the culmination of a series of energy management programmes across various local authorities, and writing the Audit Commission guide to energy management – an extremely useful guide for action, the kind of which we need more of now.

Strathclyde Regional Council covered a large chunk of Scotland, included a population of 2.9 million people, 60% of Scotland’s population and had more than 1,500 buildings covering Education, Social Work, offices, the Fire Brigade and the Police.  The energy spend in 1990 was £60m.  The Scottish equivalent of the Audit Commission, the Accounts Commission, using their version of the guide we had written, determined that the Council was the least efficient in Scotland and I was the junior member for a team of three consultants brought in to improve that situation and ended up as project manager.

We used a well proven approach: set a base line, establish monitoring and targeting, survey a sample of buildings, identify a set of standard measures that could be rolled out, and start with the big spending, least efficient buildings.  After a pilot programme in Education and Social Work the Council rolled it out under the guidance of the consultant team, recruiting a team of 25 auditors and energy managers across the sub-regions.

Over two years we deployed £7m of capital on a range of low-cost simple standardised measures including lighting controls, low energy lamps (pre-LEDs of course), heating controls, and heat recovery systems.  Amongst the few high cost measures was a Combined Heat and Power unit installed in the Police HQ which not only reduced energy costs but functioned as an additional stand-by generator and delivered extra resilience to the critical 999 call centre. I was always very well treated by the Police. The audited energy cost savings across the whole project were £10 million per annum or 17%.  Although we were not driven by climate change I do remember writing the first report to the Council ever to mention carbon savings where the reduction in carbon dioxide emissions was equated to taking a number of cars off the road for a year.

Much has changed in 30 years, particularly the context of climate change and our understanding of it, the available energy efficiency technology, and the rise of renewables which were only just starting to emerge in 1990.  However, some lessons from back then still apply:

• First of all – and critically important – the importance of leadership. The programme was supported 100% by the Chief Executive and any organisational barriers we encountered were quickly knocked over by him.
• Secondly the need to focus on scale and roll-out. With so many buildings there was no point doing one project here and there, we had to focus on rolling out standard measures across hundreds of buildings – particularly in schools. Scaling and mass roll-out are a different skill set to undertaking one-off projects.
• Simple metrics of performance and guides are important to prompt action – the Audit Commission guide helped local authorities determine where they sat on a scale of performance and set a pathway for how they could improve.
• Apply the Pareto principle – do the high users, most inefficient buildings first and then do the smaller ones – you get bigger results quicker that way.
• The importance of measurement – the technology of Monitoring and Targeting was very different then but we needed to measure and demonstrate results.
• Next training – we recruited and trained a team, most of whom did not have prior energy efficiency experience and I am proud that some are still active in the field 30 years after.
• There are large inefficiencies in practically all buildings – whenever they were built.

Back then given the mandate we had we could only address no-cost and low-cost measures. Now, given the scale of the climate crisis and the need to decarbonise rapidly, we need to apply the same approach to higher cost measures with bigger savings. We know the capital is available to invest in such measures, we need the leadership to push for them and make them happen, as well as the right approach to project development and management, coupled with training and capacity building to deliver them. The time for small actions and one-off projects has passed.

At ep group, we work with businesses, investors and governments to deliver net zero and regenerative infrastructure – get in touch if you want to find out more. www.epgroup.com

PS The title for this piece is a line from ‘Glasgow (Your Heart is Made of Gold)’ by Scott McWatt, which is a great musical tribute to the city.