The Rise and Fall, and Rise of Energy Efficiency

The limits of my language mean the limits of my world.

Ludwig Wittgenstein

I have been in the energy efficiency business long enough to witness several waves of interest and activity around energy efficiency.  Right now we are definitely in an up-wave which is good for business and good for the environment.  As part of a recent assignment to research global energy efficiency as a service markets I found myself having a discussion about the definitions and language around energy efficiency – which is always a good start to improving thinking and communication. 

In 2015 I suggested that perhaps we should ditch the phrase energy efficiency and switch to using energy productivity.  That suggestion was mis-understood in some quarters as some people thought I meant stop doing energy efficiency. In fact it was quite the opposite – it was about using a different term to help increase activity and investment that would improve overall efficiency. I still think this is a good idea but perhaps the moment has passed and here’s why.

The meaning of energy efficiency is changing. In fundamental terms it is still about getting more from less i.e. reducing the input of energy, but increasingly it is being used to cover a whole range of technologies and business models including: demand response, distributed generation, behind-the-meter energy storage, virtual power plants, micro-grids, building-to-grid, industry-to-grid, vehicle-to-grid etc. At one level I object to this slippage in the meaning of the phrase, but I think we are stuck with it and I think it is positive for two reasons. 

Firstly, all of these areas do increase overall energy efficiency somewhere in the system.  Generating power locally through CHP reduces primary energy use, using solar eliminates it altogether. Transmission and distribution losses are also reduced. They all contribute to reducing the input of primary energy to produce a given level of services or output.  

Secondly, the term ‘energy efficiency’ is now being adopted by investors to mean all the things mentioned above, even if many are still coming to grips with the subject.  A decade or so ago some of us started talking about how to make energy efficiency an asset class, thinking it was about pure efficiency. Now it is an emerging asset class with growing interest from investors looking for investments that have a positive impact on the environment. That is something to celebrate.

Now all we need to do is ensure there is a flow of high quality projects at scale to satisfy investor demand.