Thoughts on the future of energy efficient building renovation

An edited version of my panel presentation at the Building Energy Symposium, Lisbon, Portugal, 24-25 November 2015.

I have always been a student of the future. I grew up in the 1960s in the midst of the space race and started a life long passion for space and science fiction.  When you read science fiction long enough you realize that it has a habit of coming true – just think about the mobile phone or video calls, not so long ago they were the realm of science fiction and now they are part of everyday life.

My favorite science fiction writer Arthur C. Clarke once said that we tend to over-estimate what we can achieve in the short-term and under-estimate what we can achieve in the long-term.  Nowadays it seems as if the long-term has been dramatically shortened – it is only eight years since the launch of the iPhone and in that time smart phones have become the norm.  Arthur C. Clarke also said “the future isn’t what it used to be” – which I now take to mean that we have become pessimistic about the future with dystopian scenarios of over-population, resource depletion and environmental degradation becoming prominent.  Personally I am an optimist and think we can and will solve those problems – and energy efficient building renovation is the one of the best ways of addressing the energy related problems we face.

The focus of this panel is the future and that always starts people thinking about new technologies.  It is important to be crystal clear that we can make significant (20 to 40% or more) energy savings in our buildings cost-effectively without any new technology.  Today we have seen several case studies that demonstrate this, including the impressive results achieved by Sonae Sierra in shopping malls. And there are many more out there.  Accelerating the rate of energy efficient renovation, something we must do to resolve our energy problems of costs, security and environmental impact, is not a technology problem it is a management and institutional problem.  Don’t mis-understand me, we will always have new technologies emerging and they will help to make energy efficiency easier and cheaper, expanding the massive cost-effective resource that energy efficiency represents.  Innovations like factory made retrofit kits will have a massive impact.  But where we really need innovation is in processes, management, institutions and finance.

A lot of investors and lenders want to deploy money into energy efficiency as they have realized it is profitable, a big potential market and not dependent on subsidies.  At the moment many of them are working out how to deploy capital and several existing funds have had problems getting money out of the door.

In order to scale up investment into energy efficiency we need to think about the problem like a jigsaw, to complete a jigsaw you need all the pieces not just one or two.  The key piece in this jigsaw is standardization of the development and documentation of energy efficiency projects – and this is where the Investor Confidence Project comes in.  If you develop a wind farm project you have to follow standard processes and produce standardized documents whereas in energy efficiency everyone does it differently.  This causes a number of problems for banks and investors, namely: increased risks due to uncertain project performance, higher due diligence costs, inability to aggregate projects, and inability to build teams around standard processes.  The lack of standardization has been identified as a major barrier by the Energy Efficiency Financial Institutions Group (EEFIG) and others including the IEA and Citibank.

The Investor Confidence Project (ICP) is a way of addressing this problem. It started in the US and we brought it to Europe with the help of Horizon 2020.  Working with investors and lenders and the energy efficiency industry, the ICP has developed a set of Protocols that set out how to develop and document EE projects in buildings.  The Protocols cover apartment buildings & tertiary buildings.  It is important to understand that the Protocols are not about inventing new standards, we have lots of technical standards, but rather about standardizing the process and the document set.  The Protocols are now available on the website – europe.eeperformance.org – and we are now working with pilot projects across Europe including Porto Viva (the city wide renovation programme in Porto), to embed the Protocols into project development .

If you have projects that would benefit from ICP and becoming more attractive to private capital we would happily discuss how we can help you.  Please join as an Ally or join the Technical Forum that is overseeing the development of the Protocols – it is free.

Another important part of the jigsaw is capacity building and this has to be in three areas.

–          in financial institutions.  The EIB has an on-going project to train banks in energy efficiency projects and the EU has a new project to help develop standardized under-writing procedures using the ICP as a foundation.

–          on the supply side i.e. the energy efficiency industry.  We need to develop better skills in integrated design and build supply chains that can deliver whole building retrofits.

–          on the demand side i.e. the building owners.  We need to make owners more aware of the benefits of energy efficiency and particularly non-energy benefits (NEBs).  NEBs are growing in importance and are much more exciting that energy saving. Energy efficiency is boring, they include things like health, welfare, additional revenue and economic development.  Much work is now going on to value these non-energy benefits.  They are much more strategic and exciting to decision makers than energy efficiency and cost savings.  We need to talk about the NEBs every time energy efficiency is mentioned.

Another important part of the jigsaw is product offerings – the propositions offered by the energy efficiency industry.  For many years people have talked about Energy Performance Contracts (EPCs) but they have never really taken off except perhaps in the public sector. We need to accept the limitations of the EPC product and start to innovate new models.  In general, at corporate and policy levels, we need to switch to a “pay for performance” model where contractors get rewarded for actual delivered energy savings relative to the baseline consumption.  At the moment we have business models and policies that reward buying stuff with no regard to the actual savings achieved by the investment.  We now have the technology to measure these savings or negawatt hours.  Switching from a “pay for stuff” to a “pay for performance” model allows all kinds of interesting new business models where producing energy efficiency suddenly becomes a revenue stream, and revenues are always more interesting than cost savings.  California has embarked on this switch, if we in Europe can do the same my prediction for the future is that we will be amazed at the results.   We can cut building energy consumption, cut costs for owners, reduce local and global environmental impacts, and reduce Europe’s massive energy import bill which is over €1 billion a day.

Thank you.

Thanks to VIDA IMOBILIÁRIA for the invitation to speak and revisit a great city.