Just last month, I gathered with many other business leaders, policymakers and energy market experts in the gilded halls of Versailles, outside Paris, to discuss a topic that couldn’t be closer to my heart: The critical role that energy efficiency plays in tackling the climate and energy crises.
Organized by the International Energy Agency (IEA) in partnership with Schneider Electric, this Annual Global Conference was — pardon the pun — electrifying. The three packed days of panels, workshops, and valuable conversations shone a much-needed spotlight on a topic that doesn’t receive as much attention as it deserves.
Far too often, decarbonization efforts focus only on energy supply — think replacing gas-fired power stations with renewables like wind and solar. This, however, is only half of the story.
According to the IEA’s net-zero scenario, its pathway to decarbonize the energy sector (currently responsible for over 80% of global CO2 emissions), one-third of the emission reductions needed this decade must come from consuming energy more efficiently. Fortunately, the role that demand-side energy solutions can play is now more widely accepted — and widely available.
The outcomes of the event’s public-private discussions outlined how a fair energy transition, underpinned by energy efficiency, and enabled by digitalization and electrification, can drive accelerated decarbonization while also addressing the energy crisis, reducing costs and increasing security of supply.
Discussions culminated with the ‘Versailles 10X10 Actions’, a set of priorities needed to accelerate our efficiency and decarbonization journey. These are outlined below, together with my observations about each one.
1. Measure & Diagnose
For years, we have understood the efficiency of our cars but we don’t see this for our homes or buildings, despite the fact that it can be done relatively easily and inexpensively. We need to digitize consumption, connect and report in app for outcome-based performance. The power of digital innovation is crucial to visualize and act on energy waste.
Advanced energy management systems are widely available today and allow users to see and control the performance of every connected appliance within a home, an office, or an industrial facility. This birds-eye view of energy consumption offers the biggest potential to identify and eliminate waste.
Software systems built on AI algorithms help optimize how and when to consume, produce and store energy. In the absence of extensive grid upgrades, digital-enabled energy management systems connecting homes, offices, and other facilities with power grids are key enablers for resiliency and efficiency.
2. Awareness & Knowledge
People increasingly want to do ‘something’, but they don’t know what. Sharing practical applications, one-stop-shop advisories, and light house examples enable learning from best-in-class, real-life net zero homes, buildings and industries.
This was a very recurrent topic at the IEA conference and one that is not to be underestimated. Upskilling, reskilling and increasing resources will be critical to enable the energy transition. Action and discussion to-date has largely been about new construction, but the biggest impact will come from retrofitting, and this will require a large-scale mobilization of expertise.
Training people with the skills to drive the transition will have the added bonus of stimulating job creation and deliver wider social and economic benefits. The biggest opportunities will be in emerging and developing economies. As the demand for energy efficiency grows, so does the need for a digitally skilled workforce to install, operate and service these connected systems. Electricians need to become software and smart tech experts, plumbers need to understand electrical installations for heat pumps. The transition will require a rapid evolution and expansion of skills.
4. Design & Decide on Total Cost of Ownership
There is a mentality shift needed from designers/architects and decision makers away from cost of construction and towards a project’s total cost of ownership (TCO). Construction typically represents around 20% of total cost, meaning much more thought needs to be given to the operation and maintenance of a building, with massive opportunities for efficiency.
5. Financing gap
Investment in energy efficiency has a very short, but also recurring payback, meaning continued savings well beyond ROI. Investment usually means cost, but efficiency is investing to remove cost, with green capital expenditures (CAPEX) effectively saving brown operating expenditures (OPEX). Financing models needs to be optimized to recognize and support this.
6. Government as role model
The United Nations Environment Program estimates that buildings produce around 40% of global carbon emissions. The IEA has measured that energy efficiency, electrification and low-carbon energy have the potential to reduce more than 95% of these emissions by 2050.
While the onus to act is on every individual and organization, particular responsibility falls on governments as they generally own huge property and infrastructure portfolios.
Companies are demonstrating increasing commitments towards net zero (the number of organizations signing up for the Science Based Targets Initiative, or SBTi, has been doubling year-on-year since 2018). The significance of government portfolios means they have a clear responsibility to become role models and demonstrate leadership in this area. This starts by creating their decarbonization roadmap, in which they audit each building’s energy performance and carbon impact to then strategize, digitize and decarbonize.
One example of a successful civic energy efficiency project is Schneider Electric’s partnership with Madison County School District in Alabama, USA. Here, district-wide energy-efficient lighting, heating, ventilation, and air conditioning are reducing energy costs by 40%. Over two decades, the district will have saved $40 million, more than paying for building control systems and future efficiency projects.
Among attendees at the IEA conference, there was a large consensus that incentives are more effective than coercion (carrot vs stick), but when coercion is needed, there must be a horizon that allows people to review, plan and adapt for their transition.
8. Reinforce the grid
When we hear examples of seven-year wait times to get new renewable infrastructure physically connected to the grid, clearly this is not acceptable. The time to bring green electricity online needs to be accelerated, with transmission lines made available much faster.
9. Big stake items with existing tech
When it comes to tackling climate change, there has been a widespread tendency to revert to ‘big ideas’ or ‘sliver bullets’ that are years away. Perhaps it’s human nature to want what we don’t have? The reality is that reliable, efficient and inexpensive solutions already exist, so we need to focus on adopting existing technology faster. Consider that around 60% of building emissions come from heating, but only 2% of homes have thermostats. We must tackle the biggest stakes today, deploy what we have, at scale, and start with the cheapest solutions.
10. Build the new net zero
We need to aim for net zero construction everywhere, whether that be the huge new construction coming in emerging economies, or the ongoing construction in developed economies. In all cases, we must leverage existing, available technology for net-zero new builds.
Turning the Versailles 10X10 Actions into action
Energy efficiency is today’s fastest and least capital-intensive solution to deliver carbon and cost savings. And with forty-five governments in Versailles pledging to double the average global rate of energy efficiency improvements by the end of the decade, the commitment to action has never been stronger.
The time to act is now. We must enforce the measures and execute the technologies for energy efficiency. Only then will the necessary demand-side improvements materialize, to help tackle the energy and climate crises for good.