Mike Scott reports on how signatories to The Climate Group's EP100, including Mahindra, Johnson Controls and H&M, are aiming to double energy productivity as part of their response to climate change
Efficiency is often the ugly duckling of the clean energy sector, but it is also one of the areas with the biggest potential to cut emissions and tackle climate change.
One of the problems has been how to sell the concept to company managements even though the justification for efficiency measures is extremely strong. “Energy efficiency is less pretty and shiny than wind turbines or solar panels, to be sure, but there is such a good business case,” says Clay Nesler, vice-president for global sustainability and regulatory affairs at Johnson Controls.
“If you double your energy productivity (EP), you’re using half as much energy to produce the same economic output; those savings go straight to the bottom line, and they are very significant.”
We want to be able to tell a story of decoupling growth from energy consumption
One initiative that is trying to change the perception of energy productivity is EP100, a scheme run by the Climate Group and the US-based Alliance to Save Energy. The initiative, launched in 2016, brings together “energy-smart companies committed to improving their energy productivity and doing more with less,” the Climate Group says.
“It is a global leadership platform where companies can demonstrate leadership in being energy-smart,” says Jenny Chu, head of energy productivity initiatives and corporate partnerships at the group. “We really want to bring energy use out of the boiler room and into the board room. We want to be able to tell a story of decoupling growth from energy consumption.”
The International Energy Agency (IEA) estimates that improvements in energy efficiency can deliver more than 40% of the greenhouse gas emissions reductions needed to meet global climate goals. In addition to enabling a faster shift to renewables, energy efficiency improvements add enormous value to global gross domestic product (GDP) and boost companies’ bottom lines, Chu says.
The energy market is facing huge disruption because of the effect of the coronavirus on the global economy, but this may boost the attractiveness of efficiency measures as the world starts to recover, says Chu. “Energy efficiency generates cost savings and that will be more important as we try to stabilise the world economy,” she points out. “It is less capital-intensive than other energy investments and it pays back more quickly. My feeling is that will make the business case stronger as we emerge from the crisis.”
Efficiency will be a key component of UK efforts to meet its target to become a net-zero economy by 2050. The UK government says more efficient use could cut consumption by 40 terrawatt hours (TWh) in commercial and industrial buildings, and a further 10TWh in industrial processes. There is also considerable potential in domestic properties, which are responsible for 13% of the UK’s carbon emissions, rising to 22% if electricity use is taken into account.
However, there are a number of market barriers to achieving these savings, including limitations in measurement and verification, problems in accessing multiple revenue streams from energy savings, high transaction and implementation costs, and the difficultly of changing the way people behave.
We have to convince people to compare investment in energy efficiency with investment in other parts of the business
The UK’s Department for Business, Energy and Industrial Strategy (BEIS) is seeking views on how to reduce the market barriers to energy efficiency after the Environmental Audit Committee warned that the UK “stands no chance” of hitting its goals on emissions reduction and the 2050 net-zero goal without urgent action on energy efficiency.
The United Nations Economic Commission for Europe says “there is a significant gap between investment opportunities for energy efficiency and the level of investments in energy efficiency in most countries”. One reason for this is that the financial environment is not very favourable for investments in energy efficiency. “Self-financing remains the most widely used type of financing of energy efficiency,” the Commission says. “Financial institutions view financing of energy efficiency projects as significantly riskier compared to other types of business projects.”
This is despite the fact that energy efficiency provides a positive return on investment, Nesler says. “We have to convince people to compare investment in energy efficiency with investment in other parts of the business.”
There are three ways to become an EP100 member:
1. Double energy productivity A company commits to doubling its economic output from every unit of energy it consumes globally within 25 years, with a baseline year of 2005 at the earliest. The company chooses a relevant energy productivity metric (eg revenue/gigajoules (GJ) of energy) to track and report. All 5,400 hotels operated by Hilton, for example, are committed to improve their revenue/MWh (megawatt hours) by 40%.
2. Implement an energy management system A company commits to implementing an energy management system in each of its facilities within 10 years and commits to an energy productivity target.
3. Net-zero carbon buildings In a commitment led by the World Green Building Council, a company commits to owning, occupying and developing buildings that operate at net-zero carbon emissions by 2030. A net-zero carbon building reduces energy demand, is highly energy efficient and is fully powered by renewable electricity.
“We know it can be done,” Chu says. “India’s Mahindra Heavy Engines has already hit its target to double energy productivity, 21 years ahead of its 2041 target, becoming the first Indian company to do so.”
Energy productivity improvement can bring about an array of impacts that collectively help in ensuring the sustainability quotient of a business
The company met the target using a mix of technology upgrades, behavioural changes, and process modifications, including: energy-efficient lighting that cut power consumption from lighting by 30%, smart metering for real-time monitoring of energy consumption, energy audits where major opportunities for savings were identified, including installations of variable frequency drive (VFD) motor controllers and timer-based machine operations.
The benefits the company identified included a more than doubling of capacity per shift thanks to production line improvements and a reduction in engine test time from 20 minutes to 1.5 minutes per test cycle, cutting fuel consumption per test by 90%.
Vijay Kalra, CEO of Mahindra Vehicle Manufacturers, said: “Energy productivity improvement can bring about an array of direct and indirect impacts that collectively help in ensuring the sustainability quotient of a business. The EP100 journey has enabled Mahindra to reduce costs, drive innovation and support the environment.”
Another company that has embraced EP100 is Johnson Controls, which is unsurprising given that energy efficiency is one of its key businesses. “We were on track to double our energy productivity from 2002, which we accomplished in 2019, and so we committed to double it again from 2009 to 2030 for EP100,” says Nesler. “A lot of organisations are nervous about doing something like that if they have already made improvements such as lighting retrofits and other low-cost measures. But even though we harvest the low-hanging fruit first, it grows back pretty quickly. So, in lighting, we moved from incandescent bulbs to fluorescent, then to LED lights, and now we’re looking at automated lighting controls and more sophisticated options."
For H&M, the clothing retailer, membership is a way to help it work with its suppliers on the issue. “Just 0.3% of our emissions come from our own operations,” says Kim Hellström, strategy lead for corporate social responsibility at the company. “The vast majority of our emissions are Scope 3 and outside our control. You need to know where the impact is and tackle that if you are to have any credibility.”
The biggest source of emissions in the company’s supply chain is onsite heat generation, which is often done with coal-fuelled boilers, followed by electricity from the grid in countries such as Bangladesh and China, where the power system is heavily coal-based. In some countries, it is difficult or impossible to create a business case for renewable energy and energy efficiency that the supplier can gain from, Hellström says. In those countries, the main thing it can do is to engage with policymakers to introduce incentives.
Cooperating with competitors is absolutely key. Many different brands are produced in the same factories. We all face the same challenges
In other markets, H&M works to enable cheaper loans for suppliers to buy more efficient boilers. “We have to make a good business case,” he adds. “Big suppliers have a much better understanding of that because they have more resources to make it happen.”
Around 30% (or 671) of its suppliers’ factories were enrolled in energy efficiency programmes by the end of 2019 and the company aims to achieve 100% by 2025, which will save an expected 74,991 tonnes of CO2e.
But Hellström stresses that the industry needs to act together. “Cooperating with competitors is absolutely key. Many different brands are produced in the same factories. We all face the same challenges. When we collaborate in this field, there is no discussion about competition. It’s only together that we can create real change.”
One of the big challenges for the future is the emissions produced from cooling – energy consumption from air conditioners is set to triple by 2050, says the IEA, while the refrigerants have a global warming potential many thousands of times higher than CO2. (See Can we defuse the ‘ticking time bomb’ of soaring demand for cooling?)
In part, this is driven by legislation, such as the Kigali Amendment to the Montreal Protocol, which aims to phase out these highly damaging refrigerants.
The Climate Group, along with the Alliance to Save Energy, has launched a Global Cooling Challenge under which EP100 members commit to identifying ways of cooling their operations as efficiently as possible.
“Our next-generation chiller products are 30% more efficient and use 40% less refrigerant than conventional products – and that refrigerant has a very low global warming potential that is no more harmful than CO2, unlike the current refrigerants it replaces,” Nesler says.
We’re on the cusp of an active efficiency revolution that is dynamic and takes advantage of digital technology
This is just one example of how energy efficiency is changing, he adds. “In future, efficiency will go from being fairly passive, component-based interventions to active, system-level processes. There is a change going on from changing lights, insulating walls and looking for leaks in compressors to taking advantage of automation, sub-metering and data analytics. We will not only be able to save considerably more energy than in the past, we will turn buildings into interactive, flexible energy resources on the electrical grid.
“As the grid becomes cleaner over time, it will also become more intermittent. Buildings need to be able to shift loads over time, take advantage of distributed energy resources and energy storage and communicate with the grid. We’re on the cusp of an active efficiency revolution that is dynamic and takes advantage of digital technology.”
Mike Scott is a former Financial Times journalist who is now a freelance writer specialising in business and sustainability. He has written for The Guardian, the Daily Telegraph, The Times, Forbes, Fortune and Bloomberg.
This article is part of our in-depth Energy efficiency briefing. See also: