Innovation in energy performance – what is the next big thing?

For our latest edition of the Energy Efficiency Trends market report (published by EEVS Insight in partnership with Bloomberg New Energy Finance) we asked our community of energy users and suppliers of energy management products for their views on the next wave of innovation that will influence energy performance in buildings.

 

Halfway through the harvest

 

Our research has told us clearly that high efficiency lighting has been the ‘big thing’ for several years.  Since it became viable to retrofit LEDs as a replacement for fluorescent fittings in around 2011, lighting upgrades have consistently been the most reported energy efficiency measure deployed by our survey respondents.  A lighting upgrade is a clear case of ‘low hanging fruit’ – an easy-to-deploy turnkey project that will pay for itself from savings in a few years.

 

So we wanted to answer a simple question.  After four years of this LED lighting boom, how far along the adoption curve are we?  Or to put it another way, how much of this low hanging fruit has been harvested?

 

The answer appears to be ‘about half’.  A little under half of energy users consider that the bulk of their estate has been upgraded to LEDs already.  This means there are still many great opportunities for projects, but the population of buildings that will benefit from a transformational lighting upgrade is gradually diminishing.

 

So what’s next?

 

The bad news is that most energy efficiency projects are harder to implement than a lighting upgrade, being more dependent on controls and continuous optimisation, because the human beings that occupy our buildings tend to override, erode and otherwise interfere with even the best-laid energy efficiency plans.

 

But an increasing number of organisations need to work out how to do this if they are to keep decoupling energy use from growth, having already banked the savings from a lighting upgrade.  The technology to achieve this – submetering, monitoring and targeting software – has been around for many years, but in our experience really successful implementations are rare.  Many organisations struggle to control drift in energy use in operational buildings, let alone proactively seek out opportunities for savings and investable projects.

 

So we wanted to explore whether the much-vaunted ‘Internet of Things’ (IOT) might offer a solution.  Could the promise of a building-wide cloud of cheap, ubiquitous sensors enable easy, granular control of energy on a new scale, giving us a smart, self-optimising built environment?  Or does this just create stockpiles of data that cannot readily be converted into actionable performance information?

 

Our energy-using respondents are unanimous.  They declare that IOT is going to transform energy management, and it is the most-cited ‘game changing’ technology by energy consumers. 

 

The Internet of…. What?

 

Yet our community of suppliers of products and services are more ambivalent.  They predict a number of possible technological frontiers including battery storage, demand response and on-site renewables driving the future of energy performance, their responses no doubt coloured by the solutions they themselves offer to the market. 

 

But perhaps this also implies that IOT technical solutions and business models are not yet fully fledged.  There are still few turnkey smart building products on the market, and no consensus yet on the precise advantages that a smart building offers.  So we conclude, IOT is coming, but we don’t yet know what it will mean.

 

Back to basics

 

What we do know is that, if there are fewer technological ‘quick wins’ to be had, the building occupants on the ground need to share in the responsibility for delivering savings and sustaining performance.  Our Trends reports have tracked the rise of professional engagement programmes focusing on energy efficient behaviours in the workplace.  The most successful organisations in this field are instilling an awareness of energy performance at a cultural level, akin to the quality management or continuous improvement culture that has transformed manufacturing over recent decades.

 

But of course, in the modern workplace, often the people on the ground are not employees.  Many organisations have outsourced their facilities management (FM), as well as maintenance, mechanical and electrical services.  So do these contractors share the host organisation’s energy goals, and are they helping to drive efficiency in buildings?  The survey data, which is freely available in Volume 17 of Trends – can be interpreted in various ways, but it appears to show that the more innovative organisations are harnessing their outsourcing contracts to enhance energy performance. 

 

Most energy users say they are not using their FM contracts to deliver savings, either because they don’t outsource, or because energy services are not part of their FM contract.  But a higher proportion of the energy users that are working with our community of energy services providers – by implication, those who are already managing energy proactively – do seem to be using their outsourced FM contracts to drive savings, indicating that the leading organisations are pouncing on the opportunity to work with facilities partners to optimise energy use.

 

Making it work

 

The idea of using FM relationships to deliver savings is not a new one, so what are these leading organisations doing to make this work?  In our experience, these arrangements can only work with the right measurement systems in place, a clear alignment of objectives and a muscular governance and management process to ensure that claimed savings are actually being delivered in practice. 

 

Successful partnerships may not arise where lowest-cost is the overwhelming procurement driver, as it so often is with facilities management.  Instead the total cost of an FM contract that dramatically reduces energy spend needs to be taken into account, as well as the benefits of a more comfortable, better maintained working environment.

 

Of course, the IOT revolution may well be an enabling factor that opens up this market.  But as always the challenge is not really in generating data, but in converting it to information in order to improve and manage performance. 

 

So, somewhat prosaically, the ‘next big thing’ in energy efficiency might not be a new technology, but smarter contracting.

 

Alex Rathmell is founder of EEVS Insight

 

Photograph: Flickr/ Huayuan Smart.

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Energy Efficiency – the state of the nation

Over the past four years our quarterly Energy Efficiency Trends report, in partnership with Bloomberg New Energy Finance, has tracked activity and sentiment in the UK energy efficiency industry.  As we prepare for a re-launch with our November edition –– we have reflected on lessons learnt during a turbulent era.

 

Blinded by the light?

 

Eight out of ten commercial energy efficiency projects involve upgrading to LED lighting.

 

Over the last four years LEDs have been, without doubt, top performers – a new generation of technology that enable energy managers to make ‘once in a decade’ savings.  In contrast, other energy efficiency technologies cannot compete in terms of savings, payback, ROI or trust. As a result, organisations have neglected alternative or multi-technology projects. 

 

Aside from the ‘low hanging fruit’ argument, our research suggests that the main reasons for lack of broader technology uptake is consumers disbelieving the potential energy savings against capex.  LED upgrades are rightly perceived to be low risk, and measurement of results is straightforward because savings are so pronounced.  Projects relying on more complex technologies, building fabric upgrades, optimisation of controls or a combination of all three, are seen as more risky, partly because the outcomes can be more uncertain. 

 

We believe this will change as the market adopts performance management techniques based on professional measurement and verification (M&V).  We help clients manage complex programmes through a combination of good governance practice, real time monitoring and rigorous analytics.  But for now the Trends data speaks for itself – these programmes are the exception rather than the rule. For many energy users, LEDs are the only game in town.

 

So the energy efficiency sector has a huge challenge. Many typical buildings remain inefficient, and every lighting-only project that goes ahead in isolation is an opportunity missed to incorporate other technologies and take advantage of an attractive combined business case.

 

If not addressed, the rush to LEDs could lock out other energy-saving technologies for years to come.  So how can larger, more ambitious projects be developed?

 

Project size

 

Trends showed an increase in average project size from 2012 to 2014, indicating a movement towards larger, more ambitious and complex projects. Since 2014 deal sizes have declined. In 2016 the reports showed a return to small, single technology retrofit projects with short payback periods.

 

But isolated data for the public sector tells a different story.  Here, there is a steady upward trend in project size, with median capital cost rising from around £80k in 2012 to £180k by 2015. It appears that energy performance contracting – a much-hyped pay-from-savings structure for large projects – has gained traction in the public sector, but has made little progress elsewhere.  Performance contracts are being used to both improve energy efficiency, and also upgrade estates during cash-strapped times; offering guaranteed savings through a long-term relationship with an energy services company (‘ESCO’).

 

Embedding an energy efficient culture

 

Aside from the deeper savings on offer, a key outcome of a holistic approach to energy efficiency can be a change in energy culture and behaviours.

 

A simple switch to LED does not require building users to behave differently. They can rely on the organisation (and the technology) to reduce energy consumption and can continue with inefficient behaviours.  But the science of energy behaviour programmes has advanced significantly in recent years, and has consistently been within the top 5 energy saving techniques reported by the Trends community. 

 

This approach puts energy efficiency and energy actions at the forefront of user behaviour. Unlike retrofit-based projects, they are able to demonstrate how individual choices can result in a cost, or a saving.  Many organisations are using specialist providers to deliver structured engagement programmes, while many more are developing their own in-house versions.

 

Policy and confidence

 

The Trends community has always been undecided about the impact of government policy on uptake of energy efficiency measures.  On the one hand there is no doubt that initiatives like the Energy Savings Opportunities Scheme (ESOS) have driven activity, but on the other, shouldn’t the economic case for improving energy performance stack up on its own , without needing a policy incentive?

 

Our most recent edition focused on the impacts of the EU referendum.  For suppliers of energy efficiency products and services, it’s very clear that Brexit has had an immediate impact, with more than half saying that they have experienced some changes to business conditions. By contrast, only around 20% of customers (energy-using organisations) stated that they had experienced an immediate impact, suggesting that for most it is ‘business as usual’.

 

This disparity could be attributed to the rapid devaluation of the pound and the anticipated effect on the cost of importing technologies often manufactured overseas; suppliers perhaps nervous about the ‘double whammy’ effect of lower overall demand as well as the need to take a hit on profit margins.

 

Anecdotal responses to the survey also highlight ongoing political and economic uncertainty as a key cause for business disruption. One survey respondent summed it up as:

 

“Before Brexit there was policy uncertainty, post Brexit there is the same uncertainty, and in addition a period ahead of trade negotiations which creates… uncertainty.”

 

While we are undoubtedly in uncharted political and economic waters, there are signals that the new-look government might be more supportive towards energy efficiency than their predecessors. With DECC and BIS amalgamated as the Department for Business, Energy and Industrial Strategy (BEIS), the focus is more ‘business like’. An view supported by Theresa May’s announcement that:

 

“we need a proper industrial strategy that focuses on improving productivity”.

 

Energy efficiency is indeed a productivity ‘quick win’ and must play a role in BEIS’ thinking. While large-scale infrastructure investments, such as new power plants and renewable generation, are important for energy security and sustainability, they are less directly and immediately linked to boosting productivity and enhancing UK competitiveness.

 

Perhaps a key task for the energy efficiency sector in coming months will be to ensure that the BEIS Industrial Strategy team recognises this and supports the quadruple benefits of investing in energy efficiency; improved UK-wide productivity, immediate impact (and not years of infrastructure planning), lower UK energy consumption and, quite simply, some confidence-boosting good news for UK businesses.

 

Focusing on the positives

 

Energy efficiency activity is happening.  The LED lighting boom is delivering real impacts on energy performance, albeit that opportunities for deeper retrofit projects are being missed.  Thought needs to be given to how bigger projects can be incentivised, perhaps learning from successes in the public sector, and there is no doubt that this presents an opportunity for a wave of projects that could transform the UK’s energy productivity.

 

Our next edition focusses on the innovations that may make this a reality.  If LED lighting is now ‘business as usual’, what is the next wave of technology that will deliver savings in the built environment?  How do business models need to change to achieve this? Is now the time for corporates to drive energy performance improvements through their facilities management supply chain, enabled by a new generation of smart monitoring and control technologies?  Please sign up at www.energyefficiencytrends.co.uk and let us have your views, and look out for the free market report in November. 

 

Here’s to the next four years!

 

Alex Rathmell is Managing Director at EEVS Insight

 

Photograph: Flickr/ Dominic Alves.   

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