Energy Efficiency is the Global Economy’s “Hidden Fuel”

The global demand for power is rising. Although the increasing prevalence of solar farms and lithium-ion batteries is making energy expansion greener, the need for ever-increasing volumes of electricity remains an issue.

Instead of having to resort to traditional sources, there may already be a new source of energy within the global power grid: energy efficiency.

While the term is often associated with localized changes aimed at reducing power bills, energy efficiency goes further than just reducing energy consumption. Imagine two separate buildings with two unique heating systems, one standard and one energy efficient. The building with the energy-efficient system can provide the same level of energy with a lower cost, thereby reducing operating costs and increasing net operating income.

This example extends to countries. Dubbed the “hidden fuel” of the global economy by the International Energy Agency (IEA), energy efficiency is a subject of intense focus for the international community. In fact, the implementation of energy-efficiency policies in 11 nations by the Organization for Economic Co-operation and Development from 1973 to 1998 saved “approximately 49 percent of energy use.”

According to research by the IEA, each dollar spent on energy efficiency displaces $3 of utility-scale transmission and distribution investment. Each dollar of energy saved also has a corresponding potential reduction in greenhouse gas (GHG) emissions. Since it is cheaper to conserve energy than it is to build it, intelligently harnessing energy reserves by reducing wasteful usage is one of the most available energy resources today.

Financial incentives for consumers are also a component of energy efficiency. Besides reducing utility costs, information compiled on a building’s power consumption could someday be monetized and sold to third parties from either residential or commercial properties for a profit, adding further incentive.

The policy push behind energy efficiency

The Energy Efficiency Financial Institutions Group (EEFIG) was formed in 2013 by the European Commission and the United Nations Environment Programme Finance Initiative to “address the need to increase the scale of energy efficiency investments across the EU.”

In 2012, the EU bloc paid EU$400 billion for imported energy. EEFIG was thus established as a response to rising costs in energy imports by member states, as well as to take a more proactive stance in tackling climate change. Seeking to decrease these costs, EEFIG has suggested legislation such as updating EU building codes in order to meet a 20-percent primary energy consumption savings target for 2020.

Concerted policy efforts to attain energy efficiency are also underway elsewhere. The North American Energy Working Group was founded by the US, Canada and Mexico in 2001 as a joint effort to enhance energy cooperation on the continent. By instituting minimum energy performance standards in all three nations, the group has prompted the emergence of policies targeting energy efficiency.

In Canada, for instance, all regulated energy-using products, whether imported or shipped between provinces, must carry an energy efficiency certification mark from an organization accredited with the Standards Council of Canada.

Reducing energy wastefulness in commercial buildings

The energy efficiency of buildings is of significant interest to the international community. In a 2009 report titled Buildings and Climate Change: Summary for Decision-Makers, the United Nations found “the building sector has the largest potential for delivering long-term, significant and cost-effective greenhouse gas emission reductions,” while National Resources Canada stated that energy efficiency, achieved through retrofits and other means, is a “high-volume, low-cost approach to reducing energy use and greenhouse gas emissions.”

One method for managing a building’s thermal performance more efficiently is improving its windows. Properly treated or glazed windows reduce heat gain by reflecting heat energy while reflective coatings reflect solar energy, according to the Whole Building Design Guide. By properly treating windows, the amount of air conditioning needed to offset a rise in temperature can be reduced.

Larger changes, known as deep-energy retrofits, can involve replacing a heating system or reinsulating a building. “Due to their disruptive and cost-intensive nature, deep-energy retrofits are usually triggered by non-energy-related factors, such as a significant change in building occupancy. However, taking the opportunity to replace these components with energy-efficient options can lead to substantial savings,” according to Kontrol Energy (CSE:KNR) CEO Paul Ghezzi, whose company specializes in reducing its customers’ energy consumption and GHG emissions through smart energy devices, data analysis and energy retrofits.

How tech is reducing energy waste 

Properly managing current energy use is also paramount to reducing GHG emissions, an area of focus the tech sector hopes to address. Companies like Kontrol Energy are working to introduce technology solutions to help reduce their customers’ spending and emissions while maximizing energy efficiency.

These reductions are achieved, in part, by leveraging the Internet of Things (IoT). The IoT is essentially the name for the interconnectivity between devices that can generate and share data in real time. In Forbes, Jacob Morgan writes that the IoT “includes everything from cellphones, coffee makers, washing machines, headphones, lamps, wearable devices and almost anything else you can think of.”

Data collected from the IoT by companies like Kontrol Energy can track the energy output of each device so users, ranging from building managers, asset managers and institutions, can reduce waste in their energy consumption. For instance, a company using smart lighting to monitor its light usage can identify if conference room lighting is contributing to an overly high electricity bill. If so, the company can install sensor lighting that will automatically shut off if no movement is detected to curb energy waste.

IoT can essentially turn a building into a live system of connected devices reporting information in real time. This technology allows users to take greater control of their energy expenditures and is reinventing the power distribution industry, according to Ghezzi. “Through this real-time energy management, building owners and assets managers gain access to deep analytical profiles of how energy is used and also where there are potential for improvements and savings,” he told INN.

Monetizing efficiency 

Numerous governments offer tax credits for buildings that comply with energy-efficiency standards. The US’ Energy Star program, for instance, provides a “tax deduction of up to $1.80 per square foot to owners or designers of commercial buildings that meet certain standards.” However, this is just part of the financial incentive for monitoring energy use data.

Data gathered from energy usage can become an independent revenue stream. After compiling energy analytics and usage trends, building owners could potentially sell this data for a profit to third parties that could use it to better target services to their customers.

For example, a utility company could use this data to improve customer satisfaction or to garner insight on a customer’s likeliness to purchase additional utility-offered services.

This new influx of information is helping to radically shift relationships between consumers, providers and the ways they view energy. “From a disruption perspective, similar to how the taxi industry was disrupted by Uber, the utility industry is experiencing massive disruption from energy efficiency and distributed energy generation,” said Ghezzi.

“There are over 120 billion square feet of commercial real estate that consume close to US$240 billion in energy costs per annum. The energy efficiency opportunity alone within the North American commercial building sector is in excess of US$70 billion per annum,” he added.

The takeaway

Energy efficiency is booming and has become a key focus for policy makers across the world. Commercial buildings provide ample room for technology solutions like the IoT and data collection to develop comprehensive views of energy-efficiency opportunities. Through the IoT, energy efficiency, rich data aggregation and GHG reductions can now be monetized.

This article was originally published by the Investing News Network in May 2018.

This article was written according to INN editorial standards to educate investors.