Yesterday, Bill Gates announced The Breakthrough Energy Coalition, which is a $2 billion fund he is establishing with other wealthy folks and the University of California. It is aimed at closing the cost premium between legacy energy sources and those that reduce carbon emissions.
The subtext is clear: Businesses won’t become fully engaged in combating climate change if it cost them and their owners, stockholders and customers more money than doing things in less environmentally conscious ways.
The key, then, is to make the financial case for cutting energy use and increasing use of renewable energy sources. Last week, three analysts from The Rocky Mountain Institute – James Mandel, Mark Dyson and Peter Bronski – posted a commentary at The Harvard Business Review describing how companies can reduce their energy bills in energy efficient ways.
The introduction suggests that in the past most companies – outside of huge energy consumers such as data centers and “processed-focused companies” – don’t pay much attention to their utility bills.
That legacy thinking is changing, however. The piece looks at ways to cut energy use. The three suggestions are to capture “negawatts” – money saved by tweaking existing equipment in the building – using smart controls and integrating photo voltaics, storage and other renewables technologies.
Mark Dyson, who is the Manager at The Rocky Mountain Institute, wrote in response to emailed questions from Energy Manager Today that progress is being made, and for a variety of reasons: “Energy efficiency investments, more often than not, easily pay back with energy savings alone,” he wrote. “Still, we do see corporations making such investments for reasons other than energy cost savings – for example, corporate office buildings that are LEED rated are popular because they are comfortable and productive places to work, and are a visible sign of corporate values. Done right, they are also NPV positive based on energy savings alone, but this is not always the underlying motivation.”
What is Changing
It is simplistic and self-evident to say that companies want environmentally sound energy practices only if they don’t add costs. Two vital things are changing, however: More companies see the need to take action on climate change and new tools are available that make it feasible to simultaneously save money and cut energy use. That growth is both in energy generation – solar, wind and other renewable technologies – and the ability to analyze and manage usage.
Kate Mann, who leads the Natural Resources Defense Council’s Affordable Multifamily Demonstration Project, posted a blog last week about the efficienSEE project in New York City that is sponsored by the New York City Energy Efficiency Corporation and Steven Winter Associates. The idea is to arm building owners with data about energy use in their properties and the savings possible. The project extolls the virtues of cogeneration.
Mann writes that if 25 percent of the most wasteful buildings in the city upgraded, $134 million would be saved annually and greenhouse emissions cut by 380,000 metric tons. “And it’s a win for owners, tenants (who have lower energy costs to cover), and all of us,” she wrote.
The prudence of equally focusing on energy efficiency and financial benefits is evident in extensions to PECO’s Smart Ideas Program. The new ideas, which have been submitted to the Pennsylvania Public Utility Commission, include enhanced online tools that enfranchise customers by providing them with deeper insight into their energy use and providing credits for advanced in-home devices, such as responsive thermostats, the company said in a release. The programs are aimed at the utility’s residential and business customers.
The goal eventually is to drive the tie between finances and environmentally sound energy generation for companies of all sizes, even those that today don’t think too much about the topic. At this point, the pioneering work – both technically and from the financial perspective – is occurring among the relatively small group of large companies that that use the most energy and therefore have the most to gain by cutting cost and use.
At RMI Outlet, Chris Page, Brett Illers and Jacob Susman discuss an innovative approach called a virtual power purchase agreement (VPPA).
The details are illustrated through a VPPA being established between Yahoo and NJR Clean Energy Ventures (NJRCEV), which owns the 48 MW Alexander Wind Farm in central Kansas. The farm is set to come on line this month. Yahoo will buy energy from NJRCEV, though it is not “touching” the energy produced, which goes into the grid. The certainty introduced by this agreement removes a key variable and helped NJRCEV to get the financing to build the farm. Yahoo, as part of the deal, got the renewable energy credits (RECs) and other advantages that came to NJRCEV and OwnEnergy, the developer of the wind farm.
The key, the authors write, is that this makes sense all around:
Yahoo is one of a small but growing group of large companies that have signed renewable energy contracts directly with wind and solar project developers. And, while this transaction will help Yahoo progress towards its sustainability targets, the transaction is also—importantly—expected to save the company money.
The tie between finances and efficient and environmentally sound energy has always existed. Now, however, the need to act is more pressing and accepted by more people – and more substantial tools are available to get the job done.