While the IEA Energy Efficiency Report finds that progress in energy efficiency is slowing, at Recurve we believe this represents an opportunity -- EE has to change from policies focused on “reducing energy use” to instead focus on the value of Demand Flexibility and how demand can provide needed resources to balance renewable energy as we move towards a decarbonized grid.
The good news is that this transition from EE as a utility or government program to Demand Flexibility as a grid and climate resource is already well underway and scaling. It's time for us to stop lamenting the failures of traditional EE and double down on the future of demand flexibility as a true time and locational resource.
According to the IEA's recently released Energy Efficiency 2019 Report, global primary energy intensity improved by just 1.2 percent in 2018--the lowest rate since 2010, and well below the 3 percent improvement target the IEA has set in its Efficient World Strategy. This was the third year in a row that the rate of improvement declined.
Local trends have been telling some of the same stories. In California, past studies that have identified the potential for energy efficiency are finding fewer and fewer opportunities to improve partly because--as noted in the IEA report--innovation and the scale of investment have been flat.
At the same time, governments and utilities are adopting aggressive carbon reduction goals that are depending on doubling energy efficiency or more. Where will the innovation needed to meet these goals come from? How will investments in efficiency scale to meet these expectations?
Given the critical role efficiency is expected to play as we urgently decarbonize our economies, this slowdown is a wakeup call: maintaining the status quo approach to saving energy isn't going to get us where we need to go.
Until now, the suite of incentives and strategies to tackle the market and encourage investment in residential and commercial building energy efficiency has largely come either through government mandates or from voluntary programs with incentives to overcome first cost barriers for high-efficiency technology adoption. These approaches are clearly no longer enough to drive demand and are increasingly unable to deliver the time and locational impacts necessary to deliver value to the grid and real carbon reductions.
“New ways of policy thinking that move beyond traditional approaches are required, particularly to maximise the potential efficiency gains from digitalisation.”
The true potential for metering infrastructure lies in the pathway it provides to new market-based solutions to scale investment in efficiency as a demand flexibility resource that supports and complements other clean energy resources. In other words, digital infrastructure is more important than digital widgets.
The solution to the problem of inadequate investment in demand flexibility is to move from only mandates and ratepayer surcharge programs toward energy markets and procurement that represent much larger budgets, and allow interventions to be financed based on cash flows from grid and climate values through pay-for-performance. Pay-for-performance approaches increase the value of efficiency by treating it as a grid resource, opening the door for project investors to finance energy savings in the same way they would invest in new generation.
These solutions are available now to animate the future of energy efficiency as a demand flexibility resource and are essential for making the kind of pivot the world needs to turn around better efficiency numbers for the future.
Read more about our secret plan for decarbonization that illustrates the real power of digitisation to animate market-based solutions to drive savings when and where they’re needed most!