Finding your own energy transition

Finance

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25 July 2018

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Rod Janssen

We are bombarded daily with news about climate change, renewable energy, energy efficiency, sustainability, the circular economy, the energy transition, and so on. It is hard to know how much we absorb or how much we simply turn off because of overload.

In our day to day lives, we work. For you with businesses, large or small, there are many things to consider just to keep trading. Over our shoulder we are always trying to stay ahead of our competition — domestic or international. We are always trying to manage our costs.

Yes, we want to be good corporate citizens. We want to do what is good for our community, our country, our world. All of these push us to do more. Yet, there is need for calm but deliberate action.

What is this energy transition we read about?

Let us review what the obligations are.

In Europe, there have been an increasing number of commitments to lower our carbon footprint. There are targets for 2020, 2030 and 2050. The 2030 climate and energy framework sets three key targets for the year 2030:

  • At least 40% cuts in greenhouse gas emissions (from 1990 levels)
  • At least 27% share for renewable energy
  • At least 27% improvement in energy efficiency

The framework was adopted by EU leaders in October 2014. It builds on the 2020 climate and energy package. Recently, there have been revisions upwards for both energy efficiency and renewable energy.

The new regulatory framework agreed in June this year includes an energy efficiency target for the EU for 2030 of 32.5% with an upwards revision clause by 2023. Energy ministers also agreed a binding renewable energy target of 32% by 2030.

The EU’s low-carbon economy roadmap suggests that:

  • By 2050, the EU should cut greenhouse gas emissions to 80% below 1990 levels
  • Milestones to achieve this are 40% emissions cuts by 2030 and 60% by 2040
  • All sectors need to contribute

At the 1995 Paris climate conference, there were commitments to:

  • A long-term goal of keeping the increase in global average temperature to well below 2°C above pre-industrial levels;
  • To aim to limit the increase to 1.5°C, since this would significantly reduce risks and the impacts of climate change;
  • On the need for global emissions to peak as soon as possible, recognising that this will take longer for developing countries;
  • To undertake rapid reductions thereafter in accordance with the best available science.

What does this mean for you?

The most important thing you do is take care of your business, ensuring that you remain competitive. That said, it is wise to set up an energy management system. Popular is the standard for the International Standards Organisation (ISO) on energy management (ISO 50001) here.

It specifies the requirements for establishing, implementing, maintaining and improving an energy management system, whose purpose is to enable an organisation to follow a systematic approach in achieving continual improvement of energy performance, including energy efficiency, energy security, energy use and consumption. The standard aims to help organisations continually reduce their energy use, and therefore their energy costs and their greenhouse gas emissions. Importantly, it is useful for organisations of any size — even smaller SMEs.

This is about you and your organisation. This is part of your energy transition.

Through this system or from an energy audit (or both), there will be measures identified for you to undertake. Some will be low cost, some will cost more. So, what do you do? Forget about the national and global targets, you have to ensure you benefit.

The problem is starting . . . But you already have . . .

How can we help?

It is well documented that many energy conservation measures are not undertaken because of a lack of standardisation – of the process. Yes, that process is the relationship between the asset owner (the business) and the project developer (often an energy service company or an engineering firm).

There are many factors that influence decisions and action. The Investor Confidence Project is there to remove many of the complications and risks in improving your company’s energy performance in improving your company’s energy performance. It ensures that the process of choosing what to do, how to do it and how to finance it is standardised, giving you assurance. It can help senior management better understand energy efficiency from a strategic perspective because it does remove risk.

ICP brought to Europe to develop a system to give confidence to all active stakeholders. There are still concerns that investing in energy efficiency is risky. ICP is designed to change that. ICP started with investments in buildings and is now broadening the scope to include industry, district energy and street lighting through a two-year project funded by the European Commission.

The concept of ICP is relatively simple to understand:

A potential project in a factory or a district heating system, for example, is identified. Someone has to do the necessary calculations to determine the viability. Someone has to be identified to install it (often the same organisation). And some organisation needs to fund it. What this project does is standardise the procedures so that all players gain confidence in the system. The factory owner is happy. The developer/auditor/installer is happy. The financial institution is happy. There are protocols in place and third party monitoring to ensure everything is done correctly. The protocols are developed by interested experts and not by commercial interests.

The project will work with all of those involved in the project cycle from owners through to project developers and verifiers. They all have a key role to play. To ensure that the protocols are robust, technical forums are being set up to review the draft protocols and provide important technical input to their development.

  • For asset owners or managers, the ICP approach will provide transparency of the process and will give them the confidence in implementing the measures.
  • For the project developer, ICP provides a process that is understood and accepted by all participants. This will reduce transaction costs and should minimise any misunderstandings.
  • For the financial community, the ICP approach will standardise the project development process and bring the necessary confidence to undertake the investments.

Importantly, ICP Europe Investor Network is comprised of energy efficiency investors who recognise the benefit of industry best practice and standardised energy renovation project delivery. Members of the Network support the use of the ICP Protocols and Credentialing System because these systems increase confidence in project performance while reducing due diligence-related transaction costs. ICP Investor Network represents €1.5 billion in energy efficiency project capital.

ICP Europe also has a wide range of allies The ICP Europe Ally Network provides valuable input and advice on the development and deployment of the programs and products of ICP Europe. These organisations have agreed to support the goals of ICP Europe: reducing energy efficiency projects performance risk, lowering transaction costs and increasing project demand.

Next steps

It is important for you to take charge of our own energy transition. We have started training and credentialing project developers so that they can participate in our project. We are now looking for pilot projects. For those we offer free technical assistance to get everything underway.

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Do not forget...

For more information, do not hesitate to contact me at rod.janssen@ee-ip.org

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About the Author

Rod Janssen is the President of Energy Efficiency in Industrial Processes (EEIP).

Rod is also member of various Steering Groups and boards such the ICP Europe Steering Group, the SEIF advisory board and the board of ECEEE