Energy Efficiency in Buildings

Published – and not damned

2009-05-08T08:53:25+02:00

It's been a while since my last blog back in February. That's because I have been extremely busy completing the second EEB report – Transforming the Market – that was launched at the end of April.

The big question was whether we could make energy efficiency in buildings “news”. We know is not exactly a “sexy” topic for most journalists, but it is important: buildings use around 40% of all energy (even more in most developed regions) and more than 30% of all greenhouse gas emissions can be attributed to buildings. Most people do not know this – even people in the building and construction sector underestimate the energy used in buildings.

In fact our report got much better coverage than anticipated. More than 100 news articles have been written and the report has been downloaded at a rate of more than a thousand copies a day. This was the result of media activity in Beijing, Washington and Paris – where we launched during the EE Global event. But I'm sure it was also because we have produced something different:

First, it is a business report.
Second, we adopted a “bottom-up” approach using real data on different building types, in developed and developing regions, warm and cold climates, etc.
Third, we have tried to quantify the impact of policy, finance, technology and design and behavior changes on buildings' energy performance
Fourth, we have assessed the cost implications at a global level
Fifth, we have produced a full set of recommendations to transform the building sector
Last but not least, we have developed a roadmap showing who needs to do what

How much will it cost?

My last blog questioned the optimism of Mckinsey's abatement cost curve. We have estimated that the net cost to achieve transformation would be 7% of total building cost worldwide. The Peterson Institute for International Economics (PIIE) has further qualified the cost implications based on our data. Its policy brief: “Energy Efficiency in Buildings: A Global Economic Perspective” reports the preliminary findings.

Based on the EEB findings about investment costs and energy savings, the PIIE's Trevor Houser concludes that building emissions can be cut by 8.2 gigatonnes a year by 2050 with global investment of US$ 1 trillion per year. This substantial sum is significantly reduced by energy savings, resulting in a net cost of US$ 180 billion a year and a negative net present value ranging from US$ 209 billion in the US to just US$ 9 billion in Japan.

That is a lot of money, especially in the current financial climate, and it reinforces the EEB's core finding that much desirable energy investment does not add up financially – it may be cost negative over its lifetime but does not meet short-term financial investment criteria.

But delaying action will only increase the ultimate CO2 reductions needed for climate stability and the associated costs. And while there is a cost, it is relatively low. The PIIE work finds that the “social cost” of this 50–75% improvement in building energy efficiency is cheap compared to other abatement opportunities. Houser calculates that the average abatement cost would be US$ 25 per tonne of CO 2 , and in the United States it would be as low as US$ 9 per tonne. These costs are lower than estimates from the International Energy Agency for achieving comparable emission reductions from power generation, industry or transport.

From a purely economic point of view, then, this emphasizes the importance of overcoming the barriers EEB identified, because otherwise the world will spend more than needed to achieve emission reductions. Furthermore, by removing these barriers we will reduce the costs of climate policy overall, which can be particularly important in alleviating the impact on consumers.

Houser supports our view that a price on carbon will not be enough to stimulate the necessary investment – because of short-term investment time horizons. Long-term, low-cost finance will be necessary, possibly supported by funds coming from government revenues raised through a carbon tax.

I look forward to the full PIIE research on the economics of energy efficiency in buildings, to be published soon.

What next?

Once we all of the material from this stage of the project is published, we will hit the road to reach out to stakeholders worldwide. At the same time, the WBCSD will propose a Manifesto to its members to take action as a result of this study and create demand for energy efficiency in their local markets.

The Mc Kinsey Curve - False Good News?

2009-02-24T15:43:19+01:00

If we believe McKinsey (and most of us usually do because of their excellent work) we can keep global warming below the magic 2oC level at relatively little cost. This is good news, but maybe it is too good to be true, at least for the building sector.

The consulting guru's latest report on the costs of cutting greenhouse gases (Pathways to a low-carbon economy – Version 2 of the global greenhouse gas abatement cost curve) presents an update of the McKinsey greenhouse gas abatement cost curve that has become quite famous. It shows the potential of reducing greenhouse gases across sectors and regions with a € 60 per tonne of CO2 equivalent (tCO2e) maximum abatement cost.

It is very convincing and carries a very strong message. The report repeatedly stresses the time factor - we cannot wait to act if we aim to stabilize global warming below 2oC. People can see the logic for acting as well as the relative cost of different actions. It shows the extremes, from switching light bulbs in the residential sector, to retrofitting a gas plant into a carbon capture and storage facility. The former produces savings of nearly € 100 per tCO2e and the latter just squeezes in under € 60 per tCO2e. The curve shows the many options between these extremes, allowing comparisons of abatement opportunities. The total annual cost would be between € 200-350 billion, corresponding to less that 1% of forecast global GDP, matching the estimates made in the earlier “Stern Review”.

McKinsey's message is very simple: start to act now, at least on measures that do not cost society anything and that could be implemented today. So far so good.

But I believe the report is overly optimistic about the potential to reduce GHG emissions by 2030. It uses an economic lens and disregards other considerations. The weak part is of course how to do it.

Naturally, I am most interested in what it says about energy efficiency in the building sector, since that is the target of the WBCSD's Energy Efficiency in Buildings (EEB) project.

EEB is working on both the residential and commercial sectors through a detailed examination of the measures that are likely to be adopted under various financial, technical and policy conditions. In the residential sector alone we have amassed a collection of 609 construction option packages, including building performance, the nature of the equipment and energy currently and potentially used in houses in specific geographical markets.

The Mc Kinsey report has grouped its 26 housing options into six categories:

New building efficiency packages
Retrofit building envelope
HVAC for existing buildings
Water heating for existing buildings
Lighting and appliances
Electronics.

Amazingly, especially as McKinsey assumes no lifestyle or behavior changes, the report states: “approximately 75% of total abatement potential in the building sector shows net economic benefits, with the remainder available at very low cost.” It stresses, in particular, the introduction of lighting options. Lighting is always referred to despite the marginal total energy effect in a residential house in a cold climate, where electricity has been produced by hydro or nuclear. In fact there are cases of low-energy bulbs leading to increased CO2 emissions because additional heating is required to make up for the loss of internal heating.

The report assumes “aggressive” abatement measures would succeed in transforming the market, but it does not define them! This implies that all design and technical options available today would be implemented within the € 60 per tCO2e limit. Owners would see that additional investments would be cost-effective and would rapidly adopt them. Full stop.

This is difficult to accept. It seems too good to be true. The building sector is too complex and fragmented to turn around just like that.

The EEB work uses a model we developed based on detailed investment choices within specific subsectors (single family homes, multi-family homes, retail and offices) all based on real micro-economic data and realistic decision criteria.

We found that low-cost opportunities are likely to achieve limited reductions in energy and CO2 emissions. Furthermore, investments that have substantial impacts are likely to be expensive and have a long payback time. They are therefore unlikely to be implemented under normal market conditions. We also found many obstacles that significantly hold back the likely adoption of even financially sound investments in the building sector.

EEB is finalizing the analysis (the EEB report will be out by the end of April) and we are trying to answer the following questions for each global submarket we have studied:

What solutions are building owners likely to adopt under each set of conditions?
How will policy options affect decisions?
What are the energy and emissions impacts of these decisions?
What are the combinations of construction packages, prices and policies that achieve a given emission target?

We are not as optimistic as McKinsey. We see that the prices and market conditions for investing in energy efficiency in buildings – even with policies in the pipeline – will have only a limited impact.

EEB believes that to achieve the climate targets for building energy, we will need a complete transformation of the building sector and its marketplace.

We have a new financial order – but what about a new energy order?

2008-10-31T11:12:58+01:00

Money supposedly makes the world go round – or doesn't, as we have seen in the last few months. But it does make a big difference to the rate of advance of energy efficiency. So I was in New York recently at a 2-day workshop on finance and energy efficiency organized by the EEB.

The two days of discussions reinforced the EEB's initial conclusions. First, there is no easy answer to how finance can stimulate energy efficiency. Second, innovative financing mechanisms and a change to valuation models will not be enough to drive the necessary market transformation. Externalities must be priced and a value put on energy use, public/private partnerships are critical, solutions must be tailored to the specific context and building sector, and government has a significant role to play.

Regular readers will know that the EEB's first report concluded that business could influence the development of energy efficiency in buildings through three levers: a holistic approach, behavior changes, and financing. In the meeting with our Assurance Group in July, they recommended that we drill further down on finance.

We organized the workshop together with Molly McCabe of the sustainability consultancy HaydenTanner, on October 6-7, inviting around 40 stakeholders. The first day concentrated on commercial buildings, the second on residential.

The venue was very impressive: the New York Academy of Science overlooking Ground Zero, downtown Manhattan and the Federal Reserve. The building (7 World Trade Center) has a LEED Gold rating and is billed as New York City's first green office tower. Sustainable design features include plenty of natural light, individual power meters for tenants to encourage them to conserve energy, the reuse of heating steam to generate some of the building's power, and the use of recycled materials for insulation and interior materials.

Impact of the current economic turmoil

Finance has dried up so there are virtually no market-driven real estate transactions being done at this time. Real estate investors must reevaluate the nature of the risks inherent in property investing - including tenant mix and durability - including an assessment of the impacts of future regulation, energy availability and pricing.

US housing starts were off 31% in the past year and down 64% from their peak in early 2006. Economists are predicting another 5-10% drop through the beginning of 2009. Hopefully, this will help switch the focus to energy efficiency in existing properties rather than new construction.

Government stakes in major financial institutions and large mortgage portfolios may point to an opportunity for sweeping policy changes.

An economic stimulus in the form of an energy efficiency retrofit program with a focus on job creation and retention would result in reduced dependence on fossil fuels along with local capital maintenance and reinvestment. Retrofitting 5 million US homes per year at US$ 10,000 per home could result in US$ 50 billion in economic stimulus each year.

Hurdles

The workshop highlighted many familiar challenges: the low priority of energy issues, inadequate education, inertia, difficulties in accessing capital, limited comprehensive and reliable financial data, and principal-agent problems (including split incentives).

Challenges on the financial side are daunting: initial costs, long payback periods, capital vs. operating budgets, risk exposure, the low ratio of energy costs to total operating expenses, high transaction costs, discount factor issues, and the continued inadequacy of traditional financing mechanisms for energy efficiency projects.

Timescales are critical. Many participants said payback periods were much longer than they had initially anticipated, suggesting that energy efficiency measures had an unacceptable return on investment. In that case regulation and/or incentives were seen as necessary to drive investment.

Opportunities

But it's not all doom and gloom. Many participants highlighted the opportunity provided by the current economic conditions. Other opportunities include education and training, monetization of energy efficiency through cap and trade, new investment vehicles, increasing awareness around climate change and risks associated with energy price and availability. Municipalities and utilities are seen as having an opportunity to take center stage through new regulation and new financial mechanisms such as on-bill pay and property tax financing.

Market linkage and behavior

There is a need to link energy efficiency to the costs and risks of energy use. We need an agreed baseline methodology to measure energy use and a means to consistently track performance. Greater certainty and transparency are needed before private actors will be willing to engage further. Investors, owners, tenants, brokers and appraisers are pivotal to the market's development. An international protocol for measurement and verification would be useful. Energy Performance Certificates provide a vehicle to measure, compare, track and enforce efficiency.

Many discussions have made clear that most market participants believe energy efficiency and sustainability are important. Many of the workshop participants consider energy efficiency and broader sustainability skills a competitive advantage in the marketplace. However, energy efficiency has currently taken a back seat in the face of basic survival - tenant retention and paying the mortgage. The price of energy and its perceived risk are modest compared to other financial levers.

There was general consensus at the workshop around the need to reframe the discussion. Reframing the language and concept of energy efficiency to correlate with accepted real estate mores - such as health and safety issues ‑ has the potential for traction. It is necessary to move away from narrow financial calculations and make energy efficiency an accepted and expected part of the regular building inspection process.

Cool to be cool? Hot to be hot?

2008-09-15T09:58:43+02:00

In the EEB project we have started to talk about “the inertia of business as usual”. It has become increasingly clear that “business as usual”, or incremental change, will not lead to the necessary transformation of the building sector, achieving a radical decrease in global energy use in buildings. Market forces are not likely to take the lead yet, and today's building policies are not strong enough or not sufficiently enforced to have a real impact.

The fact is that we all need to change our energy behavior – at home and at work, including the professionals who finance, design, build and maintain the places where we live and work.

EEB identified this in our Facts and Trends Report. We said behavior was one of three business levers (along with a holistic approach and new financial models) that should help business achieve the desired transformation. The Assurance Group, in our meeting in Tokyo, advised us to drill further into these key factors. We are therefore holding three expert workshops on these themes. The behavior workshop was the first.

We met at Imperial College in London, hosted by Prof. David Fisk. The London-based sustainability communications group, Context, helped us to gather about 20 experts from academia, campaign organizations, advertising agencies and other marketing firms. We divided the experts into two groups, half for the morning and the other half for the afternoon session. EEB co-chairs Lafarge and UTC, along with core group member companies Philips and TEPCO participated the whole day. Our question to the experts was: “How can we get people to want energy efficiency?” Simon Glyn of Lippincott (who helped with our initial perception research) facilitated the sessions.

Our approach was to try and understand the social context, what has worked before in similar areas and try to apply it to the building sector. We wanted to look at it from the perspective of sustainability in the context of buildings but also buildings in the context of people's sustainability ambitions – not just making buildings more sustainable but making building energy the leading target among the range of sustainability activities. We wanted to look at behavior in homes and in offices, and emphasized the need for radical step change rather than incremental action.

The obstacles to behavior change

According to the experts, there are a lot of misconceptions about behavior change. This is not just about price and information. My own comments about the relationship between the economic parameters and behavior did not go down well! Accordingly we have to change the mindset in order to overcome the following blocks:

The problem is too big, too abstract and impersonal
The sustainability language is alienating
It is not easy nor convenient to change
People are different; what influences “deep greens” may not have an impact on other people. “Deep greens” are frequently “alternative”, which puts mainstream people off
There is a lack of clear benefits
And more!

The keys to success

People want to see what will generate an impact. Feedback is very important because people do not currently know the impact of their behavior. Therefore, we need to use metering and smart displays to show people's energy use; communicate on tangible words like heating and lighting rather than energy or energy efficiency, which are invisible and difficult to understand; make it visible, tangible and manageable. Other important factors are:

Create clear incentives. Ensure that the person who changes gets the rewards
Make it active. Get people involved
Create clusters - change what happens through combined pressures
Think about human values and needs
Use networks and communities
Use multiple channels because people are different and it is hard to be certain what will take off, so go for several angles at the same time.

Applying this to buildings

Much of the discussion focused on the issue of visibility. Attributes should be made clear, stylish, cool and colorful. Use visible signifiers - for example, use solar panels to show that this is an energy-efficient building. Other recommendations were:

Use designers to make things fashionable
Leadership from other industries – cross reference what they achieved
Make users active
Train building managers
Make building energy labeling more specific.

Reference was often made to successful behavior changes that have occurred in the health sector, which were often combined with penalties (seatbelts, drinking and driving, smoking).

But another example referred to was fair trade, where there are no penalties and no financial rewards, but people want to behave in a certain way in order to relieve suffering or maybe to escape guilty feelings. This has been a bottom up movement – although there was some discussion on how important that movement really has been.

A third successful way forward has been to form communities, so people collectively started to understand and measure their own energy use. They set common goals and monitor progress. At the end they are rewarded. That seems to be workable.

A warning was flagged against positioning energy efficiency with fashion icons. If the person is very credible in eight out of ten aspects, the media will concentrate on the other two that are not so good, creating negative publicity. What is cool today might be not cool once you market it. Also, if you want people to emulate a celebrity, that person should have a lifestyle that ordinary energy users can relate to.

A very interesting approach outlined in one group was the idea that you have to name a certain behavior in order to be able to research it, discuss it, allow early adapters to move, create community support, etc. Then media can multiply and influence a political process. Without a name people cannot line up with a special positive behavior. The example given was jet lag, which existed before it was named, but people didn't relate to it until then.

Who has a name which can excite people about energy efficient behavior? Please come forward! We need your help!

Cold comfort but a warm response

2008-08-14T15:53:54+02:00

Christian has kindly offered me, Constant Van Aerschot from Lafarge, one of the two co-chairs of the EEB project, a guest spot here to report on the project's recent review with our CEOs in Washington DC.

In one respect it was a stark contrast to the Assurance Group meeting in Tokyo, which Christian reported on last time. In Tokyo, air conditioners are set to cool only to a minimum of 28 o C – and it felt much warmer in the meeting room. In Washington, on the other hand, it was so cold that we couldn't work inside the hotel when we were preparing for the meeting! The air conditioning was set unbearably low, so we went outside where we were comfortable.

In other respects this meeting was very similar to that of the Assurance Group. It was a very important milestone at which we received feedback and direction, and it was very positive.

Bruno Lafont, LAFARGE CEO and Chairman, and George David, Chairman of UTC, led the review. Several other project companies were able to participate: Roberto Tellarini, CEO of Actelios/Falck and senior executives representing the CEOs of ArcelorMittal, DuPont, EDF, Philips, Skanska and TEPCO. (Unfortunately, the CEMEX representative couldn't make it because his flight was cancelled following extreme weather conditions in Mexico.)

They offered strong support for the EEB project and promised another high-level review before the next report is released. They were pleasantly surprised by the level of visibility the project has achieved so far: more than 54,000 report downloads and a growing EEB presence in conferences: 16 events in 2006, 38 in 2007 and an expected 50 in 2008.

The CEOs perceive our work as being truly unique, thanks to our bottom-up approach and business focus. It contrasts – and complements - the top-down approach taken by other organizations such as the IEA, UNEP, and the Vattenfall/McKinsey reports. Their top-down (macroeconomic) approach only shows WHAT should theoretically be done. They suggest that a carbon tax of around US$ 30 a ton should be enough of an incentive for home owners to retrofit their dwellings or for developers to build more energy-efficient houses. Our early modeling results challenge this view.

In contrast, our quantitative bottom-up approach explores HOW energy savings and CO 2 reductions can be achieved. In particular, we are able to quantify the necessary behavioral, technological, economic and political measures, and the resulting costs and benefits for stakeholders such as investors, property owners or managers, governments, etc. Our selected submarkets – single and multi family homes and offices in China, France, India, Japan and the USA, cover around 50% of the world's energy use in buildings, making our results highly relevant both globally and locally.

We shared very interesting figures from some of these sub-markets during the meeting, looking at the energy issue from both the supply and the demand side.

The feedback we got in Washington was that we are “sitting on a pile of extremely valuable information”. It means our next report will have an important impact on today's energy agenda, future business models and building sector policies.

My top conclusions from the review are:

The project is on the right track and has the potential to produce a groundbreaking report
EEB has produced an excellent set of qualitative and quantitative data
A series of strong measures might be needed to overcome the inertia to refurbish existing buildings within a meaningful timeframe; it will therefore be crucial to craft the right positive messages and recommendations
Even though the problem is complex, our communications need to be easy to digest
It is important to keep distinguishing between developed and developing countries and to find the right balance for the recommendations
EEB should continue to cooperate with IEA, UNEP and other actors to share results and thinking.

The next step will be an important 3-day project meeting in Paris at the beginning of September. There, I expect the group to draw conclusions and prepare recommendations based on the model results and the qualitative submarket assessments. In the meantime we are organizing, expert workshops on the holistic approach, behavior and finance to further feed our thinking.

During the trip to Washington the complexity and contrasting business responses to energy demand were driven home for me by two contrasting approaches. On the one hand, I saw a utility company promising that it would supply the energy necessary to meet 30% demand increase that Americans are forecast to use by 2030. On the other hand, I saw in Europe an advertising campaign with the opposite message: “Energy is our future, let us save it”.

This illustrates the different business mentalities. For EEB to be successful, we need to see much more of the latter. That is essential to achieving serious progress towards our vision of zero net energy buildings.

Back to Christian next time for more on how we are working to achieve that vision.

Constant van Aerschot

Hot times in Tokyo

2008-07-10T15:48:28+02:00

The EEB project's governance includes an Assurance Group whose job it is to keep us on track and provide a high-level response to our work. Hosted by TEPCO and Kansai, the two major utilities in Japan and members of the EEB Core group, the meeting at TEPCO's headquarters in central Tokyo gave us an insight into the clash between energy savings and personal comfort. The Japanese government has decided that air conditioners should not be set below 28°. Short-sleeved, open neck shirts are now the order of the day, but it's still hot!

The reason for this is that the authorities had to close down the world's biggest nuclear plant, Kashiwazaki-Kariwa Nuclear Power Station on the Japanese North-West coast. A very strong earthquake hit an area under the sea northwest of the power station in July 2007. It has to be thoroughly inspected before being allowed to restart. Overnight the Kanto area including Tokyo – Yokohama area lost 8,200 MW of generation capacity. Dramatic action was needed to prevent blackouts, including the regulation on office temperatures and the relaxation of the dress code.

The EEB assurance group is chaired by Klaus Toepfer, former head of the UN Environment Programme. Other members present in Tokyo were Prof. Vivian Loftness (Carnegie Mellon University), Prof. Shin-ichi Tanabe, (Waseda University) and Prof. Yi Jiang (Tsinghua University). Prof. Thomas Johansson (Lund University) and Eileen Claussen (Head of PEW Centre) were unable to participate.

The Assurance Group exists to promote the EEB project's quality and accountability. It provides comments and advice in areas such as process, scope and conclusions. The Assurance Group is charged with ensuring, and ultimately testifying, that the EEB Project maintains a high level of integrity and accountability.

It carries out these responsibilities diligently, keeping us on our toes. The Group gave us many useful comments and reflections during the frank and vivid discussions with the project team. They included some detailed comments such as being clearer about the difference between end-use and primary energy. Here are my top 10 comments from the discussion:

We must be consistent with the first stage of the project. The Assurance Group recommended that we still refer to the business levers defined in the first report (holistic approach, financing and behavior). Financing is still not explored enough in our current work.
Keep the positive "tone" of the project. In the first report, the EEB project created expectations on possible results; they should be maintained even if it will demand very strong actions by different stakeholders.
EEB's data collection, submarket focus and simulation modeling are unique. For the first time, we will be able to quantify and evaluate the economic rationale for different policy instruments on submarkets. In order to explore the full potential for change in energy efficiency in buildings, the behavior aspects have to be fully integrated in the modeling.
So far, the modeling results show limited effects of traditional and planned policy instruments on energy use and CO 2 emissions in different building submarkets. The inertia in the building stock as well as its forecast growth neutralizes most individual policy actions. It was a surprise for the Assurance Group members, who saw it highlighting the need for more combined actions.
The project should not be too visionary, but should concentrate on short- to medium-term options. But on the other hand, we should not “kill people” with too much data. Decision-makers need information on which they can design policy instruments and implement actions at lowest costs.
EEB represents the building industry and is a business voice on issues surrounding energy efficiency in buildings. Therefore, it is important that the report outline the challenges and business opportunities for the building sector. “We cannot end up in a situation that the project is able to produce wonderful results but others have to do it [the implementing].” Business' own responsibility and commitments need to be in focus.
Passive solutions and indoor climate aspects related to good design and quality are as important as new building technology options.
As regards China, it is important to “control” the development of the building stock. For China, technology can not be the final solution. China must find its own new way of modern living.
The present analyses assume submarket independence but there might be crossovers…family to multifamily houses as an example. Likewise, the building size issue (space) versus the number of people living in the building.
The holistic approach. The Assurance Group recommended that we deepen our understanding of the importance of urbanization, city planning, landscaping, links to transport, services and jobs.

The other message was that the project needs to stay focused, concentrate on a few submarkets, effectively capture the learnings and package policy recommendations to be able to communicate and influence stakeholders.

Meanwhile, we are organizing three high-level workshops, on Behavior (London in August), Holistic approach (September, venue tbd) and Finance (New York in October).

You will find more on this in my next blogs. I wish you a happy summer break (and that it not be too hot in the office).

If you want to go quickly, go alone; if you want to go far, go together.

2008-05-30T15:23:32+02:00

I have borrowed this African proverb from Al Gore. It seems relevant to my eco-innovation experience last week, when I participated with some 20 key stakeholders in Philips's Sustainability Innovation Day in Eindhoven, Holland. The purpose was spelled out in the invitation letter: “Let's listen to each other and start an ongoing dialogue to envision innovative solutions. Our goal for this event is to share knowledge and further the process of co-creating a future that will truly make a difference for the generations to come.”

We discussed sustainability and Philips's latest innovations on its High Tech Campus. The campus itself has a very interesting concept of “open innovation”. I found a concept description by Rick Harwig, CTO of Philips Electronics: “It is better to build an ecosystem in which companies find one another. Open innovation makes companies less susceptible to market fluctuations. It allows them to focus on core competencies and substantially reduce time-to-market when industrializing technology into products. This is a major advantage in a market driven by the slogan: first, fastest and fittest. And this is exactly what happens on the High Tech Campus Eindhoven.”

The Campus left me with a very good impression of Philips compared to many companies' closed and often very secretive research centers.

We saw many new innovations and were able to share our views on them. The CEO of Philips Research said that sustainability is becoming an important innovation driver. Philips has identified three types of market. Consider a chart with the human development index on one axis and ecological footprint on the other.

Philips sees three major markets types with different sustainability characteristics:

For developed economies, help people maintain or even improve their well-being by using cleaner technologies
For emerging markets, help them leapfrog existing technologies with greener technologies, thus not expanding their ecological footprint
Developing countries need work and low-cost clean technologies and services

Philips shares the long term vision of “one planet living”, where all countries would fit into an area of the graph with a high human development index and a low ecological footprint. With my EEB lens, I was most interested in Philips' energy business.

We know that lighting accounts for about 19% of total global energy use. Philips' new light sources use between 40-80% less energy than the old lighting technologies like the incandescent bulb. Even more can be gained when also introducing smart light management systems. That is a step change!

Here we have a tremendous potential for improving energy efficiency in our homes, schools, offices, all commercial buildings and streets. Initial costs are higher but payback is short. With a joint effort by governments, civil society and business we should be able to speed up change.

However, at the same time we need to address the very important issue of recycling these new lamps in order to manage the mercury component.

We had good discussions and I felt the African proverb above, used by Al Gore in his Nobel Prize speech, fits well.

Except, we want to go far, quickly!

LEEDing thoughts from the USA

2008-05-19T11:15:12+02:00

Mark Twain created some wonderful sayings – some of them very relevant to this project, such as: “Architects cannot teach nature anything”, and perhaps most pertinent of all: “Nothing so needs reforming as other people's habits.”

The reason I mention Twain is that the EEB project recently spent a valuable afternoon in the new (LEED certified) Mark Twain House & Museum in Hartford, Connecticut. Hartford is also the home of United Technologies, an EEB co-chair. The company hosted a meeting of the EEB group. An afternoon session in the museum brought together 17 “thought leaders” representing key stakeholders from the U.S. building sector. They included developers, architects, policy-makers, academics and NGOs.

We had an intensive debate on where the US is going and what needs to be done, beginning with behavior change. Energy efficiency is crucial but people will not change their behavior if they don't perceive a threat. And today most American people still feel very comfortable. They are concerned about the price of gasoline at the pump, but they do not know their energy use and they do not perceive climate change as a sufficient threat to provoke action.

There are positive signs. The LEED bandwagon is rolling fast. Tenants are asking for LEED-certified buildings, so this is a demand-driven development. Discussions have started to introduce policy aiming at having all buildings certified. That would push the developers in the right direction. Developments beyond LEED would need to be implemented nationwide. And while LEED involves very little change from existing energy practices it is an evolving standard.

Surprisingly, most of the “thought leaders” stressed the need for corporate America to take the lead. They could not see the politicians going first. Corporate America is saying it is possible and starting to construct or retrofit buildings to make them green: The “show me how” approach.

But we have learned in previous discussions with American policy-makers that corporate America reacts much better to the notion of “ pay me”. Positive financial incentives are the best way to provoke change in the US.

The EEB members tried to introduce our vision-driven pathway to zero-net energy use in buildings, but without great success. The thought leaders were falling back either on“crisis“ or “grassroots” pathways. The former sees that the US will only start to move after experiencing a crisis situation like the one after Katrina hurricane in 2005. By "grassroots” we mean fragmented change through individual and small-scale developments. Even though we repeated the need for dramatic and aggressive change, we got very little response. These stakeholders do not feel the “heat” nor the threat from the CO2 build up.

The “thought leaders” responded with a challenge to EEB (and other) companies to use their powerful marketing skills and tools to persuade people to act in the right way towards a CO2-managed way of life.

Difficult? Yes and No. As one of the attendees pointed out, companies that succeeded for years in persuading people to buy stuff they may not be able to afford should succeed in leading people to need and invest in useful habits and sustainable goods. But as some suggested, perhaps it means that companies need to change their business models to adjust to an EEB world.

It was a fascinating meeting but another Twain quote sticks in my mind: “All good things arrive unto them that wait – and don't die in the meantime.”

Blog posting co-authored with Didier Bridoux of ArcelorMittal

Building boom in Brazil needs a Green Plan

2008-04-22T16:39:54+02:00

Sao Paulo is one of the mega-cities which are becoming the world’s dominant economic force. The São Paulo Metropolitan Region actually consists of 39 cities, with São Paulo (and about 11 million people) at its heart. Greater Sao Paulo has experienced intense growth in the last few decades. The building industry is trying to catch up with a doubling of the population between 1967 and 2002.

This growth implies more and more energy. Brazil got an energy “wake-up call“back in 2001 when a black-out paralyzed the southern part of the country. They quickly cut energy demand by about a quarter but the drive to save energy is fading. If steps are not taken they might face a second “wake-up call” in a few years time. The Brazilian footprint is increasing rapidly. Brazil will need more energy but without an elaborated policy of “controlled energy growth" , there is a risk that Brazil moves away from its sustainable hydro electricity production towards considering fossil (carbon) derived energy sources to support their rapid expansion - they might go from good to worse!

The EEB project went to Brazil for our fourth Outreach event, in Rio de Janeiro on April 3. This follows events in Beijing, Brussels and New Delhi, where we have shared our findings, enjoyed a dialogue with stakeholders and learned more about the building market in each country.

We (I was with five core project companies: Lafarge, UTC,; CEMEX, Philips and Sonae Sierra) started the Brazilian week meeting experts in; Sao Paulo. They made it clear that the building sector in Brazil is different to other countries we have; studied, heavily influenced by culture, climate and history.

The sector is booming. Both commercial and residential buildings; are growing very fast. We also learned that social housing is increasing; despite the booming market. But it is not just about new construction – Brazil has a large building stock to be; refurbished.

There is a substantial informal sector, which is; unregulated, more or less out of the control; of the authorities and operates on a small scale. There are about 60.000 local; constructors in Brazil and; they contribute about a fifth of commercial building and a quarter of; residential. The formal market is modern, regulated, following basic building; codes and normal Brazilian building practices and is becoming dominated by; bigger companies which focus on commercial and bigger residential developments.; ;

This makes it hard to estimate the size of the building; market and we couldn’t find any official figures. The experts told us the; formal building sector in the Metropolitan area of Sao; ;Paulo produced about eight million square meters per; year. If we assume that the Metropolitan area is about a third of greater Sao Paulo, we can get an estimation of total; building production figures for Brazil; of around 100 million m2 per year. This is about the same as the building; capacity in India, while China; produces about 20 times as much.

It was a busy week for us. We met student architects and; construction engineers at Sao Paulo University, who asked about issues such as; the business case for energy efficient houses in Brazil.; I also presented the EEB and our project’s main; findings to about 180 key stakeholders at an international conference with; POLIUSP (Polytechnic School of the University Sao Paulo) and CIB (The International Council for Research and; Innovation in Building and Construction).

Later in the week we had our own event in Rio de Janeiro. In the morning, EEB’s co-chairs –Constant; van Aerschot from Lafarge and Bill Sisson from UTC – began by presenting a; status report on the EEB project. Then we had important contributions from Brazilian; stakeholders representing the government, academia and the investor community.
; Paulo de Tarso, general coordinator of environmental; sustainability from the Mines and Energy; Ministry, described the public policy for energy efficiency in buildings.; Up to now, the emphasis has been on market awareness and voluntary measures; rather than mandatory actions. A system of classifying energy performance is now; under development.

Marcelo Takaoka from the University of Sao Paulo underlined; the importance of a holistic approach to the building sector and stressed the; need for improved awareness of energy efficiency among building professionals.

Jean Benevides, National Manager of the state-owned bank Caixa Economica Federal, highlighted the; way the institution is pushing for energy efficiency in its many offices all; over Brazil and has now started; to include energy efficiency in the bidding process for new construction. Its; main problem is how to integrate energy efficiency into social housing projects.

Alexandre Gaspari, from Brazil Energia Magazine, chaired a; Q&A session in which there was a lot of interest in green building; certification, life cycle analysis, green government procurement, the lack of; auditing and the shortage of building data in Brazil.

In the afternoon we held two expert roundtables, discussing; barriers to radically improving energy efficiency and how to create an enabling; building environment in Brazil. The lack of information and awareness was a; common theme in the discussions. It was also clear that technology is already; available but is not being used, skills and capacity are lacking, while the; supply chain is not up to speed with green products and support. We also; learned that consumers are not informed so that the PROCEL energy conservation program; has had limited impact.

I was astonished to find that green buildings can achieve a; 20 to 40 % premium when they are sold. Amazing!; ;But in that case, how come more are not being; built?

I came away with the clear impression that plenty is; happening in Brazil (building codes, labeling, government procurement, building; certifications ….). Sustainability is so popular that everything is being named; “sustentavel“. In fact, according to Fernando Almeida, Head of the WBCSD local; partner CEBDS, the label is; over-used.

While there are many positive trends, there are also negative ones:; cheap and inefficient air conditioning in poor homes, a virtually; non-existent insulation industry, skills and; capacity shortages, social housing lagging behind.

EEB in San Francisco

2008-04-03T16:23:08+02:00

As guest blogger for this entry, I'm pleased to share thoughts on the EEB's recent workshop at Lawrence Berkeley Labs (LBL) in Berkeley, California. But first, a bit of background.

Berkeley is not just a beautiful place (east of San Francisco on the outskirts of Oakland) – the brain power of Lawrence Berkeley Labs has helped California's policy-makers develop some of the most aggressive and leading-edge energy policies in the US, if not in the world.

Our direct contact there, Steve Selkowitz, heads up the Building Technologies Group at the Labs and has been quite involved with EEB since its inception. Christian and I met Steve at the 2006 ACEEE Summer Session in Monterey, and knew we had found an exceptional resource. On the subject of buildings and energy efficiency, Steve is probably one of the most knowledgeable people around. If he doesn't have direct knowledge, I will guarantee he knows someone who does. Steve and his team at LBL are leading experts on the subjects of building energy use, modeling, human behavior, policy options, systems and controls, and much more.

We assembled the EEB Core Group at LBL at the beginning of 2007 to help us analyze our initial findings after six months of data collection and discussion. It was here that our thoughts came together about business levers for building energy efficiency, forming the basis of our first report: Facts and Trends, Business Realities and Opportunities.

Given the access to the large body of knowledge and expertise, not to mention the available resources from California 's "thought leader" community, we decided to hold another workshop at LBL. This time we focused on market modeling.

This has been a key element in the second phase of the project, which began once we had published the first report. I call it “modeling pathways” and it's where the rubber hits the road. We take the issues, barriers and challenges we outlined in the first report and develop recommendations that we believe will set the market in place to make buildings zero net energy in the future.

Modeling pathways is just that - a first-ever quantitative look at how to make zero net energy buildings a commercial economic reality, by looking at policies, technologies and market actions under a clearly-defined set of plausible scenarios. To do this takes a model - not just any model, but a comprehensive model that can calculate financial and non-financial factors that will lead to market-based decisions given a variety of options or choices.

This is not simple stuff. It must be workable and credible to be widely accepted by the diverse set of skeptical stakeholders in the market.

Now back to Berkeley. We charted a 2-day workshop, first with the LBL experts to allow us a deep exploration of our model framework and structure.

We have outlined an approach that takes us into selected submarkets (e.g., residential single homes, commercial retail, offices, etc.) and evaluates changes in outcomes against a baseline set of information. Our baselines come from a detailed building energy matrix that has been collected for the six regions of EEB.

The model uses available resources for a bottom-up calculation to calculate design, technology and user choice factors with tools such as EnergyPlus, while using a top-down structure to evaluate policy and scenario-based discretionary factors.

This is truly a "hybrid" model approach. On the first day of the workshop, we received fantastic input from the LBL experts - some positive, some negative – which will vastly improve the quality and credibility of the model results. We also came up with some ideas that will make the model more workable and could lead to a possible WBCSD tool.

The second day of the workshop involved a number of "thought leaders" from the California academic, policy, design and engineering community. "Wow" was the word in terms of the thought leaders' contributions and inputs. The model results will directly benefit.

In the end, the modeling workstream walked away with pages of notes, countless and priceless contributions, and follow-on dialog that will go well beyond the two-day session.

We're off to Brazil now to hear from the 6th region of the project (read about that here soon). Then we take the long, hard road to put the modeling together with the efforts of our policy and scenario workstreams. Look for our results later this year, and don't be surprised if you're impressed – we have a lot of smart people helping us to achieve that!

Bill Sisson
Co-chair, EEB Project