Energy efficiency: clean energy’s less popular cousin

It was apparent from the Asian Clean Energy Forum (ACEF) held at the Asian Development Bank (ADB) and the USAID sponsored Private Financing Investment Forum held in Manila during the same week last June 15-19, that energy efficiency is enjoying an increased attractiveness for investments, like its more popular cleantech cousin, renewable energy. More than 500 delegates from around the world, policy makers, government officials, investors, entrepreneurs, media, attended the event. ACEF was co-sponsored by ADB, USAID, AusAID, Japan ODA, and the Spanish, Swedish and Norwegian governments, as one prelude to the Copenhagen summit on climate change later this year.

One of the concepts explored in the ACEF was the concept of an equivalent power plant, or “efficiency power plant,” as some of the speakers called it. An efficiency power plant is a visualization of savings in power capacity from energy savings, a concept that is useful considering that most laypersons struggle to conceptualize energy efficiency, unlike the popular images of renewable wind turbines and solar farms etched in many minds.

One low hanging fruit to implement energy efficiency is more efficient lighting like compact fluorescent lights (CFLs) to replace incandescent bulbs. “Lighting by itself is responsible for 19% of total electricity consumption,” said Martin Willemsen, Director of Marketing at Philips Lighting. Willemsen said energy consumption can be reduced by a factor of five if new technologies, such as CFL and more advanced ones such as LED lighting, are implemented fully. “For example, a 60w incandescent bulb can be replaced by a 12w CFL bulb,” said Willemsen.

But large scale replacement of incandescents by CFL lighting brings about its own issues. In an interview with consultant Dilip Limaye, who has worked with various multilateral funded programs on CFL replacement in various countries, he stated that there are various hurdles to contend with in distributing CFL’s. These include: 1) the quality of the CFLs; 2) whether to give away these CFL’s or have people purchase them; 3) recycling issues; 4) testing and certification; and the destruction and proper disposal of incandescents.

Fortunately, bilateral organizations like USAID have stepped in to help manufacturers, lighting companies, lighting councils and supporting organizations to identify and promote quality CFLs for the Asian region. According to a report (Confidence in Quality) released in October 2007 by the USAID ECO-Asia Clean Development and Climate Program, as many as half of the CFL’s produced in Asia are substandard, producing less light or burning out more quickly than advertised. Many stakeholders who wish to see CFLs replace incandescent are concerned that this finding may threaten to derail that goal. A March 2009 USAID report (Phasing in Quality) stated that 10 to 12 million metric tons of CO2 emission reduction can be achieved if poor quality CFL’s will be replaced by good quality CFL’s.

“Energy saving lighting is one of the few ways where you can save energy and is at the same time cost beneficial,” says Willemsen of Philips Lighting. But in order to succeed, efforts in creating awareness, as well as the efforts of groups like the Asian Lighting Council, will have to continue in order for this strategy to succeed. Farther into the future, LED lighting will also be an option for widescale deployment. Asia plays a role at the moment, as most LED light manufacturing is done in the region.

In order to encourage more local banks to lend for implementing energy efficiency projects, there should be a concerted effort to explain the benefits of energy efficiency to them. William Beloe is with the Sustainability Energy Financing program of the International Finance Corporation (IFC) in Manila. IFC is the World Bank’s private sector finance arm. “We see ourselves as more of a catalyst,” Beloe said, citing IFC’s strategy of supporting climate change adaptation and mitigation efforts.

One of their initiatives at IFC is the Small Power Utility Group (SPUG). Many of these small utilities are typically off-grid, and are normally the domain of governments. IFC is trying to move these types of utilities, which are ideal for renewable energy, to the private sector. On energy efficiency, the main issue according to Beloe, is awareness. “It requires millions of decisions to make an impact,” he said. Recently, IFC has used the lack of demand for products because of the recession, to make its case. “We try, at IFC, to raise awareness that energy efficiency can contribute to the bottom line by cutting costs,” he said.

To do this, IFC is eager to work with local banks. “We are working to build their [local banks] loan capacity to support clean energy projects,” he said. IFC normally finances large projects; their smallest tranche size in these types of projects would be in the $5 million range, said Beloe. However, he points out that the banks themselves will determine the nature of their portfolio.

“All we do is to try to make the banks comfortable, maybe offer financial instruments,” he said. Some will be more comfortable putting money in energy efficiency, some in renewable energy, he said.

Energy efficiency is a relatively inexpensive and proven way to contribute to climate change mitigation, and at the same time contribute to the bottom line. We should expect it to share the limelight with its more visible cleantech cousin, renewable energy, particularly with ADB’s announcement during the closing plenary (and in media releases) that its target for energy efficiency loans is around $2bn/year.

But until a way can be found to help businessmen and investors visualize what energy efficiency is and its viability as an investment vehicle, it will always remain the unsung relative of its more popular cleantech cousin, renewable energy. –Dennis Posadas
____________________________________________________________

Dennis Posadas is the editor of Cleantech Asia Online an opinion site for cleantech in Asia. He is also the author of Jump Start: A Technopreneurship Fable (Singapore: Pearson Prentice Hall, 2009)