Why efficiency should have a starring role in energy transition

The Japanese business philosophy of "kaizen" – literally, change (kai) for the good (zen) – advocates for a slow but consistent approach to change. A modification here, an innovation there, and continuous improvements will be gradually achieved.

Every now and then, something comes along to upend this theory and release genuinely transformative change. For computer technology, it was the microchip. For telecoms, the satellite. For analytics, artificial intelligence.

In energy, clean electricity generated from renewable sources is touted as a means of weaning ourselves off fossil fuels and reducing the anthropogenic emissions that contribute to climate change.

Hence, the global race to accelerate investment in renewable energies with major policy measures such as China's latest five-year plan on renewables, the EU's REPowerEU plan (part of the Green Deal initiative), the Asia Energy Transition Initiative and, most recently, the United States' Inflation Reduction Act.

Yet even the most optimistic calculations point towards an incremental, kaizen-style transition rather than a wholesale shift. The electrification of Europe's economy is stuck at around 23 per cent, according to the electricity trade group Eurelectric.

Hitting agreed decarbonisation targets will require solar and wind energy to increase to 1,102 gigawatts (GW) by 2030, up from around 349 GW in 2021.

Short-term obstacles can often stand in the way. As highlighted by Eurelectric's most recent Power Barometer report, last year's severe drought, coupled with the shut-down of several nuclear reactors, created turmoil in the continent's electricity market.

Political will also has a habit of rising and falling. Nowhere is that clearer than in the UK, where according to the chair of the Climate Change Committee, Lord Deben, renewable capacity is not increasing fast enough, with the UK government "too keen to support new production of coal, oil and gas".

Given the patchy progress on electrification and renewables, the committee argues for greater attention to demand-side dynamics to decrease energy use, in particular to energy efficiency measures, which actually fell last year.

It's a view echoed by the International Energy Agency (IEA), which in its new Energy Efficiency 2022 study positions energy efficiency as the "first fuel" of all energy transitions.

"Not since the founding of the IEA in 1974 has the need for a coordinated effort on energy efficiency to reduce wasteful and inefficient use of energy been so great," the independent expert group states.

"No other energy resource can compare with energy efficiency as a solution to the energy affordability, security of supply and climate change crises."

The timing is propitious. In the wake of Russia's invasion of Ukraine, global energy prices have risen sharply over the last 16 months. Average energy bills in the European Union are 39 per cent higher than this time last year, pushing one in four households into energy poverty, the IEA maintains.

High energy prices, coupled with energy security concerns, present the conditions for a potential demand-led transformation of the electricity market.

Even laying aside the imperative to reduce energy-related emissions, households and brands have a clear economic incentive to cut energy use dramatically.

Connected Kerb CEO Chris Pateman-Jones plugs his electric vehicle into one of the charging infrastructure company's smart public on-street chargers in the borough of Hackney, London

Olivier Blum, chief strategy and sustainability officer at Schneider Electric, says the big advantage of demand-side measures is that they offer a faster return on investment.

"You don't need to wait 20 or 30 years, because in many parts of the world moving from fossil fuel to renewable energy will take time," he states.

"With energy efficiency, you can have return on investment in two or three years (in order) to decarbonise."

He points to efficiency gains linked to buildings, the source of 39 per cent of global energy-related carbon emissions. Advances in digital technologies such as building information modelling and cloud-based analytics now enable building managers to better understand energy usage patterns and identify opportunities for greater efficiency.

According to a recent white paper published by Schneider, automation of energy systems can help reduce annual energy-related emissions of carbon dioxide-equivalent by 17.5 kilograms per square metre for the average property.

By comparison, installing renewables achieves around 10 kilograms per square metre, while electrifying heating saves around 13 kilograms per square metre.

Richard Britton, chief executive of the UK-based smart energy management company Powerverse, says rapid advances in artificial intelligence promise to turbocharge energy efficiency automation.

Owned by solar energy developer, Lightsource bp, Powersource recently launched a data-driven AI platform aimed at optimising homeowner's day-to-day energy use.

The upside of smart solutions is that they cut energy use without individuals "having to raise a finger", says Britton.

"As more of our energy mix becomes renewable and more of our appliances become smart, we have a real opportunity to make significant efficiency gains."

A recent smart-charging trial by Agile Streets in the UK allowed car owners to programme their chargers so they only activate during off-peak periods. It showed that by "time-shifting" energy demand, peak energy could feasibly be cut by 240 megawatts, the equivalent to boiling more than 1.4 million kettles.

"It's essential to pay close attention to how we use our energy as we transition to an electrified transport system," said Chris Pateman-Jones, chief executive of Connected Kerb, the company behind the Agile Streets trial. "Smart charging can play a key role to ensure we keep our systems as balanced and green as possible."

As with supply-side developments, significant capital investment is also needed in energy efficiency measures to deliver change at scale and pace. Here, some sectors are moving faster than others;

According to the IEA, the estimated investment in global efficiency-related transport nearly doubled (up 47 per cent) last year, for instance, while the equivalent investment for buildings only inched up by 2 per cent.

Most importantly, to flick the transformation switch and move on from steady, kaizen-inspired improvement, demand and supply factors ideally need to merge.

A new demonstration project in Oxford points to how that might happen. The Energy Superhub scheme uses an innovative hybrid battery system to power the city's electric bus fleet, as well as digitally controlled "shoebox" ground-source heat pumps to heat residents' homes, underpinned by smart controls to ensure that the battery, fleet and heat pumps automatically use cheaper, cleaner electricity when available.

By shifting energy-use patterns alongside changes to energy-supply methods, the project is helping decarbonise energy-intensive activities in the city, says Matthew Boulton, a spokesperson for EDF Renewables, one of the initiative's six partner organisations: "With integrated systems thinking … we will ensure we can balance the grid and manage the huge electrification demand that net-zero targets will place on it."