THE CHEAPEST AND cleanest energy choice of all is not to waste it. Progress on this has been striking yet the potential is still vast. Improvements in energy…
>”[…] The “fifth fuel”, as energy efficiency is sometimes called, is the cheapest of all. A report by ACEEE, an American energy-efficiency group, reckons that the average cost of saving a kilowatt hour is 2.8 cents; the typical retail cost of one in America is 10 cents. In the electricity-using sector, saving a kilowatt hour can cost as little as one-sixth of a cent, says Mr Lovins of Rocky Mountain Institute, so payback can be measured in months, not years.
The largest single chunk of final energy consumption, 31%, is in buildings, chiefly heating and cooling. Much of that is wasted, not least because in the past architects have paid little attention to details such as the design of pipework (long, narrow pipes with lots of right angles are far more wasteful than short, fat and straight ones). Energy efficiency has been nobody’s priority: it takes time and money that architects, builders, landlords and tenants would rather spend on other things.
In countries with no tradition of thrifty energy use, the skills needed are in short supply, too. Even the wealthy, knowledgeable and determined Mr Liebreich had trouble getting the builders who worked on his energy-saving house to take his instructions seriously. Painstakingly taping the joins in insulating boards, and the gaps around them, seems unnecessary unless you understand the physics behind it: it is plugging the last few leaks that brings the biggest benefits. Builders are trained to worry about adequate ventilation, but not many know about the marvels of heat exchangers set in chimney stacks. […]
One answer to this market failure is to bring in mandatory standards for landlords and those selling properties. Another involves energy-service companies, known as ESCOs, which guarantee lower bills in exchange for modernisation. The company can develop economies of scale and tap financial markets for the upfront costs. The savings are shared with owners and occupiers. ESCOs are already a $6.5 billion-a-year industry in America and a $12 billion one in China. Both are dwarfed by Europe, with €41 billion ($56 billion) last year. Navigant Research, the consultancy, expects this to double by 2023.
That highlights one of the biggest reasons for optimism about the future of energy. Capital markets, frozen into caution after the financial crash of 2008, are now doing again what they are supposed to do: financing investments on the basis of future revenues. The growth of a bond market to pay for energy-efficiency projects was an encouraging sign in 2014, when $30 billion-40 billion were issued; this year’s total is likely to be $100 billion.
“The price of fossil fuels will always fluctuate. Solar is bound to get cheaper”
Solar energy is now a predictable income stream drawing in serious money. A rooftop lease can finance an investment of $15,000-20,000 with monthly payments that are lower than the customer’s current utility bill. SolarCity, an American company, has financed $5 billion in new solar capacity, raising money initially from institutional investors, including Goldman Sachs and Google, but now from individual private investors—who also become what the company calls “brand ambassadors”, encouraging friends and colleagues to install solar panels too.
The model is simple: SolarCity pays for the installation, then bundles the revenues and sells a bond based on the expected future income stream. Maturities range from one to seven years. The upshot is that the cost of capital for the solar industry is 200-300 basis points lower than that for utilities. […]”<