The Experts is an exclusive group of industry and thought leaders brought together by the Wall Street Journal to comment on issues raised in Journal Reports. In May 2014, BCG’s Iván Martén weighed in on several issues.
The key struggle in advancing the frontier on energy efficiency is not a technological one. Reducing energy consumption is a battle that needs to be fought on many fronts, from large industrial facilities to private homes. But it can be fought quite effectively with today’s technologies and tools.
Just by implementing net present value-positive measures with reasonable payback—and without compromising comfort or competitiveness—the U.S. could reduce its total energy consumption by nearly 20 percent through 2020 (a 16 percent reduction is similarly possible in Europe). The measures that would enable this reduction range from simple LED lighting retrofits to heating system upgrades in private homes and commercial buildings to commercial-building automation and combined heat and power (CHP) or waste-heat recovery systems in industrial facilities—all of which are technologies already available today.
Thus, the biggest lever to achieving savings is not tomorrow’s technologies but rather a means of addressing the major barriers that are holding back investments in today’s efficient technologies. This will demand actions from regulators, in the form of tighter building standards, tangible financial incentives to invest, and a homogeneous regulatory environment for companies pushing energy efficiency projects.
More important, it requires the emergence of a more vibrant energy-efficiency industry in the private sector, which presents an enormous business opportunity waiting to be seized. The market needs energy service players able to make savings potentials transparent, execute efficiency projects, and reduce investment barriers through innovative performance-contracting models. It also needs investors that comprehend the attractive returns that such projects can generate and can provide funds when building owners are unwilling or unable to invest. This market has long been nascent; we believe it is poised to take off in the coming years.
This blog was originally published by the Wall Street Journal.