Energy Efficiency: A Sign of Personal Virtue or an Untapped Business Opportunity?


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by Peter du Pont, Vice-President, Government & Clean Energy Consulting, Nexant Inc.

According to the Asian Development Bank, a total of $944 billion of investment will be needed in energy savings opportunities by 2020 in order for China, India, and Southeast Asian countries to meet their national targets for EE and greenhouse gas emission reductions. Yet only a fraction of this investment is currently being planned. This talk will address the proverbial $20 bill lying on the ground and describe why there are so few takers, and what is needed to “sex” up energy efficiency so that it becomes a more broadly bankable business opportunity. It will describe different business and regulatory models for stimulating investments in energy efficiency in buildings, factories, and the transport sector.

Dr. Peter du Pont leads the clean energy initiatives at Nexant Asia and has more than 25 years of experience developing sustainable energy and efficiency programs in the U.S. and Asia.

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Energy Efficiency: A Sign of Personal Virtue or an Untapped Business Opportunity?

  1. 1. Energy Efficiency:A Sign of Personal Virtue or anUntapped Business Opportunity?Peter du Pont, Ph.D.Vice-President, Government & Clean Energy ConsultingNexant, Inc.Presented at Net Impact LuncheonSasin Centre for Sustainability ManagementBangkok, 20 June 2013
  2. 2. Personal Virtue?Conservation may be a sign ofpersonal virtue but it is not asufficient basis for a sound,comprehensive energy policy.-- Vice-President Dick CheneyMay 20012
  3. 3. Topics Covered The Funnies Introduction Background and Drivers for Clean EnergyFinance Energy Efficiency: The First Fuel Thailand’s 5 Conservation Power Plants How Can We Seize the Energy EfficiencyInvestment Potential?3
  4. 4. The Funnies4
  5. 5. Fresh from the Laboratory5
  6. 6. Technological Overkill?6
  7. 7. The Concept of Multiple Benefits7
  8. 8. Introduction8
  9. 9. Profile of Nexant• Global company• consulting services andsolutions across theentire energy sector• 700 employees,• 3,000+ energy industryassignments in 100+countriesSanFranciscoNew YorkHoustonWashington D.C.Nexant Consulting OfficesProject OfficesRepresentative OfficeLondonAbujaCairoShanghaiBahrainBangkokTokyoBeijingKualaLumpurSeoulCapeTownBuenosAiresEnergy and Chemical Consulting CapabilityNew Delhi Software and datasolutions– iEnergy and Grid360 forutilities– Chem Systems Online Consulting services– Electric power– Oil and gas– Energy technology– Energy Efficiency and Carbon mgt– Chemicals 9
  10. 10. The Challenge Why is that $20 bill still lying there?10
  11. 11. Background and Drivers for CleanEnergy Finance11
  12. 12. Population, GDP and Energy Trends:New Locus of Energy Demand in AsiaSource: BP Energy Outlook (2010)12
  13. 13. GDP per Capita Drives EnergyDemandBUT … large differences at any income levelSource: IEA (2006) 13
  14. 14. Primary Energy Demand Per Capita,by Country: 2008Source: International Energy Agency 14
  15. 15. Is This Energy Security?Source: USAID, Energy Trends in Developing Asia (2011)15
  16. 16. In 2030, 38% of Global EnergyDemand Will Be in Developing AsiaSource: USAID, Energy Trends in Developing Asia (2011)16
  17. 17. Overwhelming Momentum towardFossil Fuels:New Demand in Developing Asia for 2008-2030 Will Come fromCoal and OilSource: USAID, Energy Trends in Developing Asia (2011)17
  18. 18. What Nuclear Renaissance?Source: World Nuclear Energy Status Report, 201218
  19. 19. Renewable is Getting More andMore Attention, and $$$New Capacity Added Worldwide (2008-2009)World Generating Capacity (2009)World ElectricityProduction (2009)Source: Global RenewableEnergy Status Report 201019
  20. 20. Financial New Investment in Renewables:Developed vs. Developing Countries,2004-2010 ($bn)15315580 82677041221325155722004 2005 2006 2007 2008 2009 2010Developed Developing31510 414 46 210118 16261 223VC CorpRD&DTotalinvestmentSDC*AssetfinanceGovR&DPublicmarketsnew equityM&A/B-Oetc.TotaltransactionsRe-investedTotalcompanyinvestmentPETechnology developmentEquipment manufacturing/scale-upProjectsAsset and companymergers, acquisitions,refinancing, buy-outs etc.Global Trendsin SustainableEnergyInvestment2010Global Trendsin RenewableEnergyInvestment2011Source: Bloomberg New Energy Finance/UNEP 20
  21. 21. New Investment in RE by Technology,2010 ($bn)0.1236118695-44%44%-22%-20%-5%52%30%MarineGeothermalSmall hydroBiofuelsBiomass & w-t-eSolarWindGrowth:*Small Distributed Capacity1510 414 46 210118 162Global Trendsin SustainableEnergyInvestment2010Global Trendsin RenewableEnergyInvestment2011Source: Bloomberg New Energy Finance/UNEP21
  22. 22. Energy Efficiency: The First Fuel22
  23. 23. And NOW … Let’s Take a Look at thedreaded Energy Efficiency Gap !!! Efficiency measures account for two-thirds of the 3.8 Gt of abatement in2020, needed to meet the 450 ppm trajectory Currently Efficiency is only capturing a small percentage of reductions –in the range of <1% to 10%2628303234363840422007 2015 2020 2025 2030Gt2010Efficiency 65 57End-use 59 52Power plants 6 5Renewables 18 20Biofuels 1 3Nuclear 13 10CCS 3 10Share of abatement %2020 20303.8 Gt13.8 GtReference Scenario450 Scenario23
  24. 24. Can Development Assistance Fillthe Gap?Bilateral and Multilateral Support for Energy Sector Assistance, by SectorArea: Comparison of Two Three-Year Periods (1997-1999 vs. 2003-2005)24
  25. 25. US Experience : Policy Action on EECan Clearly Make a Difference02,0004,0006,0008,00010,00012,00014,000196019621964196619681970197219741976197819801982198419861988199019921994199619982000KWh12,0008,0007,000CaliforniaU.S.kWhTotal Electricity Use, per capita, 1960 – 200125
  26. 26. Australia Example:Domestic Refrigerators, 1980 - 2006020040060080010001200140019801982198419861988199019921994199619982000200220042006MEPS2005 fullimpactInitial MEPSintroduced in 1999Labellingintroduced in 1986kWh/yearSource: Australian Greenhouse OfficeRefrigerator use has fallen by more than 60%26
  27. 27. U.S. Refrigerator Energy Use vs. Time, with Real Price Changes.U.S. Example:Domestic Refrigerators, 1947 - 2004Source: Goldstein, NRDC 2005Refrigerator use has fallen by more than 2/3 since 1973,while volume has increased and price has decreased27
  28. 28. South Korea Example: ApplianceStandards and Labeling28
  29. 29. Thailand’s 5 Conservation PowerPlants29
  30. 30. Famous stars forThe public campaigns Achievement• Successfully removed low efficient “fat tubes” from the market.Manufacturers stopped producing the fat tube in September 1995• Create massive popularity for thin tubes among consumers all over thecountry.• Energy savings of 1,958 GWh/yr and peak demand reduction of 402 MW and1.47 million ton of CO2 reduction.Market Transformation ProgramsSwitching from FAT to THIN TubesSource: Phumaraphand, EGAT (2011)30
  31. 31. Thailand’s Famous #5 Label:Focusing on the Residential Sector31
  32. 32. 32 Refrigerator (1994) Air conditioner (1995) Compact Fluorescent Lamp (1996) Electromagnetic Ballast (1998) Electric Fan (2001) Automatic Rice Cooker (2003) Lighting Luminare (2003) T5 (2009) Electronic Ballast (2009) Double-oscillating Fan (2009) T5 Luminare (2010) Exhaust Fan (2010) Standby 1 Watt – Television (2010)Energy Labeling Programs byEGATSource: Phumaraphand, EGAT (2011)
  33. 33. EnergyConservation FundRevolving FundESCO FundUtility FundEstablished in 1992 under Energy Conservation ActCollecting a small levy (~1 US cent/litre) from the sell ofgasoline, diesel, fuel oil and keroseneSupporting EE/RE promotion activitiesSoft loan programCo-investment programDemand Side Management programs in residential, commercial andindustrial sectorFocusing Standard & Labeling for electrical equipmentsMEA PEAEGATLimited activities in energy efficiencyPublic FundFinancing of Energy EfficiencyPrograms in Thailand33
  34. 34.  Demand-SideManagement (DSM)results:– 2,600 peak MW peakdemand reduction– 15,700 GWh of energysavings– About 5% of currentelectricity is supplied byNegawattsThailand has Avoided Constructionof five (5) Power Plants34
  35. 35. Cost Comparison of Energy Optionsin Thailand$0$50,000$100,000$150,000$200,000$250,000The30%SubsidyProgramEERevolvingFundDSMBiogasElectricityGenerationMixedConventionalEnergy(70%NG)Mini-hydro,200kW-6MWBiomassCondensing,20MWWindFarm,20,000kWMSWIncineration,3,000kWSolarPV,largescale,460kWCapitalCost(Baht/kW)฿0฿2฿4฿6฿8฿10฿12฿14GeneratingCost(Baht/kWh)Cost ofDeliveredElectricityCapital CostDemandSideMeasuresSupply SideMeasures35
  36. 36. How Can We Seize the EnergyEfficiency Investment Potential?36
  37. 37. Most Countries in the Region HaveSet Energy Savings TargetsCountry Energy Efficiency Strategy/Action PlanRequiredInvestment ($m)Brunei Darussalam Attain 25% reduction of energy intensity from 2005 level by 2030 48Cambodia Reduce final energy consumption by 10% in all sectors 126IndonesiaDecrease energy intensity by 1% annually and decrease energy-GDP elasticity tobelow 1% by 20256,019Lao PDR Reduce final energy consumption by 10% in all sectors 29MalaysiaReduce final energy consumption in industrial, commercial, and residentialsectors by 10% from 2011 to 2030, and reduce final energy consumption of thetransportation sector by 1.39 ktoe in 2030901MyanmarReduce primary energy consumption by 5% in 2020 and 8% by 2030 comparedto BAU, and improve EE in all end-use by 16% by 2030165Philippines Reduce final energy consumption by 10% in all sectors from 2007 to 2014 601SingaporeReduce energy intensity by 20% by 2020 and by 35% by 2030 from 2005 level,and cap CO2 emissions from fuel combustion at 63 Mt-CO2 in 202097Thailand Reduce the energy intensity of GDP 25% by 2030 relative to BAU 2,006Vietnam Reduce energy consumption by 3%-5% by 2010 and 5%-8% by 2010-2015 649Source: 3rd ASEAN Energy Outlook, February 2011 and Nexant calculations37
  38. 38. A Total of $944 billion is Needed toMeet National Targets by 2020($2 billion for Thailand alone!)Investment Required by 2020 to Reach EE Targets ($m) 92% of investment in China, 7% in India,1% in Southeast Asia Largest investment in Southeast Asiacountries required by- Indonesia (57%)- Thailand (19%)- Malaysia (8%)* Analysis covers SE Asia, China, and India To meet government EE targets by 2020, need- ~$11 billion in Southeast Asia- ~$944 billion in China, India, and SoutheastAsia combined To meet government EE targets by 2030, needan additional $15 billion in Southeast Asia38
  39. 39. How Will We Pick Up the $20 Bill?(or the $2 billion prize in the case of Thailand) Drivers and Policies– Cost of oil imports– Competitiveness and ASEAN openmarket– Climate change– Energy Efficiency as a Resource– Feed-in Tariff for energy efficiency Business Mechanisms– Energy service companies (ESCOs)– EE insurance products– Performance guarantees– Innovative financing mechanisms39
  40. 40. Thank you!Peter du Pont, Vice-PresidentGovernment & Clean Energy ConsultingNexant, Inc.Tel: +66 2 793 464pdupont@nexant.com40