The United States is leaving a trillion dollars in energy savings on the table because we're not harvesting the energy efficiency opportunities that are right in front of us.
McKinsey & Company estimate that by 2020, the US could cut annual energy consumption by 23% and avoid a gigaton of greenhouse gas emissions annually through energy efficiency – while saving companies and consumers $1.2tn (£750bn). And President Obama's Better Buildings Initiative aims to cut energy use in commercial buildings 20% by 2020, saving companies $40bn in the process.
With such staggering potential cost and environmental savings, why are we wasting so much energy to begin with?
The reality is that, despite what we learned in economics class, we do not make decisions about energy use based on perfect information, perfect competition, or even perfectly rational behavior. There are persistent barriers that prevent companies from using energy efficiently, and that require focused and deliberate efforts to overcome.
That's why Environmental Defense Fund (EDF) created EDF Climate Corps, an innovative fellowship program that places specially-trained MBA students in companies to develop customised energy-efficiency investment plans. Since the program began in 2008, EDF Climate Corps fellows have uncovered efficiencies in lighting, computer equipment, and heating and cooling systems that can save enough energy to power 85,000 homes for a year, while saving participating companies $439m in net operating costs. And to date, projects accounting for 84% of the energy savings recommended by our 2008 and 2009 fellows are complete or underway.
EDF Climate Corps fellows have achieved this success by helping companies overcome common barriers to change. For example, company staff may have a gut sense of where energy is wasted, but lack the data needed to make a compelling business case for upgrades. EDF Climate Corps fellow Jen Snook evaluated the lighting use in roughly half of AT&T's real-estate portfolio. The pilot study she conducted found that on average, the lights were on about half of the time, while the spaces were occupied less than 10% of the time. Simple maths told her that installing occupancy sensors could cut lighting costs by 80%, and save hundreds of millions of kilowatt hours annually.
Sometimes it just takes a fresh set of eyes to spot an energy-saving opportunity that can be leveraged across a company. At Cisco, EDF Climate Corps fellow Emily Reyna caught wind of an energy-saving device installed on equipment in research and development labs in North Carolina. After further research and analysis, Emily found that Cisco could save $24m over five years and reduce its global greenhouse gas footprint by 3% through installing power distribution units in its labs across the country.
Getting approval for capital expenditures can be challenging even for cost-effective energy efficiency investments. And short-term thinking – such as requiring one- or two-year payback on projects with 10- to 15-year lifespans – can rule out projects with the largest financial upside. Diversey, an EDF Climate Corps participant, takes a different approach. Rather than treating upgrades as one-off expenditures, Diversey combines a range of projects into a portfolio of energy efficiency investments that together deliver an attractive return. EDF Climate Corps fellow Adam Ostaszewski worked with Diversey to develop tools and financial models to fully integrate this approach into the company's operations.
In our three years of running EDF Climate Corps, we've seen countless examples like these, in which a smart and resourceful young leader, armed with specialised training and a laser focus on saving energy, breaks down the barriers to efficiency and captures big cost-savings and greenhouse gas reductions. If you are interested in hiring a fellow for your US operations this summer – joining the ranks of companies such as Facebook, Microsoft, JP Morgan Chase and RBS Group – please email Rachel Hinchliffe at EDF.
Victoria Mills is managing director of corporate partnerships at the Environmental Defense Fund in Massachusetts
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