Investors and public back energy efficiency

By Elisa Wood

January 21, 2010

Energy efficiency finally has transitioned from being a good idea to a good business – to a very good business.

Money poured into the industry last year, pumping up total deal values by 664.7% and making 2009 energy efficiency’s break-out year, according to Peachtree Green Advisors.http://peachtreemediaadvisors.com/green/downloads/2009GreentechM&ARound-Up.pdf.

This increase for EE — from $164 million to $1.3 billion — came despite a 4.1% drop in overall transaction value for the green tech sector.

“VCs and angels—have targeted the energy efficiency as the next frontier in green tech investing,” the report said, noting that “a slew of money” was channeled into software technologies that manage energy use, as well as electric and hybrid cars.

What’s ahead for 2010? Much may depend on how the industry describes itself.

The Peachtree report warns that once federal stimulus money dries up, green projects may be shelved. Placing a carbon value on energy would bolster the industry, but that will take tremendous “political willpower,” says Peachtree.

And political willpower seems scarce in Congress, particularly with the surprise election this week of Republican Scott Brown to the open US Senate seat in Massachusetts. Those already nervous about voting for cap and trade see the Brown vote as a surprise indictment of not only Obama’s healthcare agenda but also his energy policy. http://www.bloomberg.com/apps/news?pid=20601087&sid=aLrXr50OGPR0&pos=9

But the electorate’s sentiments are hard to read right now. And it may be off the mark to assume that Brown’s election means weak public backing for cap and trade. In fact, an interesting poll by Frank Luntz indicates just the opposite.http://www.edf.org/language

Issued January 21 by the Environmental Defense Fund and NRG Energy, the poll shows Americans eager for Congress to act on climate legislation that would promote energy independence and a healthier environment. And the support crossed party lines.

Much depends, though, on how the issue is framed, according to Luntz. Discard the words “carbon neutral,” he says: “People want companies to focus on greater energy efficiency and a healthier environment – not on being carbon neutral.”

In fact, energy efficiency got the top response (47%) when pollsters asked, “If a company was genuinely interested in energy and environmental issues, which of the following do you most want them to focus on?” After efficiency, poll participants said they want a healthier environment (41%), a cleaner environment (32%), reduced energy consumption (29%), greater environmental stewardship (24%), carbon neutral (12%), none of the above – it’s a waste of time, (8%).

If this poll is correct, fearful lawmakers may again be misreading the public sentiment. A carbon cap and trade bill still can be won, if it is presented correctly to the public. The word from investors is that efficiency is a good bet. The word from the American public appears to be the same. Now we await word from Congress.

Visit Elisa Wood at http://www.realenergywriters.com/ and pick up her free Energy Efficiency Markets podcast and newsletter.

Carbon cap and boom?

By Elisa Wood

August 6, 2009

If we try to reduce greenhouse gases, the economy will take a hit, according to conventional wisdom. The Energy Information Administration bolstered the notion this week by reporting that energy prices would rise for the average US family by $142 in 2020 and $583 in 2030 under the House cap and trade bill passed in late June.

Steven Chu, US energy secretary, tried to soften the blow by saying that the carbon invoice amounted to less than a postage stamp per day. But cash-strapped US households are counting their postage stamps these days and finding they have none to spare.

So if cap and trade truly increases costs, it may be a tough sell to the American public when taken up by the Senate in September. But must we take an economic hit to revamp our energy supply?

The American Council for an Energy Efficient Economy offers an interesting twist on the conventional thinking about the cost of carbon reduction. If we do it right, we could actually better the economy, the organization says in its report, “The Positive Economics of Climate Change Policies: What the Historical Evidence Can Tell US,’ by John “Skip” Laitner, an ACEEE senior economist.

Laitner provides some interesting historic detail to underscore the argument that energy efficiency can reduce greenhouse gases without breaking the bank. Efficiency is not only relatively cheap, but it also creates a more productive economy. Consider this: The US has expanded its output threefold since 1970 and doubled its per capita income, yet the nation only increased its demand for power by 50% because of energy efficiency.

To give perspective on what this means, Laitner converted our energy use into equivalent gallons of gasoline. Today we use the energy equivalent of 2,600 gallon of gasoline per resident; had we not imposed greater efficiency, we would be using the equivalent of 5,500 gallons per person.

So, we have reduced our “energy intensity,” the amount of energy it takes to support a dollar of economic activity. “This decoupling of economic growth and energy consumption is a function of increased energy productivity: in effect, the ability to generate greater economic output, but to do so with less energy,” the report says.

Analysts tend to over-estimate the cost of carbon reductions by underestimating the economic benefits of energy efficiency. For example, energy efficiency not only reduces energy bills, but also often leads to cuts in other costs to homes, buildings and factories. Maintenance, water use, chemical use all tend to decline.

“Changing our investment mix away from traditional, energy intensive patterns toward one that emphasizes more productive technology and behavior, greater energy efficiency, and more labor intensive activities can yield higher rates of economic growth and lower economic and environmental costs,” says the report. “In many ways this is much like rebalancing of a retirement portfolio to take advantage of changing market conditions and new growth opportunities.”

We managed to accomplish a high level of efficiency over the last 40 years with no particular plan. In fact, we proceeded in a “haphazard” and sometimes “counterproductive” way, says the report. What kind of energy productivity could we achieve if we actually tried? Might our energy secretary 40 years from now be talking not about what the new energy economy cost, but what it saved American households?

The report is available at: http://www.aceee.org/.

Visit Elisa Wood at www.realenergywriters.com and pick up her free Energy Efficiency Markets podcast and newsletter