Energy efficiency and the fight against climate change

Investments in renewable energy have exceeded $1 trillion over the past three years. Solar and wind, along with hydro and geothermal systems, are providing low-cost alternatives to fossil fuel-based energy.

With the rapid fall in the cost of energy storage, the prospect of transitioning grids to full reliance on renewable energy is now closer than ever. Governments from the United Kingdom to New York State have pledged a net-zero carbon economy by 2050, an unthinkable goal just a few years ago.

In this race to a net-zero carbon economy, energy efficiency and infrastructure maintenance will play a fundamental role, on a scale similar to the construction of greenfield renewable energy projects. Estimates show over one-third of the energy in American residential and commercial buildings is wasted, from lights in unoccupied rooms to poorly insulated buildings and inefficient air conditioning systems.

Investments in energy efficiency can reduce electricity demand and allow the early decommissioning of the remaining coal and fossil fuel plants. And consumers will gain from the transition to a low carbon economy: $5 LEDs can save hundreds of dollars in energy costs over several years.

Lighting fixtures and other building systems often remain in use well beyond their useful life, leading to increased maintenance costs and avoidable carbon emissions. In fact, in the United States alone, overall deferred maintenance on infrastructure is approximately $4.5 trillion, with more than half, or $2.5 trillion, concentrated in municipalities, government and schools.

Multiple innovative funding solutions have been employed to help these often cash-strapped institutions update facility infrastructure and realize the benefits of modernized, energy-efficient equipment. For example, as part of a usage-based model, outside capital has been used to purchase and take ownership of new energy efficient equipment. With this outsourced solution, it allows the public entity to pay for its actual usage of this equipment – akin to their other utility bills. Such creative solutions allow these institutions to focus their capital capabilities on mission-critical priorities within the communities they serve.

A recent example of a project involving outside capital with significant environmental and social benefits is a school district in the western suburbs of Chicago, Illinois. With 1.4 million square feet of school facilities, the district is comprised of 23 schools with over 14,000 students from pre-kindergarten through high school. The school district recently began a large-scale energy upgrade on essential facility infrastructure, which upon completion, is estimated to reduce their energy dependency by 50-60%, thus reducing their carbon footprint by approximately 50%.

This example shows the scale of the opportunity to reduce electricity demand and carbon emissions through efficiency investments. In 2017, global use of LEDs reduced carbon emissions by 570 million tonnes, nearly 2% of total emissions. Investments in efficient HVAC systems or boilers could lead to carbon emission reductions on a similar or even greater scale.

As leaders gather for climate week, it’s time to revisit the ambition of advancing creative climate solutions. The hundreds of billions of dollars needed for energy efficiency and infrastructure maintenance represent a significant challenge that needs to be addressed in achieving a net zero carbon economy.