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Why energy efficiency is key to net-zero

Electricity meters

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Have you heard the marketing expression, "Don't sell the steak, sell the sizzle"? Coined by advertising great Elmer Wheeler in the 1930s, the idea is it’s easier to sell an idea than a product. After all, the sizzle has sold more steaks than cows ever have. 

In the path to a clean economy, the idea of "net-zero" is sizzling hot.

Hundreds of companies have made net-zero carbon commitments by 2050 or 2040 — including some of the largest brands on earth, such as Amazon, Coca-Cola, Microsoft and Unilever. Investors are falling in line, with BlackRock CEO Larry Fink writing that net-zero is the opportunity of the future. Bloomberg wrote that the Intergovernmental Panel on Climate Change (IPCC) call for the world to become net-zero by 2050 is "the most important sentence ever written."

Anecdotally, my Google Alerts and slew of energy newsletters have mirrored this trend. I rarely see new corporate goals about renewable energy; now it’s all about the more comprehensive net-zero commitment.

Net-zero is an admirable north star. (There’s a much larger conversation to be had about what net-zero means, how it is tracked, and if "net" is code for an over-reliance on carbon offsets.) 

But in the excitement around the term, what about the steak of decarbonization? Are we so busy looking to the future, we’re forgetting to do everything we can do today?

Energy efficiency is a net-zero fundamental

I get it. Energy efficiency lacks pizzazz. It’s about something not happening. Like a no-hitter baseball game, it’s kind of cool in theory, boring to watch. But it is still where every single conversation about net-zero should begin. 

Efficiency is a no-brainer. Yet many companies aren't prioritizing upgrades for three key reasons: upfront costs; awareness of solutions; and inertia. Thankfully, startups are popping up to fill the first two gaps. 

This week, Daimler Trucks North America inked a deal with Metrus Energy to upgrade the efficiency in its manufacturing plant in Cleveland, North Carolina. Per the deal, called a sustainable energy service, Metrus will foot the costs to provide Daimler a slew of efficiency improvements, including LED lighting retrofits and new equipment for industrial cooling processes in seven company buildings.

Daimler’s cost for the service agreement: $6.4 million over 12 years. Daimler’s expected savings over the same period: roughly $12 million. Oh, and it gets Daimler that much closer to its carbon-neutral manufacturing goals. What CFO wouldn’t want that?

Metrus isn’t the only company offering service agreements with efficiency benefits. Other startups with innovative financial models include Sparkfund, Lightapp, Carbon Lighthouse and Tapper, as well as larger companies such as Johnson Controls and commercial real estate service provider CBRE. And the space is growing; Guidehouse predicts the energy-efficiency-as-a-service (EEaaS) market value will grow to $278 billion by 2028.

We're lagging on the easiest way to decarbonize

Despite the rise of net-zero commitments and new financial models proliferating, we're slowing on our efficiency gains.

Global efficiency improvements have been on the decline since 2015, according to the International Energy Agency (IEA). Energy intensity in 2020 is expected to improve by only 0.8 percent — nearly half of the improvements for 2019 (1.6 percent) and 2018 (1.5 percent). 

IEA Energy Intensity

While the IEA attributes the drop to the COVID crisis and low oil prices, this decline is troubling. Now is the time we should be accelerating into the turns, as energy efficiency is an important piece of the emission reductions puzzle in every climate scenario (from IPCC to IEA).

As the world gets swept away in the net-zero excitement, let’s not forget about the fundamentals. You have to walk before you can run. While it’s true that we will never efficiency our way to zero, efficiency will make zero a smaller hill to climb.

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