In the month of October, my travels took me to energy-related events in both the United States and Germany. It is well known that there are major differences in energy efficiency between these two countries. However, rather than explore these differences, this column will look at the similarities of their energy challenges within the context of two very important factors: managing high levels of uncertainty and the availability of suitable skills.
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As always, the World Energy Engineering Congress, held in Chicago, was a highly professional, well attended meeting with an extensive program on a wide range of topics. I had the honor to chair a session where four very different organizations showed how long-term integrated energy planning along with systematic implementation can dramatically reduce energy use and greenhouse gas emissions when compared to their peers. These organizations ranged from a municipality, Arlington County, Virginia, to major industrial companies, Corning and Toyota, to individual hospitals and data centers.
One common thread in these stories was the competitive and social benefits that accrue over time. At the same time, all of the programs highlighted challenges in implementing energy plans when faced with an unclear legislative outlook surrounding efficiency; new traditional and renewable energy sources; and carbon reduction. The uncertainty over energy costs is of growing concern. The currently low prices discourage investments, a decision which could easily prove a false economy under future pricing changes.
Delivering breakthrough energy results, faced with these uncertainties, requires energy management skills that are in short supply. An effective energy manager is increasingly a risk manager juggling an integrated activity and investment portfolio. They need to be comfortable with long-term targets which are often at least twice as efficient as they are today. The Association of Energy Engineers, the organizers of WEEC, is constantly adding to its personnel training programs. Training is an essential prerequisite but cannot substitute for experience, which remains in critically short supply.
Last, but certainly not least, the uncertain outlook for the overall U.S. economy makes any long-term energy planning difficult. America’s biggest risk is to underestimate the competitive importance of effective energy management and lose out on innovation and cost savings.
Immediately after my trip to Chicago, I was with a small group of U.S., Canadian and German municipalities meeting to compare their approaches to the future energy challenges of their communities. This Transatlantic Urban Climate Dialogue was the first of four workshops; two on each side of the Atlantic.
On the surface, things seem very different in Germany, where the country has been a pioneer in developing an integrated approach to energy efficiency, distribution and cleaner supplies since the early 1970s. As a result, Germany uses less than half the energy of the United States does to create a dollar of GDP. They operate within the EU-wide 20-20-20 energy guidelines, which call for 20% efficiency gains, 20% greenhouse gas reduction and 20% renewable energy by 2020.When these goals were established, they were challenging, but achievable. For Germany they meant essentially intensifying existing strategies around efficiency, heat recovery and renewable energy supplies.
In the intervening period, the Japanese tsunami struck, crippling the Fukushima Daiichi nuclear reactor. Specifically in Germany, this reopened the debate on closing all the nation’s reactors. In May of this year, the decision was made to close all reactors by 2022. This not only removes electricity generation that, at its peak, was about 23% of the country’s total; it also removes electricity that was carbon-free from a greenhouse gas standpoint. Suddenly the “steady as she goes” strategy has been redefined. New targets for efficiency, renewable energy and heat recovery have been established at levels significantly higher than the EU guidelines.
The new challenge for Germany is no less transformative than that facing the United States. Like the United States, this transformation must take place against the backdrop of an uncertain economy and uncertain energy prices. Unlike the United States, there is reasonable legislative clarity. This clarity, however, does not reduce the sheer scale of the measures and innovation needed to meet the revised targets.
Overcoming these challenges requires energy management leaders who are comfortable with evaluating technical and financial risks; embracing transformational targets; and communicating effectively with key business and political decision makers. These energy leaders need to develop plans that interlink efficiency, distribution and supply to a far greater degree than had been assumed until now. The skills required are not that different between Germany to the United States. These skills are in short supply in Germany, as they are in the United States, but for completely different reasons. The generation of energy managers that successfully led Germany through its first energy transformation is now mostly retired. Their successors have faced the different challenge of continuous improvement within a relatively predictable legislative framework. In the United States, these skills have yet to be developed for the most part.
By looking at the leadership challenges of energy transformation in both countries, I was struck much more by the similarities than the differences. Clearly, the United States can learn much from the experiences of the past 30 years of Germany’s successful energy strategies. However, the growing need for risk management, flexibility and innovation on both sides of the Atlantic underlines the value of sharing experiences in both directions.
Peter Garforth is principal of Garforth International, Toledo, Ohio. He can be reached at [email protected].