The question of short- and long-term energy performance goals came up on a recent project aimed at greatly reducing the energy and greenhouse gas footprint of a community of about 250,000 people in the United States. This triggered an interesting discussion as to the nature of short-term energy efficiency goals and their relationship to long-term energy and greenhouse gas objectives.
We are seeing cities, companies and even entire countries increasingly make ambitious energy and greenhouse gas reduction goals. An example is Owens Illinois, the world’s largest glass container maker and a major energy consumer. It recently announced a 50% energy reduction target and a 65% greenhouse gas reduction target. Other examples include cities setting targets of 50% or more greenhouse gas reductions within a couple of decades. The entire EU is setting a further 20% reduction target within a decade. These are examples of challenging but specific long-term goals that underline the growing strategic importance business and political leadership is attaching to energy productivity and climate risk mitigation.
So far so good. In each of these examples, the long-term goals are clear and measurable. In each case, the range of options to achieve the goals break down into a relatively small number of choices around conventional efficiency — basic changes in building construction and manufacturing processes, served with clean energy supplies such as on-site cogeneration and viable renewables. This will be combined with smarter and flexible energy management and supply networks. In a rational world, these options should be assessed against various energy and carbon pricing ranges, and decisions made as to the critical measures that must be implemented to ensure the long-term goals are deliverable with acceptable levels of technical and financial risks.
In many cases, the long-term energy goals effectively require reshaping basic infrastructure for energy use, supply, management and distribution. This requires a multi-year view to investment planning and implementation. It also means that not every part of the investment plan will yield immediate efficiencies, cost reductions, or carbon reductions. In fact, in some cases, a combination of efficiency, emissions, or costs may temporarily go the wrong way until the next piece of the puzzle that makes up the fully-integrated energy solution is put in place.[pullquote]
In a rational world, this wouldn’t be a problem. Expenditures would be treated as perfectly normal phasing of partial investments on the way to a substantially more efficient solution. But for some reason, when it comes to energy, rationality has a habit of being thrown out the window, which brings us to a common conundrum of short-term goals.
Short-term energy goals all too often default to a completely different model. First, there’s expectation that cost, efficiency and emissions will improve simultaneously every year without fail. Secondly, there’s the assumption that every partial investment will give instant paybacks of 30% or more, based on the historical costs of energy and assuming no future costs or penalties for carbon. These are challenging goals, and inevitably implementation defaults to simple, non-integrated energy efficiency projects. The lights get upgraded and the motors get swapped out, but the cogeneration systems don’t get built, district energy networks don’t get laid, and the smart-metering and energy management networks remain uninstalled.
This non-alignment between short- and long-term energy goals would be seen for the craziness it is in just about every other area of investment. No one would expect a half-built factory to make profitable products. No one would build a factory where each component was treated as a standalone, optional investment decision and expect it to ever make a product. Yet, somehow with energy we believe we can get to long-term goals via this disjointed approach.
Closing this disconnection between short- and long-term goals is actually easy, but sadly rarely done. All that’s needed is to lay out the total investment required to deliver the long-term goal, along with the expected costs, emissions and efficiency profiles on a year-by-year basis. Once this is done, the implementation teams would be measured against the implementation milestones: These become short-term goals we can believe in.
We all need to honestly validate whether our short-term energy goals and commitment of resources align with a plan that clearly meets the long-term vision. If not, as is often the case, it’s time to scrap the short-term goals and rethink the execution plan.
Peter Garforth is principal of Garforth International LLC, Toledo, Ohio. He can be reached at [email protected].