by Auden Schendler, via EDC Magazine
Sometimes a failure can arrive disguised as a success. For example, DDT. The A-bomb. “Don’t Ask, Don’t Tell.” The Industrial Revolution (if it ends up destroying civilization with runaway climate change). Highly profitable energy efficiency.
Wait—energy efficiency? Isn’t that what’s going to help save humanity?
Well, yes. Efficiency is one of the key climate solutions, according to virtually anyone thinking about the problem. Joe Romm, of the blog “Climate Progress,” points out that it’s cheap, easily and rapidly deployable, abundant, and therefore arguably the biggest carbon-free resource we have. Studies confirming this abound, whether from Mckinsey or PricewaterhouseCoopers.
So how can energy efficiency, especially the really profitable kind, be a failure dressed as success?
Here’s how: Successful energy efficiency programs almost always mean “picking the low-hanging fruit” or “cream skimming.” This means implementing the most cost-effective retrofits—upgrades that offer the largest and quickest return on investment (ROI). This sort of action is praised as “win-win” by consultants. You save tons of energy and money, and do good for the environment. What’s not to like?
The problem is that even though “picking the low-hanging fruit” implies there’s more work to be done (now get the higher stuff!), nobody ever gets the ladder. Progress typically stops with the out-of-the-park home run project that was almost too good to be true, like a lighting retrofit. The result is that only the highest ROI projects comprise the entirety of an organization’s or household’s energy efficiency program, achieving, say, 5 or 10 percent of the total available carbon footprint reductions (if you’re lucky) and leaving the rest on the table.
While climate scientists tell us we need to cut CO2 emissions 80 percent globally by 2050 if we hope to stabilize warming, our energy efficiency efforts typically stop at a fraction of their full potential. The result: While property owners save money, help reduce emissions and get great PR helping to “save the planet,” collectively we fail in the ultimate goal of stopping or abating climate change. This state of affairs remains true even though many leaders know that runaway warming will hurt their business or community, or could eventually render them unviable.
This cream skimming problem has been documented by The American Council for an Energy Efficient Economy’s 2009 Survey of Corporate Energy Efficiency Strategies, which showed an average corporate energy savings target of 20 percent: “Simple payback criteria were mostly three years or less, though two were as high as five years.” Even at five years, that’s the definition of cream skimming.
Cream skimming isn’t all bad. I’ve argued that purely cream-skimming projects can sometimes help grease the skids for future, bigger energy efficiency work by educating how incredibly profitable efficiency can be. After a few successes, managers might as well happily move forward with deeper (and typically lower return and longer tenor) investments.
But my experience suggests that while that may happen sometimes, the mainstream reality is less rosy. In fact, picking the low-hanging fruit, while cutting emissions and creating great PR, actually hurts deeper sustainability and prevents firms, governments and households from undertaking more comprehensive efficiency.
Why it Can Be Harmful