While codes, standards, and an increasingly energy-savvy marketplace push new buildings toward higher energy standards, existing building stock presents a conundrum.  Upgrading a building to meet higher energy standards than those for which it was originally designed is a tricky business.

McKinsey and others have identified energy efficiency in buildings, particularly large buildings, as one of the most powerful, and potentially cost-effective, opportunities for greenhouse gas (GHG) reductions needed to avoid catastrophic climate change.  However, even energy conservation measures that are “expected” to “pay for themselves” fairly quickly are not implemented universally.   Why?

There are myriad barriers to scaling energy efficiency, but one that gets little attention is the question of how reasonable and achievable upfront energy saving projections actually are.  This is remarkable, because knowing the savings will actually happen is incredibly important for ensuring that energy cost savings streams actually flow to the parties who pay for them – thus making billions of dollars available to pay for them as well ensuring that load reductions resulting from energy efficiency projects can be relied upon by electric system planners and that the GHG reductions we are counting on actually happen.

In a complex world, of course, it would be unreasonable to expect outcomes to match predictions perfectly. And, if the variability consisted of most outcomes coming pretty close to matching predictions, with overperforming and underperforming projects distributed evenly along a familiar-looking bell curve, the unpredictability of individual projects could be managed to some extent by combining them into portfolios.  Unfortunately, this does not appear to be the case.  Although data about energy efficiency project performance is scarce, the little that is publicly available suggests that outcomes do not conform to a neat bell curve, and, worse, systematic underperformance may be the norm. 

I’ve explored some of the reasons for this variability and underperformance – and described EDF’s efforts to foster the conditions for a better track record – by convening parties engaged in various aspects of the upgrade process (our Investor Confidence Project)  in a Snapshot column published yesterday in the newsletter of the Sallan Foundation, The Torchlight.