Energy efficiency: From ‘head scratcher’ to alluring lifestyle choice

By Myrna M. Velasco – September 25, 2018, 10:11 PM
from Manila Bulletin

So geek is boring, they say… why not sexy?

Imagine having a family dinner or a date and you suddenly bring up a technical concept like “energy efficiency” into the conversation – what do you think you’ll get for a reaction? One still gets a bit lucky just being thrown that ‘blank-faced modernity’ kind of stare – but don’t even attempt to make a punch line out of it, because for some, that might just be a signal to already bolt out from the dining table.

For certain, many views energy efficiency as a “stupefyingly bland” topic and had always been given disingenuous appraisal, albeit in reality it is as interesting as the next big trend – or even the forthcoming damn cool IT app – if consumers will only understand the cost savings that such lifestyle change in energy usage at homes and businesses could bring to consumers’ pockets; as well as the social benefits tied to it in that noble goal of saving the environment.

The whole rationalization appears to have antithetical snapshots, but the subject matter and arguments can really shift to something pretty vogue. Well, that is exactly the psyche turnaround that energy efficiency movers in the country would wish to be gaining traction on – chiefly that of the Philippine Energy Efficiency (PE2) Alliance, an organization that traces its roots from the precursor Energy Service Company Association of the Philippines (ESCOPhil), which had been under the tutelage of the Department of Energy (DOE) for 11 years.

So how can an individual then make energy efficiency a default choice? Firstly, and just to unlock this puzzle to the lay people, energy efficiency could entail changing old practices on energy consumption – either changing the use of appliances, lighting or air-conditioning systems at homes or offices which could pare kilowatt-hours of consumption for the same length of usage; and in turn could result in per-kilowatt hour savings in energy bills.

For the manufacturing sector in particular, efficient energy usage could bring down costs in production of goods, hence, it will redound to cheaper prices also for consumers.

‘First fuel’

Indisputably, the Philippines has been among the countries in the Asian region visited by cycles of energy crisis – from the oil embargo of the 1970s and the recurrent power supply shortages it suffered from the 1990s (the worst power crisis of the country so far) – to the recent episodes of power supply deficiencies in 2006, 2010 and 2014-2015 that unnerved many end-users across power grids.

At times, pessimism turns out to be a “comfort zone” for many Filipino consumers – that flipping such state of hopelessness into an “inspiration to do something” had just been an uphill battle.

That was almost the story of energy efficiency as well as energy conservation metamorphosis in the country – certainly a “slow climb”, according to PE2 Alliance President Alexander Ablaza, who with his more than 30 years of professional experience in the energy sector has been passionately pushing “energy efficiency” into the core of Filipino lifestyles.

“In the last three decades, Filipinos have reverted to a voluntary energy conservation market, transformed very gradually with pockets of energy efficiency programs for appliance standards and lighting, industrial energy efficiency and energy efficient lighting initiatives,” he says.

Employing cost-benefit analysis, Ablaza explains that energy efficiency is all about “producing more economic output from less input energy.” It differs from the mere standpoint of energy conservation, he narrates, because that one just entails “reducing energy demand – even at the expense of reduced economic output.”

He acknowledges though that the Filipinos need to be “re-educated from the pure-nice-to-have “enercon” (energy conservation) mindset to investing and employing energy efficiency as a must-have energy resource for our country.”

As many global experts have been articulating, Ablaza in similar fashion labels energy efficiency as the “first fuel” – because it is the prime resource that any country “can optimally tap before even pursuing the traditional fossil fuels or even emerging renewable energy sources like solar or wind technologies.”

Energy efficiency, he further reckons, is the strategy that’s ready to be reaped by consumers – in fact as many advocates would put it, “it’s not even a low hanging fruit anymore, but it’s a fruit already lying in the ground, all ready to be picked.”

In line with the Philippine Energy Plan through year 2040, energy efficient-anchored economy and base of consumers can yield as high as P36 trillion-worth of avoided purchases for electricity, according to the outcome of studies done by the PE2 Alliance.

This will likewise result in billions of power investments reduction; while at the same time providing the means for the country to avoid as much as 1.7 billion tons of carbon dioxide (CO2) in equivalent greenhouse gas emissions in the next 22 years. Fairly, that will place the country within the range of its commitment to the Paris Agreement or the climate change diplomacy that sets the 2.0 degrees challenge on to global warming’s trajectory.

“Most of other economies – whether developed or emerging – have come to realize that energy efficiency should be mainstreamed as the cheapest, fastest and most untapped energy resource in an energy mix that still utilizes a blend of coal, natural gas, nuclear and renewable energy,” Ablaza notes.

He further qualifies that to-date “many energy markets have enabled policies and market mechanisms that now position energy efficiency alongside renewable energy as a national strategy to enhance energy security and combat climate change.”

One parallel policy aspect that is highly relevant, he claims, is “DOE’s aspirations that energy efficiency will most certainly slow down or decelerate the steady rise in energy prices – both for electricity and imported fossil fuels such as crude oil and coal.”

Behavioral shift

For energy efficiency to really get into the mainstream consciousness of Filipinos and even the energy consumers of the world, Ablaza agrees on the need for it “to capture public imagination” and take its prominence in public discourse or even in everyday casual chatters – that in understanding your utilization of a commodity like electricity at home or petroleum in cars, that leaves a room for beauty and economic weight to everyone.

He notes that “societies and markets had always underestimated the complexity of scaling energy efficiency in any economy,” but on a deeper dive, Ablaza emphasizes that its coverage is all-encompassing: not just the residential end-users but even micro, small and medium enterprises (MSMEs); commercial and industrial establishments, government buildings; as well as the agricultural, forestry and fisheries sectors.”

Beyond knowledge, technology and services for energy efficiency paradigms and practices, Ablaza states that the fourth pillar – and equally important at that, is: “behavioral change.”

He laments though that “some sectors may have ready access to technologies and services, but their understanding of how energy efficiency could deliver actual energy savings is low.”

Ablaza further reckons that “one of the key behavioral barriers is the critical issues of ‘stranded assets’ – or the ability to optimize the economic life or fully depreciate an energy consuming asset, such as an industrial process equipment, a household refrigerator or an operable air-conditioning unit.

He cites for instance, that “a typical middle class family would be tempted to think: why should I replace my 10-year old window-type air-conditioner with an inverter model when I still have about 5 years of usable life in my old, but still functioning unit?”

On that lens, Ablaza postulates that “what this household usually fails to realize is that it may be losing more money for every day of hanging on to the old unit because the additional cost of electricity would most probably outweigh the perceived savings.” Regrettably, he adds, that is the frame of thinking of many energy consumers at present.

He asserts that “the same mindset dilemma faces all other end-users across sectors of the economy,” and “unless the government and the private sector jointly knock down the persistent barriers to knowledge, solutions, finance and behavioral change, then the transition to an energy-efficient economy would be severely hampered.”

Financing concerns

From an amalgam of expertise he gained both in the fields of engineering and corporate management and for one who has spent most of his career life in multilateral lending firms like the Asian Development Bank and the International Finance Corporation of the World Bank Group (both locally and in the international realm), Ablaza plaintively opines that ‘viable financing’ for energy efficiency ventures and programs is still the biggest missing link in the entire chain.

“While the whole world is busy trying to raise climate funding to implement the Paris climate agreement – and while a few local institutions are starting to see energy efficiency as a loanable energy asset class, the nagging issue would always be the accessibility of such funding,” he says ruefully.

The PE2 alliance leader bewails too that “grant funding is now becoming scarcer, even for non-commercial and pre-commercial energy efficiency market interventions.”

Ablaza casts up that “development funding may be available, but there are very few government agencies, state-owned enterprises or private sector entities that are able to channel tens, if not hundreds of millions of US dollars in approved development assistance as a market aggregator to several smaller energy efficiency projects – many of which cost less than a million dollars.”

Regardless, hope still floats for the country’s energy efficiency agenda – and for much of that, he leans on the targeted passage of a legislation that shall put EE into the policy credo of the entire energy sector.

“The Energy Efficiency and Conversation Bill, which is into final stages of legislation in the 17th Congress after a quarter century history of re-filing this measure, will shift our energy efficiency transformation from a voluntary market to a mandatory market, especially for medium and large energy consumers,” Ablaza avers.

This is also the policy underpinning that he expects to stimulate the emergence and flourishing of third party investors, such as energy service companies (ESCOs) and equity providers to targeted commercial and industrial end-users; and these are the league that will then have the ability “to de-risk and push more off-balance sheet capital to energy efficiency projects through a clearly defined fiscal incentive package that should survive and be insulated from the rationalization scope of the government’s second tax reform package.”

On portended investment cycles, Ablaza infers that the Philippines “will need to invest P12 trillion in energy efficiency measures to meet DOE’s 2040 targets,” and around one-third of the estimate or roughly P4.0 trillion “will be funded through the usual self-financed and debt-financed channels.”

The legislative measure, once enacted into law, will institutionalize product and vehicle energy performance standards and labeling, ESCO accreditation, prepare and deploy energy managers, empower local government units (LGUs) in the economy-wide implementation of energy efficiency projects as well as reinforce the DOE’s oversight and authority over energy efficiency programs and undertakings.

On a grander scale, this will also ramp up the Philippines EE ventures and make it aligned with those of peers within the new Asia-wide ESCO alliance – which fuses the country in with the likes of China, Japan, Taiwan and Singapore; and eventually India, Hongkong, South Korea, Malaysia and Thailand – that too is a movement which Ablaza has been championing with co-believers in the Asia Pacific region. The overall energy efficiency savings potential of these markets, as crunched, will be as high as US$26.8 billion.

“Aggressive energy efficiency implementation will help the Philippines contribute positively to ASEAN’s 20 percent and APEC’s 40 percent energy intensity reduction targets by 2020 and 2035, respectively,” he conveys.

Being the most acclaimed prime mover of energy efficiency in the country, Ablaza deems that such “marks only the beginning of a long journey.” To some corporate leaders, it’s mainly managing people and business targets from that corner office, yet dare say also that his lead in this advocacy is an “irreproachable passion” and a normative social influence that an economically advancing country like the Philippines would badly need to keep consumers away from horrid choices and shall instead guide them into aiming for greater things to come.