Energy efficiency paradigm shift

Energy efficiency looks like restructuring

Companies invest to increase their revenues, to grow. Sometimes they invest to reduce production costs, into more modern machine tools for instance. Generally, such investments aim to increase production capacity at the same time, in order to get more revenues.

Energy efficiency does not match this business model. It corresponds to investment to reduce overhead costs in particular. It can also reduce production costs, when energy consumption is a main cost factor.

Reducing overhead costs… does it remind you of something? Yes! Restructuring a company, thanks to eliminating and scaling back production, employee layoffs, and salary and benefit reductions, for instance.

Wrong message to investors

Therefore, on the balance-sheet, energy efficiency does not show a good image of the company. Communication efforts from management have to be deployed to explain to shareholders the interest of energy efficiency and its advantages over other possible investments. But, as shareholders want more, not less, they generally prefer growth. Energy efficiency then competes with difficulty against other type of investments.

The word to spread to shareholders

Once an investment in Energy Efficiency is done, energy costs directly decrease without harming incomes and results, thus enabling more financial resources to be made available every year, for many years to come. Energy Efficiency is a mark of confidence in the future, providing a good basis for sustainable growth.

Return on investment is higher for the companies which are the worst in energy efficiency. With high specific consumption, it is easy to significantly reduce energy consumption with simple and cheap solutions. Oddly, it is then economically less interesting to invest in Energy Efficiency in environmentally conscious companies than in energy guzzler ones. It is then normally easier to convince the later. Then, just do it!

Gauthier Dupont
Dupont Energy Consulting GmbH

The price to phase out nuclear power

Bold political decision

On March 15th, 2011, Germany halted operations at eight of its oldest nuclear reactors. Two months later Chancellor Angela Merkel announced the end of the country’s nuclear program: All of the country’s reactors will shut down by 2022. As a direct consequence, the utility company Mainova supplying the City of Frankfurt am Main will raise its kWh tariff by 9% on March 1st, 2012.

Globally, many welcome the decision to definitively phase out nuclear energy. And Germany is well prepared. German’s companies are amongst the world leader in renewable energies (in particular wind, waste-to-energy, and to a less extent photovoltaic). Relation with Gazprom is excellent (just ask former German’s Chancellor Gerhard Schröder). Siemens and others are ready to build more gas and coal fired power plants.

I am not worried about the sector ability to massively build new plants of any type, or about any energy shortage. It is highly unlikely to see any load shedding in Germany for the next decades. The issue is elsewhere.

Bold, that is all well and good, but it is also expensive

It’s not a mystery. Phasing ou nuclear power plant will turn to be a quite big financial drain. There is no miracle. Offshore wind farm investments are enormous. Not only the wind turbines have to be built, but also the transmission network necessary to transfer the power from windy areas to big load centers.

The price of natural gas will certainly continue to rise (just ask former German’s Chancellor Gerhard Schröder).

Big investments added to higher operation and maintenance costs is not a light recipe for our energy bills. They wilt get fatter.

The bill? No, thanks

Who will pay for it? You and me of course! End consumers, at the end of the commercial chain, are always there to cover costs increases. The impact is often hidden, in taxes or in eroded quality for instance. But in my case, it is quite straightforward and visible. 9% increase.

In a typical formal letter nobody likes to receive in his mailbox, Mainova gently explains “network use costs cover the maintenance of the existing network and to finance further network developments to enable, among other things, power transmission from wind farm to the consumers.” They continue, “we do whatever we can to maintain the price as low as possible”. Hum? Then further empty promises. And finally, bang! 9% increase. From 0.23 to 0.25 EUR/kWh. 0,02 EUR/kWh only for network development related to nuclear phase out. I can’t wait for the day they will ask us to pay for nuclear power plant decommissioning.

Electricity in Germany was already high compared to other countries. Now it beats the world record. Next time you come in Germany, you will think twice before turning on the light.

Welcome in the new world free of nuclear power. It’s just a matter of bold politic… and of ordinary people forced to pay for it.

The bill? Yes, please

To be honest, I do agree with this strategy. Less nuclear, more renewable energies is a good move. I just wanted to warn you it has a cost. And we have to pay for it. I am personally ready to do so. Do you?

Gauthier Dupont
Dupont Energy Consulting GmbH