Articles Your Energy Future: Alliances Required!

Your Energy Future: Alliances Required!

How do we prepare for our energy future? This is an important question for our staff and partners at IBTS. Our work with dozens of companies, governments and communities demonstrates that energy is a driving force that will shape our future. The purpose of this white paper is to help our partners and clients understand the foundational principles that guide the energy planning processes. Furthermore, it will outline the increasingly important role of partnerships as we seek to develop creative energy solutions.

ENERGY SOLUTIONS: THE TWO-HEADED MONSTER

There are two primary ways to approach energy challenges (Figure 1). First, we can look at what is. Our present situation helps us understand challenges and roadblocks that are hindering us from achieving desired energy goals. Assessing 'what is', requires us to evaluate our past. This backward look provides information about historical decisions we or others have made. Consideration of the past can be a difficult process because it reveals the consequences of our decisions. These are both good and bad as well as intended and unintended. We can respond to the identified problems of the past in two ways. First, we can view historical mistakes negatively and resort to blame games and political positioning. Alternately, history can be used to teach us how to live more effectively in the future. In this sense, past mistakes are helpful. However, this process still provides us with information that requires us to 'fix' past mistakes.

For example, Forbes recently labeled America as, "The Worldwide Leader in Wasting Energy".[1] They claim that the United States wastes more energy than it uses because 57% of energy flow is lost through heat and leaks.  This is a perfect example of past mistakes that need to be corrected.  Figure 2 provides another example from a real-life case-study of a home in Britain.[2] The thermal imaging results show the heat loss problems that occur as a result of poor quality windows and doors (indicated by red or pink shades). The second image shows the positive change that occurred when the inefficiency was addressed by replacing the windows and doors. Therefore, as we discuss energy issues we must
expect that we will have to look back in order to fix yesterday's problems.

The other perspective we can approach energy from is to look at what will be. This forward look helps us evaluate and plan for our energy future. The tool of strategic foresight is a useful way to do this. As the pace of global change increases, strategic foresight is becoming an important way to ensure our plans consider the future and not just the past. The recent bankruptcy of Kodak, once heralded as the innovator in photography, is proof that relevance is earned and cannot be assumed. When done properly, strategic foresight enables organizations to be more effective today by thoughtfully considering tomorrow. Foresight helps organizations:

1. Take the long view: Consider the long-term implications of today's decisions.
2. Think outside-in: Avoid the trap of "we've always done it this way".
3. Foster multiple perspectives: Ensure that more than one option is considered.[3]

One means of thinking about the future is to examine trends and forecasts. Richard Watson and a group of future thinkers have developed a list of trends that they expect to occur in the next decade (Figure 3). These trends are presented creatively in the form of a Periodic Table of Elements. Trends related specifically to energy are colored green and are shown in Figure 4. By considering these forecasts of what could occur within the energy sector, we can make plans that consider future needs, opportunities and challenges.

A scan of recent energy articles reveals the appropriateness of these trends listed in Figure 4. For example, as America attempts to utilize clean fuels (Cf), they have decreased use of coal for energy production.[4] However, much of this has been accomplished because of the low cost of natural gas. The low price of natural gas is not forecast to continue in the next year because of increasing price volatility (Pv). In the past year the price of natural gas has almost doubled.[5] This simple example demonstrates how projected future trends are already occurring within the energy sector.

Richard Watson notes that localization and tribalism, a counter-trend to globalization, is a significant driver to watch.[6] Tribalism simply means that we turn inward and fight for local rights versus seeking solutions that benefit the common good.  In contrast to globalism, tribalism fights homogenization and drives local city or state agendas. When this trend is applied to energy it is called resource nationalism and is caused by scarcity of resources (Sr). Therefore, as we look forward to our energy future we learn that the concept of "my" energy will become more important for individuals, cities, states and regions. While we may not agree with this mindset, we will need to prepare for it and respond to it.

For example, at the 2013 Energy Innovation Conference in Washington, DC we were reminded of a microcosm of tribalism within the energy solutions industry. Presenters stated that  "[energy solution] tribalists wave away the problems with [their] preferred energy source and exaggerate the problems of other technologies".[7] We should expect resource scarcity to create tribalistic tendencies that will affect energy innovation, solutions and application. 

Therefore, solving past problems and anticipating future ones are both challenging and important processes. However, at IBTS, we find that requests for our services most often focus on fixing problems of the past. Things such as historic building code gaps, short-sighted solutions or budgetary constraint often require us to go back and fix problems from the past.

These examples remind us of the importance of looking forward as well as looking back. Energy planning requires that we focus on both the past and the future. Looking backward without looking forward means we will result in the tyranny of always fixing yesterday's problems. Conversely, looking forward without looking back will result in overlooking solutions to problems that hinder progress.

In an era where change is pervasive and constant, we must become more adept at learning about what is coming and build this into our plans. In other words we must fix past problems and focus on the future.

PARTNERSHIPS: A KEY SUCCESS FACTOR

One of our goals at IBTS is to improve coordination among government, industry and research organizations. The process of facilitating open discussions and meetings helps create collective solutions that surpass individual ideas.[8] While every project we undertake is different, a constant in our work is the concept of partnership. As we look to the future energy needs of our nation and our globe, we believe partnership is going to continue to increase in both need and importance.

By definition, a strategic alliance or partnership provides an organization with a strategic advantage they cannot possess in-and-of-themselves.[9]^,[10] By working with another company or companies, a combination of expertise is brought forward that collectively provides or creates solutions. For example, when Harris County in Texas needed to rebuild after Hurricane Ike in 2008, they relied on partnerships to repair $30 billion in damages. They utilized funding partnerships with government agencies, collaboratively developed priorities with county partners and utilized IBTS to provide services in the areas of building inspections and the development of uniform operating procedures. Partnering became a requisite for the completion of the large task of rebuilding for Harris County.

As we consider energy needs, whether it is fixing the past or planning for the future, there are three trends  that will require the creative use of partnerships.

1. Smart Buildings/Homes: The idea of Smart Buildings often conjures images of ultra-modern high-rise towers like the Taipei 101 project. However, the concept is equally applicable to older buildings. The purpose of smart buildings is to increase energy efficiency in order to reduce costs and energy demand. This helps us address the trend of resource scarcity. To create this efficiency in cooling and heating processes, the ingredients of technology, efficient materials and effective design are combined to either the construction of new buildings or to retrofitting old ones. Many equate smart buildings with the universal LEED certification system, which guarantees high performance green buildings and neighborhoods.[11] While this is an important related certification, the LEED measure considers more factors than most Smart Buildings typically focus on. The Passivhaus certification is another smart building standard. Certified passive homes are designed to have extremely low energy loss.[12] No matter the certification, intelligent buildings rely on technology to monitor and control building systems such as heating and lighting. In turn, this provides efficiencies and monetary savings.

The creation of Smart Buildings requires that several different specializations are brought together such as architecture, technology and construction. Therefore, achieving Smart standards requires corporations or homeowners to utilize external specialists and partners. The Obama administration recognizes this and has launched initiatives over the past two years to help progress the development of Smart Buildings. The Better Buildings Initiative is a public-private partnership to develop and share new energy savings technologies.[13] Alternately, the Green Button plan helps utility companies make their energy use data easier to understand and, in turn, enables customers to establish and monitor their personal energy consumption.[14] Therefore, given the complexity of energy and scarcity of resources, partnerships or alliances are useful ways to achieve energy progress through the creation of Smart Buildings.

2. Turning Energy Consumers Into Producers: Another emerging trend is to help traditional energy consumers become involved in the production of their own energy. The California Renewable Energy Program (CREP) provides rebates and incentives for consumers to create their own energy.[15] Incentives for solar, wind and fuel cells are available to homeowners as well as businesses. While enabling consumers to produce energy is smart, it is also creating the need for partnerships and collaboration. As energy consumers become producers the trend is resulting in an increase in micro-generation and micro-grids. These networks of small, distributed electrical power generators need to be linked in order to operate as a collective unit  of energy systems. Therefore, advanced control strategies and coordination are required to unify this diverse distributed system.[16] In addition, partnership is reaching new levels as California law now allows citizens to sell surplus energy back to utility companies.[17]

This diversification of energy sources was called 'optionality' at the 2013 Bloomberg Energy Summit. Optionality means that future energy needs must be met from more than one energy source. Sound business strategy typically encourages businesses not to place all their eggs in one basket. Similarly, optionality is the energy equivalent of product diversification. Dustin Knutson, Director of Energy Solutions at IBTS, notes that future energy strategies will require a balance of solutions ranging from the creation of new energy sources to energy conservation to consumers producing their own energy.

 Microgrids and micro-generation are emerging fields and considerable work is underway to help regulate these emerging industries.  Here again we see the partnerships between business and government as well as citizens accomplishing things that cannot be done alone.

3. Carbon Tax and Trade: Carbon tax credits are another regulatory change and trend that will require partnerships. Carbon markets are intended to address climate change by treating greenhouse gas emissions as a tradable commodity. This demand is driven by treaties like the Kyoto Accord and the United Nations Framework Convention on Climate Change. These agreements set a capacity of carbon emissions that can be produced by a country or region. Countries then allocate these finite credits to industry and business. When a business emits less carbon than it is allowed, it earns a carbon credit that in turn can be sold on the carbon market. Industries that emit more carbon than they are allowed can purchase these credits, effectively making pollution costly. Stated positively, carbon taxes create awareness and accountability about the effects of carbon pollution.  RBC Markets, a global division of the Royal Bank of Canada, has a department dedicated solely to carbon emissions trading .[18] The Carbon Trade Exchange operates as a global carbon stock market (C^TX).[19]  The value of the North American Carbon market is  estimated to surge by 270% in 2013, an increase driven primarily by changes in the California carbon market. [20] Figure 5 shows different carbon tax initiatives and protocols that affect North American regions.

Though not without supporters and dissidents, carbon trade and carbon credits signal a dramatic change in regulatory norms. Once again, we find that partnership and alliances are a requisite for this unique aspect of our energy future. In a future white paper, we will deliver more comprehensive coverage to the important topic of carbon tax.

CONCLUSION

In conclusion, we believe partnerships and strategic alliances are critical components of our energy futures. The development of energy plans requires us to fix problems from the past as well as make plans for emerging needs in the future. Through the use of foresight, we can strategically determine key energy drivers such as resource micro-grids and regulatory changes. In turn, we can ensure we allocate resources to meet these emerging challenges and opportunities. There are three trends that are already affecting our energy future: the creation of Smart Buildings, shifting energy consumers into energy producers, and the carbon tax and credit system. These changes require that we utilize partnerships in order to develop effective solutions.

REFERENCES

[16] J. Vasiljevska, J.A. Peças L., & Matos, M.A. (February 2013). Integrated micro-generation, load and energy storage control functionality under the multi micro-grid concept. Electric Power Systems Research: Volume 95. Pages 292-301.

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