Conservation shouldn't be a dirty word
By Basil Karampelas
This week, thousands of climate experts from around the world will gather in New York City for Climate Week. Conservation should be prioritized as a topic of discussion, yet it is often not at such gatherings and the missed opportunities are material for improving the climate.
As someone who grew up in the 1970s through two oil crises, I am somewhat amazed at the lack of progress in cleantech. Cleantech seems to be nearly singularly focused on production instead of conservation. This is a significant error, given the number of benefits that conservation has over production, particularly in the context of the myriad of challenges our planet currently faces. An examination of financial metrics of cleantech investing over the past two decades shows demonstrates this.
Cambridge Associates analyzed cleantech investing from the 2000-2018 period and found that only 15% of investment was earmarked for Energy Optimization, the lowest of the four sectors identified. Renewable Power led with 48%. However, in terms of investment returns, Energy Optimization was second at 8.5% while Renewable Power was at negative 8.4%. Investors can do better in the coming decade than they have in the prior two.
So why does conservation perform so much better than other cleantech sectors?
First, conservation has operational benefits over production. Specifically, a product that conserves energy does so on a 24/7 basis, while renewable energy production is at best, sporadic, e.g., wind, solar. Second, something that increases energy efficiency can dampen the effects of outages, whether they are natural, such as what happened in the Winter Freeze of 2021 in Texas, or man-made supply shocks, such as what is happening to purchasers of Russian natural gas in the wake of the Ukraine invasion.
Additionally, conservation has financial benefits over new production. For example, with private homes, there are after tax savings for the owners. Additionally, passive energy savings do not require a government subsidy for the economics to work. One of the biggest issues for many types of renewable energy is that to make sense they are often reliant on government mandates or subsidies, and any lack of certainty regarding these mandates or subsidies can hinder the ability to achieve cost-effective financing.
One example of conservation is solar window technology.
It not only generates electricity but also conserves significant amounts of energy through heat-insulating properties and the diversion of infrared and UV rays from the glass, reducing heat gain. It is my hope that more companies in the cleantech space begin to offer hybrid products that can offer both energy production and energy savings. Tying in conservation into a product not only enhances the economics but can also offer operational benefits.
Our industry is facing a once-in-a-lifetime opportunity that has been afforded by the cleantech provisions of the Inflation Reduction Act.
If the industry can learn the lessons of the past two decades and give conservation its proper place on the investment stage, investors, companies, customers, and ultimately, our planet will benefit immensely. I challenge my colleagues in the cleantech arena to take up the mantle of conservation to ensure the success of our critical industry for decades to come.
