Why Light Bulbs Still Need Changing In a Recession

(Bloomberg) --

Doing more with less electricity is one of the best ways to decarbonize the economy, but the future for energy efficiency has hit a pandemic-size speed bump. While other methods of slowing global warming are expected to continue apace, with the potential to reduce costs and employ millions of workers, getting companies to change a light bulb, as it were, just got a lot harder. 

One of the keys to achieving aggressive climate goals has been to convince building owners to find ways to reduce energy use, as buildings make up about 40% of U.S. energy consumption. Before the coronavirus stalled economic activity, Johnson Controls found that 75% of businesses were planning to increase energy efficiency, renewable energy and smart building technology. This year had been projected to see the largest annual increase in such spending in more than a decade. 

The global plunge in electric power, however, is expected to continue for months, which means the financial incentive for companies to increase energy efficiency will diminish. New incentives will be needed. 

Energy efficiency is the largest part of the clean energy jobs market, representing about 2.4 million jobs, but the sector has lost more than 400,000 positions since the pandemic started, representing 70% of all clean energy jobs lost. “Energy audits” have been one of the main ways buildings find out about energy efficiency, but everything from low-priced oil to social distancing is getting in the way.

“The job losses in clean energy, and especially energy efficiency, are pretty alarming,” said Clay Nesler, vice president of global sustainability and regulatory affairs at Johnson Controls. “Social distancing is keeping efficiency auditors and contractors out of homes,” though commercial and industrial projects already in progress are still moving forward, he said.

In New York, companies are facing pressure to ensure light bulbs are swapped out with more efficient versions and install smart building metering within five years. “The economic incentives for energy efficiency upgrades should still be there regardless of the return to work scenario,” said Jeff Eckel, chief executive of Hannon Armstrong Sustainable Infrastructure, which finances commercial energy efficiency projects. “If you don’t have people in a building, you may not run the lights, but you’ll still need to run HVAC equipment because you can’t have a building without lungs,” he said. 

Eckel said that as companies rethink office spaces for virus control—adding air handlers, UV radiation and touchless doors and faucets—they’ll also keep rethinking energy use. 

Energy efficiency stocks are already seeing signs of a shakeout between winners and losers from the pandemic. LED lighting firm Cree was upgraded by JPMorgan analysts last week, sending its stock on a tear, but energy-audit focused FLIR Systems has trailed the S&P 500 index this year. 

Providing national incentives to electrify and decarbonize buildings, and training a workforce to do it, may be catching on as a solution for both unemployment and climate change. A study from the London School of Economics this week suggested that U.K. households should each get  £100 ($123) vouchers to install smart meters, since only 15% of homeowners would install them without a financial incentive. Sustainability think tank the Rocky Mountain Institute this month offered a stimulus plan that includes launching a national building retrofit program, scaling up government-backed green mortgages and offering national incentives for electrifying buildings and disconnecting gas.

“This stuff still saves people money, and in a recession the need to save money is even greater,” Eckel said. “Changing out fluorescent lighting and switching air compressors to variable speed have some of the fastest paybacks for building upgrades out there.”

Sustainable Finance In Brief

• Cornell University’s endowment put a moratorium on new private fossil fuel investments.
• Meat companies are facing investor pressure to improve working conditions amid Covid-19 outbreaks at processing plants. 
• Food waste reduction startup Apeel Sciences raised $250 million in a new funding round led by Singapore’s GIC, giving it a $1 billion valuation.
• Exxon Mobil shareholders are voting this week on a proposal to require future CEOs to report to an independent chairman of the board.

Emily Chasan writes the Good Business newsletter about climate-conscious investors and the frontiers of sustainability.

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