Energy efficiency, rediscovered: climate change and rising energy prices are making efficiency look good--again.

• Author: Jeffries, Elisabeth
• Position: Company overview

Cursing is not uncommon at the World Cup, the quadrennial global football championship. The event routinely provokes malediction for many reasons--ties, losses, inept play, called fouls, uncalled fouls, official favoritism (or disfavoritism), player injuries, national animosities, and so on. The next tournament will be no different in that respect. Due to begin in June 2010 and hosted this time by South Africa, it will be scattered across 10 stadiums crammed with tens of thousands of screaming fans. But millions more around the globe will watch the games on television, and they may well have a new reason to curse: blackouts.

The Cup will occur at a delicate time for South Africa's energy moguls. Eskom, the national utility, has warned that power cuts, which have plunged thousands of households into darkness on many occasions over the last three years and cost businesses millions, could continue right through to 2010. There is a real possibility that these shortages will disrupt the matches and broadcasts during high-demand periods. "Eskom's power system will remain tight over the next five years with an increased likelihood of power interruptions. This trend is set to continue at least until the first new coal-fired base load power station is commissioned in 2011," the utility reported last year.

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Eskom's customers are getting used to it. At times, they have been forced, reluctantly, to adopt an energy-saving mindset, turning off electric equipment at the wall, avoiding use of washing machines during peak hours, and baking less. But the utility is still in a difficult position. South Africa's total demand for energy is increasing faster every year than its supply, and is projected to double within the next 10 years. New capacity investment is expensive. So, under pressure from the government, Eskom has had to open itself to energy-saving initiatives and renewable energy measures such as solar water heating. "Eskom had in the past refused to admit any link between solar water heating and the blackouts, but has now finally acknowledged it," says consultant Glynn Morris of the South African energy consulting group Agama Energy. Probably one of the first utilities in the world turning to renewable energy as a result of supply problems rather than government-mandated targets, Eskom in 2007 pledged US$200 million over the next five years in support of a solar water heating roll-out as part of its energy-saving initiatives, which help finance new equipment for customers.

Low-Hanging Fruit

The idea of an energy supplier helping its customers to save energy is intriguing but counterintuitive. And until recently, most utilities have stood squarely against it, since they are programmed as a supply-side industry, to sell as much energy (as it happens, mostly fossil-fuel based) as possible. But this stance is increasingly seen as a problem, not only because of capacity shortages such as that faced by Eskom, but because of the growing urgency of bringing the world's emissions of greenhouse gases, especially carbon dioxide, under control so as to avert the worst effects of climate change.

Those emissions are proving a difficult challenge, even when intentions are good and the nominal policies are aggressive. For instance, in the 15 wealthier and older members of the European Union (the EU-15), which account for 81 percent of EU greenhouse gas emissions, those emissions (excluding land use, land-use change, and forestry) remain well above target. Although they dropped by 0.8 percent between 2004 and 2005 and by 2 percent between 1990 (the Kyoto Protocol base year) and 2005, this means the EU-15 have managed only one-quarter of the total reduction needed to achieve the 2008-2012 target of 8 percent below the base-year level.

There are many reasons for this failure. However, it is clear that cracking the nut of energy wastage is a major key to achieving deep cuts in emissions--a nut that seems no less easy to crack for the fact that energy efficiency can be a very financially rewarding route to that goal. As Eric Kane, utilities analyst at the strategy consultancy Innovest, puts it: "The cheapest way to cut the carbon footprint is to reduce energy demand." That is the most peculiar problem about energy efficiency: it increases the bottom line almost immediately, yet few people or organizations have been prepared to invest in it without a push.

As long ago as 1989, Amory Lovins, founder of the Colorado-based Rocky Mountain Institute (RMI), coined the term "negawatts" for electricity that was saved instead of generated. "You get the most environmental benefit from saving electricity, as well as the most financial benefit," he...