Developing energy efficiency in the UK: conclusions of the 2012 McKinsey report

McKinsey , energy savings ,Electrical efficiency, lighting control , renovating building , thermal insulationIn 2007 the British government launched an ambitious energy programme based on the White paper entitled “Meeting the energy challenge”, setting itself goals such as reducing CO2 emissions by 60% in 2050 compared with 1990 levels. In order to reach this target – already mentioned in the so-called Green Deal policy (Energy Act 2011) – the Department of Energy and Climate Change ordered a study on the energy efficiency potential in the kingdom from the McKinsey consulting firm. This report, issued in July, aims mainly at assessing the extent to which energy consumption can be cut and greenhouse gases emissions can be reduced. Here are its key conclusions.

Identifying the most energy-consuming sectors in 2030

Based on a forecast of 15% more electricity consumption compared with 2010 (i.e. 400 TWh), the consulting firm pinpointed three sectors with the greatest energy efficiency potential: residential buildings, services and industry. These three sectors alone are thought to represent 127 TWh in energy savings, that is 80% of the total.

Although they are realistic, such goals can’t be met unless more assertive policies are implemented. For instance, the report states that current energy programmes could only yield 4% of potential savings in the industry and 13% in services. Nevertheless, McKinsey is more confident about energy savings in residential buildings, which, thanks to the Green Deal legislative framework, could amount to 76% compared to energy consumption levels in 1990. Efficiency could be gained mainly through better thermal insulation of buildings as well as better control over lighting (shops, public lighting and compact fluorescent lamps (CFLs)). For instance, the systematic replacement of filament lamps with CFLs is assumed to represent 26 TWh in energy savings in 2030.

Renovating public and private buildings is another option. The goal would be to reduce a new building’s energy consumption through a specific design aiming for better heat circulation – for example by allowing for optimal capturing of sunlight. Similarly, heating, ventilation and air conditioning (HVAC) should be optimized. All these measures could save 22.5 TWh in 2030. The report shows that 25% of current greenhouse gases emissions in the UK are due to private heating.

New options to be considered

One of the main options the report pinpoints is the widespread deployment of automated light-control systems (e.g. motion sensors) in public and service buildings. McKinsey also recommends the nationwide use of “smart public lighting”, i.e. to reduce or even disable part of night-time public lighting. These simple steps alone could save 15.6 TWh, i.e. more than the UK-wide renovation of thermal insulation of residential buildings. Besides, it is obviously less expensive than renovating buildings as far as initial investment in concerned.

Industrial pumps are another large-scale energy-efficiency option which has so far received little attention from policy-makers. According to the report, hydraulic-pumping systems, whose main function in factories is to cool down and lubricate machinery, are often ill-suited and almost always oversized. Replacing them with pumps better suited to factories’ needs could save 33% energy in some cases. Similar action on industrial engines and boilers could also save 24 TWh, only 5% of which could be saved given the current policy framework.

Many obstacles remain

McKinsey lists 11 obstacles that could slow down or even prevent the implementation of seemingly simple measures. Political volatility on the subject is the main hurdle. Recurring government and legislation changes, accumulating and confused and/or contradictory government programmes considerably slow down the implementation of important policies.

Moreover, the current market for energy efficient goods is not developed enough to provide everyone with tailor-made solutions perfectly suited to their needs. Therefore the initial investment required to meet energy efficiency standards is still very high. Return on investment takes five to ten years, whereas some lenders or stockholders demand faster payback.

Another important hurdle lies in the structure of the real-estate market itself, since most housing is occupied by tenants and not landlords. For instance, over 60% of office space is rented, which makes the sharing of responsibilities and costs of compliance more complex. Parallel to that, 60% of companies are not highly energy intensive and will therefore not feel the urge to fully embrace energy efficiency. The report states that following its recommendations could save 115 TWH by 2030.

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