As a former contributor to Intergovernmental Panel on Climate Change (IPCC) assessment reports, I was eager to read the latest mitigation assessment released in April 2022 [1]. It pointed to the importance, opportunity and challenges of reigning in greenhouse gas emissions from the buildings sector and estimated that demand-side strategies in the building sector can reduce emissions by 66% in 2050 (5.763 GtCO2-eq), larger than in any other sector.
For the first time ever, the report included a dedicated chapter that used social science perspectives to assess mitigation options that involve end-users, and the authors also prepared a “Social Science Primer” on underlying social science frameworks and concepts that help explain the variety in demand-side responses to climate mitigation. While it's not clear if/how this huge body of work was reflected in IPCC mitigation scenarios, I’m planning a sequel to this blog on how these social science frameworks and concepts align with Enervee’s program theory and impact.
For now, I share my take on some of the report’s other findings.
Individual decisions and appliances matter
The authors estimate that – on a global scale – households directly and indirectly influence 72% of greenhouse gas (GHG) emissions.
And there is a good reason why appliances were mentioned frequently – 228 times, to be exact! – in the full report. The increase in use, number and size of appliances and equipment is a primary building-specific driver of GHG emissions, and the authors concluded that the greatest technological potential across all sectors comes from within the building sector, specifically from increased use of energy efficient end-use technologies and passive housing.
The report emphasized minimum energy performance standards and related product labeling schemes, including information on programs implemented in China and India. It also provided some discussion of what the report referred to as “information programs”, stating that they can reduce GHG emissions by correcting for a range of market failures related to imperfect information and consumer perceptions, as well as promoting voluntary technology choices and behavioral changes by firms and households.
According to the report, “consumers who are shown energy efficiency labels on average buy more energy efficient appliances than those who are not.” However, the assessment also found that the information provided to consumers in labeling programs is often not detailed enough to yield the best possible results, which is consistent with Enervee’s own published research on the incremental impact of the Enervee Score on top of the ENERGY STAR label [2].
Despite this massive effort, however, the report was weak in a number of areas related to Enervee’s focus on driving individual private investment into clean and energy efficient consumer products.
Quantifying demand-side mitigation potential
For one, the report (and supplemental material) provided only minimal information on how appliances and other plug loads (and related social science frameworks and perspectives) were taken into account in the various IPCC mitigation estimates and illustrative mitigation pathways, other than extensive references to underlying studies.
Appliance ownership is typically considered as a driver of energy demand in bottom-up models, and is based on detailed stock modeling. Efficiency improvement of the building envelope and appliances/equipment are the main mitigation options considered in the existing models/scenarios. Potential estimates assume that business-as-usual technologies and practices are replaced with demonstrated best available or commercially feasible technologies and practices. But all of the methodological detail was lacking.
Energy efficiency investment needs
Given the wide range of estimates on current investment flows into energy efficiency, substantial uncertainty exists with regard to the magnitude of the investment gaps. For the buildings sector, energy efficiency investment needs were estimated to range from USD 600 million to 1.8 billion annually.
The IPCC attributes this 3X range in estimates and uncertainty to lack of transparency with regard to underlying assumptions on technology costs. Most models make assumptions and are not based on reliable data on current retail product and incremental costs. Regulators and modelers have struggled to reflect dynamic product markets in their estimates of unit energy savings and incremental costs, a pain point that Enervee’s daily updated market data can alleviate. Recently, we’ve provided retail price data to utilities tasked with updating incremental measure costs for use in energy efficiency program cost-effectiveness testing.
Energy-related services beyond providing thermal comfort and lighting
The assessment of service-related mitigation options didn’t include options related to energy efficient appliances and other plug loads that provide many services throughout a typical home and which, in California, account for the greatest energy consumption. Refrigeration, for example, accounts for 25% of residential electricity consumption in California [3], much larger than lighting – which the IPCC report did consider in its assessment. While there were many mentions of appliances, the services provided by them, such as refrigeration, hygiene or entertainment, were apparently not evaluated.
Barriers and solutions to encourage greater private investment
The report was a massive effort, but the authors of each chapter could still only go so deep, and the finance and investment chapter did not address consumer lending for climate investments by individuals, a major shortcoming. The report specifically called out the need to focus policy attention on climate finance at three levels – globally, nationally and at the local community level – overlooking the individual consumer. A growing body of Enervee research and independent evaluations is showing how powerful consumer lending can be to unlock residential sector decarbonization potential.
Role of green banks and utilities in de-risking consumer lending
The report noted the catalytic effect of policy to lower financing costs, including transaction costs, and addressing risks through funds and risk-sharing mechanisms for under-served groups, but the emphasis was on infrastructure investments. It didn’t specifically address financial barriers to individuals, nor provide examples of effective approaches to empower individuals to invest in efficient product purchases and home upgrades.
Enervee participates in the California GoGreen Home Energy Financing program, which provides loan loss reserves to leverage private capital for affordable, inclusive unsecured loans. The program is funded by a surcharge on utility customer bills and is administered by the California Advanced Energy and Alternative Transportation Financing Authority within the State Treasurer’s Office. The New York State Energy Research & Development Authority has also launched a loan loss reserve program, which Enervee and our partners are tapping into for instant consumer loans targeting low- and moderate-income customers across the entire state of New York. Green banks in the US also support larger home improvement loans [4]. Other financing programs include utility on-bill and property-assessed clean energy financing programs.
Deeper understanding of residential sector mitigation potential needed
At the end of the day, capturing residential energy efficiency potential depends on removing barriers and influencing the actions of billions of individual consumers. This is challenging to model, but there are many studies and innovative approaches that warrant further consideration by the International Energy Agency and the Intergovernmental Panel on Climate Change.
It's clear to me that we need an IPCC Special Report on climate mitigation potential by individuals.
Notes
[1] Final Draft files for Climate Change 2022: Mitigation of Climate Change
[2] Champniss, Arquit Niederberger and Li (2017)
[3] 2019 California Residential Appliance Saturation Study
[4] Relevant research is available online from Berkeley Lab’s Electricity Markets & Policy group