How energy efficiency is creating environmental and economic value in cities

04 July 2023 - Nico van der Merwe, Signify's UK&I CEO, explains how energy efficiency measures such as the retrofitting of smart LEDs can provide green impacts across society in combination with the switch to renewable energy.

The IPCC Climate Change 2023 report has offered the world a stark reminder of what is at stake if we fail to take urgent climate action – the trick is how.

In consecutive COP meetings, we have yet to see the necessary leap forward in progress that will keep global warming within the science-based 1.5ºC target. At COP27, the time had come for global powers to produce a work plan based on the Paris Agreement that would account for climate mitigation, emissions reduction, adaptation, and financing. Instead, the conference concluded with talk of phasing down rather than phasing out coal, and little mention of oil and gas.

The transition to green energy and a green economy can take root in our cities. The time has come to focus on solutions and action rather than problems and potential. In Egypt, Signify had a clear message to bring one of those solutions into sharp focus: energy efficiency now. Energy efficiency has clear and tangible benefits and there is one area in which cities can take quick action to reduce both emissions and costs – lighting. Whether it be lighting up the homes, city streets, offices, factories or other commercial and municipal buildings, lighting has huge potential to lower a city’s carbon footprint and to do so quickly.

The path to energy efficiency

Approximately 35 percent of the world’s lighting points are still conventional. In Europe and the US, which lag much of Asia in the switch to greener lighting, this figure is even higher at 50 percent. What this demonstrates, though, is the huge potential for transition in the coming years.

If we apply the 10/20/70 model, where 10 percent of our efforts are inspiration, 20 percent aspiration, and 70 percent perspiration, the time has come to give full focus to perspiration and getting the job done. At COP27, a financing agreement for climate loss and damage was agreed but without an increase in the speed and urgency of climate action, the loss and damage suffered will be beyond what anybody can afford.

With the adoption of technology such as smart LED lighting, cities are not only taking immediate action to improve the quality of their environment, they are providing greater social, financial and ecological benefits in the future. For example, World Council on City Data shows LED implementation can reduce night-time traffic incidents by about 30 percent, and reduce street crime by 20 percent.

Business models for technology suppliers into cities also need to shift, from invoicing for hardware to leasing hardware and services and taking away much, if not all, of the upfront costs that can prove prohibitive to green lighting projects. Lighting-as-a-service, for example, brings forward lifetime benefits that are divided over a certain number of years through a service agreement, reducing the need for big upfront capital investment and budget requirements. These service agreements illustrate that it’s as important that the business model is sustainable for the long term as the product is.

With the EU’s Green Deal, the UK’s ten-point plan and other equivalent strategies emerging around the world, there is a lot of focus currently on what I’d call “the supply side” – the supply side of the energy mix, where there are calls for alternative gas, the scaling of renewables, and even nuclear and hydrogen (though it will take longer to come to fruition). This is important for heavy industry, where we need energy-intensive sectors to keep investing in the markets they’re in, rather than move out to geographies where fossil fuels are cheaper.

I believe there must be more focus on the demand side itself where the potential for quicker acceleration on efficiency exists. Importantly, the demand side industries provide both active and passive energy efficiency technologies and solutions. Lighting companies like Signify or building management sensor companies, are facilitating the green transition with active digital technologies that will help us finally make the shift away from fossil fuel. They are also the drivers of economic growth and the green economy. But as well as the digital solutions, it is important to recognise the part played by the demand-side industries in the more passive parts of the efficiency process such as insulation and triple-glazing. These will similarly drive growth and provide many jobs for the future, particularly around retrofitting.

Why start with lighting

Smart LED lighting has the highest relative cost saving of any replacement technology. In Europe, this amounts to a saving of 65 billion euros depending on energy rates, and also brings the potential to reduce CO2 emissions by 51 million tonnes. Meanwhile, switching all the light points in the UK alone, could reduce CO2 emissions by 3.9 million tonnes, the amount of emissions that 175 million trees could sequester in a year. Making the switch would also generate electricity savings of 16.1 TWh, which is equivalent to the annual electricity consumption of more than 4.3 million households. In both cases, those savings bring the potential to bolster capacity in energy networks for other purposes.

Cities are facing pressure to electrify public services and amenities, such as transport and heating, as part of their climate action push. The average electricity consumption for a European household is approximately 3,400kW/h – roughly the same amount of electricity it would take to charge an electric vehicle to travel 10,000 miles in the course of a year. By transitioning to LED lighting at scale, we can save enough energy to power almost 50 million heat pumps or charge 55 million electric vehicles for a year. And there are benefits for households to reap. For an average British household, switching to LED lighting can help save up to £250 per year (i.e., £15-£18 per light bulb). These savings are bound to increase with every change in price cap.

What can be done

In terms of encouraging the switch more broadly in cities among citizens, subsidies can be very effective but only when rolled out in the right way. In the current energy crisis, governments are implementing schemes to subsidise energy bills for consumers and businesses continuously. It doesn’t necessarily bring about energy savings and doesn’t treat the root cause of the problem. At some point, subsidies will need to be paid back and the lighting will need to be replaced so municipalities or building owners effectively have to deal with the problem twice.

Instead, what if the subsidy were switched out for a retrofitting measure, like LED lamps. It provides immediate energy- and cost-savings and means you only have to deal with the problem once. For example, if you provided 10,000 households with five LED lamps to replace traditional lighting in their homes, the collective energy bill saving would increase manifold. Additionally, energy savings would total 4,372 MWh (equivalent to the annual recharging of 2,144 electric cars), and would result in 1,115 fewer tons of CO2 being emitted (equal to the amount captured by 20,000 trees) for Europe.

The bigger picture

The transition to energy efficiency takes an integrated approach at all levels of government and society, and cannot be achieved without a clear, cohesive, and long-term plan. National governments must agree targets on carbon reduction and energy saving, but the action and the work to achieve them ultimately takes place in cities, among others.

If we build the agenda on what needs to be saved and reduced, we can then extrapolate the plan to different sectors to assess the work that must be done. It’s only then that we gain a clearer understanding of what needs to be done, by whom, and by when, including numbers on job creation in different sectors, new curriculums in education, and the application of new technologies like AI and IoT.

A cohesive energy transition plan built in this way cannot ignore the potential of energy efficiency. Renewables and energy efficiency combined can create a transition to a decarbonised society that is twice as fast and twice as cheap, because the clean energy being generated is not being wasted in offsetting fossil fuels, it is going much further in powering more efficient homes and buildings.

We are still in the relatively early stages of a transition that truly accounts for renewables and energy efficiency together, but the potential to integrate these as outlined above demonstrates the value of a path forward that improves not just the environment, but the economy and our society.

Recent weather events have literally brought the impact of climate change to the doorstep of cities around the world. The window for action to avert a climate catastrophe will close before our very eyes if we don’t treat this with the seriousness it deserves. It is a complex challenge but making the switch to greener, energy efficient lighting represents one of the most immediate, achievable, and cost-efficient actions that can be taken. And whether it be to provide more education, awareness or practical demonstrations of what is possible, the lighting industry stands ready to support cities and organisations around the world.

To find out more about how Signify’s technology can help make the switch to a more energy-efficient and greener future, go to Flipping the Green Switch for Europe and UK.

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