A penny saved is a penny earned. An old idiom still frequently uttered today. And its core value extends well beyond basic finance to energy. While "a watt saved is a watt earned" doesn't have quite the same ring to it, the implications are much the same.
It should come as no surprise that the world requires more and more natural resources and energy to both drive economic growth and sustain our rising global population. Reports vary widely, but the general trend strongly points to the declining availability of economically viable non-renewable energy sources while energy requirements continue to grow resulting in a paradoxal situation that we have to find a solution for, lest we run out of energy. There are two parallel tracks – (1) develop renewable and reliable sources of energy and (2) improve the efficiency of how we use the energy sources we develop.
According to a new report from the International Energy Agency (IEA), we require a minimum of $48 TRILLION in new investment between now and 2035 in order to meet the world's growing energy needs. According to the report, annual spending on energy efficiency measures must rise four fold from $130 billion in 2012 to more than $550 billion by 2035. This results in a total investment of $8 trillion in energy efficiency measures and new technologies. Of this, more than 90% will fall within the transportation and building sectors.
At Pangaea Ventures, we believe strongly in the urgency driving the development of energy efficient technologies and their implementation. When we launched our third fund in 2011, energy efficiency was named one of the five core technology areas we would focus on. We've made several investments in the efficiency space covering materials for more efficient vehicles, buildings, and electronic devices.
Some of the most oft discussed 'low hanging fruit' of energy efficiency – light-weighting vehicles, energy efficient electronics, green building materials, to name a few – fundamentally depend on materials innovation to ensure commercial viability. Perhaps the most visible (excuse the pun) energy efficient initiative is the replacement of halogen or metal-halide light bulbs with CFLs or LEDs. It took a long time and a lot of fundamental materials research to move these technologies from the lab to the hardware store, and at prices that were palatable to consumers. While there is some push from legislation around air quality, mass public transit, efficiency standards for appliances, and others, the technology must still be sufficiently advanced and ready for prime time.
Focusing on the two big sectors for energy efficiency investment – buildings and transportation – opportunities abound. Heating and cooling currently account for about 2/3rds of current global energy demand in buildings and will account for about 70% of the investment in energy efficiency improvements in the sector. In colder climates, improving building insulation is a key area for innovation. Aerogels are a group of material we have previously touched on in our blog on light-weighting materials. An extremely porous, lightweight material with remarkable insulation properties, aerogel is currently relegated to niche applications due to high manufacturing costs (oil and gas and aerospace for example). Increasing urban density and high cost of land results in taller buildings where lightweight, affordable insulation becomes increasingly important. A fundamental breakthrough in low cost synthesis here could break the market wide open.
Tivra is a company in our current portfolio with fundamental materials innovation to improve the efficiency of LED lights and power electronics – all while making the manufacturing process easier and cheaper! Tivra's breakthrough is a lattice tunable alloy template which enables the production of high performing devices – high quality LED devices at a 10x reduction in $/kilolumen. In power electronics (such as inverters for consumer electronics along with wind and solar generation) increased device efficiency reduces waste heat generated, enables smaller devices and reduces overall energy requirements. By 2030 it is estimated that 80% of all US electricity will flow through power electronics so efficiency gains here will have significant cost benefits.
Another opportunity, one with potential to be a quick energy win, is smart windows. Smart windows refers to glass that has the ability to change the light transmittance properties in reaction to a stimulus (e.g. light, heat, electricity). By reducing light transmittance, it is possible to reduce seasonal heating and cooling costs in buildings and reduce the temperature gain in vehicles reducing the power draw of air conditioning – which is an important consideration in electric vehicles.
There are several approaches in the smart window space including liquid crystal technologies, suspended particle devices, micro blinds, among others. One of the technologies we are most excited about is being commercialized by Switch Materials. Switch has developed a switchable film that is both photochromic and electrochromic meaning it darkens with UV light but can be returned to the light state with the application of an electric pulse. Switch's elegant solution is a film that is applied to the glass and so it can be produced in a range of form factors, including curved surfaces. Switch Materials is paving a path forward for smart windows in the automotive market – with an aim to drive down cost.
The estimated level of investment required is staggering. However, saving energy is significantly cheaper than producing more of it! A recent study from the American Council for an Energy Efficient Economy (ACEEE) found that the average cost of energy efficiency measures is 2.8 cents/kWh. When the average price (residential) for electricity in the US is 12 cents/kWh it shouldn't take much convincing that this is where we get the most bang for our buck. After all, a penny saved is a penny earned.