Energy Outlook 2023: Energy Management

Technology and green buildings

Buildings are one of the most significant contributors to energy consumptions in cities, with heating ventilation and air conditioning (HVAC) systems making up about 60% of a building’s total energy consumption. Green building management tools can help monitor performance, optimise energy use, make predictive adjustments and allow the building user to monitor live data on energy consumption, which overall helps to promote energy savings.

Standalone energy conservation measures are now being replaced by integrated digital services where technologies are interlinked to enable not just automation but clever customization to occupants’ needs and preferences. Modern day green building management systems incorporate smart technology solutions that make use of AI, data analytics and IoT. The new generation of green buildings are smart, safe and sustainable and benefit occupants, operators and the environment.

The legal documentation we see in this area revolves around fairly long-term energy savings and energy performance contracts with customised variations, and with the increase in buildings implementing intelligent green building management systems, we anticipate the same trend will continue through 2023.

Energy as a Service (EaaS)

Energy Management is the efficient and effective use of energy to minimize costs and reduce future energy demand. As energy management solutions may be capital-intensive and a burden to businesses already grappling with an energy crisis and inflationary pressures, EaaS has become an increasingly attractive option.

Under an EaaS agreement, the energy service provider (ESP) secures third-party funding to pay for all project costs, so the customer has no upfront expenses or internal capital and the customer typically treats the transaction as an off-balance-sheet financing solution. As the EaaS model generally operates on a pay-for-performance model, the ESP bears the performance risks and is constantly seeking operational efficiencies. This usually means more frequent upgrades to new technology to secure more savings for the customer. The ESP can usually also offer a suite of energy-related services on top of supplying electricity. For instance, ESPs can bundle energy consultancy, financing, asset installation and energy management solutions all-in-one for customers.

Increased government spending

With stakeholders prioritising a reduction in energy demand and minimising greenhouse gas emissions, energy management systems are key to enhancing building performance and ensuring energy efficiency. Governments are boosting their investments in building systems but also monitoring the output of digital devices and IoT technologies to collect reliable data regarding electricity supply and consumption.

Since 2020, US$1 trillion of government spending around the world has gone towards energy efficiency measures[1]. Global investment into energy efficiency reached US$ 560 billion in 2022, an 16% increase from 2021[2]. The investments have gone into energy management solutions, for homes, commercial buildings, public transport and infrastructure.

This is in part triggered by the 2022 energy crisis sparked by the Russian invasion of Ukraine, as well as rising demand for energy. Lowering consumer bills and energy spending through energy management is considered as a critical must-have, not an option.

Tightening regulation

Laws play a key role in the push towards adopting energy efficiency practices both for consumers and manufacturers, with many countries already enacting laws to encourage energy efficiency in various sectors of the economy.

Singapore introduced the Energy Conservation Act 2012 in 2013, which aims to promote energy conservation in industries by requiring certain high-energy consuming facilities to adopt prescribed energy management practices. For household appliances, inefficient household appliances are removed from the market by making it an offence to supply them; and persons who supply certain consumer goods are required to affix energy labels, which contain information on, amongst others, the relative energy efficiency of an appliance through a tick rating system. Since its inception, the ECA has undergone several rounds of enhancements to raise energy efficiency standards. Further amendments to the ECA are targeted to take effect between 2024 to 2025; under which, certain household appliances have to meet a higher minimum efficiency requirement and the tick rating system will be expanded to include other household appliances that were not previously regulated (such as portable air-conditioners). More appliances are now being monitored and scrutinised, which puts pressure on manufacturers to introduce more high efficiency models into the market.

Singapore is an example of how regulatory authorities are continuously scrutinising best-in-class standards, and reviewing and tightening energy efficiency standards through legislation. As greater emphasis is being placed on energy efficiency in countries’ push to decarbonise, regulations in this space are likewise becoming increasingly stringent. Companies must therefore remain proactive to, not merely meet the minimum standards, but constantly improve their energy management and keep a close watch on how energy is being used in the production of their goods and services and in the latest innovations in energy management practices.

In 2022 the European Commission, as part of the REPowerEU plan, proposed an increase to the EU energy efficiency target up to 13% by 2030, up from the 9% target from 2021. The negotiation of the proposal is currently ongoing in the Council and the European Parliament through the legislative procedure. Negotiations are understood to be progressing but there is still plenty of work to do, with many of the most sensitive issues, including the overall energy savings target, yet to be agreed – The European Parliament would like a the much more ambitious target of 14.5%. As such, the Council may need to amend its position on targets in order to finalise the proposal. Once the proposal is adopted by both co-legislators, the new 2030 energy efficiency targets will apply.

[1] https://www.weforum.org/agenda/2023/01/energy-efficiency-projects-innovations/