Inspired innovation
This week I participated in a great workshop facilitated and prepared by my colleagues Anneke Stolk and Menno van Rijn. the subject of the workshop was systemic retrofit of existing buildings with the aim of making them more energy efficient. The subject at hand is of huge technological and economical interest, if you consider that Europe spends over 300 billion euros on oil per year. Shaving off 50% of our building's energy consumption would save us over 25% of these oil bills, a staggering 75 billion euros a year. Of course the problem is that we have many buildings in Europe and the investment required to reach a 50% energy consumption cut is so high that it would take over 40 years to recover it based on energy bill savings alone. The good news is though that the real estate market is beginning to acknowledge that buidling value will increasingly be influenced by the energy efficiency of that building. This means that an energy retrofit pays off not just in lower energy bills, but also in higher building value. Of course, monetizing that value only occurs really when you sell the building, but here smart financial models (specific energy efficiency mortgages for example) can work, just like the Green Deal in the UK is supposed to mobilize the marketplace.
In our workshop, the brightest and most innovative minds on this particular subject exchanged insights and built on each other's ideas. We looked at how to integrate the plethora of partial solutions into complete retrofit packages. We also looked at how the retrofit process can be streamlined and packaged. We looked at business models and organizational models of those businesses, and plenty of interesting ideas emerged which will be subject of further elaboration in a subsequent workshop to be held in September 2011.
I expect that the technologies applied today still have at least 50% of cost shaving potential in them when integrated into packaged solutions; I suspect that the processes applied today have at least 100% cost reduction potential in them. Combining these two factors we should be able to reduce the cost of energy efficiency retrofitting by more than half, without reducing the cost of the components themselves. If such components would be produced in mass volumes, further cost reduction would come within reach. Considering the importance of cost reduction, it is perhaps surprising that many innovation and R&D funding programs focus so much on financing the newest, most innovative ideas rather than directing their budgets towards R&D and innovation principally aimed at reducing cost. Perhaps, policy makers around the world should shift some of their public funding millions to those projects that simply promise to do the same thing existing solutions can do, but at a substantially lower cost?
