In the history of climate change, this year’s record book gives pause for thought. The National Aeronautics and Space Administration (NASA) reports that July 2016 was the hottest month since scientists began keeping records in 1880. The planet is heating up at a faster pace than at any time in the past 1,000 years. And that’s not all.
At the same time, the global population is growing – to almost 10 billion by 2050, according to United Nations estimates. More people need more resources, especially in cities where two-thirds of us will live. The combination of these mega-trends poses a stark challenge to humanity. To meet rising demand we will need to foster new economic models of low carbon growth.
Energy efficiency is the low hanging fruit: an easy win among the raft of measures needed to tackle climate change. Today, energy efficiency improves by about 1.5 per cent every year. Translated into an equivalent reduction in coal-fired power stations, simply doubling the annual rate of improvement in energy efficiency to 3 per cent per year would set us on a sustainable path.
Philips Lighting CEO Eric Rondolat has called this “The 3% Syndrome”. In terms of reducing carbon emissions, greater energy efficiency could deliver fully two-thirds of what needs to be done to meet the bold commitments agreed at COP 21 in Paris. This incremental gain in energy efficiency improvement would unlock huge benefits – for the planet, its people, business and society.
Connected LED
To meet the needs of a growing population, we need to consume resources more efficiently. To create successful cities, we need clean energy and smart infrastructure. Fortunately, our response to these challenges is helped by a fourth mega-trend: Digitalization. The transformative powers of connected technologies offer a myriad of ways to make our world cleaner and smarter.
Lighting is a significant part of the answer. By 2030 for example, the global tally of light points will have increased by 35% to 60 billion. Simply adopting LED in place of incandescent lighting would reduce energy consumption by a massive 53%. Intelligent lighting for smart buildings and smart cities can further boost those savings by up to 80%. So connected LED lighting is a form of energy efficiency that pays for itself in cost savings.
Bluntly stated, we can no longer afford the status quo. Faster renovation of existing infrastructure is long and urgently overdue. In September 2016, at Climate Week, New York City, Philips Lighting issued a joint call to action with The Climate Group and World Green Building Council. To boost energy efficiency in buildings we urged business and governments alike to adopt new targets for the private and public sector:
- All new buildings to be LED or equivalent energy-efficient lighting by 2020
- All street lighting to be LED or equivalent by 2025
- All corporate buildings to be LED or equivalent by 2030
Walking the talk
Shared conviction is a necessary condition for change. By walking the talk – in our own business, and through our offer to customers – we believe it is possible to build consensus on how to achieve low carbon growth. So what exactly have we promised? And with hindsight, what have we delivered to date?
Ten years ago, Philips called for a global ban on incandescent lamps – the product on which today’s global technology company was founded. In December 2006, these bulbs accounted for two-thirds of our sales volume in a global market that was stable at 12bn units per year. Today, the logic of switching from incandescent to energy-efficient LED is widely accepted. By end-2016, the global incandescent lamp market is forecast to at just 4bn units, a two-thirds (and ongoing) decline in just a decade.
In 2012 we made our first call for the renovation of street lighting at the Rio+20 summit, on a theme of sustainable development. A call renewed by our partners, at Climate Week NYC, this year. In 2016, we answered a Global Lighting Challenge from the 7th Clean Energy Ministerial in San Francisco, with a pledge to sell 2 billion LED light points by 2020.
To set these statements in context, our record should not be seen in isolation. In lighting, the transition to connected products, systems and services brings new opportunities to address an urgent global imperative. Digitalization of light means new ways to live, work and relax; to grow crops, heal the sick, power industry and build cities. My point is that we have risen to tough challenges before, and we can do so again.
Technology evolves, but the innovation we need is already with us. By 2020, 80 per cent of Philips Lighting revenues will come from sustainable products, systems and services; our global operations will be carbon neutral, and 100 per cent of our energy will be from sustainable sources. These and other commitments lie at the heart of our Brighter Lives, Better Planet sustainability strategy.
For the private sector at large, it is important to share the lessons of experience. In the connected world, bringing innovation to scale is really a matter of shared purpose and creative partnerships. For example, our partnership with Cisco Systems, to deliver Power Over Ethernet, has made possible office lighting powered through data cables. For smart cities, our go-to-market alliance with Vodafone has transformed humble street poles into a new form of digital real estate, loaded with sensors and multi- tasking connectivity.
Light as a service, around the clock
Seizing opportunity
Globally, lighting accounts for about 15 per cent of all electricity consumption, which we project to decline to 8% in 2030. Harnessing the potential of smart buildings – homes, industry and offices – is also smart public policy. Doubling the rate of energy efficient gains would create a hydra-headed stimulus for economic and social development. Benefits include creating six million new jobs and cutting annual energy costs by Euro 2,300 billion by 2030.
At COP22, world leaders are tasked with finding concrete next steps. Our best hope is for a mix of carrot-and-stick measures with particular emphasis on policy and financing. Next to bold targets on energy efficiency, equivalent at least to an annual improvement of 3 per cent, we urgently need more ambition to drive renovation in buildings.
As it stands the renovation rate for buildings currently stands at about 1.2%, far short of what is required. Accelerated renovation, lifting the rate to around 3% per year, will be a key factor for success. Obviously this requires enabling policies in building codes and performance-based procurement, as well as fiscal measures.
Research by Architecture 2030, a campaigning consultancy, shows that by regulating for renovation of commercial buildings at the point of every change in ownership, we could double current rates of renovation to 3% per year. Let’s explore this avenue and make it happen. I see only benefits for owners and real estate (more valuable future-proof buildings) and for occupants (more comfortable places to live and work), and a shift from operational (energy) expenses to slight rent increases that is cost-neutral overall.
On financing we essentially need to leverage the lower cost over lifetime of the building to take away the renovation budget hurdle. It is amazing to hear from cities and companies that they have projects but no money, and from banks that they have money but no projects. In other words, if we want to finance change, we need to change finance.
Here we are greatly helped by the fact that LED lighting is getting smarter and connected, as it allows us to move to new business models. Instead of invoicing boxes with lamps, we can now lease lighting as a service in larger projects. I believe LED lighting is just one part of the broad transition to more circular, more economical business models.
In this sense, energy efficiency is not just our business; it is everybody’s business. A transition to LED would save some Euro 272 billion in energy costs, equivalent to a reduction of 1,400 megatons in carbon emissions or shutting down 1,250 power plants. At household level, energy bills would fall by one-third. This is possible now. A new world order of low carbon growth. An opportunity – for people and planet – that we cannot afford to miss.
Harry Verhaar is head of global public and government affairs at Philips Lighting, which supports Climate Home’s work