What happened in COP30’s first week? Support for energy efficiency and a status report on methane show which climate initiatives are still making progress

0:04Hello and welcome to the Energy Gang, a discussion show from Wood Mackenzie about the fast changing world of energy. I'm Ed Crooks. And on this show, we're going to be bringing you an update from the COP30 climate talks in Belém, Brazil. The negotiations continue with continuing evidence of deep divisions between countries over the right responses to climate change. And there have been the usual announcements and updates on specific sectoral initiatives. There's been a lot of talk about methane, including the launch of the first global methane status report from the UN. We're going to be talking a little bit more about that later in the show.

0:35But another big topic for COP30 has been energy efficiency. COP28 in Dubai a couple of years ago agreed a pledge to double the rate of energy efficiency improvements worldwide. And one of the issues on the agenda at COP30 has been how to implement that pledge. And to discuss that issue of energy efficiency, it's a pleasure to welcome back Amy Myers-Jaffe. Amy is the director of the Energy, Climate Justice and Sustainability Lab at New York University. Hi, Amy. How are you? I'm great, Ed. How are you? Very good, thanks. Very good. It's also a pleasure to welcome from Berlin, Brazil, for the first time on the show, Bob Henkel, who is the founder and CEO of Metris Energy.

1:11Hello, Bob. Welcome to the Energy Gang. Yeah, no, great to be here. I'm really excited for the discussion today and doing this from COP30. Ads a lot, probably a little background noise too. So apologies in advance for that. Yeah, not at all. No, it sounds great. Very live, kind of good to hear from you right at the heart of the talks as they're going on right now. Now, before we get into that, and I want to talk a little bit about the sort of the scene and the feel of COP30 in a moment. But before we do that, tell us a little bit about yourself and about Metris Energy. You founded the company in, I think, 2009.

1:43Can you talk a bit about what it is you do and what your goals are? Yeah, in terms of some background on Metris, we're a developer, financer, and an owner of larger scale energy efficiency and sustainable energy upgrade projects, typically for commercial, industrial, and manufacturing firms, but also for colleges, schools, and hospitals, really a lot of community type investment projects. We finance and implement projects under our energy as a service solution, where we fund 100 % of the upfront cost of a project, own the assets, and then bill customers based on the measured performance. And back when I founded Metris, and you're right, it was kind of right in that 2008, 2009 time period.

2:21It was at a time when the market for power purchase agreements, particularly for smaller scale solar projects, was taking off. And my objective with Metris was really to turn that solar PPA model on its head and finance projects, but then build based on realized energy savings rather than energy generations. And our first tagline at Metris was even saved as earned back when we started. And that really reflected that our focus was solely on energy savings. But over time, as the markets evolved and metrics is involved, and frankly, as I've learned, we've really come to realize that projects are about a lot more than energy savings.

3:03Good. So tell us about going to COP30 then. Why are you there? Well, I mean, you know, a variety of reasons. I mean, first off, it's a privilege to be here at COP. You know, this is my fifth COP. And every time that I come, I learn something. And I learned something that I take away as an individual, but also really from a business perspective. I mentioned that Metris has expanded into the delivery of cooling and heating as a service and not just energy efficiency as a service. Well, that really came from COP28 and back at that time, the Global Cooling Pledge. And Metris joined a group that's part of the UN Cool Coalition.

3:43And all that just really helped me see around different corners, new business opportunities for Metris. So that's really meaningful. But then I think also I'm a big believer in voting with your feet. And this is a critical time in the energy transition. And as we think about climate change and showing that the U.S. is broader than the federal government, is part of a larger private sector and really subnational leaders that are engaged and focused on, you know, from my perspective, the business opportunity that climate presents. that's key and that's why I'm here. And how does this one compare to those earlier cops that you've been to?

4:23It certainly feels like the American business presence has been dialed down quite a bit, partly I think for logistical reasons. I know some people went to meetings in Sao Paulo or Rio, didn't actually come to Belém, which is not a huge city. Does it feel lonely being an American business representative when a lot of other businesses have stayed away? Yeah, well, I mean, I guess, you know, breaking it into a couple of different parts, there's the federal government presence and then there's the U.S. business presence and then there's subnational leaders. So starting with the first is pretty simple.

4:56The federal presence at the U.S. from the U.S. government was one person. And that was Senator Sheldon Whitehouse of Rhode Island. And it was it was great to have him here. I bet he was pretty lonely. But in terms of the broader business, you know, presence here. You know, I don't see it being as of a radical drop as maybe is being talked about. You know, yes, I do think it's a smaller presence. Some of that, as you pointed out, I think is the logistics here of getting to BLEM. I wouldn't separate. I mean, I would think of the broader business presence within the leader summits that did take place in Sao Paulo and Rio as well.

5:38So I think when you add up the presence of U.S. businesses from those two earlier events, along with who's here in Vilem, I think you get a good group of folks. I'm here as part of the Business Council for Sustainable Energy's delegation. I've come with them for the last five years. Their delegation is similar size. So, you know, a little bit of a drop, but not as much as people are saying. And then just last night, I was on a panel that was a combo of both private sector leaders and subnational leaders. And there were a lot of folks from the different city and state level, New Mexico, Tennessee, you know, California, of course, has had a really big presence here.

6:18And I'm not just saying that because Metris is based in San Francisco. But, you know, California is the fourth largest economy in the world, if you want to look at it in this isolation. And there was a strong presence here. And again, it gets back to that point of the U.S. is really, you know, a mosaic of a lot broader groups, And many of them are here. So, Bob, let me ask you about that, because I, you know, in watching the media, you have I mean, Exxon seems to have a presence and wanted to make that presence known. But the complaints from the Azerbaijan cop and the Dubai cop was that the oil industry was all over the place.

6:55Did you feel that in previous cops? And do you do they seem not present this time? I mean, do you see a change in that? Yeah, I think that's a good point. I would say certainly in the last two cups, probably even take it back one to Egypt as well. Definitely a strong oil and gas presence. And that was more palpable, more palpable than Glasgow and more palpable than it is here. So I would say, you know, that that for sure is true. Probably a little less of a presence, I would say, also from larger financial institutions. You know, that I think is a big drop off. But some of that, too, and there's been some discussion on this topic and your question is a good one.

7:39not all cops are created equal. I think COP28 with the global stock take that was happening then, COP26 and some of the focus on the net zero alliance, there's certain cops that I think pull in people more. And the absence of some of those folks might or might not mean anything. And what I've seen here is definitely a very strong private sector kind of focus on projects where a lot of the discussions I've been having were with the people that might not be some of the higher level CEO folks from businesses, but are the people that are getting the work done. So let's talk about what has been happening then and what businesses have been doing.

8:25There was one thing that particularly caught my eye was this letter. I know you were one of the signatories of this letter signed by 180 American businesses sent to the president and the CEO of COP30, organized by the Business Council for Sustainable Energy, you were talking about earlier, and the Alliance to Save Energy. And it's talking about your commitment to that goal of doubling energy efficiency by 2030, or to be clear, to be doubling energy efficiency improvements, the rate of those by 2030. That was the goal that was first agreed by governments, COP28 in Dubai. Let's talk first of all about why you signed that letter.

9:05What is the significance of it to you? The letter does a couple of things that I really like. I mean, first, it puts a spotlight on energy efficiency, which is critical. It's critical on many fronts. It's really a strategic imperative for US businesses in terms of the climate. Energy efficiency on its own can account for over 40 % of the emission reductions that are needed to hit the Paris Agreement. And I like the style of the goal because it sets the direction of travel, tells where we need to get to. It gives a time period, but it isn't prescriptive in how to get there. It gives flexibility to deploy all different types of energy efficiency solutions and upgrades.

9:48And that's exactly how we think about things at Metris when we work with customers. It's about meeting a customer where they're at, finding the right solutions for them, because energy efficiency is a lot of different things, a lot of different technologies, and you don't want to be too prescriptive. So, of course, the other thing that people really like about energy efficiency is that you can want to pursue it, even if you don't care at all about climate. It, as you say, can have significant benefits in terms of reducing emissions, but it can also be something you want to do just in order to save money, which I guess, presumably, particularly in the present climate, when everyone's very focused on energy affordability, when many people, including the present administration, are much less focused on emissions reduction.

10:33means that it's kind of compelling as something you can continue to support and advance and make progress with, even at the moment. Well, and especially a lot of countries have pressures on their electricity grid. So that gets to either the price for electricity, the retail price to consumers, but it also gets to just how many businesses can you add? Can you move forward economic development if you're in the global south? Can you move forward on other kinds of industries that need electricity to be successful? So it does really, you know, check a lot of boxes. Bob, are you finding, though, with electricity prices going up, there's less interest in HVAC for heating solutions or not?

11:21I mean, is that something that you see in your business? I think it's across the board. You both bring up two really key points. I mean, maybe starting first with Ed's comment, I think that's spot on. What we see from customers is, yes, energy savings are nice, but if I'm being honest, very few of our projects are getting done because someone is saving on their energy bill. We're doing projects because we're replacing boilers and HVAC systems that are 30, 40, 50 years old. We replaced a boiler up in New England that was almost 70 years old. So it's about resiliency of equipment. And it's also about health.

12:01We're hearing a lot about indoor air quality. And there's a hospital that we're working with in the Pacific Northwest that has had to cancel surgeries because they haven't had within their surgery suites the right type of indoor air quality metrics to perform surgeries. That's bad for patients and that's bad for the business of the hospital. And Amy, on the demand side, yeah, we're seeing that is really something that's going to be a coming feature. We haven't been hearing a lot from customers about rising energy demand, but we know it's coming. We know it's coming because AI, beyond the AI and data center demand increase, there's a massive jump in demand for space cooling and just electrification in general.

12:47And we've had a period for a couple decades now where it's been pretty flat or stagnant growth in energy demand. And we're now expecting that to jump 3 % to 4 % a year, doubling by the time we get to 2040. And that's going to be another reason, both for businesses to do it because it's going to start hitting their bill, but governments too, because they're going to need to avoid downtime on the grid and think about grid resiliency and avoid bottlenecks. And energy efficiency can be rapidly deployed for that. I think the speed at which some of these things can be deployed is really a pivotal thing.

13:23If you've got a particular location that has some kind of congestion on their grid, or even countries that have experienced severe fuel shortages in 2022 also have that front of mind. And then just competitiveness. The less energy you're using to produce a product, the more cheaply you're producing it, basically. And so I'm seeing that as being a big driver everywhere, especially as we go into this competitive landscape with new AI and so forth. And, you know, Ed and I have been debating this, but, I mean, I did a piece recently in the Wall Street Journal, the numbers that you can crank out of AI for efficiency across a wide number of sectors, whether that's transportation, building sector, building materials sector, et cetera, is very high.

14:15And it's higher than even the highest projections for how much electricity we're going to need from the AI. So, you know, there is this new course that people can take because the AI can actually help them with energy efficiency, can have them know when their equipment is going to fail before it fails, and all kinds of applications like that. So I think it should be energy efficiency enabling. But not everybody says that, but I really believe in that. Yeah. And I think, you know, as Ed was talking about, too, it even goes broader where I think AI and collecting data on indoor air quality and, you know, through other sensors and then analyzing those patterns and trends is going to result in more sustainable and efficient cooling systems, better air circulation that's done just automatically.

15:13I think there's a lot of upside there, too, that often gets lost in the demand growth side for the equation. Yeah, absolutely. Okay, so I hear all of that. And I agree that when you put it like that, it does all sound very compelling. I have to say I have a couple of big reservations about the debate around energy efficiency. And in particular, when you think about this goal, the goal that you say you're supporting of accelerating the pace in energy efficiency improvements, doubling that from 2 % a year to 4%. One of the things I think about that is that seems to be really hard to do, that if you look at the long-run trend over the course of decades, that efficiency improvement has been running at about 2 % a year, on and on and on, year after year after year, occasionally a little bit faster when energy prices spike and occasionally a little bit slower when energy prices decline.

16:08But on the whole, there seem to be some pretty built-in structural reasons why that's about the pace of improvement that we can expect in energy efficiency. And obviously, companies like yours and others can do great things at particular sites and generate real improvements. But across the economy as a whole, that doesn't seem to be possible to transform things. And so that makes me think, you know, when you hear this international commitment, and the big talk about doubling the pace of gains across the global economy. Is that really realistic? Yeah, I mean, I think it is. And I'll give you a few different perspectives.

16:49You know, one, and I'll give just a US focused example. And if you go into an average large commercial industrial building in the US, I can almost guarantee you that there is 30 to 40 % of the energy use that can be saved. So I think, you know, we're almost sitting on this just reserve of an energy resource that businesses, schools, hospitals in the U.S. and across the globe are not tapping into. And, you know, why isn't that happening? I think, you know, it's not happening for a variety of reasons. The one that I spend a lot of time thinking about is the way that people are thinking about the investment decisions in energy efficiency.

17:33and they're, I mean, to be blunt, they're flat out making the wrong economic decision day after day. The businesses will look at an energy efficiency upgrade. First off, they'll only think about the utility bill savings, which is a piece of the puzzle, but it doesn't get into the operational expenses, avoided operation and maintenance. It doesn't get into the fact of, okay, what's your opportunity cost if this chiller that you're operating that's 40 years old fails and your business goes down and you lose that revenue and what are the added emergency repair costs if that economic you know full picture is looked at on a holistic basis these investments are slam dunks and they're just sitting there so you know yes there's been a good clip of efficiency improvements but i think some of that is technology improvements, but it's not getting at the rational or irrational investment decisions that are happening day after day and country after country as it relates to energy efficiency.

18:38So I think it's just a massive potential, and as Amy was saying, is one that we can deploy quickly. And you think about a four-year wait for gas turbines right now. What are we going to do in the next four years in the U.S. It really needs to be massive energy efficiency, deploy solar and storage. I'm a believer in the all of the above for energy, but we have the next four years to think about here, and there's an energy transition that needs to be made. And in some countries, energy intensity has really dropped. Take China, of course, is always the example everybody uses, But it's true because they've had to modernize a lot of their industry across the entire economy.

19:22And now, of course, they're exporting a lot of equipment. So you would think almost by fiat, we might get more energy efficiency with some of those products, you know, coming to market more and more. So and then, you know, I mean, we're moving to all these things like robotics and manufacturing and so on and so forth. And one would assume that done correctly, that could be optimized in a way that actually lowers energy use and not just, oh, I'm throwing some more things I'm plugging in. And so therefore, you know, it's all going up, up, up. It takes some sort of thoughtful planning, whether or not you're going to upgrade your equipment at what moment in time and with what kind of resource.

20:06Right. I mean, it still doesn't sound like something that is particularly susceptible to being influenced by governments. I wonder, is there more that governments could be doing to drive this acceleration? As you say, it's a lot of individual business investment decisions being taken by businesses and nonprofits and other organizations right the way around the world. Hard to wave a magic wand to make that happen. Yeah, I think you're right. I do think there's a lot of elements where there's a private sector decision to make. But some of that varies by country. You know, there's the U.S. and then, of course, I think it's different and more emerging markets.

20:46I do think, you know, I mentioned the holistic view of the investment decision for energy efficiency by businesses. I think governments, and I'll even take it to utilities and in the U.S. independent system operators can take the same view on what is the benefit of energy efficiency in terms of removing regional grid constraints. And I think there can be pain for energy efficiency that's delivered in the right way. And, you know, you see this in some markets like PJM and ISO New England, where there's demand response, which is, let's call it a cousin of energy efficiency. there's payments for energy efficiency itself and that matters and i'll go to one example of a project that metris did in connecticut for a community hospital where that project was a four million dollar project and it was in an area where there were real grid constraints and the utility eversource was having problems at that point in time um and concerns about the grid we got a million dollar incentive from Eversource that was partially about energy efficiency, but it was really just a smart economic decision that Eversource made to get projects done.

22:01So I think you could extrapolate that, Ed, to the policy level as well. So there's a private sector role, but there's more that governments and utilities could do as well. Hey, Ed, also, you know, Bob's sitting in Brazil, a country that's talking about putting in carbon pricing or carbon taxing for heavy industry. If you're going to have to account for your emissions in the industrial sector, which a lot of countries are starting to move to because of the CBAM from Europe and other kinds of policies coming in in many places, Japan and elsewhere, that encourages energy efficiency because you want to use less energy because energy is the biggest contributor to the emissions of running an industrial enterprise.

22:47So, you know, I do think there's things that governments can do. California, you know, they're at the COP. I mean, they have a lot of programs that are directed at energy efficiency and emissions incentives or emissions reductions through the carbon pricing mechanism. And I was on a panel last night with the California Public Utility Commissioner. And in California, there's a loading order where energy efficiency is the first thing that utilities have to think of as they're making their integrated resource plans to think about how to meet demand. And, you know, Ed, I would put that in the same bucket of things that utilities and other governments could think on as well.

23:26What about the other issue then, my favourite subject, the Jevons paradox or the Jevons effect? This idea that as energy efficiency improves, essentially what that's saying is the productivity of your energy use is going up. And as a result, you can actually end up using more energy, not less, because you're doing more with that energy. This is, as it goes back to William Jevons of the 19th century, it was absolutely an observable phenomenon with coal. and coal use of coal soared through the 19th century and has continued to rise in the 20th century and into the 21st as people were able to do more with it.

24:05It's not necessarily something that happens always and everywhere, but it's a real issue, isn't it? That it is quite possible to actually improve energy efficiency and end up using more energy as a result. I'm going to argue against that, Ed, which the listeners always like when we disagree. But first, Bob, I think you have like a firsthand story about the Jeevans paradox. So why don't you go first? Yeah, well, maybe it's firsthand, secondhand, but, you know, it's kind of just goes to show a little bit of the atmosphere, COP, which is so fun. But the COP meetings run six days a week and then there's a day off.

24:39And so on the day off, we went over to the TED countdown house that was having a book reading. and Stanley Robinson. I don't know if you guys are familiar with the book, The Ministry of the Future. Oh, yes. I am very familiar. Yeah, indeed. Yeah, yeah. I've seen him talk. He's wonderful. Yeah, no, it's hands down the best book on climate that I've ever read. I mean, kind of, I read it about four or five months ago and just stopped me in my tracks, you know, just the topics that are covered. And his book talks about the Jevons paradox And his book is set, roughly, it starts around right now, and then it goes out about 30 or 40 years, and it gets intertwined with the COP process.

25:23But he talks about it, and his main point is that you really need policy interventions to help counter that. So areas that, you know, maybe it gets into a carbon tax, you know, that could be one example. But that there's a role of policymakers and interventions that need to be deployed to help solve this. I generally agree with that, but I'm also of the view that I don't know if this is our biggest concern right now. And it maybe gets back to our earlier conversation where on a couple of points, actually, energy prices. You know, we're at a time now where we're going to start to see in some parts of the U.S.

26:00double digit energy prices. That is going to at least stall the Jevons effect, you know, for sure. The prices are going up. And then I'll go back to the buildings and the customers that we work with, that we go into a facility and they're not saving all the energy they can. You know, they're 30, 40 percent inefficient. So I hope we get to the point, Ed, that this is going to be a problem. But I think we got a lag and we got a lot of work to do. And, you know, I would love metrics to be part of it. But it's an interesting discussion. Well, and Ed, let me just say there's a really big difference between the coal industry in 1865 and what's happening today.

26:43I got it. You know, everybody's talking about how with this electricity thing, global coals rose one and a half percent in 2024. But actually, it's been down in China and India this year. And the expectation from International Energy Agency anyway is that it's going to be flat this year. Right. And maybe we might see at some point peak coal in the IEA's view. Who knows? But I think really more to the point, in these markets where we've suddenly seen a robust response to energy efficiency, such as efficiency and fuel economy, take the United States market. Vehicle miles travel has gone up in the United States.

27:25Gasoline demand has been going down, down, down since 2019. I get it. COVID gave a little momentum, but still to this day, we're still seeing it. Gasoline prices didn't necessarily go down, even though demand went down because of the peculiarities of the oil industry and the peculiarities of the geopolitics of oil and some other factors. So there isn't necessarily even a one-to-one that we can start using a lot less of something and the price actually goes down. You know, even for coal, because it's a mined commodity. And so there's not necessarily this instantaneous effect. You know, one of the interesting statistics for wasted fuel in the United States, right?

28:08There's some giant amount of gasoline and diesel fuel gets wasted every year just from people sitting in congestion. And that interested me because, of course, the AI is making steady improvements in that. And Texas A &M tracks that. And unfortunately, their last set of data was 2022. But they, I think, honestly, I think I have a better interpretation of their data than they did. what they found was that traffic from automobile commuters was still way down in 2022 and that there was a little more traffic on Saturdays than there had been in the past which probably gets the remote working right people can run out and do their errands on Saturday or I don't know why that would make people do more driving on Saturday but maybe they feel more relaxed they don't have to rest on Saturday who knows but the interesting thing was that congestion for trucks was up a bit, of course, they say because of e-commerce, but that will eventually get eased because the programs for optimizing e-commerce is not just that the trucks are going to use better routing, because that's already happening since 2022, market improvements in that.