EDF's energy efficiency push faces uphill struggle

It is not often you find yourself feeling a bit sorry for one of Europe's largest energy giants, but as the rain poured down on EDF's Site de Renardieres research and development (R&D) centre south of Paris it was hard not to feel a twinge of sympathy for the executives responsible for promoting the company's new energy efficiency consultancy services.

That is not to suggest there is anything wrong with EDF's push to get business customers to embrace energy efficiency measures. Far from it. In fact, the technologies and best practices EDF is working on at its energy efficiency R &D facilities near Fontainebleau are almost universally impressive.

It is more that despite investing a fair chunk of its €375m annual R&D budget in improving energy efficiency, recently launching a new energy efficiency-focused research programme and offering energy efficiency consultancy services to businesses since 2002, the company is still facing an uphill struggle to get customers to embrace even the simplest efficiency measures.

"Only a few customers have strong energy efficiency programmes in place," complained Pascal Terrien, director of the new European Centres and Laboratories for Energy Efficiency Research (ECLEER) initiative the company has launched in conjunction with several French universities. "Even though energy efficiency measures lead to increased productivity and lower costs, they are just not focused on it."

EDF estimates that businesses can typically reduce their energy use by 15 to 20 per cent by implementing existing technologies and improved energy management processes, but despite these potential savings energy efficiency remains a low priority for most firms.

Terrien laid the blame for the situation on a number of "cultural, technical and economic barriers" that hamper any attempts to promote energy efficiency. The most persistent problem, according to Terrien, remains firms' unwillingness to assess the lifetime running cost of new technologies when making purchasing decisions.

"With a few exceptions, energy performance criteria are not being included in specifications for new equipment," he observed. "It's a pity, because it is often cost effective to find out that data and for the most energy efficient option."

This failure to demand more energy efficient products is justified by many organisations on the grounds that despite increasing energy prices, energy bills remain a small proportion of costs.

"Energy costs are usually no more than five per cent of operational costs," explained Magali Saint-Donat, head of the utilities group for EDF's R&D division. "Even if a company's total energy bill is huge, it is a small proportion of operational costs so it is easy to ignore."

She added that where energy costs accounted for a higher proportion of costs – such as in the chemicals and steel industry – interest in energy efficiency had been more pronounced, but such sectors remained relatively rare.

Cultural barriers are also stopping some firms from exploiting EDF's energy efficiency services, according to Terrien.

"We are often talking to managers who should focus on energy efficiency but don't," he explained. "It means they can oppose the idea of changing things as they believe it could show that they were not doing their job as well as they could have been."

Furthermore, even where firms do show an interest in enhancing the energy efficiency of their operations they are unwilling to assign the management resources required to ensure best practices are followed.

"Improving energy efficiency requires constant management," continues Terrien. "We can give advice on how to optimise a furnace and when we go back two years later we need to give the same advice because over time the set up has changed."

The net result of these various barriers is that EDF has just over 100 business customers signed up to its energy efficiency consultancy service, which helps firms optimise the energy efficiency of a wide range of different facilities and industrial equipment – a surprisingly low number given the service has been running since 2002 in France and since 2005 in the UK, Germany and Italy.

This slow progress would be bad enough for EDF given its internal goals to cut customer's energy consumption and CO2 emissions by 20 per cent by 2020, but the situation is made worse still when you consider it faces fines of up to €600m from the French government if it fails to meet similarly demanding targets to reduce customers' energy use.

However, despite the looming threat of many of EDF's execs remain convinced that the tide is turning and interest in energy efficiency among corporate customers is finally beginning grow.

"We had a period of energy prices falling throughout the 1990s and we saw all the corporate energy managers laid off and a decrease in energy efficiency," explained Colin Warne, director of marketing for major business at EDF. "But in the past few years in the UK the Climate Change Levy woke a few companies up and then two years ago energy prices began to rise, fuelling more interest. This year we've seen a real surge in interest in climate change and that has sparked more interest. We are definitely seeing interest in energy efficiency services increase."

This interest is being further fuelled by EDF's growing number of successful customer case studies – such as a car manufacturer that cut €1.8m off its energy bills simply by optimising its compressed air and boiler systems and a chocolate manufacturer that cut its bill by 20 per cent by optimising its systems – and the company's policy of virtually guaranteeing cost savings through its consultancy services.

"We either include the cost of the service in the supply price or offer it through a shared savings contract," explained Saint-Donat. "That means the customer pays us based on the size of the energy cost savings they achieve."

From the outside it seems rather perverse for a company to offer a service designed to encourage customers to buy less of its product. But Warne insisted the service has a commercial value beyond simply helping EDF hit its legally imposed energy efficiency targets.

"We really do see it as a customer retention initiative," he explained. " Providing this type of service is a great way of building a long relationship with customers."

And despite the relatively small number of customers that are currently working to improve the energy efficiency of their facilities, EDF's execs remain confident efficiency rates at commercial customers will improve rapidly once many of the next generation technologies that it is currently working on through ECLEER and its R&D division hit the market. The company predicts that imminent improvements in the energy efficiency of induction heaters, furnaces, cooling technologies and heat pumps could all deliver rapid cuts in corporate energy use.

"Many customers are not focused on energy efficiency at the moment," explained Terrien. "But when you consider five to six per cent of industrial equipment is replaced each year, energy efficiency has the potential to improve really rapidly as the new technologies emerge."