Sector focus: Energy efficiency

Efficiency stays out of the spotlight, but energy-saving heating investments are attracting increasing attention.

In May 2020, we polled top managers and investors to find out what they were doing about climate change. On the key measure of energy efficiency, we found the answers could be summarised as ‘not enough’.

Several of the top GPs and investors declined to detail their energy-efficiency efforts. There were a few honourable exceptions, such as Australia-based IFM Investors, which reported that it was working with domestic electricity supplier Ausgrid to upgrade 60 percent of its 260,000 streetlights to energy-efficient LEDs. On the whole, however, we concluded that the ‘forgotten fuel’ remained just that, as investors scrambled to put money to work in more visible energy transition ventures.

The pandemic brought more bad news. The International Energy Agency warned in June that it expected spending on energy efficiency to decline by 12 percent in 2020, from the $250 billion invested in 2019. “Investment is not enough to meet sustainability goals and reduce the effort required from energy supply,” the IEA noted at the time. It stated that “primary energy intensity” was falling at an annual rate of just 2 percent, far below the 3.6 percent needed to meet climate goals.

Although progress has been disappointing overall, the past year has seen renewed attention on the vital role that efficient heating systems will play in the energy transition.

At our Nordics roundtable in June, Kai Rintala, managing director at Finnish renewables manager Taaleri Energia, pointed out that assets such as data centres are coming under pressure to go “deep green” and “capture the heat they produce and recycle it through district heating”.

Then in February, Australia’s QIC was one of several firms to acquire a stake in thermal heating business Enwave Energy from Brookfield Asset Management. Christian Schmid, the firm’s sector lead for utilities, told us QIC believed “in the potential of distributed energy as providing sustainable, long-term energy solutions to buildings and their operators”.

Using waste to reduce waste

Turning waste of various forms into power could be seen as the ultimate form of efficiency in the energy sector. In December, Greencoat Capital’s Jamie Milne explained how the firm’s commercial greenhouses in the east of England were using heat generated from local wastewater treatment facilities through the largest heat pump installations in Europe.

Meridiam has also focused heavily on energy efficiency in agriculture. The French firm entered the US biogas market in July with a $35 million investment in a company that produces renewable natural gas from dairy waste. Meridiam partner Elisabeth Hivon described this as a “perfect example of circular economy”.

Yet, as we reported in March, the UK’s energy-from-waste industry appears to be losing momentum. After achieving strong growth in the early 2010s, heat and power projects using advanced conversion technology have been beset by technical and contractual difficulties.

Stories of the year

Investors take tentative steps towards efficiency

May 2020 SUSI Partners raises €289m for its energy-efficiency debt fund

September French asset manager Acofi Gestion holds a first close on its €120m renewables fund and plans to invest 20% in energy-efficiency projects

November German asset manager Aquila Capital announces a new energy-efficiency fund

February 2021 Brookfield Asset Management exits from Enwave Energy, a provider of efficient heating systems, in a $4.1bn deal