Thursday, August 6, 2009

EVO Insights Episode 1 with Pierre Langlois

I got a chance to speak with Pierre Langlois at the end of last year and decided to use it as the 1st of a few pilot episodes of our new EVO Insights podcast show. If you're interested in the role of measurement and verification and energy efficiency in the future of the Kyoto Protocol I really recommend it. We used Skype, and there are a couple places were we cut out, but over all very interesting and informative.
Click here to listen to the show right in your browser or click here to download the episode.

Episode 1 Transcription:

Nathan: Welcome to the first ever episode of EVO Insights. I’m Nathan Shetterley, I’ll be your host. EVO Insights is a concept we’ve been kicking around on the web committee for a while now and we’re hoping it’ll be your chance to get to know some of the key players at the Efficiency Valuation Organization and see what they’ve been up to lately. We want it to be your show, not ours, so please give us your feedback at or Toady we’ll hear a phone interview that I had with Pierre Langlois in late 2008 where we’ll get to talk about the Kyoto protocol, what’s coming in the future and how IPMVP and EVO can play a role. I hope you’ll enjoy.
Today I’m with Pierre Langlois from Econoler International and also Vice Chair of EVO and we’re going to be talking a little bit about Kyoto and energy efficiency and how IPMVP falls into all that. So, how you doing today Pierre?

Pierre: Well, pretty good.

Nathan: How are things in Quebec, how’s the weather up there?

Pierre: Err, well, pretty cold and chilly. Winter is coming up so I guess in a few days we’ll start to see snow.

Nathan: Well hopefully in the States we’ll have a couple more weeks before we see that. Pierre, I wanted to talk a little bit today about energy efficiency in Kyoto. For the person who’s just out there and knows Kyoto, they know it’s about reducing carbon and I think most people would think energy efficiency is part of that, but how does that really work with Kyoto and energy efficiency? Is it the same thing as sort of a clean energy project, or how would that work?

Pierre: Yeah, well, (gap where unclear over phone), would be then both for renewable energy and other types of projects and the focus would be done for energy efficiency. Unfortunately, as of today, if you look at the CDM small scale board in the UNFCCC essentially there’s less than 2% of the projects that are focusing on energy efficiency and even a very small portion of those 2% are related to demand side energy efficiency, most of it is related to supply side energy efficiency. So energy efficiency in the production sites, essentially the one using coal, and one of the main reasons for that, well there’s a couple of areas that are related to that, so, technically, the problem financing could be applicable for energy efficiency but in reality it’s pretty complicated and we can go into the details of the areas to use in problem financing to benefit energy efficiency projects.

Nathan: Yeah, so going directly into that, for the energy efficiency projects that we have now, and I just sort of read over some of the Kyoto protocol today, it was one of the main things. Going into that I guess the first thing was the financial barrier. Why would there be a financial barrier on energy efficiency projects versus a clean energy project? You know, the money’s being put there, it’s the same money, so what’s the problem there?

Pierre: Well, you get to one of the… …two issues really… …energy efficiency really there are… …and the transaction costs to be able to get a carbon financing deal out of an energy efficiency project is still quite high and the process is quite complicated. So why it prevents quite small scale projects to be integrated into the CDM mechanics and the GI mechanics. As an example, a typical energy efficiency project in an industry might be one hundred thousand dollars and the potential carbon credits that could be obtained out of a project like that might be something between five and fifteen thousand dollars. For example, then just for that small amount of money the cost to deal up a project, use the methodology, present it to the UNFCCC board, get it approved and then the transaction being made and then you still have to do measurement and verification of savings would prevent the use of such mechanism because of these transaction costs. That’s one of the barriers, instead of either the money not being able to reach the end user, it’s basically the transaction cost that’s too high. So that’s one of the couple of barriers that we can find. The other one might be related to measurement in verification itself, that’s probably a topic that you want to address. Measurement and verification finance efficiency projects might be quite specific to the type of project we're using. So, the 
UNFCCC and the CDM Board, essentially, they want to work with the pre-developed methodologies where you use a methodology over and over again over a similar project. A very good example would be a wind power project. Whether you do it in India or you do it in Morocco, and you have a 1 megawatt or a 20 megawatt, basically, the measurement aspect of it would remain quite pretty much the same. If you have a energy-efficiency project, then, obviously, it might… …actually, be different from one project to the other even though you use the same technology. The baseline issue and the way to measure these savings maybe different. That’s how the protocol works, is you develop a basic methodology and use it over and over again. For energy efficiency, it's very costly to develop one methodology and it's difficult to use it over and over again because of the specificity of the project. So, because of that, basically, the project has been very difficult to develop. The only ones that have been developed are usually pretty big projects in pretty big industrial sites. The size of the project makes sense, at least, for transaction cost point of view, and as well for the development of specific... …plan that would be approved by the Board of UNFCCC and then be put in place.

Nathan: So, from a very layman’s perspective, I look at that… …knowing about IPMVP, as we already have that, is that something that they're looking at? One of the advantages of IBM BP is that it's flexible enough to go with any energy efficiency project out there and still have a comparable and reliable result. Is that something that they would accept, or is that too wide open for them? Do they want something more specific?

Pierre: Well, that’s a pretty good question. EVO has been trying to address that issue with the different stakeholders we're working on that topic, UNFCCC being one of them, World Bank and Carbon Finance Group within the World Bank has been another one. We're trying to push for the adoption of IPMVP as the protocol of reference. So, they can say if something is complying with IPMVP, then it could be acceptable. The problem is, at the UNFCCC… …that they have not approved such a generic protocol so far. They, basically, work on a very, very specific type of protocol that is applicable for one technology, for example. IBM BP is not specific enough. It could be specific enough if we were going to develop a specific plan for a project. But, IPMVP as itself is generic, and that’s the beauty of it in once sense that it can be applicable for any type of project. But, on the other hand, it's too broad to be able to be approved on the way that UNFCCC is working today. But, on the other hand, there's no real other way to do it as if you try to develop on protocol per project. Like we said, that the size of the project and the transaction cost involved in it, then it's likely that that protocol will never be good enough to enable energy efficiency projects to flourish under it. So, it's kind of an adaptation that the people working under the Carbon Financing… …would have to change their views if they want to attract more energy efficiency projects into their portfolio. EVO is working on it and trying to be… …to help them understand the specificity of energy efficiency project as it in general. All the… …use IPMVP as a reference to limit these barriers for the development of projects.

Nathan: What are the different outcomes that could of this? I mean, obviously, one of the consequences would be if they don’t adopt it, then they’ll just not have energy efficiency projects or have such a low rate as they do right now. But, if they were to adopt this, what do you think the impact would be?

Pierre: Well, if they were going to adopt it then, I guess, the capacity from stakeholders to develop such a project would be increased quite a lot. It would be easier to use that protocol and train people on the protocol so they can be able to develop plans for their own project, and not try to be as specific as to develop a new plan all the time. So, it would definitely enable the stakeholders to look at energy efficiency in Carbon Financing as something that could go together it’s not the case today. But even though that would happen, there would still be the barrier of the size of the project.
One of the ways to address that is probably through bundling and a lot of the stakeholders within the market are thinking about this bundling opportunity. Unfortunately it's not something that's easy to do because as you try to bundle projects they are not all the same so they don't use all the same technologies, they're unfortunately not likely to start at the same date and end on the same date. So bundling, conceptually, would make things easier in practice, it's almost never been done because it's too complicated to implement. So a lot of us are working on this issue to try to find the best way to bundle projects to make them sizeable enough to be able to benefit from carbon financing. So the M&V and IPMVP is one of the answers but it's not the only answer to that big problematic that we have right now around the world.

Nathan: That sounds good, it sounds like it's promising but still have the challenges ahead. Looking back over the last few years with Kyoto being ratified by almost everybody and hopefully here with Obama coming in, the United States will be jumping on that ship as well. What do you think that the big success is and maybe some of the failures or some of the weak points of Kyoto have been?
Pierre: Well like I said, one of the weak points is not being able to include energy efficiency in the activities they started, but we have to realize that Kyoto is basically the first step out of a long long road and a lot of the people in the market are really looking at post-Kyoto and the next phase after 2012 and trying to figure out a way to improve on it. And improving on it is certainly not going to be to complexify it more. It's going to be to simplify it more and try to find a way to reduce the transaction costs to be able to have carbon financing being efficient for all kinds of projects including energy efficiency. So a lot of the stakeholders in the market are thinking out ways to introduce energy efficiency within that market starting from 2012 because I think everybody kind of dropped the idea that we will be able to scale up the energy efficiency portfolio before 2012 under the actual Kyoto mechanics. There's probably some other mechanisms out there that will enter the market that are trying to address that as well, but there's going to be a way after 2012, especially with the U.S. coming on board and hopefully Canada one day, to basically find a way to include energy efficiency in this. Because everybody recognizes that that's where it will basically come from. A lot of the carbon emission reduction around the world will have to come from efficiency. Renewable energy is a great way to reduce carbon emission, but still it's more costly and it probably takes a longer time to be able to implement. So I think pretty much everybody recognizes that, and then we just have to develop the mechanism to enable the activity to join that market.

Nathan: What do you think the chances of it working out in 2012 are there? It gives us awhile to brainstorm and come up with ideas, but do you think it's something we can hit that deadline or do you think it'll go to the next rewrite?

Pierre: No, I think it's going to make it by 2012. Everybody is focusing on making the post Kyoto concept or agreement work and everybody thinks of energy efficiency. So there will be a way. Is it going to be the best way? Likely not. It's going to be improved over time, but there's going to be significant improvement as the U.S. coming in to make energy efficiency part of that new round of carbon emission reduction. And it's certainly going to be a big thing in the U.S. and around the world. So I'm pretty optimistic but what's going to happen, I guess no one knows today.

Nathan: Alright, well thank you very much Pierre and thank you for your insights.

Pierre: Well, it's been my pleasure and hoping EVO is going to be able to collaborate through that big initiative.

Nathan: Excellent. Alright, have a great day and I'm sure sometime in the future we'll be talking again with you soon.

Pierre: Alright, thank you very much.
Nathan Shetterley (
EVO New Media Director