Confronting Risk – its about the marketing effort

Being corrected by a 15 year old can be confronting – but she was right – the risk model is about marketing potential, not financial exposure. Potentially all those years of study, and all those educators that instilled what was expected of us – all wrong!  So fellow innovators we can look to the thought leaders for inspiration, can we not?

A friend recently attempted to post a story, and complained that the story was not just moderated but removed as a post. In this instance the group, the Carbon War Room, may have thought the scenario too cheeky? However, Co2Land org found the story was a visualization of how branding can prevent an innovator from getting the correct exposure, and how opinion might be too concentrated and worried about marketing risk, which inadvertently prevent a fair review of the financial exposure of not following the innovator.

The author below I will identify as Peter:

“I have heard that Richard Branson has a 1 $billion private investment plan to help Island nations with adopting renewable energy, they are just waiting to identify the best technology to go with. Our plan for the Pacific Rim Island nations facing the same problems is to get some of our island friends going ourselves in the mean time with a properly designed and integrated biomass gasification system and containerized syngas reformer and invite him and his corporate mates across, have them picked up from the airport in a renewable alcohol fueled jeepnee and delivered to the jetty where a Green diesel fueled inter island boat takes them to their coconut shell powered hotel on the next island while they deliberated their options over locally caught and syngas fried fish & prawns with side of biochar grown fruit & vegies, sipping wine cooled using waste heat driven absorption chillers, and distilled activated carbon filtered water from the evaporators while their used biodegradable plates and cups are quietly taken away with the rest of the rubbish and recycled through the gasifier where the reformer can also produce a little aviation fuel to refuel his plane while he visits…all of which helps build the local economy and create far more permanent jobs than importing solar panels and wind turbines (though these certainly to do have their place as part of the overall energy mix). All of the above is possible with existing proven technology. The solutions are out there, just not supported by big business yet”

So as not to prejudice this discussion in any way Peter was quick to add “I am not a depositor in a bank in Cyprus….”.  Now that, Co2Land would say is outside the risk model of this discussion, and cheeky! On reflection, maybe we should look at how many brand banks are exposed in Australia?

 

Its Real – again

That word ‘real’ has popped up again – and we must prepare to again endure the use of a synonym and have it portrayed as the truth. Perfect for politicians is the use of the word or term ‘real’ as it can be seen as a initial or promised activity increase and not guarantee an increased activity (it could be real activity and still lead to a decrease of activity!!). So if I say it was real at the time I acted; I have been true to my intent to act in good faith, and equally a review of my intent can happen when convenient. The issue with the word ‘real’ in this context is it literally means the activity is a cause of change.

To put this in context in August 2012, Co2Land org wrote two stories that looked at the use of ‘real’ with implications for the Carbon Farming Initiative its legislation and regulations. In the Story

Time for a real review Posted on August 20, 2012 by co2land , the opening paragraphs said:

‘Smart forms of research has found that customer service and sales skills are considered the least important when building a brand, and it would seem big brand and government know this very well. This might explain why any meaningful programs are explained in a way of the language of spin. For what is done would we not prefer to hear or feel that our policy makers value some measure of the actions and actively seek feedback from those that influence our lives at least every 6 to 12 months from a startup campaign. This view suggests government is a business – a business that must please its total stakeholder basis.

Why should this happen? Take a look at quotes taken from the writings of Laurissa Smith and Anna Vidot (www.abc.net.au ), on Monday, 20/08/2012, the story ‘Carbon farmers challenged by rigorous process’: “The guidelines which set out how they can make money from schemes like the Federal Government’s Carbon Farming Initiative are still being developed…It’s still sitting under consideration with the Domestic Offset Integrity Committee which is the committee tasked under the clean energy regulator to review the methodologies…So we hope that it’s going to become available for public interest by early 2013.” This is extremely frustrating when you consider the Department responsible made announcements of a body as set up for Carbon Offsets in June 2010.”

While numerous new methodologies are now approved – what holds true is that branded entities and those that were transitioned from the Greenhouse Friendly Program benefited, and most farmers that hoped to earn credits have not.

Then in the story Real, Additionality, RECs Posted on August 14, 2012 by co2land , the opening paragraphs it was said:

“Observing CTi’s Carbon Offsets 2 day Masterclass offering, it occurred that a US based mob was on about getting real about ‘real’ carbon offsets. Curiosity led to checking out the reporting standard AS/NZS ISO 14064, finding it is silent on the word or term ‘real’ and completely avoids the topic of additionality, was fascinating given that you can’t even conceive of an offset without the concept of additionality!

CO2Land org now ponders: If ‘real’ cannot be a guarantee of a good project outcome. It follows that the use of the word or term ‘real’ can be seen as a initial or promised activity increase and not be seen as a guarantee of an increase in the carbon offset (it could be real activity and still lead to a decrease of carbon offsets). So if I say it was real at the time I acted; it was an act in good faith only. The issue with the word ‘real’ is it literally means the activity is a cause of change.

This lead to thinking of the impact this has on the Carbon Farming Initiative as legislated when the Gold Standard and Carbon Fix require that projects be “real”, but no international standard could explain what they mean by using the terms”.

Then if you consider where ‘real’ is covered with a contrived definition and includes the concepts of completeness and accuracy in accounting, and leakage. It does so as no more than use ‘real’ as a synonym!

It would also appear that additionality is the next condition that might be the excuse that you cannot be real and CO2Land org looked a little harder (we don’t want this post to be no more than ‘hot air’) and found:

Specifically ISO 14064-2 (project accounting) does not include ‘Real’ because during development of ISO 14064-2 ‘Real’ was regarded as a programmatic rule/criteria, which is outside the scope of ISO 14064-2.

ISO 14064-2 is a standard rather than a program

ISO 14064-2 (Clause 5.4) specifies the following requirement in regards to additionality: “The project proponent shall select or establish, justify and apply criteria and procedures for demonstrating that the project results in GHG emissions reductions or removal enhancements that are additional to what would occur in the baseline scenario.”

Additionality is incorporated into ISO 14064-2 is based on the core principles of ISO standards in general, i.e. that ISO standards not be a barrier to trade (WTO-TBT – anyone following development of ISO 14067 (product) will know this is a major issue). As such, ISO standards must be policy-neutral (extended to include program-neutrality). This is of course very important for market confidence.

ISO 14064 deals with the concept of additionality by requiring that the GHG project has resulted in GHG emission reductions or removal enhancements in addition to what would have happened in the absence of that project. It does not use the term “additionality”…Thus the project proponent may apply additionality criteria and procedures, or define and use boundaries consistent with relevant legislation, policy, GHG programmes and good practice.”

Although the concept/requirement of additionality is within the requirements of ISO 14064-2, the simple reason why the ‘term’ additionality is not present within the requirements of ISO 14064-2 is because of certain sensitivities/perceptions/politics of certain parties involved in the development of the standard –

And, the following references helpful in gaining a more complete understanding:

ISO 14064-2 addresses ‘additionality’ with a general requirement and reference-out to the program rules (link = http://www.co2offsetresearch.org/policy/ISO14064.html#Additionality).

Also http://ghginstitute.org/2012/01/25/how-do-you-explain-additionality/

 

Danger in oversimplifying energy savings – built environment

When organizing energy procurement opportunities you can experience frustration with the need to use simplified language in order to tell your client how they will make the cost savings. The danger in presenting over simplified information is the data might be clearly shown the distortion of savings that may occur. However, the simplified information package cannot illustrate the effects when small but significant changes to operations, occupancy rates of building, seasonal variations, how government policy changes will impact on the cost equation.  What comes to mind immediately is the Carbon Price in government policy, and the opposition in Australia stating they will retrench that price – it then becomes important to consider how different energy retailers might treat it in the energy agreement – something very few thought about until recent times.

And, it appears universal that the common mistake in the information delivery is the over simplified explanations that can be interpreted as all actions the client takes is a linear function in terms of costs. When in reality the issue is the bigger the contract in terms of dollars the greater the impacts of what you do to affect energy used will affect your price paid for the total energy consumed.

Then we find we are not alone: It is common to make mistakes, and it all comes down to oversimplifying the estimates when presenting the cost savings.

When researching the phenomena it was found Lindsay Audin wrote  “Common Mistakes Made By Energy Managers” recently and we share much of his thoughts. So similar in fact, it is also what Co2Land org has been discussing with Ecoprofit Management (www.ecoprofitmanagement.com.au ). What we need to exercise care in is the data has a message, and to paraphrase into simplified information may miss very important part of that message:

1.    Beware of using averaged electricity rates. Customers in a tranche other than domestic tariffs will be rated for electricity charges for both how much electricity is used in terms of kilowatt-hours (kWh) and for how fast electricity is used in terms of kilowatts (kW) – The  “peak demand charge” and the variance of how fast you use electricity can be as much as 50% of a total bill change.

Note a) The danger in using averaged electricity rates as a simplify in estimating dollar savings from energy upgrades, is it is likely you might calculate an average electricity rate by dividing the total cost of electricity in a month by the kWh used in the same time period – therefore the rate includes the cost of peak demand in it.

Note b) Some upgrades to equipment may fail to reduce peak kW demand – examples are using motion sensors to control lighting needs and such measures will save kWh, but may fail to reduce peak kW demand because of changes to occupancy rates and timing of production loads changing to operational needs to be met. It also follows that controlled lighting might also only happen when the peak of energy use has already passed. In the case of motion sensors for lighting if they don’t cut peak demand, they won’t reduce the kW charge of the bill.

Note c) “This same problem arises with photovoltaic (PV) panels that generate power. A system rated (for example) at 100 kW will, at some point, provide that level of capacity – but not necessarily at a building’s peak time. Full PV output occurs when the sun is highest (between noon and 1 PM), unless the panels are mounted on a motorized platform that follows the sun. Commercial buildings usually peak between 3 and 5 PM, at which point PV output may have dropped considerably.” – Audin.

Note d) “Under a power purchasing agreement (PPA), a PV vendor owns the system and sells the output to the host customer at a small discount off the average utility price, typically for 15-20 years. Once again, that averaged price assumes all the PV power is being provided during the building’s peak. Studies have found that is often not the case. Depending on how much of one’s bill is for peak kW, the true value of the kWh from PV may be significantly lower than the vendor’s price.” – Audin.

Note e) It is then obvious that an averaged electric price overestimates dollar savings, and in all likelihood and unless there is data to prove otherwise, only savings based on the kWh can be assumed as a simple measure.

2.    Beware HVAC savings might not result from a lighting upgrade. Do not assume a watt for watt drop in cooling or assume a heating constant to replace the lamping output. It will not be a proportional saving of kWh in a linear fashion.

Note f) “Reducing lighting kWh cuts fixture heat output, but – for several reasons – that may not always translate into a proportional air conditioning (A/C) savings. For example, chillers run for only a portion of the year, while lighting is on most of the year. When lighting wattage is reduced in a room served by a constant volume air system containing electric reheat coils, a drop in cooling load may be made up – watt for watt – by an increase in reheat output. Not only will there be no cooling savings but even the kWh savings from the lighting upgrade may be negated.” – Audin.

Note g) “A 100% outside air system (e.g., serving a lab) may remove a significant portion of fixture ballast heat in its exhaust air instead of returning it to the cooling coil, thus mitigating some of the assumed A/C savings. If any of the upgraded light fixtures are outdoors or in uncooled spaces (e.g., stairwells, bathrooms, basements, mechanical rooms), their reduced heat output will never be seen by the A/C system. If, on the other hand, that reduced heat output necessitates an increase in winter heating through electric resistance baseboards, the net winter electric savings from the lighting upgrade may also be minimal.” – Audin.

3.    In Co2Land org’s mind the greater mistake is assuming maintenance savings will occur.  Repeated again and again are claims that new equipment will need less maintenance. It may be true, but in all likelihood it will have a cause and effect that might not be adequately assessed.  Consider this scenario: A new boiler is fitted with inverter technology and will require less maintenance. Staff will be cut because of this, or retrained, or reassigned elsewhere. But when maintenance is required of a harmonic distortion occurred the building’s maintenance budget will blow out and little or no actual measurable savings from new equipment will be reported. Admittedly it will most likely be in the preceding budget periods that this affect will show itself.

Note h) Research you case studies thoroughly, and do not assume marketing is telling the truth, the whole truth.

Our underlying message is to exercise caution when you try to explain with too little detail, and do not assume the other party is wanting you to explain all as a simplified explanation.  It might even pay to ask – can you make the time to understand all the implications?

Not selling – suburban transport EV dream.

The evidence to date suggests the socio-economic structure of suburban life is partly to blame for car dependent suburbanites rejecting electric vehicles. It might also explain the lack of patronage for City of Sydney recharging facilities infrastructure. And, now we have a political bidding war for public infrastructure in Western Sydney it will be even more difficult, or more correctly a major barrier is being put up to suppress the EV market even more.

The reference to City of Sydney patronage can be read on a previous post – Posted on February 27, 2013 by co2land – ‘Not selling – no better place to charge your EV!’ In particular the quote  “the first two power point stations were installed in September 2012: ”We haven’t had a customer yet,” but there have ”been a few drop-ins”.

When CO2Land org was researching the uptake of EV’s in suburbia it started with the premise of electric vehicles being a favoured solution, the dream technology is another way of putting it, and the best fit to solve our a families transport challenges and mitigate them from the economic and environmental impacts from oil dependence and how our lifestyles pose significant environmental threats. No such evidence exists that it will happen this way. The sales of EV’s are not happening as hoped, and the technology use indicates the problem occurs in a social context, and seemingly the discussion of electric vehicles has not included suburban social patterns among which electric vehicles might be adopted.

That said, someone else said, on 14 Feb 2013, we have looked deeper for the reasons and provided evidence . This was taken up by The Conversation and we quote “what Neil Sipe, Terry Li and I have assembled suggests the socio-economic structure of Australian suburbia, in combination with the distribution of public transport infrastructure, constitutes a major barrier to the widespread adoption of electric vehicles, especially among the most car-dependent households.

Relying on electric vehicles as a solution to energy and environmental problems may perpetuate suburban social disadvantage in a period of economic and resource insecurity.

Australia’s five largest cities are the most car-dependent national set outside the United States. Our previous studies (Dodson and Sipe 2007; 2008 have shown that outer suburban residents, especially those with lower socio-economic capacity, are among those most exposed to the pressures of higher transport fuel prices.

Future transport fuel costs are likely to be even higher (currently oil is approximately US$100 per barrel). Unconventional oil sources such as shale or tar sands may be abundant, but they have much higher production costs than conventional light crude. Their current production boom is underpinned by expectations that global oil prices will remain high or increase further over the long term.

Higher oil prices and the need to constrain carbon emissions will likely lead to much higher transport fuel costs than have prevailed in the past decade.

Electric vehicles are often presented as the most likely way to resolve this transport conundrum. Australia’s 2012 Energy White Paper alludes to a transition to electric vehicles as the economy of conventional fuels wanes.

Much of the Energy White Paper and the rhetoric around electric vehicles assumes an unproblematic transition – consumers will change their behaviour in response to price pressures. There is little discussion of potential barriers and impediments to this comforting, convenient narrative.

It makes sense that households who are most car dependent and least able to afford higher fuel prices would be the most eager to switch to an electric car. But, it turns out, the social structure of Australian suburbia means these groups are poorly placed to lead such a transition.

In our study of Brisbane we created datasets linking vehicle fuel efficiency with household socio-economic status. In our analysis, high vehicle fuel efficiency, including hybrids, serves as a proxy for future electric vehicles. We linked motor vehicle registration data with the Green Vehicle dataset on fuel efficiency, plus travel and socio-economic data from the ABS Census.

Our analysis builds a rich picture of how the spatial distribution of vehicle efficiency intersects with suburban socio-spatial patterns, using Brisbane and Sydney as case studies.

We found that the average commuting distance increases with distance from the CBD while average fuel efficiency of vehicles declines. So outer suburban residents travel further, in less efficient vehicles, than more centrally situated households. Outer suburban residents are also likely to be on relatively lower incomes than those closer in.

The result is those living in the outer suburbs have relatively weaker socio-economic status but are paying more for transport. For example, one-third of the most disadvantaged suburbs in greater Brisbane also have the most energy-intensive motor vehicle use.

A socially equitable transition to highly fuel efficient or electric vehicles ought to favour those with the highest current exposure to high fuel prices. Yet our research finds it’s not likely to happen.

26 February 2013, Jogo Dodson, Associate Professor and Director, Urban Research Program at Griffith University “

CO2Land org still maintains it is the politics that drives community attitudes and where it may be immoral, it is not illegal. Thought of today – more politicians face charges with illegal activities each year than illegal immigrants! Source ABC.