For Sustainable Energy
The transformation of the global energy sector through efficiency improvements and higher uptake of renewables has remained the main pillars of action for governments and businesses to slash greenhouse gas (GHG) emissions. While necessary, these efforts have been far from sufficient for meeting the climate targets set out in the Paris Agreement, indicating a need to widen the lens through which the challenges in the energy sector are viewed and addressed. One such shift can come from integrating circular thinking in the energy sector through changes that help limit unnecessary energy consumption, extend the life cycle of energy-efficient equipment, and create added value through new product and service models. Recent studies by leading organisations confirm that moving towards a cleaner energy mix is merely step one since nearly 70% of man-made GHG emissions are a product of material extraction, handling, and use.
Organisations partaking in the energy sector hold tremendous potential to contribute to a circular economy by incorporating the principles of reducing, reusing, repairing, refurbishing, remanufacturing, and recycling in all spheres of operation. Circularity replaces the linear ‘take-make- dispose’ mindset with closed-loop production cycles to prolong the lifetime of products and cut down on waste. The resulting changes in the production paradigm entail being mindful of the raw materials used, keeping materials at the highest possible utility along the supply chain, taking back used items, and repurposing its components for new products. Within the energy sector, these stages translate into employing renewable inputs, maximising the use of stocks of objects through service-based models, and recovering by-products and waste for further usage. Despite the range of benefits the circularity model offers, it has struggled to permeate the markets globally because of acute funding shortfalls and a lack of grasp over ways to apply the concept to the existing economic systems. Until as recently as 2017, debt and equity instruments backing projects promoting circularity were absent from the financial landscape – but the tide may slowly be turning. Venture capital, private equity and debt, and other private market funds investing in circular economy activities have grown tenfold in the last four years. This trend is expected to gain further momentum with the implementation of the EU taxonomy, which will provide clear guidance to investors on projects that can credibly be counted as advancing the circular economy. There is much room for current national climate pledges to embed circular policies and practices across sectors. COP26 offers a massive opportunity for disseminating best and showcasing that despite being an ambitious endeavour, circularity begins with small steps that can deliver meaningful rewards for the planet.
This article emphasises two ways in which BASE and its partners, through their business and financial models, are pushing forward the circularity agenda in the energy sector. Presently, these objectives are being pursued through the servitisation model in Cooling as a Service and Efficiency as a Service Initiatives and take-back schemes in Ecofridges.
Moving to selling the services and outcomes a product can provide instead of the equipment needed to generate it, referred to as servitisation, can effectively scale circular business models while helping unlock energy investments in underserved markets. Building on this opportunity, BASE and its partners have launched Cooling as a Service (CaaS) and Efficiency as a Service (EaaS) initiatives, which follow a service-based model that allows end-users to access energy-efficient equipment on a pay-per-use basis, also increasing the affordability of such solutions. In addition to providing an economic incentive for refraining energy use beyond requirement, the pay-per-use model makes end-users more aware of their overall consumption and motivates behavioural changes such as voluntary mitigation.
Meanwhile, technology providers registered with the initiatives continue to own, maintain, and repair the assets in exchange for a monthly fee from customers based on the units of energy consumed. Since the technology providers cover all costs associated with the appliance, offering energy-efficient options with lower operating costs over the long run makes commercial sense. The model achieves resource efficiency and circularity by encouraging the provider to make the equipment durable, substitute corrective with preventive maintenance practices to extend product life, use renewable inputs, maximise value recovery at the end-of-life, and introduce systems thinking in the research and design phase to take advantage of synthesis across technologies (e.g., combining heating and cooling, electric thermal storage).
As of now, technology providers sell the equipment and forget about it – an outcome that can be prevented by servitisation. Being the owners of efficient appliances, the technology providers are incentivised to minimise wastage and maximise the time resources stay in the loop. Accordingly, servitisation promotes the re-utilisation of the equipment and its components through modular designs that give technology providers the flexibility to upgrade the appliances in line with the consumers’ evolving needs.
Ecofridges aims at improving access to energy-efficient and climate-friendly refrigeration and air conditioning solutions in the residential sector in Senegal and Ghana. Under the initiative, BASE and its partners are working towards adding take-back schemes into the green on-wage financing mechanism (Ghana) and the on-bill financing mechanism (Senegal) to collect old room air-conditioners and residential refrigerators. As many older appliances contain chlorofluorocarbons as cooling and foaming agents, retrieving reusable components, and ensuring proper end-of-life treatment of the chemicals can curb the rise in GHG emissions and ozone-depleting substances.
To set up the green on-wage and on-bill models, local financial institutions and technology providers agree on a rebate scheme that guarantees the former a predefined percentage of the selling price at which the cooling appliances are offered to the customers. Ecofridges can gradually pilot the take-back system by extending the scope of the rebate agreement, such that technology providers can both encourage consumers to deposit old operational devices in return for
a voucher or cash-back for future purchases and cover the cost of hiring e-waste companies for the transportation, treatment, and disposal of end-of-life appliances.
While the execution of the take-back scheme poses multiple challenges, such as unclear policy frameworks for defining the roles of different actors and under-regulation of e-waste carriers, BASE and UNEP are working closely with the Environmental Protection Agencies in the target countries to make the idea actionable for the long term. Making circularity the new normal can ensure that the triple bottom line of people, profits, and the planet drives companies and their operating strategies across the globe.