Is efficiency misunderstood

When it comes to energy, terms like 'frugal' or 'efficiency' can be perceived as 'going without' or suggest having to make do with less. The reality is the opposite. Efficiency often improves our experience.

In a world where energy demand is rising, becoming more volatile and costly, and climate pressures remain ever-present, efficiency offers more potential than ever. It's no longer just a matter of operational performance. It's about speed, comfort but also resilience, competitiveness, sustainability, and, increasingly, it's about better control.

Energy efficiency is not a side benefit, but the foundation for smarter growth. It should be seen as a powerful industry in its own right, and a crucial thread that runs through the success of other sectors. It's what enables buildings, industries, and entire cities to function more intelligently and more sustainably for better life quality.

Efficiency today is dynamic, digital, and deeply human. And unlocking it is one of the most powerful things we can do to accelerate the transition to a low-carbon future while strengthening the systems we rely on every day. Businesses must evolve their mindset and see efficiency not just as a vehicle for cost savings, but as a fundamental driver of operations.

The new meaning of efficiency

The traditional definition of efficiency – squeezing more value from fewer resources – remains relevant. But it's also not enough. It's about doing better – smarter operations, stronger margins, sharper control. It can also be the fastest and most cost-effective path to decarbonisation. In fact, its importance to hitting our net zero goals, has seen the IEA declare energy efficiency the "first fuel" of clean energy transitions.

In advanced economies, the bulk of efficiency savings are found through upgrading older infrastructure with new, more efficient solutions – things we've all heard of like switching to LEDs. However, more significant changes can and should be made to promote efficiency, from improving building efficiency to replacing HVAC systems. The IEA projected in 2021 that improving energy efficiency could deliver a reduction in annual energy-related emissions of 3.5 Gt CO2-eq (12%) compared with 2017 levels, delivering more than 40% of the abatement required to be in line with the Paris Agreement. The climate impact of efficiency is significant, but the wider impact to your organisation is why it should be on your radar.

Digitalisation and electrification: the twin engines of modern efficiency

As part of our decarbonisation journey, efficiency might be the first fuel, but it's the combination of electrification and digitalisation, or what we call Electricity 4.0, that is supercharging its potential. Alone, each makes an impact. When combined, they are transformative, redefining efficiency across industries, cities and households.

Electrification replaces fossil-fuel-based systems with electric alternatives – we're seeing lots of examples of this in our day-to-day lives with things like heat pumps, EVs or even induction hobs. But these changes can also be at an industrial scale with changes to process heating in energy intensive applications. These technologies are inherently more efficient and, when powered by renewables, dramatically reduce emissions. While a powerful part of decarbonisation, electrification's impact is magnified with digital solutions. For example, Schneider Electric helped ArcelorMittal, a major steel manufacturer, upgrade its Belval facility with digital sensors and software to monitor energy use and critical equipment 24/7. This led to a reduction of 170 metric tons of CO₂ emissions and a 20% decrease in capital costs.

The digital revolution has transformed the way we understand and manage energy. Smart sensors, connected devices, and advanced analytics provide unprecedented visibility into how, when, and where energy is used. This data-driven approach enables organisations to identify inefficiencies and remedy them. But beyond this, digital tools can manage electricity demand and balance loads dynamically. This allows energy users to be more in control and actively manage demand to when renewable generation is highest – which is something traditional systems just cannot manage.

Take your home for example. If you install energy management, such as smart thermostats, you save energy (and reduce energy bills) by applying energy exactly where you need it. As a result, not only do you save costs and carbon, you also get precise control and comfort, having rooms the exact temperature you want (vs just cold, warm or hot). These systems can even be enhanced with AI, incorporating weather forecasting to know that tomorrow will be warmer than today, so the boiler can start a bit later to reach your desired temperatures (saving even more energy and cost).

Efficiency for competitiveness

What was once viewed purely as a cost-saving tactic is now becoming a stepping stone for organisations striving to become more competitive, and we've shown some of the ways you can increase efficiency and move to a more electric and digital approach. Energy efficiency no longer deserves to be relegated to an afterthought or a box ticking exercise. It belongs in boardroom strategies – driving profitability, resilience and brand strength.

Businesses that use less energy are less exposed to price volatility and fossil fuel supply chain disruptions. And with smart, electrified systems, they can even participate in new energy markets – and even move into the prosumer space, becoming both consumers and producers of energy. This shift helps to future proof key elements of an organisation's cash flow and operations.

However, the value of energy efficiency transcends the bottom line. Energy efficient operations are increasingly a signal of innovation and responsibility, resonating with customers, investors and regulators. It's no surprise, then, that in their 2024 Investor Letter, BlackRock said companies that show a clear commitment to sustainability and efficiency are more likely to attract long-term capital.

Baking in resilience

It bears reiterating that investing in efficiency is investing in a long-term saving. For many it's also investing in more modern equipment which can offer a myriad of side benefits that weren't previously considered within the move. But the long-term saving on energy bills can see knock on reductions in maintenance costs. We've already talked about the efficiency improvements we helped ArcelorMittal achieve. But their benefits didn't end there. The more digitalised site, had a 5–10% decrease in downtime, making the site more productive while also increasing its efficiency.

Whether you're counting savings in MWhs or dollars, you're not counting the right thing with energy efficiency today. Instead, you should be looking at additional available spend for training, R&D or global expansion. You should be counting additional hours saved through better maintenance schedules or increased productivity due to a happier, healthier workforce. What you once knew to be true of efficiency isn't wrong, it's just too narrow for the value it can deliver today.

This article is also published on ESG Today. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy Thought Leaders, their opinions do not necessarily represent those of illuminem.

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