What does Expanding the Energy Efficiency Market have to do with the Law of Diffusion of Innovation?

Carbon reduction is the current hot topic but saving energy and saving money has always been a driver for businesses and organizations. In fact, the most environmentally beneficial action we can take is not using energy which is vastly better than even generating electricity through solar or wind. Yet, the Department of Energy states that 30% to 40% of energy use in buildings for heating, cooling, and lighting is wasted. The fastest carbon reduction we can do is to implement energy efficiency. It is also the most cost-effective solution we can do but there seems to be a disconnect holding back the mass implementation.

We have well proven technologies for saving energy along with skilled technicians. In fact, new technologies are expanding with the internet of things providing us with systems that can learn and adapt in real time through artificial intelligence to save even more. New technologies are being created every day for saving energy so what is the hang up stopping the rapid expansion? But the innovation that is needed is not a technology breakthrough rather a CapEx breakthrough.

The climate change goals for carbon reduction will require the deployment of trillions of dollars in energy saving infrastructure. So where will all this capital come from? Some people say the government, but you must remember the government doesn’t have their own capital unless they take it from its citizens. But then again government is what gives us $700 hammers, bridges to nowhere or a million-dollar bathroom for the homeless (a single bathroom) in CA so perhaps they aren’t the solution. Capital is the key though, but it is a battle for the use of capital in businesses and our families. The use of capital has important impacts on our futures. Does the pharmaceutical company use its capital to reduce its carbon footprint or perhaps the use of the capital creates a cure for cancer? Does the school put its budget focused on saving energy or building the new computer science lab that might bring us a student creating a new source of energy that changes humanities future?

The Capital Innovation that will change the deployment of energy saving and carbon reduction technologies is Energy Savings-as-a-Service. The Innovation is based on Sam Insull’s creation of the modern electric utility Commonwealth Edison in Chicago) and the electrification of the United States. The electric utility provides the capital to build the power plant, operate and maintain it and simply charges you a monthly charge for the service. Your business and family get to focus your capital on your goals. This same concept was utilized and expanded solar deployment through the PPA or power purchase agreement.

However, changing how a business adapts innovation comes to the Law of Diffusion and Innovation from the Diffusion of Innovation Theory by E.M. Rogers in 1962. According to this Law, 50% of the population welcomes change to some degree and those who accept change more easily will ultimately be the drivers for cutting edge innovation for the future. This Law has been shown in the introduction of the iPhone or even the basic adoption of wireless phones itself.

When you look at a basic bell curve, the first 2.5% of people are the early innovators that just must have the newest invention. Then the next 13.5% are the early adopters. At this stage it is still not mainstream until the percentage reaches 18% when the 34% of the early majority rapidly expands the implementation of the Innovation. The next 34% are the late majority and of course the laggards are the last 16% that would probably still be using a land line telephone attached to the wall and fight any kind of change. So where is Energy Savings-as-a-Service? At this point it is probably at about only 4%.  To expand the deployment of energy efficiency, Onsite Utility Services Capital has expanded it Energy Savings-as-a-Service capital platform to fund projects for customers, energy efficiency contractors and energy consultants nationwide. The CapEx barrier and debt barrier has been removed for companies to reduce the carbon footprint while still maintain their use of capital for their organization’s primary focus. How quickly we can get to the early majority depends on how fast people learn about Energy Savings-as-a-Service.  If your company has been waiting to implement an energy conservation project or if you are an energy efficiency contractor with a stack of great projects on the corner of your desk, contact Onsite Utility Services Capital and let the decarbonization begin!

Written by OUS

June 2, 2023

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