Section one: Hong Kong’s climate action plan
Chris: Kritika, thanks very much for joining us. This wonderful world that we live in in where you can be in Hong Kong, I can be in London, we can be having these types of conversations – it’s fantastic!
Kritika: My absolute pleasure. Thank you for inviting me to this platform so I could share more about this and how we are looking into decarbonization.
Chris: We’re here to have a conversation about climate and all things CO2 and carbon, and for you to give us your perspective from a hugely dynamic and innovative part of the world in Hong Kong, with your own specialty coming in from technology and how technology interacts with energy.
So with the Hong Kong top-down approach, where the pressure for environmental change seems to come from a governmental level rather than the centre bottom up approach that seems to be happening in Europe: would you say that Hong Kong is further ahead, or behind on the curve? Where do you see Hong Kong is in relation to its environmental initiatives, as compared to, say, London or Paris or New York?
Kritika: I would say quite behind in comparison to London or other regions. Setting targets is a great way to start, but I think even those targets were not very ambitious when they were set. And that’s just step one, that’s the tip of the iceberg.
There’s a lot more that needs to be done beyond setting targets from the government perspective. But now we are seeing like in the latest update to the Climate Action Plan for 2050, we see some concrete steps or concrete targets around the timeframe of 2035.
Just as an example, for commercial buildings there’s a target to reduce the carbon dioxide emissions by 15% to 20% by 2035. Then there’s also the renewable energy target, which Hong Kong didn’t even have – in the current mix renewable energies are 0.1%. But given the land constraints, I guess, there has not been that much of an ambitious way to set up renewables in Hong Kong. But now there’s a target of 7.5% to 10% in 2035.
The other major thing that the government has started to put targets for is electric vehicles. So transport accounts for 18% of carbon dioxide emissions in Hong Kong. That’s something now that the government has said: no more non EV vehicles starting in 2035.
As for electric vehicles, not only for individual users, but also the commercial fleet – your vans, your trucks, delivery between Hong Kong and even with mainland China –the government is looking into how to move more towards the electric vehicle future. That’s something I still think it’s so behind. We have 11,000 EVs in Hong Kong. Private vehicles, I mean, and the electric vehicle to charger ratio is five electric vehicles for every one charger. Again, the charging infrastructure needs to be updated, there needs to be a lot of investment put in there so that it becomes a norm and not just some people buying Tesla’s and driving them in Hong Kong.
Section two: renewables in Hong Kong
Chris: Absolutely. That’s the same with the world over. I know from my own experience I’ve tried to plug in my car into an electric charger in Ireland last week. I drove to two chargers – neither of them worked! There was serious range anxiety happening there!
To follow up questions from that. One is: my goodness, how on earth do they think that they can Get to a zero carbon economy with only 10% or 15% of renewables in the in the entire mix? That’s the other way around compared to what the rest of the planet is trying to do; they’re trying to get it up to 70%, 80%, 85% of renewables and then fill in the gaps with the rest. I understand that there isn’t an awful lot of land mass that you can use for renewables on Hong Kong. It’s an island – that’s life. But it puts an awful lot more pressure on people like yourself who are trying to make efficiencies, drive efficiencies from buildings. How can you deal with that type of pressure? Do you think that you can be shouldering the burden that the rest of the planet is asking renewables to be shouldering?
Kritika: Yes, so on the renewable side I think there are two major initiatives. Even though we don’t have the utility scale renewable here, the government did introduce a feed-in tariff scheme to incentivize rooftop solar. And although in the beginning there was this sense amongst the people that no, there’s not enough land; or, I don’t have enough space to put up a rooftop panel in my house in Hong Kong. But there are some areas in new territories, there are village houses that have ample space and the right centre structure and they’re also the landowners. That’s an important thing as well, that you must own the building to actually put a rooftop solar on it. And a lot of real estate in Hong Kong is leased. So that also brought in brought in its own challenge.
But I did see the residential side (especially in new territories) but also the commercial side leaning in more to put rooftop solar on their buildings so that they could meet their sustainability goal at least through that amount; and also the cost side of it, looking into payback of such centre investments.
The other piece is the renewable energy certificates. So that’s something also that the government has introduced. And again, we see corporates buying more of these renewable energy certificates because if you cannot again have the physical installations, these are various ways in which at least there is some direction towards increasing awareness of renewable energy in Hong Kong.
When we come more to the building side, how we can focus on energy reduction or carbon dioxide reduction right now? That has been an exciting space for me to be in, to be honest. It started off with me working at Schneider Electric, where I was looking into the technology startups that are installed on top of existing building systems to make them more efficient. Usually in a building, the heating, ventilation, air conditioning is what consumes the maximum energy. Around 40% to 60% of the energy in a building is consumed by these systems. And these systems, the equipment itself has a life of 20 to 30 years, so the solution is not usually, ‘ok, let’s just replace this equipment.’ But there are many efficiencies that can be gained by either getting the data from these equipment and utilizing and learning about that data, and then deploying some strategies to make the equipment efficient; or having some control on the equipment which is intelligent, using artificial intelligence.
So that has been the focus for me in the last few years: looking to the technology either coming from Australia, the US, Singapore and then seeing, how can we bring this technology to buildings in Hong Kong and make them commercialized? Because at the end of the day it’s not a showcase. It’s not, ‘this is how you can use it in one building.’ That’s not the objective. The objective is that it works in one building and then you scale it up to the portfolio of buildings. And the target is commercial property owners who own shopping malls, data centres or office spaces. These are the major consumers of electricity, and they are now looking into how can they make their portfolio of buildings more energy efficient.
Section three: Putting numbers on decarbonising energy use
Chris: Can we put some numbers on that? If you if you go into a building which doesn’t have any smart technologies in it, what type efficiencies can you get out of a first sweep? And if the electricity price goes up – doubles, say – what can you then be justifying economically, to be installing? What type of efficiencies can you get to?
Kritika: I would look at the building from two perspectives. One side is the operational side, which is more the chiller plant side of the building, where you can get the most energy saving. So if we can make that system more efficient, it can help save up to 20% to 30% of energy in a year. Every year, you can have about 20% to 30% saving. For a building owner that centre energy saving is quite substantial.
The other way to look at it is more on the tenant site. It’s the people who are occupying the building and the lighting and the air conditioning in this space that can also be optimized. It can just be turning off the light when no one is using the room, or not having the temperature at 18 degrees Celsius the whole day. Because based on the temperature outside, you should be adjusting the indoor temperature. But we really freeze in Hong Kong offices because they also have to maintain the humidity. They also have to maintain the CO2 level indoor. So there are these various factors in a building that come into play, and maintaining these different parameters affects the energy consumption. So at the end of the day, the building owner or the building manager has to make a call. What is more important, the comfort or the energy saving part? How do I balance these two for my building? That’s one of the major challenges of any building manager.
Section four: the quirks of Hong Kong’s buildings!
Chris: I can remember going walking around Hong Kong and being bakingly hot outside, wearing t – shirts and a pair of trousers, and going into department stores and having to take a jacket with me because it’s so cold inside! It always baffled me. But it’s just how people seem to like it in Hong Kong.
Kritika: I actually worked with one of the office owners who are looking into automation of temperature setting, so that it’s not set at one level throughout the day, let’s say 80 degrees throughout the day, and then you have staff complaining at different times in the day. ‘Oh, I’m feeling too hot,’ or, ‘I’m feeling too cold.’ And then they’re calling the facility management company to adjust the temperature. Some buildings in Hong Kong are so old that the thermostat is on the ceiling! Literally, the facility manager has a ladder that he takes over to the site and adjusts the temperature manually. This still happens in Hong Kong in some buildings.
So when you’re looking into energy saving, you have to start with automation and remote control. In some buildings, , we do have to do that and that’s usually retrofit. But you would see, even in some of the newer buildings, there is still opportunity. Even if it’s a new build, it still has an opportunity to be more optimized and to save energy. It doesn’t mean that just because it’s a brand new building, there’s nothing that can be done. The time of design and the time of operation, these are two different phases of the building and there’s always opportunity there. The good thing is that property owners are realizing this, and they are also seeing the value of saving energy and saving their carbon dioxide emission.
Section five: How ambitious can we be on energy efficiency?
Chris: So you say that we can save 20%-30% of the heating and cooling costs with energy efficiencies, and about 60% of the entire energy consumption of Hong Kong is from buildings. What other savings can you make out of the total, that 60%? How much do you think efficiencies and the type of things that you’re working on can take that 60% down from current levels – can you can you halve it? How ambitious can you be?
Kritika: If we did that for every building, it could come down to maybe 30%. There is another perspective, to look into the other savings that we also are generating from deploying technology like this, which automates and makes your equipment more efficient by optimizing it. One thing is the payback, which is something that property owner definitely looks into. So if we are saying that we can get 20% to 30% saving and the property owner’s spending on this technology, the payback for this centre technology is actually one to two years. It’s not that much.
This particular technology product that I’ve been working with from Australia, it’s actually a mini computer and EDGE device, which is very easy to install on top of the building management system of a building. It takes the data from the building management system and then runs a prediction of the cooling load of the building. It would predict how much the building needs to consume, and then it decides which equipment needs to be put in which order, or what temperature should the water actually flow, what is the rate at which the water should flow. It puts all these variables into a place to make it the most optimal performance for the building, and then it takes the action to execute this, at all the equipment levels. So this exact thing which this device does, is currently being done manually in most buildings, or by the building management system to some extent. But it’s not taking it to the next level where it can get this energy efficiency, because having to monitor and then work on at least 20 different variables in a building, you humanly cannot do that.
So, if you bring in this, you’re saving this time that these engineers are working on the building, just changing different temperatures all day. They can instead focus on critical issues in the building. Focus more on that and let the building run in a more efficient way. We also face this resistance that this thing is going to just replace me. It’s actually not true. You still need the expertize there, but you’d rather spend that expertize on more critical issues, which this system can actually notify you of.
That’s how I think; there’s of course the energy saving part, but there’s also this manpower that we are saving their time and that time is always money in Hong Kong.
Chris: Can these type of technologies also be used in a residential context? Or do economies of scale just mean that, at least currently, they’re restricted to large commercial buildings?
Kritika: This centre technology, this particular one is more focused on commercial heating ventilation systems. At the residential level, yes, there are steps that people can take at the home level. But in my personal opinion, something like a smart home or Internet-of-Things based home (IOT home) hasn’t really picked up in Hong Kong. It’s very niche and very few people are doing it. To be honest, the electricity bill in homes is not as high in Hong Kong. It’s a regulated business for electricity supply, and the unit rate is one Hong Kong dollar per unit of electricity. So it doesn’t incentivize people to really save from the save energy perspective. It doesn’t really incentivize that at the residential level. Technology does exist, yes. But whether people are open to adopt it at this stage, I don’t think so.
Section six: buildings management in the macro picture
Chris: OK, so on a big a macro picture, what part do you think that the broadest sense of building management – and that includes residential, IoT – will play in the overall energy transition, not just in Hong Kong, but globally? Do you think it’ll be a major part, absolutely crucial? Or do you think it has a role to play, but there are bigger fish out there? Where do you see technology in the energy transition space?
Kritika: I see technology as the enabler for all of these targets that are being set up and these plans that are being devised. In my experience, having seen how a particular technology can help save energy, that has really convinced me that this is possible. It’s not as hard as it looks. If we have the right knowledge and we do it in the right way, it’s possible on a bigger scale. Actually, there are a lot of targets and internationally approved standards that have been set. There’s the Green Building Council. There is also the way that you measure energy saving and the way that you quantify energy saving, which is by the International Performance and Measurement Verification Protocol. So if you are doing it in a standard way across different buildings, it is possible to have a major impact. So I do think that technology is the way forward.
Section seven: Why should we be passionate about energy efficiency?
Chris: Yes, you make a very persuasive case: the best way of trying to prevent carbon emissions is by not using them in the first place. And could you possibly lay out why you think that your particular space, your particular niche and technology and how technology interacts with energy, would be a good place for people to be focusing either their time, or their career, or their money? Why should we be passionate about what you’re passionate about?
Kritika: Because I don’t think that what I’m now doing in the energy and technology sector is just limited to energy. When we start looking into decarbonization, my focus is how this technology is helping to meet decarbonization goals. So when we’re looking into decarbonization and looking into reducing carbon dioxide emissions, it’s no longer just an energy industry issue. Different types of industries now are looking into how they can reduce their own carbon dioxide emissions. I recently interacted with an auction house that was looking into a sustainability policy. So last year, they looked into all their emissions coming from either shipping, logistics, buildings, and it means shipping paintings or shipping artwork from all over the world. That was a major factor of their emissions. You wouldn’t see an auction house looking into the carbon dioxide emissions ten years ago, but it’s happening now, and you wouldn’t think that coming from energy background, you’d look for a job in an auction house. But if they have a sustainability team and if they are looking into it, today they’re seeing where these emissions are. Now they need to work on how to reduce these emissions. So that was one example of a very non-energy industry; but you have Google, you have Amazon, you have all these big players now looking into their own decarbonization strategies and also creating new technology and innovative ways of combating that. So I think it’s no longer limited to just this energy industry.
Section eight: How to make money in this space
Chris: We’re both London Business School alumni. If you were talking to other London business school alumni, what would you tell them? How can they make money out of this? Why should they be interested in this purely on the financial side? Look, I fully appreciate what you’re saying, but if you’re talking about the hard-nosed LBS-ers , how are you selling them?
Kritika: I think LBS-ers are either in investment or consulting, right? So let’s say if you are in investment, that’s already booming! All the investment into renewable energies, solar, wind coming out of China or India right now – the biggest solar installers at the moment – there are so many different projects that one can put money into.
And then on the consulting side, all these companies that are wanting to have a decarbonization strategy, they don’t know how. They need experts in sustainability, in carbon reduction, in ESG. And there’s a huge opportunity there, not only in terms of guiding or setting that strategy, but on the other end of it is the implementation as well.
I would say the kind of work I am doing is more on this implementation side where I’m helping reduce the carbon dioxide emission in buildings by helping reduce the energy consumption in buildings through technology. Installing hardware and software solutions that can help optimize buildings so then they reduce their carbon emissions. But there are many, many other ways of achieving that reduction in carbon dioxide.
Section nine: Summary
Chris: Fantastic. And if there’s one thing that both consultants and bankers want, it’s numbers.
To summarize then, taking it from the top, we started with the ambitious targets or the ambitious goals set by the Hong Kong government for decarbonization, and that has encouraged buildings to be looking towards their energy efficiencies. That’s then also filtered down into the people doing their daily jobs, and improvements are made via technologies and systems to be trying to get increasing amounts of efficiencies from existing infrastructures. Improved, tweaked, rather than rebuilt infrastructures. And with all of that, if it can be spread out more, then significant savings in the energy consumption of the city can be made. Was that a fair summary of what you were saying?
Kritika: Yes, I think that is a great summary, Chris. I just would like to add one more thing which would be that to bridge this gap at the government level – our goals for decarbonization and what private entities are doing today – it may sound unrealistic to put more targets, or to think, ‘we need to look into what decarbonization goals and strategies we need to set again.’ But if we don’t know where to start – how to start reducing the carbon dioxide emissions and from where – then it won’t happen.
There is a need for private entities and organizations to take stock of what is consuming the most carbon dioxide emissions from their operations and probably start there. That’s the easiest way to begin, because it won’t happen in one go.
Chris: Fantastic point. Unless we understand the levels of carbon that are being put out by companies, by buildings – and by particular subset of the companies and buildings – you don’t know what you’re fighting against. And if you don’t know what you’re fighting against, you’re never going to win. It is a fantastic point, and it’s one that isn’t made enough. We’re running up against some very serious deadlines here to try and decarbonize the planet, to try and try and avoid the worst impacts of CO2 and climate change. And very few people are talking like you are, on: well, what are our emissions? How are we managing? What do we need to need to attack? What do we need to battle? Absolutely fantastic points and more people need to be understanding that.
Thank you very much for your time here. I think that’s a really good point to be leaving it on. Thanks very much Kritika for coming – I know it’s incredibly late now in Hong Kong. So again, thank you.
Kritika: My absolute pleasure. Thank you, Chris.
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