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Some Dilemma: Efficient Appliances Use Less Energy, Produce the Same Level of Service with Less Pollution and Provide Consumers with Greater Savings. What's Not to Like?

David Goldstein

Posted December 17, 2010 in Curbing Pollution

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In The Efficiency Dilemma, The New Yorker  (December 20, 2010), David Owen revives a discredited 19th century article on economics to posit that the increasing efficiency of household products such as refrigerators and air conditioners is responsible for a range of problems, including everything from food waste to America’s culture of excess.  Owen argues (apparently seriously) that by allowing consumers to save money that would otherwise go to high and wasted energy bills, efficient appliances have caused Americans to abandon the simple life.

Owen – whose expertise lies in the unrelated field of golfing (I’m not making this up), has unfortunately cobbled together this thesis without the benefit of facts or data. In the real world, efficient appliances (and the laws and policies that make them increasingly efficient) play a major role in reducing household energy usage, slashing  energy bills for those consumers who can least afford them, and avoiding the need to build new costly power plants.  Sad to say, this article – however well-intentioned, is a great example of misguided pseudo-analysis that is based on rank speculation made worse by gross errors of fact.

The reality is that the increase in efficiency of appliances is a huge success story for all consumers who benefit from the savings these products provide. Refrigerator energy use was growing with a trend that would have resulted in electricity demand of about 175 GW by today; but with efficiency policies that level of power demand was cut to less than 15 GW. The difference, about 160 GW, compares to about 125 GW provided by the entire nuclear power fleet in the United States, or to 400 large coal plants that were expected to be needed but now are not.

Owen, however, blames a host of evils on efficiency, but fails to back up his accusations with facts. Owen starts by conceding that serious energy analysis of rebound effects shows them to be “comparatively trivial.”  People who insulate their houses don’t absorb all the savings by sweltering through the winter, and buyers of efficient refrigerators don’t start leaving the door open gratuitously. But after admitting that the serious studies show rebound effects to be small and getting smaller over time, he does nothing to address the finding of the studies but instead starts writing a fairy-tale story of how efficient refrigerators don’t really save energy because somehow efficiency is responsible for the growing size of refrigerators, the increasing extent of refrigeration, and even the growing girth of Americans. The author notes how the size and feature offerings of refrigerators increased rapidly from 1954 until recently, and then, with out-of-the blue imagination, tries to link this to efficiency increases.

The facts stubbornly contradict this hypothesis, however. Figure 1 shows that trend in refrigerator size and energy use. What leaps out from the graph is that the big, fast increase in size (the red line) occurred WHEN EFFICIENCY WAS DECLINING. When efficiency began to improve, after 1972, the trend toward increasing size SLOWED DOWN. This is positive evidence that the rebound hypothesis is false, at least for refrigerators, Owen’s first example of choice. The growth in energy services in home refrigerators evidently has at best no relationship to efficiency, or even worse for this author’s point, is INVERSELY CORRELATED: the evidence suggests that greater efficiency implies more satiation with energy services.

2 Quakers book talk 2007.jpg

Owen then refers to the great increase in refrigeration in stores, a phenomenon he asserts but does not demonstrate to be true, somehow trying to relate it to the efficiency of home refrigerators. A more plausible speculation is that it had to do with the trend towards suburban sprawl, where the absence of retail food stores within walking distance of homes leads to people making longer trips to the grocery store at less frequency and (necessarily) picking up more food each time. Even this explanation does not necessarily imply that the shelf area that is refrigerated must, or did, increase. And when Owen refers to the kitchen of a friend of his with multiple refrigerators and freezers, he apparently is unaware of the fact that there were already 15% more home refrigerators than homes in 1973 when refrigerator efficiency was at its low point. The number is hardly different today.

The speculation then extends to air conditioners. Did air conditioning get much more common after 1960 because the cost of cool air went down? The facts are that the EFFICIENCY of air conditioners was not regulated until 1978 and even then only at the state level. National standards for air conditioners did not take effect until 1992. So to support his hypothesis, the author would also have to show that air conditioners’ market share started to rise in 1992, which he doesn’t do. In large part because it is not true.

Instead, he uses cooling as an example of how demand for energy services can grow. But this is undisputed, and is included in every forecast of energy use with or without efficiency policies. Efficiency does not mean restraining energy services growth. It means using less for the same amount of service. The author is confusing this trend with the sometimes-on sometimes-off trend towards more efficiency, and claiming that more efficiency INDUCES more demand for energy services. Again, this is what the serious studies were addressing when they found the effect to be “comparatively trivial.” 

The problem is that he has not presented any evidence that this is happening in the real world: all of the examples he talks about (at great length) are devoid of any mention of how one could relate the energy service demand growth to efficiency as opposed to other economic factors. He does not even say HOW one could do so, much less present evidence that someone has really done so.

The clearest test, though, of the author’s hypothesis is whether an economy that embarks seriously on efficiency policy really can cut its overall energy use. Because without question, if the author’s thesis has any plausibility at all, the answer has to be “no”; or at least “not nearly as much as predicted.

Fortunately for the cause of economic truth, we have such an experiment. California embarked on a broad set of policy reforms to encourage efficiency and promote renewable energy in 1974.

Figure 2 shows the expected results: the ones Owen claims should not show up in overall consumption data. These are the projected savings from energy efficiency programs, derived year by year in real time by the California Energy Commission.

Quakers book talk 2007.jpg

Figure 3 shows the realized results for the whole California economy. As you can see, the reduction in electricity use compared to the rest of the US is not smaller than the projections, it is bigger. Figure 2 shows efficiency programs to have resulted in a 15% reduction in usage, but Figure 3 shows an actual reduction of 40% compared to the rest of the country (which itself saw reductions in electricity use due to efficiency).

1 Quakers book talk 2007.jpg

So if anything is rebounding, it is the influence of energy efficiency policies—they are causing a whole economy (California would be the 8th largest national economy in the world if it were a nation) to save much more than one would expect. California is not the only example of a state or country promoting efficiency through policy and then showing divergent usage trends from its neighbors and thus demonstrating that energy really is saved. Perhaps this is why the serious studies to which Owens referred found that the economy-wide rebound effect is trivially small.

And more detailed versions of this graph also refute Owen’s attempt to claim that energy use really would be increasing if we also consider the energy use embedded in things we used to manufacture domestically but now import. The detailed version looks separately at residential, commercial, and industrial uses of electricity in California compared to the rest of the nation. The graph looks just the same. So while one can still argue about how much different the industrial sector would look if we added in Chinese imports, clearly we are not importing buildings or the operation of our lights and appliances.

This is not inconsistent with theory. One of the biggest impediments to saving energy is that it is so small a fraction of GDP—the author suggests 6%. This is too small for people to pay much attention to. So not only do people ignore efficiency, absent policy, they ignore conservation as well. Thus we see stories like our own office’s experience with efficient lighting. When NRDC moved into a new space in San Francisco in about 1988, we negotiated with the landlord to pay for a much more efficient lighting system by agreeing to pay the extra up front but then reap the savings in utility bills compared to an agreed upon baseline every month. To determine savings, the landlord metered our lighting.

But the fact that we were paying for the lights, and the visible reminder that the lighting was special and efficient (it looked much better than inefficient building standard lighting) caused our staff to cut the hours of operation by over half compared to the baseline. We not only got the savings from efficiency, but they were redoubled by behavior changes, even though we did or said nothing to encourage this behavioral change.

Efficient appliances save energy, reduce energy bills and rates, avoid the need to build new power plants, and save Americans money.  It’s really that simple.

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Comments

HanrodDec 21 2010 09:43 PM

We can certainly quibble about the specifics of the trade off between increased efficiency (of anything) and its specific, measrable relationship to use and consumption; but the general concept is understandable.

Freeway designers have long known that, to the extent that they make the freeways more capacity-enabled, "efficient" and useable, the more they will be used; thus calling for even furher "enhancements", presumably ad infinitum.

This seems either a correlary, or maybe almost the reverse proposition, of the seeming fact that, to extent that resources (say personal education or personal savings) are increased, and thus the more "available" they are, the less they are worth in "the marketplace".

Substitute the term "energy" for the terms "education" or "savings", and seems that perhaps the more that exists the cheaper it becomes, the more that it is taken for granted, and the more of "it" that is subsequently required.

Maybe we could call these the "Resource Availability, Consumption and Value Conundrums, I and II". To reduce consumption, of anything, most directly and "efficiently", it is probably necessary and best to reduce the consumers.

Think widely available and convenient birth control, and "blissfull euthanasia". Both entirely voluntary of course, which fact would certainly not reduce the demand for them.

Roland jamesDec 22 2010 01:56 AM

Owen: "No one's going to 'mandate inefficient equipment,' but, unless we're willing to do the equivalent--say, by mandating costlier energy--increased efficiency, as Jevons predicted, can only make our predicament worse." [especially re Global Climate Crisis]

"ENERGY EFFICIENCY: U.S. homes haven't improved energy use per capita in 30 years [no use of tax system in US-- as in Europe. Germany has 1/2 the energy use per capita despite having 3x the percentage of its work force in energy intensive manufacturing]
Dishwashers, refrigerators and heating and cooling systems have gotten more efficient since the 1970s, but per capita, Americans still use the same amount of energy to power their homes today as they did 30 years ago.
It takes 70 million British thermal units a year to power American homes, the same as in 1971. That number contributes 22 percent of all the energy used in the country.
A large factor is that the size of American homes keeps increasing, experts say. Another is that even as Americans reduce the amount of energy use in dish washing by buying more efficient appliances, they tend to then drop the money they saved on things like 96-inch TVs that use up more kilowatts of energy.
According to the U.S. Department of Energy, homes also lose 5 to 10 percent of their energy from "vampire" sources, or electronics that continue to suck up energy even when they're off.
While energy has flatlined, electricity usage in homes has risen from 23 percent of an average household's energy in 1978 to 42 percent in 2005. Houses require more electricity than is actually used inside them because electricity tends to come from power plants located at long distances from residential areas. Current is lost in its transport.
The Obama administration has issued 20 tougher standards for energy efficiency, but environmentalists criticize the government for advocating more efficient products and better insulation for homes instead of urging Americans to stop using products that take up energy so much in the first place.
"Do we tell people that maybe you should consume a bit less? I think we need to do more of that," said Steve Nadel of the American Council for an Energy-Efficient Economy (David Fahrenthold, Washington Post, Sept. 30). -- AP"

David B. GoldsteinDec 22 2010 12:35 PM

Thanks for the reponses. Both of these comments are good example of the kind of reaction that this issue triggers. I will address both:
1) to Reader Hanrod:
A general concept being understandable and having analogies to other concepts does not make it correct.
What makes a statement of economics correct or wrong is its relationship to the data.
I have received a number of comments on my blog over the past several days, which are of the same tone as even greater amounts of discussion that this issue has received over 25 years (that I am aware of). I have never seen any data showing on an economy-wide basis that any amount of rebound is observable. As a matter of science, we do not know if economy-wide “rebound” is even positive (as proponents of the rebound hypothesis believe) or negative (which would occur if efficiency policies increase public awareness of the value and ease of saving energy and cause them to be more conserving, as seems to be the case with Prius drivers and was measured to be the case in the NRDC lighting project.
If someone wants to demonstrate that rebound is real and nontrivial, it is their obligation to offer a rigorous statement of what they are trying to demonstrate and data to support their hypothesis. For all the sizzle of speculation and rhetoric I have seen on this subject, there is almost no steak of data.
2) to Reader James:
A key reason that the energy use of the average American home has not declined is that America as a whole has not done that much on energy efficiency in homes. The difference between the California outcomes shown in Figure 3 in the blog and national outcomes shows the visible result of how much more you can save when you really try than if you just talk about it, as we largely have done nationally.
DOE still has not caught up with the schedule required in the National Appliance Energy Conservation Act of 1987, so lots of savings are still on the table. Building energy standards are, in most states, based on models that have hardly improved in 25 years, despite major improvements in model codes in for 2009 and 2012 effectiveness that are not enforced anywhere yet. Even these codes permit wasteful uses of electricity where gas would be more efficient and cheaper—another key reason the fraction of home use that is electricity keeps rising. And only a handful of states have large and effective incentives-based efficiency programs.
For efficiency policies to have an effect, you have to actually adopt them.
We need to be careful about language in discussions of rebound effect. It is one thing to say, “even as Americans reduce the amount of energy use in dish washing by buying more efficient appliances, they tend to then drop the money they saved on things like 96-inch TVs that use up more kilowatts of energy” as you have done, but quite another to imply, as Mr. Owens does, that there is some causal relationship between efficient dishwashers and higher energy services demand for TVs. The latter is based on pure speculation devoid of evidence or even logical analysis. And note that the biggest reason that large screen TVs use so much energy is that there were never efficiency standards for them until California’s regulation of late 2009. There were not even test procedures that could allow labeling until 2007. Since then we have seen reductions in energy use of well over 50%, with much more in prospect with the right combination of labels, incentives, and future standards.
In contrast, conservation has never been shown to produce much savings on a community wide basis. And unlike efficiency, where the graph of refrigerator performance shows the possibility of continual improvement, you can only reduce energy service demands once.

David B. GoldsteinDec 22 2010 12:40 PM

Thanks for the responses. Both of these comments are good examples of the kind of reaction that this issue triggers. I will address both:

1) to Reader Hanrod: A general concept being understandable and having analogies to other concepts does not make it correct. What makes a statement of economics correct or wrong is its relationship to the data. I have received a number of comments on my blog over the past several days, which are of the same tone as even greater amounts of discussion that this issue has received over 25 years (that I am aware of). I have never seen any data showing on an economy-wide basis that any amount of rebound is observable. As a matter of science, we do not know if economy-wide “rebound” is even positive (as proponents of the rebound hypothesis believe) or negative (which would occur if efficiency policies increase public awareness of the value and ease of saving energy and cause them to be more conserving, as seems to be the case with Prius drivers and was measured to be the case in the NRDC lighting project. If someone wants to demonstrate that rebound is real and nontrivial, it is their obligation to offer a rigorous statement of what they are trying to demonstrate and data to support their hypothesis. For all the sizzle of speculation and rhetoric I have seen on this subject, there is almost no steak of data.

2) to Reader James: A key reason that the energy use of the average American home has not declined is that America as a whole has not done that much on energy efficiency in homes. The difference between the California outcomes shown in Figure 3 in the blog and national outcomes shows the visible result of how much more you can save when you really try than if you just talk about it, as we largely have done nationally. DOE still has not caught up with the schedule required in the National Appliance Energy Conservation Act of 1987, so lots of savings are still on the table. Building energy standards are, in most states, based on models that have hardly improved in 25 years, despite major improvements in model codes in for 2009 and 2012 effectiveness that are not enforced anywhere yet. Even these codes permit wasteful uses of electricity where gas would be more efficient and cheaper—another key reason the fraction of home use that is electricity keeps rising. And only a handful of states have large and effective incentives-based efficiency programs. For efficiency policies to have an effect, you have to actually adopt them. We need to be careful about language in discussions of rebound effect. It is one thing to say, “even as Americans reduce the amount of energy use in dish washing by buying more efficient appliances, they tend to then drop the money they saved on things like 96-inch TVs that use up more kilowatts of energy” as you have done, but quite another to imply, as Mr. Owens does, that there is some causal relationship between efficient dishwashers and higher energy services demand for TVs. The latter is based on pure speculation devoid of evidence or even logical analysis. And note that the biggest reason that large screen TVs use so much energy is that there were never efficiency standards for them until California’s regulation of late 2009. There were not even test procedures that could allow labeling until 2007. Since then we have seen reductions in energy use of well over 50%, with much more in prospect with the right combination of labels, incentives, and future standards. In contrast, conservation has never been shown to produce much savings on a community wide basis. And unlike efficiency, where the graph of refrigerator performance shows the possibility of continual improvement, you can only reduce energy service demands once.

Roland JamesDec 22 2010 02:04 PM

Ca has a large part of its population living in a Mediterranean climate.
It also has steeply inverted rates.

If you don't use price or tax, then usage will probably go up after
efficiency improvements, especially if there are rates like south central Texas
where there are electric basic service charges of $6 to 22.50 with no commodity
included and then a flat kwh rate. So cost-causing large users pay an effective rate
that is much less per kwh than low users, whether poor or conserving.

In contrast, residential rates in Ca PUC regulated utilities have no basic charges and
"tiered rates provide a significant energy efficiency incentive."
[as well as an incentive to conserve to stay in the lower tiers
and keep your rate from doubling or tripling. Too much air conditioning
at 40 cents/kwh can cause your bill to skyrocket.

While renting (2003-2007) a 1300 sqft condo in Sonoma County Ca, combined PG&E gas
and electric bills under Ca PUC/PG&E baseline (baseline for electric was about 200 kwhs
in Sonoma County) and inverted rates were $30 to $35 per month for the 7 to 8 months when
heating wasn't required (even though it got above 100 F in Santa Rosa, late afternoon and
evening ocean breezes cooled things off without need to use air conditioning to keep condo
below 80 degrees--and using fans at 76 and above) and total bill was $80 to $100 per month*
during the 4 or 5 winter months (keeping thermostat 55-62) when it rained a lot and the sun
usually didn't shine. This was for an uninsulated condo with single pane windows.
*Heating cost--nationwide home average is $986 per year--Newsweek 11/1/10 p8 ]



Here are PG&E E-1 residential rates:
[no basic service charge]
Usage

cents per kWh
0 – Baseline
11.877
Baseline – 1.3×Baseline
13.502
1.3×Baseline – 2×Baseline
29.062
Over 2×Baseline
40.029

summer baseline, depending on climate, varies from ~200 to 375 kwhrs per month

The average retail price of electricity in California is 12.48 cents per kWh,
and the average residential cost is 13.81 cents per kWh,
so obviously most people stay in the lower tiers.

Tiered rates provide a significant energy efficiency incentive and should
be adopted nationwide.

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