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Ralph Cavanagh’s Blog

Energy Efficiency Already Provides More than "All of the Above" Energy Strategy

Ralph Cavanagh

Posted October 23, 2012

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Throughout a long presidential election season in which both sides constantly invoke “all of the above” as the energy policy of choice, neither campaign has paid much -- if any -- attention to our fastest, cheapest and cleanest source of new energy supply: energy efficiency, a term encompassing all the ways to get more work out of less energy.

The candidates have pretty much ignored our electric and natural gas utilities, too, but these companies have more than doubled their energy efficiency investments in just the past four years to a surprising $8 billion annually.

That’s right -- $8 BILLION to be spent in ways to get their customers to use less of what most would consider the utilities’ principal products:     kilowatt-hours of electricity and therms of natural gas. But utilities know better; their real product is reliable and affordable energy services, and everyone benefits if those services can be delivered at lower cost by devices and buildings that need less energy.

Utilities’ growing energy efficiency commitment reflects a long and productive history of U.S. efforts dating to the 1970s that shouldn’t be ignored by those vying to lead our nation, the energy industry or consumers, themselves.

They also must not overlook the fact that we’ve barely broken a sweat on the energy efficiency front. We need everyone in leadership positions, from national to local, to recognize and support this non-polluting and relatively cheap energy resource.  

In a comprehensive assessment of cost-effective domestic energy efficiency opportunities, McKinsey & Company identified potential ten-year savings of $1.2 trillion in U.S. utility bills alone. MacArthur laureate David Goldstein believes that aggressive efficiency improvements could drive domestic energy consumption down by more than 80 percent within four decades, and that $10 trillion in associated savings is likely a gross underestimate.

To better understand this enormous potential, look at how far we’ve come.

Since the first huge global oil supply disruption in 1973, our economy has tripled in size but our energy use has increased by only a third, thanks in part to efficiency improvements in everything from cars to refrigerators. We’ve also more than halved the amount of energy required to produce a dollar’s worth of U.S. economic output in the form of goods and services.

And consider this: by making the energy we use work smarter, we’ve saved more energy from efficiency improvements than we produced form all our new power plants, gas wells and oil fields since 1973.

And we did it by saving energy at a small fraction of the cost of producing those conventional supplies, while sustaining efficiency momentum even when the price of energy declined. If we had relied solely on energy prices to drive cost-effective energy efficiency, progress would have been slow to nonexistent. Instead, we used combinations of incentives (delivered through tax codes and utility company payments to customers) and steadily upgraded efficiency standards at both state and federal levels. For example:

  • Coordinated standards and incentives are the reason why today’s sleek multi-function refrigerator needs less than a third of the electricity of the avocado 1970s version to cool our food, and why this year’s TV is at least 50 percent more efficient per square inch of flat screen than its four-year-old equivalent.
  • Many light bulbs today are required to beat the century-old Edison equivalent by 28% in illumination delivered per kilowatt-hour, and the improvement is more like 50-75% for most of the newer technologies.
  • With strong support from the industry itself, federal regulators have issued fuel efficiency standards requiring that by 2016 the typical new car will get 36 miles per gallon by 2016, compared to less than 14 in 1975. By 2025, we’ll be at almost 55 miles per gallon. The best antidote to pricey gasoline is needing a lot less to get around.

These are just a few of the areas where we’ve made energy efficiency progress, but scientists and researchers are convinced so much more is possible. And while it’s surprising that Barack Obama and Mitt Romney haven’t been talking about efficiency as our fastest, cheapest and cleanest source of new energy, at least we know we don’t have to fear partisan discord on this issue. No matter who wins in November, at whatever level of government, the right approach isn’t betting our limited resources on “all of the above.” Let’s embrace instead the principle that the Pacific Northwest’s utilities used to identify energy efficiency as their resource of choice:  “buy only what you need, and buy it as cheaply as possible.”

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Comments (Add yours)

Bob HitchnerOct 23 2012 05:05 PM

Ralph --

I love your blog and appreciate your insights into energy policy and energy use. In today's blog, though, I think that we really need to refine our focus when we talk about energy efficiency. There are three inter-related concepts that need to be distinguished by policymakers, utilities and average energy users alike: Energy efficiency, Energy Use, and Conservation.

By focusing so much on efficiency, we lose sight of the fact that we continue to be extremely heavy energy users and we are doing little to address the issue of GHG emissions.

In the residential sector, for example, we used 197 million BTUs per home in 1980. In 2010, we used 195 million. If efficiency is an answer, I am not sure what the question is. We are standing still.

We could do a lot more if we would only focus on the right problems. Our problem is that we need to address energy use.

I agree that efficiency is critical to our energy future, but we could get there faster if we talked about energy use and about conservation as well.

Tom StrumoloOct 24 2012 10:34 AM

Hi Ralph, hi Bob: we have refined those distinctions Bob, since they defined themselves during the Carter presidency. That simple intensity metric is almost meaningless (houses are much larger than they used to be) and EIA's data is awful as well. (EIA uses tiny samples in wide, shallow pools, mostly due to budgetary restraints.) Of conservation, efficiency, and usage (total?), the last 2 are 'asset' improvement concepts and what Ralph, McKinsey, and Dave Goldstein are talking about. Projects to retrofit or upgrade our buildings can be scaled because the science and the economics are mature and about 95% reliable (inventment-worthy). Making better buildings is fast, cheap, Earth-friendly, American, consumer-progressive, approved by DOD and Homeland Securuty, apolitical, and otherwise the absolutely perfect public policy. Conservation, as Carter found out, is almost none of the preceding. While people and their habits are definitely a big problem, public (and private) policies that "improve energy behavior" are perceived as blaming the customer and are way too slow to match up with our current energy problems and atmospheric degradation. I respect Opower and the 2-3% they can force people to save, but those are invisible kWh's (within the margins of error) and make for a far lower return on investment than, say, cellulose insulation. I like the idea of just fixing the 100 million inefficient buildings and ignoring the occupants until round 2.

Tom StrumoloOct 24 2012 10:39 AM

Investment-grade, not inventment-grade, whatever that is. Remember me, Ralph, YC1974?

Sid AbmaOct 24 2012 01:40 PM

Ralph. I also like what you write.
How about our natural gas, this energy source that could give America Energy Security and Energy Independence.
It doesn't get mentioned much. What is there that you consume, feel wear, eat, touch and use daily that has not been touched by natural gas?
Commercial buildings, industry and power plants consumed according to the EIA in 2011 17.5 Trillion cu.ft of natural gas.
Every natural gas appliance has a chimney, and leaving these chimney's is a lot of HOT wasted energy. 40% (?)
The residential market has condensing boilers and condensing water heaters.
Industry has not yet caught onto Condensing Flue Gas Heat Recovery.
Coal is on it's way out slowly, to be replaced by natural gas and renewable energy.
Transportation is pushing to use more natural gas.
This is good, but if we want our natural gas supply to remain available and reasonably priced, it's time that Energy Efficiency is also to include natural gas.
It is possible to have natural gas power plants operating at near 100% energy efficiency instead of 35% as they are on coal.
There really is so much more that can be done to reduce global warming and emissions by promoting Energy Efficiency.

TheRocketSurgeonOct 25 2012 09:39 PM

The ultimate measure of an economy's energy efficiency is the energy consumed per unit of economic output. The US total yearly energy consumption per dollar of GDP was cut in half from 1980 to 2010. I hope we can keep up that admirable progress.

N FaridOct 28 2012 03:19 AM

Excellent piece. Energy efficiency gets very little respect from the general public, and maybe that is because the government doesn't support it enough. Bob, I do disagree with you in part, since I think it is harder to convince consumers to give up their own comfort for energy conservation. But if they are made aware of using energy efficient devices that offer them the same service at a lower operating cost, then they can do their own math.
I sincerely do believe that the part of the reason we have such a major energy crisis going on in Pakistan right now is the lack of energy efficiency. Pakistan has just not entered the level of awareness that is seen in Europe, or the US. I hope to change that with my own campaign to spread the word.

wdNov 20 2012 12:09 AM

I enjoyed what Ralph and Bob have written. I especially like (because I didn't know it) the "if we had relied solely on energy prices.. progress ..would have been non-existant" part along with the differentiation among: Energy Efficiency, Energy Use, and Conservation. The differentiation makes me see a difference among projects.

Now, I need some coaching to make sure I'm using the concepts properly. Let's take an example: I'd like to save electricity for air conditioning. I install solar screens or solar grates of the type often seen in the sunbelt on the outside of windows. The house stays cool while the a/c is idled much of the time. The Utility bill documents the success of the project. Without any sacrifice in comfort, I reduce the annual cost of electricity by 20 to 30 % depending on where I live. I'm happy but I'm wondering... have I improved efficiency? have I reduced usage? or have I conserved energy? I seem to be able to argue for each depending on my 'system boundaries'.

In my world I focus on getting the results I want and, eventually, that's what drives my energy usage down.

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