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Can we envision a future where America runs on a lot less energy? We’re not talking about just turning down the thermostat when you leave the house, but a vast suite of measures that could cut our national energy appetite in half or more.

In general, no one is against the concept of energy efficiency—it’s sort of the mom and apple pie issue of the energy world. But achieving energy efficiency at a large scale and on an accelerated time frame has been a difficult and unmet challenge for the United States—which, by many measures, is among the least energy efficient of industrial nations.

What forces and barriers are standing in the way of realizing America’s vast potential for energy efficiency? What’s been missing from energy efficiency efforts to date? What would strategies for extreme efficiency look like?

We’ll examine these and other key questions regarding the outlook for extreme energy efficiency and the implications for America’s future.

Guests:

• Brian Castelli – president & CEO, Home Performance Coalition; former senior fellow, Alliance to Save Energy
• Scott Sklar – president, The Stella Group; board member, Business Council for Sustainable Energy
• Kenneth Green – senior director, Center for Natural Resources The Fraser Institute; former director for energy policy, American Enterprise Institute

Key Questions:

• Cost: If energy efficiency is the least expensive form of energy, why is it not always the “go-to” option? What are the economic or financial barriers to dramatically reducing energy use through efficiency?   What other barriers need to be overcome?

• Density/Scale: Energy efficiency often means doing a lot of little things—not to mention in lots of places. How does the density of efficiency opportunities affect prospects to scale up and accelerate measures to reduce energy use?

• Renewables: With the cost of renewable energy falling, why not focus resources there?

• Differences among sectors and forms of energy: Energy efficiency means different things for different sectors—e.g. tightening homes may not directly reduce oil use.  Which areas of the economy present the greatest opportunities and priorities for energy efficiency?

Takeaways:

• Energy efficiency should be viewed as America’s greatest energy resource—it has saved more energy—approximately 52 quads (quadrillion BTUs) per year—than that provided by any other single source, including oil, coal, or natural gas. Without the energy efficiency investments over the past 30 years, the U.S. economy would require approximately 50 percent more energy than it presently uses. America currently uses (about 100 quads per year).

• It is always less expensive to save energy than generate it from ANY source. From an economic growth viewpoint, there are only so many dollars to go around. It is far preferable to spend billions of dollars to save energy than to tie up trillions of dollars in generation, when capital could be more productively invested somewhere else.

• Most energy efficiency measures pay for themselves without a carbon price and do not require any technological advances to scale up, according to a study by McKinsey & Company. However, cost savings are often not clearly visible to energy users because of the way we pay for energy—typically separate in time and place from the energy consuming product.

• Information is a driver—getting information out to energy users in more dramatic and useful ways will lead to more rapid adoption, demand, and innovation for energy efficiency.

• To unleash innovation in energy efficiency, the focus needs to be on:

Increasing consumer choice and transparency of information in ways that allow consumers and energy users to make rational decisions. For example, Opower provides information that shows consumers how their energy use compares to similar houses in their community and drives demand for energy improvements.

Increasing competition and allowing markets to function. In cases of monopolies and market failures, government can play an essential role to promote research and development, stimulate demand, and support emerging industries (with caveats). Reducing regulatory barriers can be an effective way to enhance competition—e.g. Tesla is only new auto company in 50 years in part because barriers to entry are so high.

Educating financial institutions and developing financing mechanisms and products that allow consumers to benefit from cost savings right away—such as on-bill financing programs. Banks can take a long time to get oriented to a new industry—for example, financing for automobiles took decades to develop.

• Government programs and regulations have increased consumer choice in many cases—e.g. many energy-efficient products may not have been on the market otherwise—but have reduced it in others, e.g. removing certain products from the market.

Other Key Points:

• Energy efficiency would account for roughly half of the reductions in greenhouse gas emissions needed to limit concentrations in the atmosphere to 450 ppm, according to the International Energy Agency.

• Appliance standards and building codes have been particularly effective. For example, refrigerators used to account for a large share of household electricity consumption, but today they use 75 percent less energy on average than they did in 1973, even though their capacity is 29 percent larger and the price is 64 percent lower.  Recent building code revisions when implemented achieve an estimated 30 percent reduction in energy use.

• Renewables are important, but investment in more energy generation is not ultimate goal. Energy efficiency makes renewables much more viable to integrate into buildings and infrastructure because you don’t need as big a system to power a building—whether it’s residential, commercial, or industrial.

• Energy efficiency is still a relatively new industry. For example, the Minneapolis blower door test that is commonly used for energy audits today was only invented in the 1970’s.  It often takes decades for new technologies to get adopted (e.g. it took 80 years just for zippers to replace buttons on jeans).

• Large corporate and institutional players in the private sector—e.g. Walmart-are making big investments in energy efficiency—not just to have something to write about in their annual report (for PR purposes), but to save money. Key examples—daylighting factories and large stores, better windows, thermal and reflective coatings, appliances, LED lighting.

• More water is used in the total energy cycle than any other use, including agriculture—primarily for electric generation and oil-refining—accounting for 15 percent of global water withdrawal.

• Energy efficiency generally defined as doing more with less—more miles per gallon etc.—but has energy efficiency been achieved because the market demanded it or because government mandated it? Are energy efficiency measures interfering with free markets and consumer choice? Energy is not the only value that goes into consumer decisions.

• We need to be realistic about the timeline for accelerating energy efficiency. Large-scale energy transitions historically take on the order of 50 or more years, not 10-20 (see Vaclav Smil’s Energy at the Crossroads). Lots of capital is tied up in the existing energy system; infrastructure tends not to be retired before the end of its economic life.  In many cases, however, it makes sense to retire old infrastructure early.

• Energy efficiency measures can lead to increased consumptive behavior (the rebound effect)—e.g. people with an energy-efficient car may drive more, because it costs less or they feel more virtuous. The effect is real and needs to be recognized and addressed, but it generally affects only a portion of energy users.

• The fossil fuel industry has benefitted from government “Intervention” for years—depletion allowances, intangible drilling costs (arguably, some of these are just mechanisms to determine how any given industry will be taxed and not a subsidy). Subsidies have become part of culture for many energy-related industries.  Question is, should subsidies now be applied to new industries or should we aim to remove all subsidies and let market function. Either way, more transparency and symmetry is needed.

• Subsidies and other government policies and programs have produced unintended negative consequences—e.g. we built the interstate system with great speed, but was that really such a good thing? What change in human in knowledge has there been to think we will avoid similar mistakes? Perhaps instead of choosing an energy technology and subsidizing the heck out of it, we should work to remove all subsidies and let the market work.

• Renewable portfolio standards (RPSs)—some of which incorporate energy efficiency measures—are reasonable requirements to ensure diversity and stability of a regulated, monopoly industry—similar what government requires of banks and the financial sector.