Much of the debate around climate change has centered around the costs of reducing green house emissions. Being modernity-lovers who appreciate economic growth, groups like Breakthrough feel as though they are forced to confront these costs head one. And in this confrontation we inevitably admit that renewable energy technologies are just as, if not more, expensive than conventional generation. Sometimes, however, we forget that the most cost-effective way to clean our economies—even moreso than conventional power generation—is to avoid generation in the first place.
Energy efficiency upgrades for buildings and transportation could prevent the construction of hundreds of power plants while actually making people a profit. Their financial feasibility is legendary. In 1989 the Cambridge-educated physicist Amory Lovins calculated that utilizing existing technologies, the application of energy efficiency measures in the US could reduce our energy consumption by over 50% at an average cost of less than 1 cent/kwh (average US residential electricity rates in 1990 were 8 cents/kwh). Energy efficiency technologies have improved since then, so we should be able to do it even cheaper now.
This cost-effectiveness is reflected in a recent McKinsey report, which puts the average rate of return on energy efficiency investments at 17%, a figure that trumps recent stock market performance. True, the exact amount of profitability of EE measures varies according to local electricity prices and the efficiency of program administration, but in the end, and purely on financial terms, these so-called “negawatts” end up being somewhere between an attractive and a very handsome investment.
Yet there is a gap between the financial and environmental appeal of energy-efficiency measures and their actual level of implementation. The primary reason for this is that electricity providing institutions in the US are still stuck in it role of energy producers, rather than energy savers. For utilities to become energy savers requiring existing tools, such as energy performance contracts, and new federal mandates that guide the implementation of these performance contracts and the associated increases in energy efficiency they will bring.
A good place for such a mandate is Senator Markey’s climate bill, iCAP, which the US House of Representatives will soon consider. iCAP, unlike the Lieberman-Warner Climate Security Act, provides ample funding for both energy efficiency and clean energy innovation. Attaching this funding to a new mandate for our electricity industry to become foremost energy savers, not producers is necessary to successfully pluck the ripe fruit of energy efficiency. Until then, the hunger continues to burn.
My reading of the McKinsey report was that there was about a 20% energy savings from efficiency. After that, one is still looking at replacing carbon energy with something else. Still, it shaves off some of the carbon.
That’s even better! And yes, perhaps I should have emphasized the need for replacement. But the economic efficiency of energy efficiency measures just needs attention drawn to it.
[...] less money to be made from doing so. The profitability comes in a little further upstream, from efficiency retrofits such as installing combined heat-and-power (CHP) on industrial factories, and other money-saving [...]
[...] establishing regional cap-and-trade programs, and capitalizing on energy efficiency gains (the low hanging fruit). Many states are also incorporating programs and incentive structures that have already enjoyed [...]