The State of Energy Efficiency

Is there a better pitch man to have on your team than the President of the United States? Who better to sell the virtues of energy efficiency and conservation as he did during his speech on energy and jobs in Alexandria, Va., this week?

Raising the awareness of energy efficiency and federal support for programs such as retrofitting homes are both greatly welcome and will have an impact. However I think we can - and must - go further.

We need to ask ourselves why the United States uses almost twice the energy that Japan does per $1,000 GDP. Or why, for example, do we spend more energy to produce a ton of cement than Canada, China or Mexico? Energy efficiency needs to be the foundation of our energy policy and instilled in every office, home and factory across the country. In fact, the federal government is the single largest consumer of energy.

A McKinsey study showed that we could reduce energy consumption in the United States by as much as 23 percent by 2020, which would deliver an estimated savings of $1.2 trillion to the economy. That's like a second economic stimulus just by working smarter. The study also estimated that a reduction in energy use on this scale would result in the abatement of 1.1 gigatons of greenhouse gas emissions annually - the equivalent of taking the entire U.S. fleet of passenger vehicles and light trucks off the roads. To achieve this level of efficiency though would require deploying an array of economy-wide energy efficiency measures and assumes that barriers - including those involving consumers, regulators, government agencies, utilities, etc. - could be overcome.

I agree with the president that energy efficiency is both an economic competitiveness issue and a jobs issue. Just as we all need a personal savings plan, the United States needs an energy savings plan. If we are going to achieve the true potential for energy savings in this country, we need three things to happen:

1. Link R&D with policymakers, entrepreneurs and companies to fast-track innovative technology into the market. We need to close the gap between the great ideas in the laboratory and the realities of the marketplace. Academic centers of excellence like University of California Davis' Energy Efficiency Center, where we established the Chevron Chair in Energy Efficiency, have already identified this need and have built innovative programs that bring research together with companies like ours to commercialize breakthrough technologies.

2. Sustainable financing programs to enable capital investment. McKinsey estimates that to hit the 23 percent target, we need to invest around $520 billion through 2020. Proven financing programs such as the federal government's Energy Savings Performance Contracting Program, a public private partnership, can be used to meet the federal government's own energy efficiency targets and should be expanded. In this successful program, no upfront funds are required as all efficiency upgrades are paid through guaranteed energy savings. We also need to develop new sustainable financing structures that would encourage the long-term investment that is needed.

3. An integrated approach at national, state and local levels. Federal directives should be coordinated with state and local efforts to streamline procedures, accelerate projects and bring positive results without creating market distortions and unintended consequences. We also need government at all levels to send clear signals that energy conservation is their No. 1 energy priority and to make efficiency an easy choice through incentive programs that are designed to address specific state and local issues. California, one of the most energy efficient states in the country, has three decades of experience with energy efficiency standards related to appliances, equipment and building codes and has some valuable lessons to share.

Creating an energy efficient economy is a critical pathway to achieve both economic and energy security. Genuine innovation, in the words of economist Joseph Schumpeter, does not "consist in inventing anything. It consists in getting things done." Energy efficiency is the first and best source of "new" energy. So let's get it done.

 

Comments

[WonderingNThinking]

Energy efficiency is the way to go, economically and environmentally. I don't know what it will take for the majority of people and businesses to realize that many improvements save money without compromise to function and quality.

[mbaty]

Speaking of innovative, check out Steorn.com or google Steorn. This could be a gamechanger. I have no vested interests in their company, but it's about time for a 21st century energy technology.

[mzap]

How ironic! Chevron portraying itself as a concerned corporate citizen! Funny how all their smooth talk turns into pollution, repression, and sickness if you live near a refinery or in a place where they extract petroleum.

Just today there was an open letter to Chevron's CEO posted here on the HuffPost:
http://www.huffingtonpost.com/han-shan/letter-to-new-chevron-ceo_b_395129.html

James will you please ask Mr. Watson to read and respond to it?

[Thermodynamics]

This is very important and absolutely correct. It would be great if ideas like this could be promoted by Michael Moore or illustrated by the antics of the Yes Men.

It also points out a big fat fallacy in our current economics dogma. By conventional reckoning, all GDP is equal. If I bash my car and spend $10k to fix it, that expenditure shows up in the GDP just the same as if I spent $10k to reduce the energy consumption of my house.

But-- the money spent on energy efficiency keeps on giving me value. Every year it saves me money that I can spend elsewhere. While the car is just like any other car and depreciates, pollutes, and generally has a low return on investment.