Energy Efficiency: Beyond The Wish

On October 22, the CSIS Energy and National Security Program hosted a panel of distinguished experts to explore the opportunities and the obstacles to becoming a more energy efficient society. Energy efficiency is often heralded as the cheapest and easiest path to lower energy prices and fewer greenhouse gas emissions. By decreasing the amount of energy needed for society to function, increased energy efficiency has the potential to reduce greenhouse gas emissions throughout the economy and lessen upward pressure on energy prices. Energy efficiency gains are therefore an important component of any policy solution to address climate change and energy security.
 
Joe Loper, from the Alliance to Save Energy, began the session by describing energy efficiency as America’s greatest resource – often the cleanest and cheapest way to meet energy-related environmental, economic and security goals. Although it is the least-cost option for emissions abatement and vast opportunity exists to deploy more efficient energy technologies and practices, Mr. Loper enumerated a number of market and non-market barriers restricting greater penetration of efficiency into society: externality costs such as climate change, split incentives between tenants and landlords or buyers and builders, unevenly distributed energy subsidies, a lack of information about opportunities to become more efficient, uncertain costs, consumer choices and rationality. Mr. Loper stressed a critical role for policy in reducing these barriers and suggested several imperatives in doing so; the most vital of these, he argued, is the correct pricing of carbon emissions into the cost of energy.

Karen Palmer, from Resources for the Future, discussed the findings of their recent study on the effectiveness of in-building efficiency programs. The study revealed an annual energy savings of approximately 12% of total residential and commercial electricity consumption during the period studied. Additionally, emissions savings from the surveyed efficiency programs constituted 10% of all residential and commercial CO2 emissions. Ms. Palmer also touched on the debate over carbon allocation allowances and the role auctioning could play in an equitable allocation for regulated and unregulated power markets. She noted that applying auction proceeds to efficiency programs can reduce demand for energy as well as the price of allowances.

Larry Makovich, from Cambridge Energy Research Associates, focused his discussion on the cost of efficiency in the power sector. Mr. Makovich declared the often referenced McKinsey efficiency graph to be flawed in its treatment of efficiency as a negative cost, and stressed that abatement can be a positive cost when energy savings are applied elsewhere. He stressed that policy and application must strike a number of balances—including marginal cost and a demographically even distribution of cost burdens. In closing, Mr. Makovich again noted that efficiency is not free but with a cost on carbon, it can be less onerous on consumers.

Skip Laitner, from the American Council for an Energy-Efficient Economy, opened his discussion with a request that the policy community ask the right questions to appropriately frame the debate on climate change solutions. Mr. Laitner’s question was whether we can find productive investments to gain efficiency with decent returns. He then introduced his colleague Dick Munson who noted that energy waste was one of the best places to uncover efficiency. Next Mr. Laitner introduced Paula Collins of Texas Instruments who pointed out the role the semiconductor industry plays in the drive for efficiency, with semiconductors guiding SmartGrid technology and hybrid vehicles. Lastly, Karen Erhardt-Martinez of ACEEE spoke briefly on the role of education in adjusting consumption norms. Her research found that consumers use less when educated about the benefits of efficiency. 

Speaker:
Energy Efficiency: Beyond the Wish
Joe Loper, Vice President, Policy & Research
Alliance to Save Energy

Respondents:
Karen Palmer, Resources for the Future
John A. "Skip" Laitner, American Council for an Energy-Efficient Economy
Lawrence Makovich, Cambridge Energy Research Associates