Why Energy Efficiency is About to Come Roaring Back

EfficiencyWe write a lot of stories these days about the remarkable growth of solar and wind power and how they are truly transforming the energy landscape. Another important component of this sea change is energy efficiency (EE), though we haven’t been writing as much about that, perhaps because it’s not as sexy and exciting as shiny new solar panels or towering wind turbines. But there is another reason: Investment in energy efficiency projects has been in a long-term decline, going back to a peak of about $2 billion annually in 1992, which has drifted down to about $1.2 billion in recent years.

Last year, utilities in Indiana were ordered to refund $32 million to ratepayers. Those funds represented the balance of $74 million that was collected for energy efficiency projects, many of which were never implemented.

In Nevada, EE savings declined 61 percent last year, compared to those realized four years earlier. Reports blamed a lack of state policies and incentives for the decline. This seems apparent when comparing Nevada with neighboring Arizona where utility customers saved three times as much due to efficiency measures, despite the similar climate.

State incentives constitute one factor in the decline; financing is another. A program called PACE had been quite popular until 2010, when it ran into trouble. PACE, which stands for Property-Assessed Clean Energy Financing, essentially allowed homeowners to borrow money from the city for clean energy and energy efficient upgrades, and then repay the loans through annual property tax assessments. Complex financing rules made it impossible for the loans to be sold to Fannie Mae and Freddie Mac for consolidation, which really put a damper on things.

Chris Hummel, chief marketing officer of Schneider Electric, thinks that all of that is about to change. After ticking off some $7 billion in new financing going into efficiency from state banks in Europe and the U.S., he told the Guardian the reasons why energy efficiency is about to come roaring back.

The first reason is awareness, particularly in the business community. Both price increases and price uncertainty are now weighing on the minds of executives in industries ranging from data centers to food. The International Energy Agency estimates that $8 trillion of the $48 trillion we’ll need to get us where we need to be by 2035 will go into efficiency.

Technology has brought much of the low-hanging fruit even lower. Things like LED light bulbs that pay for themselves in less than two years, to solar panels that have dropped in price by a factor of a hundred or more. “Smart” devices are almost always more efficient than their not-so-smart predecessors, sometimes by a lot. Besides smart devices, there are increasing numbers of software applications to help people save energy in many facets of life.

New business models, including a newly reinvigorated PACE program, as well as utility based on-bill financing programs, share the implicit goal of making the costs invisible. Since the energy savings continue to increase relative to the cost, it’s much easier to use those savings to pay for improvements.

Finally, there is the distribution that has now become ubiquitous. You no longer need to go to a “green store” to get a more efficient version of anything you can think of. It’s everywhere. Today you can find the high efficiency version of just about any widget you can think of, sitting right next to the regular widget in any big box store; that is, if there even are any more regular widgets available. The same is true for contractors: building, heating, electrical — all of them are well-equipped to help you set you up with the latest, most efficient items and services, because they too can see the writing on the wall.

Image credit: Siemens nv/SA: Flickr Creative Commons

RP Siegel, PE, is an author, inventor and consultant. He has written for numerous publications ranging from Huffington Post to Mechanical Engineering. He and Roger Saillant co-wrote the successful eco-thriller Vapor Trails. RP, who is a regular contributor to Triple Pundit and Justmeans, sees it as his mission to help articulate and clarify the problems and challenges confronting our planet at this time, as well as the steadily emerging list of proposed solutions. His uniquely combined engineering and humanities background help to bring both global perspective and analytical detail to bear on the questions at hand.

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RP Siegel

RP Siegel, author and inventor, shines a powerful light on numerous environmental and technological topics. His work has appeared in Triple Pundit, GreenBiz, Justmeans, CSRWire, Sustainable Brands, PolicyInnovations, Social Earth, 3BL Media, ThomasNet, Huffington Post, Strategy+Business, Mechanical Engineering, and engineering.com among others . He is the co-author, with Roger Saillant, of Vapor Trails, an adventure novel that shows climate change from a human perspective. RP is a professional engineer - a prolific inventor with 52 patents and President of Rain Mountain LLC a an independent product development group. RP recently returned from Abu Dhabi where he traveled as the winner of the 2015 Sustainability Week blogging competition.Contact: bobolink52@gmail.com

14 responses

  1. Unfortunately, Energy Efficiency (EE) is rife with misunderstandings, and frequently misapplied. There is always a reason for being efficient if it is economical, regardless of what energy sources you use. However, for the most part existing programs tend to stimulate us to undertake energy efficiency first, without first exploring the options for renewable technology in a given property. At the property level, what you need to decide first is a life-cycle plan for energy sourcing, in which you should maximize Site Derived Renewable Energy, because it replaces energy bills (liability) with energy plant (assets). That means it directly creates asset appreciation. The moment for the switch-over could be 5 or 10 or 15 years into the future, depending on the economic end-of-life of existing equipment. Once those major decisions are out of the way, you can plan your efficiency measures around them, but they will in many cases be different depending on the energy sources used. Also note that efficiency and/or passive improvements directly reduce the capital cost in the case of SDRE, but only pay for themselves over time in case of fossil fuels.
    The nefarious possibility to watch out for is that unthinking application of EE, could cause you to design yourself into a corner, and do things that later on prevent you from doing other things that would have been much more valuable. Lastly, from an environmental standpoint, EE makes our climate change position worse, not better in the long run. See Steve Hallett’s The Efficiency Trap, and David Owen’s The Conundrum, or my website http://www.vliscony.com

  2. The easiest way to drive efficiency is to just triple the price of electricity and water…. of course that would be politically disastrous, so we’re screwed with this half assed approach. Alas….

  3. Please explain to me how a renewable energy power source, pick your source, can exceed the efficiency of a Combined Cycle Natural Gas Turbine, which has been rated at between 58% to 62% efficient as opposed to a typical gasoline internal combustion engine which generally rated at 30%. Inquiring minds would like to know? For example, a typical offshore turbine project (Cape Wind, which will not be built) must generate 3.45 times the energy of a CCNT. Cost $2.6 Billion v $311 Million

    1. I think you’re confusing a couple of things here. First, the article is about demand-side efficiency. What you’re talking about is supply-side efficiency. Second, does it really matter if wind is less thermodynamically efficient than gas when the wind blows for free. Consider the total operating cost of each over its life and wind wins hands down, especially when you include the cost of carbon. The more meaningful advantages that gas enjoys are energy intensity, and continuous operation.

      1. Cost of Production per Megawatt, 2012, US$. Hydro $19, Natural Gas $23, Nuclear $22..$36 depending on installation, Coal $40, Wind $70 and Solar $100. Wind and Solar is not free.

        Federal subsidies dedicated for electric power production by source, fiscal 2010, dollars per Megawatt. Oil and Gas $0.64, Hydropower $0.82, Coal $0.64, Nuclear $3.14, SOLAR $775.64, WIND $56.29.

        1. Nuclear costs do not include disposal…oh wait, there is no legal means of disposal….so all reactors become nuclear waste dumps

        2. Actually, the costs do in the US. Since 1982, a small fee has been charged for each kilowatt-hour to pay for waste disposal. Currently, there is $25 billion available in a fund held by the US government (and paid for by the utility customers) to pay for disposing of the waste.

  4. Capacity Factor (CF) allows for planned maintenance, unplanned maintenance, and grid requirements, load and peak following. In the case of Solar and Wind it would allow for the intermittent nature of the source. European experience CF calculations come in on average mid twenties. However, CF is not the complete story. The power has to be dispatchable. A six year study of Denmark’s offshore wind production found that while wind provided 19% of the country’s electricity generation, it only met an average 9.7% of the demand over a five year period, and a mere 5% during 2006. This is referred to as Demand Capacity. Please do the math and explain how some “efficiency” computation even enters into the calculus?

  5. Energy efficiency is great as is renewable energy.
    Energy conservation however, via values based behavioural change programs and cultural transformation are key to any real progress.

    Why spend capital when all one actually needs to do is behave differently?
    once behavior has been altered and a conservation mind set is instilled in the culture, then energy efficient hardware upgrades can be investigated.

    Energy conservation, Energy efficient hardware and then renewables – in that order of priority.


    1. I agree with you River– efficiency first. The cleanest form of energy is the energy you don’t use. Who would design and pay for a home PV system for a house filled with inefficient appliances, lights, etc? As Rogier said, “efficiency and/or passive improvements directly reduce the capital cost [of renewables]. Taken far enough, super-efficient homes use almost no energy, making an investment in site-derived renewables difficult to justify on an economic basis.But let’s not lose sight of the point here–which is to save money and reduce emissions in the most expedient and responsible way.

  6. Why is Energy Efficiency mostly focused on electricity?
    Even the CHP that alpha is mentioning is only 60% energy efficient. Where is the other 40%? It is being wasted somewhere.
    Does this “high efficiency” CHP 40% waste affect Climate Change?
    What are the 3 main factors of Climate Change that need to be addressed?
    My thoughts are:
    1) Reduce Global Warming
    2) Reduce CO2 Emissions
    3) Conserve Water

    What can Increasing our natural gas energy efficiency do for America?
    Increased natural gas energy efficiency = Reduced utility bills = Profit
    That’s a given.

    Increased natural gas energy efficiency = Reduced exhaust temperatures
    A high efficiency water heater or condensing boiler vents Cool exhaust out of the wall through a PVC pipe.

    Increased natural gas energy efficiency = Reduced CO2 emissions
    The DOE states ~ For every 1 million Btu’s of heat energy recovered from the exhaust of combusted natural gas, 117 lbs of CO2 will Not be put into the atmosphere.
    There is in every 1 lb of combusted natural gas, 2 lbs of recoverable Water, and this distilled water is very usable.

    So when Energy Efficiency is being discussed, why isn’t the largest reducer of Climate Change Emissions (natural gas) not mentioned?
    What energy source is being used to create a lot of this electricity?
    Imagine America’s power plants operating with No Chimneys. No exhaust going into the atmosphere! No, or very little CO2. And lots of distilled water being created.

    Power plants at well over 90% Energy Efficiency. This 30 plus year proven technology
    is waiting to be applied.
    What America is waiting for is the decision to Want to Win this battle against Climate Change.
    Is it government or is it Industry, or both who have to decide~ We want to Win this Battle?

  7. Germany’s push toward renewable energy is causing so many drops and surges from wind and solar power that more utilities than ever are receiving money from the grids to help stabilize the country’s electricity Twenty power companies including Germany’s biggest utilities, EON SE and RWE AG, now get fees for pledging to add or cut electricity within seconds to keep the power system stable, double the number in September, according to data from the nation’s four grid operators. Utilities that sign up to the 800 million-euro ($1.1 billion) balancing market can be paid as much as 400 times wholesale electricity prices, the data show. Germany’s drive to almost double power output from renewables by 2035 has seen one operator reporting five times as many potential disruptions as four years ago, raising the risk of blackouts in Europe’s biggest electricity market while pushing wholesale prices to a nine-year low. German Utilities Bail Out Electric Grid at Wind’s Mercy, Bloomberg.com Germany has given away $130 billion, mostly to solar power companies, yet solar power makes up a minuscule 0.3 percent of German power supply, while doing almost nothing toward the original objective of reducing greenhouse gas emissions. Last year, Germany saw a drop of 13 percent in green jobs, primarily due to collapse of their solar industry.

  8. Subsidies that have driven the spread of large solar farms across Britain are to be scrapped under plans to stop the panels from blighting the countryside. Energy companies that build solar farms currently qualify for generous consumer-funded subsidies through the so-called ‘Renewable Obligation’ (RO) scheme, and had expected to keep doing so until 2017. But the Department of Energy and Climate Change announced on May 13, 2014 that it planned to shut the RO to new large solar farms two years early, from April next year notes Emily Gosden. The decision follows an admission by ministers that far more projects have been built than expected, leading to a rising subsidy bill for consumers and increasing local opposition. Lord Marland said solar is already going to cost the consumer 7 billion euros for 400 million euros of net present value. This is on a product where you need the electricity when the sun doesn’t shine.

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