For the last 40 years, energy efficiency has been a quiet success story in America’s energy industry. Modern energy efficiency in the United States began to emerge in the 1970s as changes in patterns of energy consumption and events, such as the oil crisis, began to put pressure on the U.S. energy infrastructure. In response, a diverse group of scientists and analysts from many fields and industries began to develop strategies and technologies for using less energy to deliver the same or better services to consumers and businesses. These strategies have grown to affect almost every activity that uses energy, and have greatly influenced utilities, building designers, industrial planners and manufacturers of everything from household appliances to heavy-duty vehicles.
The result has been an unqualified success story, both economically and environmentally, although one often overlooked by the public at large. Since the oil crisis of 1974, the U.S. economy has continued to grow while the rate of increase in energy use has slowed significantly. If we were using energy today at the rate we were in 1974, we would be consuming more than twice the amount that we actually are using. Despite the recent recession and the period of sluggish growth that has followed, in the past 15 years, the economy has grown tremendously and we have seen total energy use remain constant.
That is due in no small part to advances in energy-efficient technologies, policies and practices.
Because of its proven track record in saving consumers money, energy efficiency should be the cornerstone of any energy policy. Efficiency is generally our least-expensive energy resource, meaning that it typically costs less to save a unit of energy and provide the same service than it costs to produce that same unit of energy. As a result, large cost-effective savings are achievable across the country, regardless of local conditions and geography. Energy efficiency programs cost utilities only about 3 cents per kilowatt hour, while generating the same amount of electricity from other sources can cost two to three times more.
Energy policies directly impact the economy, and many studies have shown that energy efficiency promotes economic growth and well-being by saving consumers money while creating jobs. Since energy efficiency isn’t tangible, it may be difficult to appreciate; however, the savings that result have had a very real impact on people’s lives. A more energy-efficient economy makes more money available to consumers and businesses to both save and spend. Businesses’ bottom lines are improved and consumers are free to spend money in whichever area of the economy they choose. A recent American Council for an Energy-Efficient Economy (ACEEE) analysis of the proposed EPA Clean Power Plan found that energy efficiency efforts could drive more than $625 billion in investment and create an average of 400,000 net jobs per year through 2030.
Some of the most significant energy efficiency improvements to the economy have occurred in transportation fleets and the appliances and equipment used in homes and workplaces. Since model year 1975, the energy required to drive a car or light truck each mile has declined 45 percent, an improvement made possible by technological progress and government fuel-economy standards. And these improvements are expected to continue as 2025 fuel economy standards call for the average automobile to improve fuel economy by an additional 35 percent relative to the average new 2013 vehicle.
Similarly, efficiency improvements for appliances and many other types of equipment have also accelerated, driven by many of the same forces. For example, the average 2014 refrigerator uses only about 30 percent of the energy of a 1973 unit, even though the 2014 unit is larger, has more features, and its inflation-adjusted price is lower.
Similar efficiency improvements have have been achieved in buildings, farms and factories across the country, due to better building practices, improved farming methods and advances in process technologies and materials.
Not only is energy efficiency a critical resource for economic growth and productivity, it is also an important source of employment. In the manufacturing sector, energy efficiency plays an important role in developing new, affordable and more efficient products, and in improving industrial processes that allow us to make products with less energy than ever. Investing resources in making homes and offices more energy-efficient creates jobs in construction and in related equipment and materials manufacturing.
The positive effect of savings accrued from energy efficiency continue to ripple through the economy as well, creating even more jobs as consumers and businesses are free to spend their money from energy savings in all other sectors of the economy. In 2010 alone, homeowners and businesses spent less than half as much on energy as they would have without efficiency gains, saving over $1.3 trillion, enough to directly employ almost 9 million workers.
A study by ACEEE found that energy efficiency could further reduce energy requirements in our economy by about half by 2050. There are always opportunities to increase the nation’s energy efficiency as technologies evolve, and information and communications technology innovations are enabling revolutionary advances in energy efficiency. For much of the past four decades, we have improved the efficiency of individual products that use energy, such as cars, lightbulbs and refrigerators. Experts have been aware for years that even greater energy savings are available from optimizing entire energy-using systems such as buildings, factories, freight transportation or even cities.
The challenge has been to collect data on operations and process the data quickly enough to be able to make decisions to eliminate energy waste. The information, communications and computing revolution of the past 15 years has given rise to the tools needed to accomplish this goal. We have seen the cost of sensors and controls fall while advances in communication and computing allow us to manage energy use in near-real time, anticipating demands for energy and optimizing the performance of these energy-using systems. ACEEE, working with industry thought leaders, has labeled this new approach “intelligent efficiency.”
Manifestations of intelligent efficiency are already appearing in the marketplace, ranging from intelligent buildings, such as the rehabilitated Empire State Building, to smart manufacturing plants, to the intelligent freight systems operated by major carriers such as UPS and FedEx. The energy savings potential is huge, with intelligent efficiency projects already saving more than 20 percent. Ultimately, we could see buildings networked with transportation systems to create intelligent cities that can meet businesses’ and families’ needs while saving energy.
Energy efficiency will also inevitably play a leading role in the fight against climate change. In a recent report, ACEEE found that a combination of the energy efficiency actions already undertaken by the government along with the future actions that could be employed, including appliance, vehicle and power plant standards, could cut cumulative carbon dioxide emissions by 34 billion metric tons, more than the total emissions produced by the U.S. in six years. This would translate into $2.6 trillion in savings for the American people, proving that smart policies can protect our environment while strengthening tomorrow’s economy.
While energy efficiency has proven highly cost effective over the past four decades, it continues to face challenges. Perhaps the greatest challenge is that saving energy can be invisible to most consumers and policymakers. Hence, the need to increase awareness of the untapped potential for savings through energy efficiency and of the steps needed to realize that potential, such as incentivizing energysaving programs by utilities.
Additionally, energy efficiency represents a challenge to many established energy supply markets whose financial viability relies on growing demand for energy. So working with traditional energy supply industries to identify alternative business models that will allow them to decouple their financial viability from increasing energy use will be critical. Electric and natural gas utilities are already focused on exploring new models.
Much as we are seeing a shift from efficiency improvements on discrete components, the U.S. needs to consider an integrated energy approach that optimizes the use of available resources. This would allow for continued economic growth while addressing the environmental challenges facing America and the world that result from energy use.
Energy efficiency has been a great, but unheralded, American energy success story for the past four decades. The future looks bright for efficiency, with intelligent technologies and systems enabling greater future efficiency savings while delivering even greater consumer benefits. Efficiency alone cannot meet all of the economy’s energy needs, but with more intelligent use of all energy resources, we can ensure continued economic health while addressing the environmental challenges that face our world.
Content developed with: The American Council for an Energy-Efficient Economy
Energy Tomorrow is a project of the American Petroleum Institute – the only national trade association that represents all aspects of America’s oil and natural gas industry – speaking for the industry to the public, Congress and the Executive Branch, state governments and the media.