Efficiency First

Unlocking Energy Efficiency in the U.S. Economy

Efficiency measures could save the U.S. more than $1.2 trillion by 2020 according to a new McKinsey & Company study

July 31, 2009 – The global consulting firm McKinsey & Company has released a new report based on an exhaustive study of potential savings from energy efficiency measures. The study concluded that:

Energy efficiency offers a vast, low-cost energy resource for the U.S. economy – but only if the nation can craft a comprehensive and innovative approach to unlock it. Significant and persistent barriers will need to be addressed at multiple levels to stimulate demand for energy efficiency and manage its delivery across more than 100 million buildings and literally billions of devices. If executed at scale, a holistic approach would yield gross energy savings worth more than $1.2 trillion, well above the $520 billion needed through 2020 for upfront investment in efficiency measures (not including program costs). Such a program is estimated to reduce end-use energy consumption in 2020 by 9.1 quadrillion BTUs, roughly 23 percent of projected demand, potentially abating up to 1.1 gigatons of greenhouse gases annually.

The McKinsey study aimed to understand why proven efficiency opportunities have not been captured in the past, and to evaluate potential measures to overcome those barriers. “For most opportunities,” the report states, “a comprehensive approach will require multiple solutions to address the entire set of barriers facing a cluster of efficiency potential.” Solutions outlined in the report fall into four basic categories:

1. Information and education to build public awareness
2. Incentives and financing to facilitate the large upfront investment needed for many efficiency measures
3. Codes and standards

IV. Third-party involvement, in which utilities, government agencies or private companies handle energy efficiency improvements for the end user.

Commenting on the report in the New York Times, Peter Lehner of the Natural Resources Defense Council is said that even greater savings were possible:

The McKinsey report made conservative assumptions, (Lehner) noted, and it did not account for savings from changes in behavior — people turning out lights in empty rooms or turning down the thermostat in winter, for example.

Nor did the $1.2 trillion figure take account of a possible cost for greenhouse gas emissions, which could be capped under climate legislation pending in Congress, and could bring about increases in energy efficiency.

“Even if we don’t get a climate bill this year, it’s extremely conservative to think there will not be a price on carbon in the next decade,” Mr. Lehner said.

Download the report: http://www.mckinsey.com/clientservice/electricpowernaturalgas/downloads/US_energy_efficiency_full_report.pdf

Read about it in the New York Times:

http://www.nytimes.com/2009/07/30/business/energy-environment/30energy.html?_r=2