The Biggest Low-Carbon Resource by Far

Energy efficiency is the most important climate solution for several reasons:

1. It is by far the biggest resource.
2. It is by far the cheapest, far cheaper than the current cost of unsustainable energy, so cheap that it helps pay for the other solutions.
3. It is by far the fastest to deploy, without the transmission and siting issues that plague most other strategies.
4. It is “renewable” — the efficiency potential never runs out.

This post focuses on #1 — the tremendous size of the resource, especially here in the United States, the Saudi Arabia of wasted energy. Part 2 explains why it is The limitless resource, Part 3 explains why efficiency is The only cheap power left, and Part 4 explains How California does it so consistently and cost-effectively. Part 5 explains why efficiency has the highest documented rate of return of any federal program.

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Of the 12 to 14 wedges we need to deploy globally over the next half decade (or, preferably, faster), I have argued that about two are electricity efficiency, one is recycled energy (cogeneration), and one is vehicle fuel efficiency (cars globally averaging 60 mpg). For background on the wedges, see “Breaking: Socolow reaffirms 2004 ‘wedges’ paper, urges aggressive low-carbon deployment ASAP” and “The full global warming solution: How the world can stabilize at 350 to 450 ppm.”

The International Energy Agency also thinks about four wedges are efficiency, see “IEA report, Part 2: the 450-ppm solution.” And so does Price Waterhouse Coopers, see here.

[I would also add that since plug-in hybrids are another core solution — and since the electric motor is inherently more efficient than the gasoline engine — you could also consider part of the plug-in wedge to be an efficiency gain.]

I have already written about recycled energy (here) and high-efficiency plug-in hybrids (here), so what I will focus on over the next several days is end-use electricity efficiency.

In the past three decades, electricity per capita has stayed flat in Californian while it has risen 60% in the rest of the country. If all Americans had the same per capita electricity demand as Californians, we would cut electricity consumption 40%. And if all of America adopted the same energy efficiency policies that California is now putting in place, the country would never have to build another power plant.

How big is the efficiency potential in this country? More than perhaps any other company, McKinsey has documented how an aggressive energy efficiency strategy sharply lowers the cost of climate action (see “McKinsey 2008 Research in Review: Stabilizing at 450 ppm has a net cost near zero”).

In 2009 they released their most comprehensive analysis to date of this country’s energy efficiency opportunity, “Unlocking energy efficiency in the U.S. economy.” Bottom line: Whenever this country gets serious about energy efficiency, then we can sharply reduce existing emissions at a large net savings to the public and U.S. businesses. McKinsey has a new cost-curve just of efficiency measures (click to enlarge):

The width of each column on the chart represents the amount of efficiency potential (in trillion BTUs) found in that group of measures…. The height of each bar corresponds to the average annualized cost (in dollars per million BTU of potential).

For those expecting to seeing efficiency below the line (i.e. negative cost), McKinsey has added a dashed line that represents the average cost of a new power plant. McKinsey said at its press conference that all the measures above have a positive net present value.

McKinsey explained that these measures, if fully enacted over the next decade, would save a remarkable 1.2 billion tons of CO2 equivalent, which is 17% of U.S. CO2e emissions in 2005. In other words, the entire 2020 target in the original House climate bill (Waxman-Markey) could be met with energy efficiency at a net savings to U.S. consumers and businesses of $700 billion.

And what is even more stunning about this analysis is that it didn’t even look at the transportation sector, where we know huge savings opportunities are possible (see “U.S. can cut half its transportation emissions by 2050“).

McKinsey explains “The central conclusion of our work”:

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.

Whereas McKinsey thinks we could save 9.1 quads after a decade of serious investment, a 2009 analysis by the American Council for an Energy-Efficient Economy (ACEEE) found the Waxman-Markey bill would “only” achieve that some time in the mid-2020s (see “The triumph of energy efficiency: Waxman-Markey could save $3,900 per household and create 650,000 jobs by 2030“).

The new McKinsey report has an excellent discussion of the barriers to efficiency and how to address them, which they summarize in this figure:

The bad news is the nation’s not appear likely to address most of these barriers in a comprehensive fashion anytime soon. The good news is, as California has shown, it isn’t really that hard to do. So whenever we do get serious, the cost of carbon mitigation — integrating efficiency and low-carbon energy — won’t be high.

Energy efficiency is THE core climate solution.