Energy Efficiency May Be the Key to Saving Trillions

Originally published by the New York Times

Compared with eye-catching renewable power technologies like wind turbines and solar panels, energy efficiency is nearly invisible. But advocates say doing more with less power may be an even more critical weapon in the fight against climate change and offers big economic benefits, too.

Worldwide, governments, companies and families could be saving trillions of dollars by improving efficiency with cars that go farther on less fuel and improved appliances, light bulbs and factories, experts say.

“It’s logical, because we simply waste so much,” said Harry Verhaar, head of global and public affairs at Philips Lighting and chairman of the European Alliance to Save Energy. “Some people call energy efficiency low-hanging fruit. I would even say energy efficiency is fruit lying on the ground. We only need to bend over and pick it up.”

An environmental activist dressed as a lobbyist, his hands covered in coal, protested in Brussels in October. Europe has agreed to cut greenhouse gas emissions by 40 percent from 1990 levels by 2030.

To realize an ambitious plan to switch over to renewable energy, Germany would have to greatly increase the use of photovoltaic panels like these. The country would also have to make major changes to vehicles, home design and power plants.

Li Hejun, founder of Hanergy Holding, says he believes that China will be No. 1. in solar energy in the next decade.

Realizing those energy savings would be a huge boon to the climate, ease illness-causing air pollution, reduce many nations’ reliance on fuel imports and increase competitiveness by lowering costs, the advocates say. It creates jobs in fields like upgrading buildings, and is generally cheaper than the alternative of constructing new power plants and buying more energy, they argue.

But increasing efficiency is logistically complicated, requiring many individuals and organizations to take a tremendous number of small steps, and most nations have failed to aggressively pursue the potential savings.

Even Germany, which topped the American Council for an Energy-Efficient Economy’s rankings as the most efficient of the world’s 16 biggest economies, scored only 65 of a possible 100 points, noted Rachel Young, the lead author. Denmark and Switzerland, too small to be included in the survey, are doing more, she said.

“Energy efficiency is everywhere and nowhere at the same time,” said Jonathan Sinton, senior energy specialist at the World Bank. “Power generation happens in a place, in a piece of equipment that you can see and touch. But energy efficiency happens everyplace energy is, and that pervasiveness makes it really, really hard to deal with.”

Some also argue that making energy cheaper by reducing demand just leads consumers to use more, a phenomenon called the rebound effect. Steven Nadel, executive director of the American Council for an Energy-Efficient Economy, said the effect was real but relatively modest, with about 20 percent of saved energy in developed countries being used as a result.

The countries that have made the most progress on efficiency are those whose governments have prioritized it, Mr. Nadel said. Many are in Europe, where Germany, for example, requires regular efficiency audits of manufacturers and has stringent building codes, Ms. Young said.

Environmentalists, though, are disappointed with an October agreement by European Union leaders to set a non-binding target of increasing the bloc’s energy efficiency by at least 27 percent by 2030, as part of a broader climate deal.

Monica Frassoni, president of the European alliance, said that would hardly exceed the rate of efficiency improvements already happening, and stronger government action was needed. “These things do not fall from the sky,” she said. “You need political leadership and you need money.”

When Deng Xiaoping set his sights in the early 1980s on quadrupling economic output, China’s leaders realized that, without dramatic efficiency improvements, it would depend heavily on imported energy, Mr. Sinton said.

“It really takes persistence, and persistence is what has characterized the Chinese effort,” he said. “They began to institutionalize energy efficiency, they allocated money to research and development, they started to set targets.”

While China still has wasteful factories and buildings, it also boasts some of the world’s most efficient, he said.

Interest in efficiency spiked worldwide during the oil embargo of the 1970s, but later waned, said Philippe Benoit, head of energy efficiency and environment at the International Energy Agency. Awareness has risen again in recent years because of climbing energy prices, concerns about supply and the threat of climate change, he said.

Efficiency will have to account for 40 percent of the emissions reductions if warming is to be limited to 2 degrees Celsius, as world leaders have pledged, Mr. Benoit said. That will cost $14 trillion between now and 2035, more than $600 billion a year, doubling the current rate of spending on efficiency, the agency estimates.

Even during the 1970s crisis, the United States’ focus on efficiency was less intent than many nations’, said Mr. Nadel of the American efficiency council.

Even so, America uses half the energy per dollar of gross domestic product that it did in the 1970s and has saved more than $15 trillion since then through rising efficiency, he said. Experts say that the use of more modern cars, appliances and equipment leads to efficiency improvements of more than 1 percent a year in developed countries, even without concerted effort.

President Obama has sought to improve efficiency with measures like higher mileage standards for cars and proposed emissions cuts for power plants.

In Britain, the Carbon Trust has helped dozens of major companies, thousands of small ones and nearly all municipal governments to increase efficiency, said James Wilde, the group’s managing director of policy and innovation.

Most companies can cut energy costs by between 10 percent and 20 percent with measures that pay for themselves within three years, he said. Some changes, like resetting heating systems and getting employees to turn off lights, bring big savings almost for free, he said. But, “It’s one of these funny things: If it is so attractive financially, why aren’t people doing it?” he said.

Lack of awareness, inertia and the small percentage of overall costs that energy represents for some businesses are all obstacles, he said.

Commercial lending for building upgrades or appliance purchases is growing, Mr. Benoit said, often through programs that allow borrowers to make repayments through deductions from their energy bills.

In poorer countries, increasing efficiency also makes it easier to provide power to those who lack it. When poor households switch to LED light bulbs, for example, “you’re getting a lot more light and leaving enough electricity to do something else, have a fan, a cell phone charger,” Mr. Sinton said.

Despite up-front costs, advocates say efficiency measures are a bargain compared with other pieces of the puzzle. “Energy efficiency is the only energy that you could say is for free, where you get your money back,” Mr. Verhaar said. “Because it’s energy that you don’t use.”