Energy Efficiency: Hidden Potential – 12/22/16

From energy security to energy access to air quality or climate goals, energy efficiency makes it easier to reach; however, it has rarely gotten the attention it deserves.

According to analysis by the IEA, “energy efficiency would have to provide more than 40% of total GHG emissions reductions” to meet the goal of limiting climate change to 2 degrees, the largest source of reductions in the IEA scenario. So why do renewables get so much more attention.

Clean energy benefits from clear, visible goal: production of electricity at a competitive price. Wind and solar power will see a monumental jump in popularity as they get close to price parity with fossil fuels — after all, there is no reasonable excuse for using fossil fuels if they aren’t at least a relatively cheap energy source. Lacking a cost advantage, however, renewables struggle to find a foothold.

Fortunately, energy efficiency has the potential to provide the same environmental benefits as clean power in areas where renewables aren’t competitive with fossil fuels.

Looking at the cost of solar power generation, clearly states on the left of the graph will benefit far less from a switch to solar than those on the right.

For such states, pursuing energy efficiency policies is much more likely to be cost-effective and politically viable than a push for renewables.

Yet while utilities and other power providers make energy choices between oil and other fuels based on price per kilowatt, energy efficiency lacks a comparable metric. As a result, large-scale efficiency programs rely heavily on government policy for support.

A large solar project can benefit from access to capital markets, economies of scale, potential returns acting as an incentive for developers, and other market forces.

On the other hand, efficiency projects don’t translate well to those market mechanisms. Even with a project on a similar scale, like building weatherization efforts, will generally come down to making sure thousands of household systems add up to large cost savings. The additional steps of making the value proposition to all of those homeowners in that distributed system creates costs and complications that few companies would bother with.

If the costs and benefits of energy efficiency were as easy to account for as renewable energy, efficiency would likely get a lot more attention. For now, only the government has the means to go through the trouble of dealing with such complexity so it may take some time for efficiency projects to come out in force.

Print Friendly, PDF & Email

Comments are closed.