How Far Can Efficiency Take Us? ACEEE Offers Answers

PACIFIC GROVE, CALIFORNIA — With increasing prices for oil, natural gas, coal, and electricity beginning to slow the economic recovery, energy efficiency offers the only near-term option to decrease energy bills by reducing both consumption and prices. To help policymakers gauge efficiency's prospective contribution to energy and economic policy, the American Council for an Energy-Efficient Economy (ACEEE) released a new paper today that assesses the size of the energy efficiency potential in the United States.

"Because the current high prices stem from the imbalance between supply and demand creating very tight energy markets, small changes in either supply or demand can have disproportionately large impacts on energy prices," said Anna Shipley, a researcher and analyst with ACEEE. "Our research last year showed that a 4 percent reduction in natural gas consumption nationally by means of energy efficiency could reduce wholesale prices by almost 20 percent. Natural gas markets have tightened even further this year, so price effects would be even more dramatic." For more information, see http://aceee.org/energy/natlgas.htm.

Beyond its immediate effects on energy markets, saving energy would also help stabilize the economy as a whole. "Economists agree that high energy prices are crimping the economic recovery," said Bill Prindle, ACEEE's Deputy Director. "Taking action now to moderate energy demand is one of the best ways to take the brakes off the economy. Efficiency investments themselves stimulate economic growth, but efficiency's larger effects on energy prices create much broader benefits for all energy consumers and the economy as a whole."

Since tight markets now exist for all major energy sources, few options exist to switch among energy sources. "Energy markets are interrelated," said Neal Elliott, ACEEE's Industrial Program Director. "As demand for gasoline increases, refiners use more natural gas and produce less heating oil, driving heating oil prices to record levels." ACEEE shares industry observers' concerns about high prices and even the potential for shortages in these very tight markets for heating oil and natural gas for home heating this winter, particularly if there is an unusually cold winter.

If energy efficiency is our best option to rebalance energy markets, it is important to know how much of this resource is available. The response to the electricity crisis of 2000/2001 in California conclusively demonstrated that an aggressive public information campaign for conservation, coupled with expanded funding for energy efficiency programs, can achieve remarkable reductions in customer energy demand. In 2001, California averaged a 10% cut in peak demand during the summer months (with a record reduction of 14% in June), and overall electricity use declined in 2001 by 6.7%, after adjusting for economic growth and weather, according to an ACEEE report (see http://aceee.org/pubs/u033full.pdf).

While these results are encouraging, we also need to know if this potential exists in "normal" markets and over the longer term. Steven Nadel, ACEEE's Executive Director, is presenting today a paper that reviews 11 recent studies of energy efficiency potential in the United States. The paper reviews their estimates of the technical, economic, and achievable potential for electric and natural gas efficiency and compares them with actual implemented savings from efficiency programs to date. This paper shows that very substantial technical, economic, and achievable energy efficiency potential remains available in the United States. A review of the most successful state and utility energy efficiency programs shows that savings of these magnitudes can be achieved in practice.

"The savings potentials found in these studies tended to be similar to the savings potentials found in studies from the 1990s, despite the fact that many measures included in the 1990s studies (such as T8 lamps and electronic ballasts) are now widely implemented," said Nadel. "What has happened is that many new measures have been developed (e.g., "super T8 lamps" and high-efficiency packaged commercial refrigeration equipment) that replace the measures that have been implemented over the past decade."

The Technical, Economic, and Achievable Potential for Energy Efficiency in the United States: A Meta-Analysis of Recent Studies (see http://aceee.org/energy/eeassess.htm#meta), by Steven Nadel, Anna Shipley, and R. Neal Elliott, is being presented at the ACEEE Summer Study on Energy Efficiency in Buildings being held at the Asilomar Conference Center in Pacific Grove, California. This Summer Study, ACEEE's 12th biennial conference, is perhaps the most important energy efficiency conference, drawing more than 750 researchers and practitioners.