America's Energy Straitjacket

Executive Summary

America is wrapped up in a chain of energy crises that are best described as a “straitjacket.” There are no easy escapes from this situation, because our deeply interrelated energy problems cut across all major energy markets. With significant tightness in all markets, we are unable to get relief by turning to conventional energy alternatives as we have done in the past. In 2003, ACEEE responded to the tightening in natural gas markets with extensive research into the market impacts of energy efficiency and renewables. Since then, we have researched sources of strain in oil, coal, and electricity markets as well. These strains are manifested in increased energy prices (see Figure ES-1).

This report outlines the major problems related to the oil, natural gas, coal, electricity, and renewables markets, as well as the external factors that threaten the stability of these markets. In addition, the report analyzes the reasons why many of our energy problems have been hard to discern in the recent past and attempts to project what we can expect for the future.

The report focuses primarily on the near-term energy straitjacket and what can be done to ameliorate it. Energy efficiency is a proven energy resource and the only policy solution that could provide near-term relief. Energy efficiency can quickly and cost-effectively moderate energy demand growth, stretching available energy resources while providing price relief to consumers and reducing the risk that our energy straitjacket will derail the economic recovery.

A short-term, stop-gap approach to energy efficiency, however, is not enough to bring long-term balance and sustainability to America’s energy policy. We are in an ongoing, long-term race to deliver enough energy, conventional or otherwise, to meet rising demands. Conventional energy resources are becoming more difficult and expensive to bring to market, and clean-energy alternatives face their own cost and other constraints. Energy efficiency is thus the cornerstone of a sustainable energy policy; if demand grows too fast, no supply infrastructure will be able to keep up. This means that investing in energy efficiency resources is essential to moderating the need for new energy supplies, and we must act now to begin the efficiency investments needed to put America on a sustainable energy path. The resource decisions we make today will determine how painful our energy problems will be in the future.

To loosen America’s energy straitjacket, the U.S. will need political leadership on energy efficiency and conservation at all levels of government. ACEEE recommends four immediate policy actions:

1. The President should call on governors, legislators, utility regulators, utility companies, and the energy efficiency industry to join him in a national campaign to action encouraging energy efficiency and conservation. This campaign should be funded through the $90 million per year public awareness campaign authorized in last year's Energy Policy Act (EPAct) legislation.
2. Funding for Energy Efficiency budgets cut in the FY 2007 budget request should be restored to FY 2002 levels, plus an additional 20%, to put total funding on track to meet EPAct authorizations by FY 2008.
3. An energy efficiency resource standard (EERS), as considered by the Senate in developing EPAct 2005, should be enacted.
4. Oil savings legislation with enforceable provisions should be enacted, designed to save at least 2.5 million barrels per day by 2015. This legislation should also affirm that the National Highway Traffic Safety Administration has authority over automotive fuel economy requirements.

While these measures may not enough by themselves to rebalance energy markets, they would make a substantial start, particularly if the states respond in kind.

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28 pp., April 2006, $16.00, E065