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Semiconductor Technology: The Potential to Revolutionize U.S. Energy Productivity


May 1, 2009

Research Report E094

Authors:

John A. "Skip" Laitner, Chris Knight, Vanessa McKinney, and Karen Ehrhardt-Martinez

Description:

On any given day a consultant might use his home-office to “telecommute” rather than drive to the office, or a business executive may video-conference with her clients in Europe and avoid a flight across the Atlantic. A downed power line may trigger a series of actions to prevent an area blackout, an industrial motor may slow down to adjust to a decreased load, or a GPS navigation system may give instructions to a delivery truck driver on the shortest route to cover all of his deliveries. These many different events all share one thing in common—the reliance on semiconductor-related technologies that also enable energy savings. From the use of cellular phones and online banking to managing industrial operations and product testing, semiconductor technologies have transformed our economy and our lives. In some surprising and unexpected ways they also have revolutionized the relationship between economic production and energy consumption.

Since the development of the first practical transistor in the late 1940s, and especially since the introduction of the microprocessor in the early 1970s, the huge cost and performance breakthroughs and the many new innovations in semiconductor-related devices have worked to drive the expansion and diffusion of new technology applications and systems. These innovations, in turn, have enabled the development of new high-tech products and services, new investments, and new ways of doing things. In other words, the positive economic returns generated by these new innovations have stimulated higher levels of economic productivity. In perhaps some surprising ways, these innovations have also driven net gains in cost-effective energy savings throughout the U.S. economy. How big of an impact might we suggest?

The available data and statistics now collected by various governmental agencies do not allow a precise estimate. Nonetheless, the evidence is compelling. Looking only at productivity gains in electricity consumption, we estimate that deployment of semiconductor technologies—whether in consumer goods, industrial operations, or the production of alternative energy resources—has generated a net savings of about 775 billion kilowatt-hours (kWh) of electricity in the year 2006 alone. This is on the order of a 20 percent savings for the entire U.S. economy. A large 600 megawatt coal-fired power plant might generate just over 4 billion kWh in a year’s time. So stated differently, our national economy might have required the construction and operation of 184 large electric generating power plants “but for” the widespread use of semiconductor technologies. Yes, while deployment of the now ubiquitous semiconductor has created new economic activities and powered the development of the U.S. and the international economies, it has also made our economy more productive. In short, the family of semiconductor technologies now at work in our economy has leveraged and amplified the use of our capital, labor, and energy resources beyond normally expected returns. Energy productivity gains, although not immediately obvious to the average consumer, have been especially large.

In this report we explore both the deployment and use of the full array of semiconductor technologies now hard at work within our economy. We especially note the historical contribution of semiconductor devices to the energy productivity benefits that have accrued. We then look to gather some idea of the larger benefits that might accrue in the near future should U.S. energy policy emphasize more productive investments in our nation’s equipment, buildings, industrial plants, transportation system, and energy infrastructure through investment in semiconductor-enabled technologies. To accomplish this purpose, we first examine the nature of semiconductor technologies and how they assist in the production of our nation’s goods and services. We then set up a series of analytical frameworks that help us generate reasonable estimates of the historical energy savings that have resulted from the use of semiconductor devices and technologies. Finally we use the latest “official forecast” of U.S. energy consumption to see how semiconductor technologies might contribute to further energy productivity gains—especially projections of future energy saving benefits should we choose to develop smart investment policies that accelerate the development and diffusion of smart, new technology systems based on semiconductor technologies. In completing this larger exercise to quantify future benefits, we will also provide a series of short appendices to summarize and describe the analytical methods that underpin our assessments.