Obama and the Reinvention of Energy Efficiency

The energy efficiency industry received a nice boost this week during President Barack Obama’s State of the Union address. Obama called for cutting energy use by half over the next 20 years.

Such attention comes at a significant point in the history of the energy efficiency movement. It appears to be re-inventing itself again, and in a way that is likely to have broad appeal.

First, consider how far energy efficiency has come in terms of perception.

Until about a decade ago, we equated saving energy with austerity, turning down the thermostat in winter and up in summer. It was called ‘conservation’ or the more clunky term ‘demand-side management.’

With the dawn of smart grid, conservation was reinvented into ‘energy efficiency,’ a way to save energy through technology. No sacrifice required, energy efficiency might even bring more comfort – lighting that is easier on the eyes and devices that make sure your apartment is cool just when you arrive home.

Now we seem to be entering a third stage, the era of ‘energy productivity’, where we focus on the economic result of energy efficiency: more bang for the energy buck.

“By doubling productivity, we’ll wring more out of every dollar spent on energy, helping families improve the quality of their lives by freeing up money to either save or spend on other things,’ said Kateri Callahan, president of the Alliance to Save Energy.

Callahan made the statement as she introduced new goals released last week by the Alliance Commission on National Energy Efficiency Policy. (The commission is led by Tom King, president of National Grid and US Sen. Mark Warner, a Democrat from Virginia.)

The commission wants to double energy productivity by 2030, or get twice as much economic output for each energy dollar spent. This sounds a lot like Obama’s call to cut energy waste by half in 20 years. Indeed, following Obama’s speech, Callahan noted: “Twenty national energy experts spent a year developing a plan to double U.S. energy productivity, and it took the White House just days to publicly embrace it.”

So what’s the end game here?

We’ve been improving our energy productivity for many years, albeit somewhat haphazardly. The advent of the computer has helped. (It takes less energy to move an electron than a car or person.) Had we not made these gains, we’d need about 50 percent more energy today to maintain our way of life, according to the report.

Still, we waste a lot of energy. So the commission proposed a series of steps toward a large energy productivity goal: $270 billion of GDP for each quadrillion (quad) Btu consumed in 2030. To put this in perspective, we’re at only about $135 billion per quad now, according to the report.

Energy productivity is integral to economic prosperity. The report found that doubling our energy productivity will add 1.3 million jobs in 2030 and lead to household savings of about $1,000 per year. Moreover, such productivity could increase national industrial output by $100 billion in 2030, the report said.

It will take some serious work to achieve the goal. We must upgrade energy infrastructure, adopt advanced technologies, educate and motivate consumers, and institute a favorable regulatory climate, the commission said. These steps will cost hundreds of billions of dollars, but the potential exists to capture a trillion dollars in energy savings.

It’s a big undertaking, one that could dramatically boost the energy efficiency industry. And it’s not a bad start, getting a plug from the leader of the free world on national TV.

Elisa Wood is a long-time energy writer whose work appears in many of the industry’s top magazines and newsletters. She is publisher of the Energy Efficiency Markets podcast and newsletter.