What’s Undermining Energy Efficiency?

Exhilaration swept through the energy efficiency industry as city after city, state after state and nation after nation set aggressive energy saving goals over the last several years. But with target dates nearing in certain jurisdictions, a more sober attitude now permeates. Some governments are asking: Are we reaching too high?

A global report issued this week by PwC, which looks into the minds of power industry executives, suggests the worry may be justified. Called ‘The shape of power to come,’ the annual report emerged from interviews with senior executives at 72 power companies in 43 countries. It found that a good number (45%) of executives are dubious that we will reach energy efficiency targets by 2030.

Meanwhile, PwC also says North America and Europe may be heading for a blackout watch. Remember those? Such warnings sprang up during the pre-recession era of heady economic growth. With economic recovery, the risk of power shortages again rises, as worldwide energy demand expands from 17,200 TWh in 2009 to over 31,700 TWh in 2035.

Energy efficiency is widely seen as the cheapest way to meet at least some of the new demand. But the report cites two significant problems that hinder efficiency efforts. The first is fossil fuel subsidies; the second is human nature.

Fossil fuel subsides create artificial price signals that encourage us to consume rather than develop more efficient technologies. Several government leaders, including President Obama, have pledged to reduce fossil fuel subsides, but change is slow to come. And time is of the essence according to PwC: “If a phasing-out of fossil fuels is to have an impact on energy efficiency in the period to 2030, it needs to be well underway by 2020. Our survey asked about the probability of fossil fuel subsidies being largely phased-out by 2020? Less than a fifth (18%) see this as highly probable. The overwhelming industry sentiment in our survey is that this is improbable and that such subsidies will persist. If this is the case, it will be a major factor undermining energy efficiency.”

The other issue, human behavior, is a dilemma that arises out of smart grid technology. Smart meters, energy displays, and other technologies offer a way for consumers to better manage their energy use. But early pilot studies indicate most of us have neither the time nor the interest. Or better put, the technologies and programs offered so far, have not captured our attention. It’s the old ‘you can lead a horse to water’ adage.

However, reason exists to believe we can solve the human behavior issue, perhaps more easily than the fossil fuel subsidy hindrance. Take a look at the kind of research on behavior and energy being done by organizations like the American Council for an Energy Efficient Economy or the work underway by innovators like Energy Points. We may find that making the horse drink is easier than getting the world to give up on its fossil fuel subsides.

One thing is clear though. The all-of-the-above energy strategies touted by many US political candidates (from both parties) seem somewhat nonsensical. We do not have unlimited dollars to invest in infrastructure, so can’t possibly proceed without setting priorities. And as PwC points out, one resource can displace another – continuing to push fossil fuels, by way of subsidies, undercuts efficiency. All-of-the-above leads to just some-of-the-above, and the winners are not necessarily the most cost-effective or environmentally benign. To reach our energy efficiency goals, we may need some hard decision-making – a scarce commodity in an election year.

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.