beyond the wish: scaling up energy efficiency
DESCRIPTION
As part of its series of discussions on energy and national security, the Center for Strategic and International Studies held a panel discussion on the role of energy efficiency in climate legislation. Joe Loper, Senior Vice President for Policy and Research at the Alliance to Save Energy, led off the discussion with an overview of the opportunities and challenges of using energy efficiency to reduce the cost of compliance with federal climate legislation.TRANSCRIPT
Beyond the Wish: Scaling Up Energy Efficiency
Joe Loper
Alliance to Save Energy
October 22, 2008
What is the Alliance? Mission: The Alliance to Save Energy promotes energy
efficiency worldwide to achieve a healthier economy, a cleaner environment, and greater energy security
Chaired by Senator Mark Pryor (D-AR) and James Rogers (CEO, Duke Energy) with strong bipartisan congressional, corporate & public interest leadership.
What is the Alliance? NGO coalition of 150+ prominent business, government,
environmental and consumer leaders.Conduct policy, education, research, technology deployment, market
transformation and communication initiatives.
Headquartered in Washington, D.C. with operations in Eastern Europe, South Africa, Mexico, India and several states in the U.S.
EE Benefits Concerned about climate, national
security, energy security, high energy prices, other environmental Issues?
EE is often cheapest, cleanest, easiest way to achieve - Cost of measures can be low - No nuclear waste- Less CO2- No battleships required
Everyone’s talking about energy efficiency
Secretary Bodman - "The biggest source of immediately available 'new'
energy is the energy that we waste every day." National Petroleum Council (“Hard Truths”)
- ”The study demonstrates that energy efficiency is a very near-term energy resource, and tapping it is essential to national energy strategy.” (Dan Yergin, Vice Chair of Study)
Jim Rogers (CEO, Duke Energy)- Energy efficiency is “the fifth fuel”
Tom Kuhn (President, EEI)- Energy efficiency is “the first fuel”
America's Greatest Energy Resource Energy Efficiency and Conservation Improvements Since 1973
Have Reduced Annual Energy Consumption by 50 Quads
0.8
3
4
8
23
24
40
50
0 10 20 30 40 50 60
Geothermal, Solar and Wind
Conventional Hydroe lectric
Wood, Waste , Alcohol
Nuclear Electric Power
Coal
Natural Gas
Petroleum
Energy Efficiency and Conservation
Quads
2007 Domestic Production Net ImportsAlliance to Save EnergyAugust 2008
Huge EE Potential Remains
Energy Efficiency Potential 40%
Adapted from McKinsey Analysis
McKinsey mid-range reductions (2030)
McKinsey high-range reductions (2030)
We need all we can get
Adapted from WRI Analysis
EE potential is uncertain Depends- Discount rates
- Economic growth
- Energy prices
- Capital turnover
- Technology development
- Policy
- Market barriers
Note: Supply potential is uncertain too
Latest Potential Study (Draft)
Market Barriers Cause economically inefficient
underinvestment in EE #1 Externality costs- Costs -- Climate, national security risks, risk of
nuclear waste/meltdown, acid rain, local health
#2 Split incentives- Tenant-landlord- Builder-buyer
Market Barriers (Cont’d) #3 Energy Subsidies- $16 billion according to EIA
#4 Lack of informationKnow what – Lack of awarenessKnow-how -- EE can be complicated
#5 Bounded Rationality Others
Lock-in (light fixtures, big cars?)First cost, lack of financing
Job #1: Get prices right Cap or tax Cap and trade dominates discussion
- Cap (beyond BAU) reduces emissions - Trading reduces overall costs of compliance
Elements to watch – stringency- Cap, scope, cost-containment elements
Elements to watch – cost containment- Lower cost -- Safety valves, offsets- Higher cost – Muting of certain price signals through
allocations
Role of EE in Cap n Trade EE is one of many abatement options If excluded, forcing EE can reduce costs of
overall compliance- If “cheaper” than next best option- Doesn’t need to be “negative cost”- Same as other “excluded” (underinvested) options
Note: Forcing EE does not reduce emissions EE can be excluded due to
- Policy elements – e.g., free allowances to regulated entities
- Market barriers
Many “Non-Price” Barriers
Caution …. Barriers may reveal preferences or costs Barriers difficult to quantify Some non-price barriers addressed by carbon
price Fixing barriers is not free – count as cost
Job story good, but challenging too Overall cost of abatement could be higher
If fix barriers that don’t exist Political viability of cap a consideration
Less allowance value for other interests Basic argument for cap and trade undermined
Address non-price barriers Not all barriers must/can be conquered- Still better off than we were
If ignored, cost of overall abatement will be higher!
Different barriers require different approaches- McKinsey, et al pursuing
EE Policies in Brief Carbon Price
- Addresses service demand (e.g., VMT, home size) and appropriate application (e.g., HVAC sizing)
Vehicle, Equipment, Appliance Standards - Addresses lack of information, split incentives,
bounded rationality Building Codes
- Addresses lack of information, split incentives Labeling
- Addresses lack of information, split incentives- Addresses bounded rationality could go up or down
EE Policies in Brief (cont’d) Tax Incentives- Address lack of information
Energy Efficiency Resource Standard- Utilities may be best able to address “local”
barriers Labor Force Education & Training- Needed to respond to policies
R&D Investment - Because we still need game changers
Recap A lot of EE potential – We decide potential EE is often cheapest, cleanest, easiest But….EE is not free- Ability to get people to implement is TBD
Strong and smart policy will be the key- Learn by doing everything NOW
Prospects for Cap and Trade Economy in recession But…oil prices down too Political stars aligned?
- Lieberman-Warner
- Boucher-Dingell
- McCain and Obama
Biggest economic challenge is uncertainty- Indecision on climate adds to uncertainty
Nobody benefits from stand-off
