US Energy Efficiency in 2013: Success Stories and Barriers

Energy efficiency has played a pivotal role in American productivity
improvements. In 2013, energy efficiency continued to move forward in the U.S.
Driven by cost savings, energy efficiency is good for business and the economy.
Improving efficiency increases production and can even lead to a higher quality
of material life. Energy efficiency improves the nation’s GDP for each national
energy dollar. Perhaps most importantly, energy efficiency is a meaningful part
of emissions reductions, which combats climate change and improves air
quality.

Despite progress, there is still a lot of room for
improvement in energy efficiency. As reported in Forbes, the U.S. is the global leader in
wasting energy with the nation currently wasting more energy than it uses. A
total of 57 percent of the energy flowing into our economy is wasted as heat,
noise, and leaks, costing U.S. businesses and households an estimated $130
billion per year. In addition to massive cost savings, it is estimated that
energy efficiency can also create more than one million jobs in the U.S.

Federal legislation pertaining to energy efficiency has been around for
almost 27 years. Existing energy efficiency standards for everything from
appliances to commercial products was first signed into law in 1987. Congress
and the Department of Energy have subsequently added many new products and
updated standards.

According to a 2012 study by the American Council for an Energy-Efficient
Economy (ACEEE), appliance, equipment, and lighting standards will save businesses and consumers more than $1.1
trillion by 2035. By updating existing standards and setting new standards
for additional products, consumers and businesses could save another $170
billion.

Climate benefits of energy efficiency

The benefits of energy efficiency extend well beyond cost savings. As
indicated in an International Energy Agency (IEA)
report, adopting measures to promote energy efficiency can buy the world an
additional five years to secure a global climate deal. The IEA also suggests
that energy efficiency may help us to keep temperature increases within 3
degrees Celsius (5.4 Fahrenheit) or perhaps even the 2 degrees Celsius upper
threshold limit agreed upon by scientists.

Economic improvements

The health of the American economy is being buoyed in part by energy
efficiency. This is one of the findings in a new report by the Natural Resources
Defense Council (NRDC) titled Energy and Environment Report, America’s
(Amazingly) Good Energy News. The report demonstrates that energy efficiency
measures are working in America. Although the U.S. economy grew by 25 percent
between 1999 and 2012, total U.S. energy use actually declined during this
period. The costs of energy services has also declined during the same period
according to the NRDC report.

Energy productivity

Energy efficiency was largely replaced by the term energy productivity
in 2013, this is due to the growing appreciation that conserving energy is good
for the economy. Energy productivity is defined as the amount of economic output
possible at a given level of energy supply.

Energy productivity rose to prominence in 2013, due largely to the political
advocacy of the Alliance to Save Energy and their Energy 2030 plan, which was put forth by the
Alliance Commission on National Energy Efficiency Policy. The plan proposes
doubling energy productivity by 2030.

The Obama administration and energy efficiency

The Obama administration embraced energy efficiency in earnest in 2013.
President Obama showed his support for energy efficiency in his State of the
Union address in which he called for cutting energy waste by half in
our homes and buildings by 2030. As outlined in the President’s 2014 budget,
energy efficiency is central to the Race to the Top program.

Doubling energy productivity is a key strategy in the President’s Climate
Action Plan. The President’s Plan also sets power plant carbon standards, builds
a 21st-century transportation sector, reduces energy bills for families and
businesses, invests in R&D, and modernizes the grid.

The federal government’s Better Building Challenge has been expanded
to include multifamily housing, and incorporate new accelerator programs for
building data, performance contracting, and energy performance certification.
Govenment agencies have also increased their energy savings performance
contracts, which augments efficiency in federal buildings. Another catalyst is
the Energy Efficiency and Loan Conservation Program, which provides $250
million for energy efficiency retrofitting projects in rural communities.

A couple of federal government agencies stand out for their promotion of
energy efficiency. Both the Environmental Protection Agency (EPA) chief Gina
McCarthy and Secretary of Energy Ernest Moniz are energy efficiency
advocates.

The Department of Energy (DOE) is taking a leadership role by working on
energy efficiency with new publications detailing methods for estimating energy
efficiency savings and creating protocols for energy efficiency programs. Moniz
has pledged to address appliance and equipment standards as well as establish
rules pertaining to efficiency standards in electric motors. As reported by The
Hill, the new rules will save up to $23 billion in energy costs over 30 years,
as cited by DOE data.

According to Steven Nadel, Executive Director of ACEEE, electricity use and oil for
transportation were down nationwide in 2013 as compared to 2011 and 2012
levels. He attributed the decline to utility-run energy efficiency programs, as
well as equipment and vehicle standards.

States and cities

Energy efficiency is also moving forward on state and municipal levels.
According to Nadel, highlights include utility programs in states like
Mississippi and Louisiana, and legislation that was passed in Connecticut and
Maine.

ACEEE’s 2013 State Energy Efficiency Scorecard
shows that the top 10 states for energy efficiency are Massachusetts,
California, New York, Oregon, Connecticut, Rhode Island, Vermont, Washington,
Maryland, and Illinois. With Mississippi, Maine, Kansas, Ohio, and West Virginia
showing the most improvement.

As explained in the ACEEE Scorecard report, states are continuing to use
energy efficiency as a key strategy to generate cost-savings, promote
technological innovation, and stimulate growth. A total of twenty six states
have adopted and adequately funded an energy efficiency resource standard
(EERS), which sets long term energy savings targets and drives investments in
utility sector energy efficiency programs.

Ranked number two by the ACEEE Scorecard, California is one of the best
examples of state level energy efficiency efforts. However, action at the
municipal level is proving to be another important factor driving energy
efficiency. This is particularly true of Minneapolis, Chicago, Boston, Atlantic
City, and Dallas.

Business

Driven by cost concerns, the business community has been leading energy
efficiency efforts. A growing number of corporations are getting onboard the
efficiency train and putting pressure up and down their supply chains to produce
economy wide impacts.

According to an article in Greentech Media (GTM), in 2013, energy
efficiency became “cooler, sexier and cheaper than ever before — driven largely
by innovations in intelligent efficiency such as energy management software,
virtual audits and better data crunching abilities.”

GTM solicited the perspectives of efficiency executives in response to the
question “What was the most important technology or market development for
efficiency in 2013?” These executives indicated that a growing number of large
corporations are getting serious about energy efficiency, they also talked about
the importance of data, reporting and technology. Here is a summary of their
responses:

Clay Nesler, VP of global energy and sustainability Johnson Controls, shared
the results of their 2013 global survey of 3,000
facility and energy management executives. Their study showed that 73 percent of
organizations surveyed had made internal or public goals to reduce energy
consumption, of those, 50 percent implemented more efficiency measures in
2013.

Stephen Cowell, CEO, Conservation Services Group, said that smart devices
provided multiple benefits by combining technologies to control equipment,
engage customer behavior and link both demand response and efficiency.

Paul Baier, vice president of sustainability at Groom Energy indicated that
the widespread acceptance of energy efficiency among senior management was
driven by three trends: 1) Execution to achieve publicly stated greenhouse gas
reduction goals. 2) Pressure from top customers like Wal-Mart. 3) Increased
funding from utilities for behavior change (through demand response) and
retrofits (through incentives).

Chuck McKinney, VP of marketing at Aircuity suggested that the availability
of building energy consumption information helped to drive the efficiency market
in 2013. Swapnil Shah, CEO at FirstFuel, said that in 2013, utilities
demonstrated some innovative thinking in energy efficiency. He further indicated
that energy efficiency oriented pilot programs were a defining feature of
2013.

Buildings and energy efficiency

Buildings account for 40 percent of all U.S. energy requirements, and a
report by the Rhodium Group and United Technologies, entitled “Unlocking American Efficiency:
The Economic and Commercial Power of Investing in Energy Efficient
Buildings,” indicates that this translates to costs of almost half a
trillion dollars per year. ($432 billion in 2011).

Building efficiency not only saves costs and benefits investors, it actually
boosts the economy. Improving energy efficiency in buildings by 30 percent can
create a $275 billion market for advanced technology, engineering and design
services, and construction activity.

As reviewed in the 2013 State Energy Scorecard, a total of seven
states adopted building energy codes in 2013, which require large commercial
buildings to benchmark and report on their energy use.

Building efficiency is good business that offers outstanding ROI. It not only
increases the productivity of existing assets, it also protects against volatile
energy costs. According to the Rhodium Group report, the return on investment is
exceptional. As explained by John Mandyck, Chief Sustainability Officer for
United Technologies Climate, Controls & Security in an Energy Manager Today
article,

“[I]nvesting…30% improvement in building energy efficiency would have an
internal rate of return (IRR) of 28.6% over a 10-year period. An IRR of 28.6% is
four times better than average corporate bond yields or average equity
performance, and more than double the returns even high-performing venture
capital firms.”

As reviewed in the Rhodium Group report, with a five percent penetration
rate, U.S. government and utility sponsored programs are just starting to impact
on the efficiency finance opportunity.

The financing barrier

Despite the fact that energy efficiency is a valuable investment for almost
all companies, a lack of capital and difficulties associted with financing
continue to represent challenging obstacles. In addition to addressing the issue
of up-front costs, financing can make energy efficiency cash flow positive by
spreading out payments over time so that the cost is actually less than the
savings cash flow. For qualifying companies there are also a number of utility
rebates, tax refunds, credits, and other sources of free money that will improve
a project’s financial return.

However, as pointed out by Clay Nesler of Johnson Controls, funding is a
perennial barrier to investment in energy efficiency. The specific barriers
cited by Nesler include lack of internal capital, competition from other
investments and lack of competitive third-party financing options.

Swapnil Shah, of FirstFuel, concurs, reiterating the point that fostering
private investment is the most serious hurdle for commercial building
efficiency. He sees the absence of standard assessment metrics in energy
efficiency as the major problem.

Despite these financing problems, the increasing focus on energy
efficiency/productivity in 2013 represents important progress in the evolution
of the green economy.

Source: Global Warming is Real