Is Energy Efficiency The First Fuel?

With global energy demand expected to grow by over 27% by 2040, energy efficiency has never been more important (source). Improving energy efficiency can help curb energy consumption and emissions while still supporting economic growth and improved quality of life. Some have called energy efficiency the “first fuel” because it maximizes energy productivity from existing power systems before bringing new supply online. Energy efficiency improvements use less energy to provide the same service, like lighting a room or heating a home. This can reduce costs for consumers and businesses while also lowering greenhouse gas emissions associated with energy production. According to the International Energy Agency (IEA), energy efficiency improvements could deliver over 40% of the emissions reductions needed to reach global climate goals. With numerous benefits and cost-effective potential still untapped, accelerating global progress on energy efficiency is essential.

What is Energy Efficiency?

Energy efficiency refers to using less energy to provide the same service (NRDC, 2022). This can be achieved through more efficient end-use technologies and practices that reduce energy waste. Energy efficiency plays a key role in energy management by reducing energy consumption and costs while maintaining or enhancing existing services (Repsol, 2022).

Some examples of energy efficiency measures include installing LED lighting, adding insulation, sealing air leaks in buildings, using energy efficient appliances, and upgrading to high-efficiency heating and cooling equipment. Implementing these improvements helps consumers and businesses save energy and money.

Energy efficiency is considered the “first fuel” because it makes energy systems work more productively. By reducing energy waste, efficiency frees up energy capacity and lessens the need to build additional power plants and infrastructure. It is often the most cost-effective way to meet rising energy demand while lowering greenhouse gas emissions.

Benefits of Energy Efficiency

Energy efficiency provides numerous benefits on the individual, business, and societal levels by reducing energy consumption and costs. According to the EPA, improving energy efficiency can lower utility bills and stabilize electricity prices and volatility[1]. The DOE reports that energy efficiency saves money and provides environmental, community, and health benefits[2].

At the organizational level, energy efficiency enhances competitiveness and profitability by lowering operating costs. The IEA found that energy efficiency investments in industry yield average returns of over 50% as savings from reduced energy expenditures outweigh upfront investment costs[3]. Businesses can gain a competitive edge by redirecting cost savings into other productivity-enhancing investments.

Regarding carbon emissions, energy efficiency is considered the “first fuel” because it reduces energy demand, thereby lowering carbon emissions from power generation. With buildings responsible for 36% of global final energy consumption and nearly 40% of total direct and indirect CO2 emissions, efficiency improvements in heating, cooling, lighting, appliances, and building envelopes are critical for climate change mitigation[3]. The EPA reports that energy efficiency policies in the U.S. avoided emissions of nearly 300 million metric tons of CO2 in 2020 alone[1].

Barriers to Energy Efficiency

There are several key barriers that prevent the adoption of energy efficiency measures and technologies (Bagaini, 2020). The main barriers include:

Upfront Costs

One of the biggest barriers to energy efficiency is the high upfront cost of implementing energy efficient technologies and retrofits, compared to the longer term payback from energy savings. The initial capital investment can deter many consumers and businesses from adopting energy efficient solutions, even if they offer a positive return on investment over time (Bagaini, 2020).

Lack of Information

There is often a lack of information and awareness about the available energy efficient technologies and their benefits. Consumers may not have access to the necessary information to make informed choices. There can also be uncertainty about the real costs and energy savings from implementing energy efficiency measures (IDB, 2016).

Split Incentives

In rental properties and commercial buildings, there is often a disconnect between who pays for upgrades (landlords) and who benefits from energy savings (tenants). This results in little incentive for property owners to invest in energy efficiency, while tenants have limited ability to implement retrofits. This split incentive is a major barrier in sectors like rental housing and commercial real estate.

Energy Efficiency Trends

Energy efficiency adoption and progress continues to increase globally. Some of the major trends include:

Adoption of LED lighting continues to grow rapidly. As per the IEA, between 2015-2020, global LED sales doubled to over 20 billion units, reducing lighting energy demand by up to 10% (IEA Energy Efficiency 2022). LEDs now account for over 50% of global lighting sales.

Industrial energy efficiency keeps improving through technology upgrades. The IEA reports that globally, industrial energy intensity dropped by nearly 1.5% in 2019. This is being driven by more energy efficient industrial processes, heat recovery systems, and adoption of digital solutions (IEA Energy Efficiency 2022).

Energy Service Companies (ESCOs) are seeing rapid growth, especially in developing economies. ESCO industry revenues grew by 8% to over $32 billion in 2018 globally, with China, India and Brazil leading growth. ESCOs help drive progress in industrial, buildings and transport efficiency (BCSE Energy Efficiency Trends).

Energy Efficiency Policies

Governments use several types of policies to promote energy efficiency across sectors. These include regulations, financial incentives, and information programs. According to the Energy Information Administration, energy efficiency policies aim to overcome market barriers that prevent the wider adoption of energy-efficient technologies and practices (1).

Some key categories of energy efficiency policies include:

Government regulations and standards – These mandatory policies set minimum energy performance levels for appliances, equipment, and buildings. Examples include fuel economy standards for vehicles, energy efficiency codes for new buildings, and performance standards for appliances and industrial equipment (2). These help phase out the least efficient products and practices.

Financial incentives – Governments provide rebates, tax credits, and other incentives to encourage the adoption of energy-efficient technologies and practices. These help offset higher upfront costs of energy efficient options. Some common financial incentives include rebates for ENERGY STAR appliances, tax credits for home energy efficiency improvements, and discounted financing for commercial energy efficiency projects (3).

Information and education programs – These programs raise awareness of energy efficiency opportunities and benefits. Examples include energy audit programs, energy efficiency training and technical assistance, energy performance labelling, and consumer education campaigns. By providing information, these programs help consumers make informed choices (4).

A combination of regulations, incentives, and information is often the most effective policy approach for driving energy efficiency improvements across the economy (5).

Sources:

1. https://www.eia.gov/energyexplained/energy-efficiency/policy-goal-to-improve-energy-efficiency.php

2. https://www.energy.gov/scep/slsc/energy-efficiency-policies-and-programs

3. https://www.usaid.gov/energy/efficiency/developing-programs

4. https://www.iea.org/reports/the-value-of-urgent-action-on-energy-efficiency/policy-toolkit

5. https://www.iea.org/reports/the-value-of-urgent-action-on-energy-efficiency/policy-toolkit

Case Studies

When executed properly, energy efficiency projects can result in significant cost savings and short payback periods for organizations. Here are some examples from the EPA:

The U.S. Navy implemented a $20 million energy savings performance contract across 70 buildings at a Maryland naval base, installing efficient lighting, HVAC, and control systems. The upgrades saved the Navy $1.43 million annually and paid for themselves in just 14 years.

A 250,000 square foot office building in New York completed an energy retrofit including lighting and HVAC upgrades at a cost of $1.3 million. The project achieved 28% energy savings and a payback period of 4.5 years.

At manufacturing facilities, the Department of Energy has helped companies integrate energy management systems and conduct process optimization. One aluminum manufacturer achieved 11.5% energy savings totaling $400,000 per year. The project paid for itself in just over 3 years.

These case studies demonstrate the potential for major cost savings through properly implemented energy efficiency measures. Organizations across sectors can modernize equipment and optimize processes to reduce energy usage and quickly recoup project costs.

Emerging Technologies

Some of the most promising emerging technologies for energy efficiency include smart meters, smart thermostats, and systems that leverage AI and data analytics.

Smart meters provide real-time data on energy usage in homes and businesses. This allows users to better understand their consumption patterns and make adjustments to save energy and money (Department of Energy, n.d.). Smart thermostats like Nest go a step further by using occupancy sensing and learning algorithms to automatically optimize heating and cooling (ACEEE, n.d.).

The large amount of data from smart meters, sensors, and connected devices is also enabling new artificial intelligence and data analytics applications. Machine learning models can detect anomalies, forecast energy needs, and optimize efficiency controls across an entire building or grid (USAID, n.d.). These intelligent efficiency systems have significant potential for energy and cost savings.

Call to Action

Improving energy efficiency often starts at home. Here are some steps readers can take to increase efficiency and lower energy costs:

Conduct an energy audit to find areas for improvement. Many utility companies offer free audits. Look for air leaks around windows and doors and add weatherstripping or caulk to seal them (Source).

Upgrade old appliances like refrigerators, washers, and water heaters to ENERGY STAR certified models (Source).

Install a programmable thermostat to better control heating and cooling. Set it to adjust temps when no one is home (Source).

Switch to LED light bulbs which use at least 75% less energy than incandescents (Source).

Additional resources to learn more:

• U.S. Department of Energy – Energy Efficiency Information
• ENERGY STAR – Energy Efficient Product Information

Conclusion

In conclusion, energy efficiency plays an important role in reducing carbon emissions, saving money, and creating more sustainable and climate-friendly communities. As mentioned in this article, making buildings and transportation more energy-efficient can greatly reduce emissions and energy costs. While upfront investments are often needed, research from the EPA shows the long-term economic benefits and savings from energy efficiency measures often outweigh these costs. Citizens, companies and governments must continue improving access to information, funding and resources to enable wider adoption of energy-efficient technologies and practices. With the right policies and investments in place, we can unleash the full potential of energy efficiency as our cleanest, fastest and most cost-effective fuel for the future.

My hope is that this article has inspired readers to learn more and take action around energy efficiency, whether in your home, workplace or community. Small changes can make a big difference, but we must also advocate for broader changes like energy-efficient building codes, transportation improvements, and government incentives that maximize energy savings. The transition to more energy-efficient and climate-friendly systems is critically important for the future of our planet. Let us embrace energy efficiency as a powerful solution.