Stand with Energy Efficient Product Innovators

The opportunity for Americans to benefit from energy efficiency gains remains enormous. “Since 1990, energy efficiency has become the third-largest electricity resource in the United States; without it, we would need the equivalent of 313 additional large power plants to meet the country’s energy needs. If savings from appliance standards, utility programs, and building codes reached their full potential, efficiency would become our nation’s largest electricity resource by 2030,” according to the American Council for an Energy-Efficient Economy. Taking a complementary approach, the Electric Power Research Institute estimates that we could profitably reduce overall energy consumption by more than 10% overall and peak demand by more than 20% overall with technologies we have on hand today.

Consider the specific example of LEDs. Over 70% of American homes still don’t have a single LED light bulb and fewer than one in a hundred homes have switched fully to LEDs, according to the Energy Information Administration. At the same time, the US Department of Energy estimates that we could save 261 TWh of energy each year by getting today’s LED technology out in the market and an additional 134 TWh of energy each year with further investment in R&D. To put that in perspective, by 2030, LEDs could be saving 20 times more energy than all solar systems in America generate in the same year.

The highest leverage point to capture incremental efficiency gains is equally clear: manufacture and sell more energy efficient products. This truth underpins the incredible efficiency gains we have accomplished over the past several decades by implementing efficiency standards on products from cars to refrigerators. A car sold today can travel two and a half times as far on a tank of gas as the average one in the 1970s, and a refrigerator sold today consumes only one quarter as much energy as a comparable one in the 1970s.

The numbers are striking, but those results are not free. Across the industry, tens of billions of dollars have already been spent on research and development and new manufacturing facilities to bring LED and OLED technologies to market. Thereafter, retailers and distributors are spending hundreds of millions more to educate consumers about these new products. Similarly, in the automotive space, manufacturers anticipate spending well north of a billion dollars a year to introduce their electric vehicles to consumers.

These costs evidence that efficiency standards in isolation are not enough, because they impose a huge cost burden on manufacturers and retailers for compliance without properly compensating them for the corollary benefits. Efficient product standards alone neglect both the real and material benefits utilities and the public receive from reduced emissions and reduced investment in energy generation, transmission, and distribution and the tremendous cost burdens placed on manufacturers and retailers to bring ever more efficient products to market. In short, in a world of efficiency standards alone, manufacturers get stuck with the costs of compliance without commensurate compensation for the benefits they produce.

We have and should continue to complement efficiency standards with compensation to manufacturers and retailers for the energy and environmental benefits that they produce and bring to market. By pairing efficient product standards with compensation for efficient product innovators, we can build a balanced system of sticks and carrots that underpins continued efficiency innovation over the long-term.

For years, we have accomplished this goal by accompanying efficiency standards with “utility programs” that encourage the adoption of efficient products. However, a rising chorus of energy market firms have begun to declare that increasing product efficiency, falling efficient product prices, and falling energy demand render efficiency programs obsolete. In the last few years, states from Arizona to Florida have suggested eliminating efficiency programs in whole or in part. Indeed, the Tennessee Valley Authority has gone so far as to suggest that they intend to roll out rates that actively disincentivize efficiency with “a model in which the more energy you use, the more the price goes down; and the less you use, the higher the price you’d pay.” Put differently, the more energy efficient you become, the more you will be charged for your electricity, effectively negating your ability to benefit from efficiency investments.

In contrast, Energy Star’s recently announced Retail Products Platform is a step in the right direction, enabling utilities like PG&E, conEdison, and other energy efficiency program sponsors to directly and cost-effectively support the investments that manufacturers and retailers are making to bring efficient products to market. The energy savings and emissions reductions that these firms produce are valuable in ways that extend beyond the consumer’s energy bill: from avoided grid upgrades to reduced generation capacity requirements to avoided emissions.

Energy efficiency should be the energy source upon which we can all agree. Fossil fuels emit pollution. Renewables can be expensive and intermittent. Nuclear produces radioactive waste. But energy efficiency emits no pollution, can save everyone money, and can produce employment opportunities for Americans to upgrade our infrastructure. It is the easiest win in the entire energy equation, and there should be no question whether we embrace it wholeheartedly. Reward businesses that manufacture and distribute energy efficient products and empower them to continue investing in the research and development, retooling, and marketing necessary to continue bringing efficient product innovations to market.