Energy Efficiency: The Secret Revolution

RMI cofounder and chief scientist Amory Lovins. Image courtesy of Judy Hill Lovins.

Michael Liebreich, chairman of Bloomberg New Energy Finance’s advisory board, notes that the U.S. fracking revolution and the consequent 2004–13 rise in domestic oil output displaced oil imports equivalent to 10 percent of domestic consumption — while two little-noticed demand-side trends, less driving and more-efficient vehicles, saved 18 percent, nearly twice as much. Drilling’s impressive achievements were almost lapped by demand-side shifts. Yet those saved barrels were nearly invisible because we can’t see energy we don’t use or buy.

Similarly, showed that in 2012, lower U.S. electric intensity — using less electricity to produce a dollar of real GDP — displaced nearly twice as much domestically burned coal as expanded natural gas use did. In that year, weather-adjusted electric intensity fell by an unprecedented 3.4 percent, saving 145 TWh (billion kilowatt-hours). In other words, saved electricity was six times the same year’s 24-TWh rise in non-hydro renewable generation.

Moreover, natural gas additions didn’t deliver some key benefits claimed for them. Price-driven switching of electric generation from coal to gas accounted for only about a tenth of the 2006–11 drop in U.S. carbon emissions. Moreover, much displaced coal was dumped into foreign markets, offsetting 173 percent of domestic carbon savings with overseas emissions. Separately, gas power’s “collateral damage” — displacement of carbon-free generation — plus a conservative estimate of gas leakage meant that U.S. coal-to-gas switching has not yet reduced U.S. carbon emissions at all.

These examples reveal a yawning gap in our understanding and discussion of energy, due to gross inequality not in achievements but in microphones. With all due respect to the American Council for an Energy-Efficient Economy and the Alliance to Save Energy, energy savings lack an amplifier powerful enough to make their important signals audible over the supply-side hype, so efficiency continues to be underestimated or ignored. This omission makes governments and firms misallocate even more financial, physical, and political capital to costlier, slower, and less effective supply expansions. Reduced energy intensity could have fueled about three times as much recent global economic growth as increased supply, but the supply industries own more like 99 percent of the message.

Image courtesy of Shutterstock.

The International Energy Agency’s pioneering Energy Efficiency Market Report 2013 estimated that in 2011, the world invested up to $300 billion in energy efficiency, about as much as in fossil-fueled power generation. Yet this investment was probably understated, it had never before been estimated, its savings still aren’t well measured, and vastly more efficiency remains available and worth buying.

Increased efficiency matters: lower consumption due to 1974–2010 drops in energy intensity was the largest single energy resource across the 11 IEA member countries’ aggregate total final consumption — bigger than either oil or the combined contributions of gas, electricity, and coal. Had those 11 countries produced their 2010 GDP at their 1974 delivered energy intensities, they’d have used 65 percent more energy than they did. Reduced intensity has fueled half the world’s growth in energy services since 1970 — as much as all supply expansions. Who knew?

To be sure, not all the decreased intensity is due to more efficient lights, motors, appliances, building envelopes, vehicles, or industrial processes. Such technical improvements, says the same IEA report, caused about half of 1990–2010 intensity drops in the U.S., U.K., and the average IEA country. The rest came from changes in economic structure, such as producing more financial services and less steel, and a tiny bit came from behavior shifts. Thus the IEA ascribes nearly all of Spain’s 1990–2010 drop in energy intensity to changes in its economic structure, but four-fifths of Germany’s savings to greater technical efficiency. While American, German, and British energy intensity all fell by similar amounts during 1990–2012, technical efficiency improved much more in Germany.

Energy intensity sounds like a clear and simple metric, but actually it’s fuzzed by different countries’ sizes, economic structures, climates, behaviors, efficiencies, and definitions (such as whether one counts fuel used by international plane and ship travel). Even within a single country, intensity can fluctuate due to weather — the cold winter of 2013 raised it in the U.S. — and business cycles, because the least-efficient factories shut down first in a recession, exaggerating intensity drops, then return to service in a recovery, reducing them.

Such distortions can be avoided by comparing physical intensities, such as the energy or electricity used per square meter of floorspace per degree-day, or per unit of lighting service, or to produce a ton of cement or carry a ton-mile of truck freight. Unlike fuzzy GDP, such denominators are real, measurable, comparable, and meaningful.

But even though the primary or delivered energy used per unit of GDP is only a crude yardstick to be applied with caution, it’s still a handy way to illustrate how energy savings can surprise — as we’ve already seen — in both size and cause. After the second oil shock in 1979, the U.S. cut energy use 10 percent in four years while GDP rose 11 percent. That saving, equivalent to a supply expansion of 11.8 quadrillion BTU per year, was 44 percent greater than the 2009–13 rise in oil and gas output.

In 1975, government and industry insisted the primary energy needed to make a dollar of real GDP could never go down: trying to break this supposed link would send us, we were told, back to caves and candles. I heretically suggested in a 1976 Foreign Affairs article that U.S. energy intensity could fall by two-thirds over the next 50 years. As the graph shows (see previous page), we’ve already cut energy intensity by more than half in 38 years. We’re using less than half the energy (and emitting less than half the carbon) we would be if today’s economy had 1975 energy intensities. But that’s only a fraction of the savings now available and worthwhile.

RMI’s Reinventing Fire showed that another two-thirds saving, tripling energy productivity, could be led by business for profit. Moreover, combining that tripled efficiency with a shift from one-tenth to three-fourths renewable supply (including 80 percent renewables for a half-distributed and highly resilient electricity system) could cost $5 trillion less in net present value (2009 $) than business-as-usual, conservatively counting all hidden or external costs at zero. Those efficiency-tripling improvements can use new technologies, designs, and financing, marketing, and delivery channels to achieve twice the total energy savings, at about a third the cost, that my 1976 Foreign Affairs article foresaw. The low-hanging efficiency fruit keeps growing faster than it’s harvested.

Energy efficiency improves quality of life, delivering better services — comfort, mobility, visibility, information processing, cooking, smelting, whatever — with less energy, less money, and smarter technologies. Ever-better technology and design keep its scope growing and its cost falling, with no end in sight. So while the Carbon Tracker Initiative’s Unburnable Carbon report emphasizes the size and cost of the world’s fossil fuel reserves we can’t burn for climatic reasons, a separate “carbon bubble” is unrelated to climate: fuels uncompetitive with the ever bigger and cheaper reserve of unbought zero-carbon “negawatts” (saved watts). Fuel sales are probably at greater risk from efficiency’s competition than from regulators’ mandates.

How low can we go in the efficiency limbo? Nobody knows — but we’re far from any practical limit, and the frontiers keep expanding. Every gain in smart thermostats and superwindows, in LEDs and motors, in process equipment and computers, locks in more “negawatts” that further reduce our energy intensity.

Those energy savings bring a clean, prosperous, secure energy future steadily closer. They’re not costly but profitable. Getting started takes intent focus on energy intensity — the biggest, cheapest, fastest, safest, least noticed, least understood, and still most underbought way to deliver the reliable energy services we need.

Written by Amory B. Lovins, cofounder, chief scientist, and chairman emeritus of RMI. A version of this article previously appeared on Follow Amory on Twitter.

This article is from the Summer 2014 issue of Rocky Mountain Institute’s Solution Journal. To read more from back issues of Solutions Journal, please visit the RMI website.

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