Why Energy Efficiency is About to Come Roaring Back

We write a lot of stories these days about the remarkable growth of solar and wind power and how they are truly transforming the energy landscape. Another important component of this sea change is energy efficiency (EE), though we haven’t been writing as much about that, perhaps because it’s not as sexy and exciting as shiny new solar panels or towering wind turbines. But there is another reason: Investment in energy efficiency projects has been in a long-term decline, going back to a peak of about $2 billion annually in 1992, which has drifted down to about $1.2 billion in recent years.

Last year, utilities in Indiana were ordered to refund $32 million to ratepayers. Those funds represented the balance of $74 million that was collected for energy efficiency projects, many of which were never implemented.

In Nevada, EE savings declined 61 percent last year, compared to those realized four years earlier. Reports blamed a lack of state policies and incentives for the decline. This seems apparent when comparing Nevada with neighboring Arizona where utility customers saved three times as much due to efficiency measures, despite the similar climate.

State incentives constitute one factor in the decline; financing is another. A program called PACE had been quite popular until 2010, when it ran into trouble. PACE, which stands for Property-Assessed Clean Energy Financing, essentially allowed homeowners to borrow money from the city for clean energy and energy efficient upgrades, and then repay the loans through annual property tax assessments. Complex financing rules made it impossible for the loans to be sold to Fannie Mae and Freddie Mac for consolidation, which really put a damper on things.

Chris Hummel, chief marketing officer of Schneider Electric, thinks that all of that is about to change. After ticking off some $7 billion in new financing going into efficiency from state banks in Europe and the U.S., he told the Guardian the reasons why energy efficiency is about to come roaring back.

The first reason is awareness, particularly in the business community. Both price increases and price uncertainty are now weighing on the minds of executives in industries ranging from data centers to food. The International Energy Agency estimates that $8 trillion of the $48 trillion we’ll need to get us where we need to be by 2035 will go into efficiency.

Technology has brought much of the low-hanging fruit even lower. Things like LED light bulbs that pay for themselves in less than two years, to solar panels that have dropped in price by a factor of a hundred or more. “Smart” devices are almost always more efficient than their not-so-smart predecessors, sometimes by a lot. Besides smart devices, there are increasing numbers of software applications to help people save energy in many facets of life.

New business models, including a newly reinvigorated PACE program, as well as utility based on-bill financing programs, share the implicit goal of making the costs invisible. Since the energy savings continue to increase relative to the cost, it’s much easier to use those savings to pay for improvements.

Finally, there is the distribution that has now become ubiquitous. You no longer need to go to a “green store” to get a more efficient version of anything you can think of. It’s everywhere. Today you can find the high efficiency version of just about any widget you can think of, sitting right next to the regular widget in any big box store; that is, if there even are any more regular widgets available. The same is true for contractors: building, heating, electrical — all of them are well-equipped to help you set you up with the latest, most efficient items and services, because they too can see the writing on the wall.

Image credit: Siemens nv/SA: Flickr Creative Commons

RP Siegel, PE, is an author, inventor and consultant. He has written for numerous publications ranging from Huffington Post to Mechanical Engineering. He and Roger Saillant co-wrote the successful eco-thriller Vapor Trails. RP, who is a regular contributor to Triple Pundit and Justmeans, sees it as his mission to help articulate and clarify the problems and challenges confronting our planet at this time, as well as the steadily emerging list of proposed solutions. His uniquely combined engineering and humanities background help to bring both global perspective and analytical detail to bear on the questions at hand.

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