Energy efficiency has been a lightning rod in the debate about the cost of addressing climate change, because it is generally seen as a least-cost approach to mitigating greenhouse gas emissions. But the mere mention of possible “negative costs” associated with energy efficiency is enough to send shock waves across the profession of neoclassical economics. Experts continue to disagree about the magnitude, cost and possibility of managing demand.
Some say that the future potential for energy efficiency is limited because markets have already exploited all cost-effective opportunities, and there are insurmountable obstacles to further expansion. Demand-side resources may have played a role in the past, but they are now “tapped out.” Policies to promote more energy efficiency have failed, and any future efforts run the risk of expanding – not shrinking – energy consumption because demand “rebounds” with more energy-efficient products. In any event, savings from policies are too difficult to measure and monetize; as a result, energy efficiency is unreliable, unpredictable and unenforceable.
Others argue that market failures abound, producing a large reservoir of energy efficiency opportunities waiting to be exploited. Policies have, and can in the future successfully address these obstacles, producing a vast improvement in the efficiency of energy use. The rebound of demand in response to energy efficiency may occur, but it is small and does not negate the value of efficiency investments. Measurement and verification practices are mature and have documented that energy efficiency is reliable, predictable and enforceable, and it minimizes the risks of supply-side investments.
When energy efficiency skeptics prevail, expanding supply becomes the only way to meet increasing energy demand. Capital is diverted to large-scale projects, and unsustainable energy practices are amplified. When energy efficiency advocates prevail, new jobs in labor-intensive industries are created, but jobs at energy suppliers may erode.
Do the benefits of energy efficiency programs outweigh the costs?
Ms. Brown The comment “Some say that the future potential for energy efficiency is limited because markets have already exploited all cost-effective opportunities,” I think are talking about… Read more »
The buzzwords “Best Available Technology” are sought in many aspects of environmental regulation. Their purpose is to delay, make uncertain or difficult, or even to kill a technology for which… Read more »
“Energy Efficiency” is a short cut for the Second Law of Thermodynamics: Entropy. It is ignored in economic analyses and in the role of government. If government approves of “Smart”… Read more »
“Do the benefits of energy efficiency programs outweigh the costs? ” –Yes. Though, to elaborate, the correct answer is “often” or “usually.” In U.S. utility ratepayer programs, energy efficiency programs… Read more »
I like either name … ‘First Fuel’, or ‘Fifth Fuel’ … as the CEO of Duke Power has called efficiency. The fact is that efficiency can create a 30% drop… Read more »
One has to be a little careful with semantics, energy efficiency means using less energy to product the same good or service, but energy efficiency is not necessarily economic efficiency. … Read more »
Dr. Brown, Energy efficiency is certainly not tapped out. With power plants running at approximately 33% efficiency and internal combustion engines running at approximately 40% efficiency, great gains can… Read more »
Matthew, Are you are ignoring what I believe to be the greatest energy efficiency improvement of all? The power generation industry has, through technology advancement, achieved thermal efficiencies of more than… Read more »
Forgive me, Mr. Shortt, I was including energy loss in transmission in my thoughts on energy efficiency from power generation.
Unlike what conventional wisdom would suggest, the world economic growth is gradually decoupling from energy demand. As the latest BP Energy Outlook 2035, pointed out, global energy consumption has been… Read more »
Dr Brown, There is some confusion between the title’ s reference to “managing energy demand” and the wrap-up question “do the benefits of energy efficiency programs outweigh the costs?” Improvements… Read more »
Meta Response to Comments: We Can and We Should The vibrant discussion we are having on OurEnergyPolicy.org‘s forum clearly indicates that the potential of energy efficiency and demand response has… Read more »