Wednesday, January 26, 2011

Energy Efficiency: The Low-Hanging Fruit That is Sometimes Hard To Pick

U.S. Department of Energy chief Steven Chu and others are fond of calling conservation and efficiency the "low-hanging" fruit of the clean-energy movement. But, as this international report points out, fruit that is ripe for the picking often remains on the tree.

And that's a problem. Energy demand worldwide is expected to increase 40% by 2050, and the projected cost of meeting that increase is $26 trillion. But the incentives for business and consumers to invest in the necessary efficiency measures aren't always in place.

People and businesses invest in assets they can see, feel and touch. As a result, energy-efficiency measures get lost in a myriad of more tangible priorities. "Today, the polices and market structures in place are currently not robust enough to support energy-efficiency scale-up," the 40-page report concludes.

Some of the barriers have been mentioned before: Investing in new products and buildings is often easier than retrofitting existing ones; the entity paying for the upgrades is sometimes not the same one benefiting from the investment; and combining a bunch of little projects is challenging.

Add to those such things as regulatory issues, a lack of international standards and the complexity of consumer behavior and you have a brake on the ability to make the needed changes.

Thus, some recommendations are put forth in the study: create innovative financing mechanisms, increase access to capital, ease regulations and focus attention on the benefits of efficiency are just some of them.

However, it should not be assumed that all energy-efficiency programs are not working. In fact, the European Union lowered consumption 40% between 1990 and 2006, and Japan has slashed use 37% since the 1970s.

The report also shines a spotlight on successful efficiency programs. Japan has the lowest energy consumption per GDP, a decrease sparked by the effects of two oil shocks. Japan, which was importing large amounts of energy, was persuaded to pursue efficiency measures.

The star in Japan's energy policy is its Top Runner Program, which selects certain suppliers and manufacturers as "Top Runners" and then challenges others to exceed those standards. Japan also is testing four "smart cities" that integrate efficiency and renewable energy throughout the entire power chain - from generation to appliances.

And then there is London's RE:FIT program. It uses preselected energy service companies to retrofit government buildings. The public sector finances the improvements and the servicers take on construction and performance risk and guarantee expected savings.

The pilot program retrofitted 42 public buildings and cut power consumption an average of 28%. At that rate, the return on investment is seven years. The program has been spread nationwide, with a $100 million Green Fund spurring investment.

Across the pond, the Lawrence Berkeley National Laboratory's Environmental Energy Technologies Division in California studied new standards for appliances and calculated consumers would save $240 billion by 2030.

The evidence is clear: energy efficiency pays in the long run. How we get there is the issue.

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