Energy Efficiency: Achieving the Potential

By Steven Chu, U.S. Secretary of Energy For the next few decades, energy efficiency is one of the lowest cost options for reducing US carbon emissions. Many studies have concluded that energy efficiency can save both energy and money. For example, a recent McKinsey report calculated the potential savings assuming a 7% discount rate, no price on carbon and using only “net present value positive” investments. It found the potential to reduce consumer demand by about 23% by 2020 and reduce GHG emissions by 1.1 gigatons each year–at a net savings of US$ 680 billion. Likewise, the National Academies found in 2009 that accelerated deployment of cost-effective technologies in buildings could reduce energy use by 25-30% in 2030. The report stated: “Many building efficiency technologies represent attractive investment opportunities with a payback period of two to three years.” Some economists, however, don’t believe these analyses; they say there aren’t 20-dollar bills lying around waiting to be picked up. If the savings were real, they argue, why didn’t the free market vacuum them up? The skeptics are asking a fair question: why do potential energy efficiency savings often go unrealized? I asked our team at the Department of Energy to review […]

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