Energy efficiency is a wonderful investment both for businesses and consumers often paying far better returns than the stock and bond markets. If so, then why don’t we take advantage of it? Increases in efficiency can reduce energy consumption for the same or increasing amount of output. All the while, pollution is reduced and money is saved increasing the health and well being of our communities. Is all of this good news falling on deaf ears?
To be certain, there can be a significant capital expense involved with increasing energy efficiency. But, this article by The Economist reports that studies have shown that the average feasible efficiency improvement project nets a return on investment of approximately 17%. That is much better than the average investment return over the long term, if we were considering what other options we might have for that pile of money lying around, or potentially devoted to some alternate business project.
As the Economist article points out, it is not as though no one has received the message. Energy productivity (the amount of output for a given unit of energy input) has been increasing in the United States, especially since the 1970s oil embargo, when the trend changed from one of 0.4% per year to approximately 2% per year. That is certainly progress, but it does not even come close to approaching the improvement that could be made in energy productivity.
Certainly, people and our mental decision making processes are likely to blame for much of our collective apathy towards energy efficiency. One of the stumbling blocks is the relatively small expense on the part of the end user for inefficiency. The chart below from the US Department of Energy displays average energy costs incurred for many appliances common in a western home. A 4-5% increase in efficiency on a single appliance makes a small difference to a single consumer, even though it may mean the difference counted in dozens of power plants across the whole society.
But the seemingly small effects on the finances of the end user do not change the balance of the overall equation, which says that well chosen efficiency improvements pay for themselves in a short period of time. Unfortunately, that fact does not seem to always get through our minds when looking at prices in a retail store. That makes energy efficiency a target for effective government policy to encourage the best decision whether through incentives or regulation.
The rebound effect (the potential for users to consume even more energy with their savings) is discussed in The Economist article as well as this earlier article on True Progress. This potential problem can be corrected via targeted regulation of the market to prevent the community from realizing the negative outcome from good intentions.
In the end, I think the good news is not even made available to people making the decisions in a way that is easy to understand and break though the paralysis caused by too many choices and spending resources on something that seems so intangible. More clearly descriptive labels on energy consuming products and information tools are needed to help people make the best decisions. Energy costs per year, over the life of the product, and per standardized unit of output should be provided to the purchaser whether an individual or business. That information and other data in an easy to read and understand format could help turn those deaf ears to hearing the music of increased efficiency.