Energy Efficiency - "The First Fuel"

"The findings of the IPCC [Intergovernmental Panel on Climate Change], the consensus estimate of the world’s scientists, couldn’t be any clearer: human activities are altering our atmosphere, and the planet is warming. Unless we act now, with great urgency, costly and disruptive impacts all over the world are inevitable. We have no choice but to act. We need to change the way we produce, use, and conserve energy. It is just this simple: We must use less energy and release less carbon dioxide by being smarter about how we use energy, and that means energy efficiency. . . . Energy efficiency should be viewed as our 'first fuel.' Maximizing energy efficiency and conservation should be the 'fuel' of first choice."

Simply speaking, energy efficiency means doing more (and often better) with less. It refers to using less energy to provide the same or improved level of service to the energy consumer in an economically efficient way. Examples of energy efficient products include appliances bearing the ENERGY STAR label, such as furnaces, air conditioners, refrigerators and dish washers. ENERGY STAR appliances are designed to use less energy than their counterparts, saving money and reducing the amount of CO2 being produced with their usage. Energy efficient systems include things such as schools, office buildings and factories, designed to use less energy to reduce economic costs and environmental impacts.

  • "Making homes, vehicles, and businesses more energy efficient is seen as a largely untapped solution to addressing global warming and energy security. Many of these ideas have been discussed for years, since the 1973 oil crisis brought energy issues to the forefront. In the late 1970s, physicist Amory Lovins popularized the notion of a 'soft path' on energy, with a strong focus on energy efficiency. Among other things, Lovins popularized the notion of negawatts – the idea of meeting energy needs by increasing efficiency instead of increasing energy production."
  • "Lovins' Rocky Mountain Institute points out that in industrial settings, 'there are abundant opportunities to save 70% to 90% of the energy and cost for lighting, fan, and pump systems; 50% for electric motors; and 60% in areas such as heating, cooling, office equipment and appliances.' In general, up to 75% of the electricity used in the U.S. today could be saved with efficiency measures that cost less than the electricity itself."
  • "Energy efficiency has proved to be a cost-effective strategy for building economies without necessarily growing energy consumption . . . . For example, the state of California began implementing energy-efficiency measures in the mid-1970s, including building code and appliance standards with strict efficiency requirements. As a result, the state's energy consumption has remained flat over 30 years while the national U.S. consumption doubled. As part of its strategy, California implemented a three-step plan for new energy resources that puts energy efficiency first, renewable electricity supplies second, and new fossil-fired power plants last."
  • "More and more states are turning to energy efficiency as the 'first fuel' in the race for clean and secure energy resources. . . . States now spend about three times as much on energy efficiency programs as the federal government, and are leading the way on appliance standards, building codes, energy efficiency resource standards, and other key policies that drive energy efficiency investment."

Regrettably, Indiana lags far behind other states in terms of its energy efficiency investments. A June, 2007 report published by the American Council for an Energy-Efficient Economy ranked state energy efficiency policies based on their progress in a number of categories, such as spending on utility and public benefits energy efficiency programs, building codes, appliance and equipment efficiency standards and tax incentives, to name a few.

The report ranked Indiana 41st among the 50 states and the District of Columbia, receiving only 5 out of 44 total points, seriously lagging behind other states in having strong energy efficiency policies and programs. The report concluded: "As fossil fuel prices continue to rise and show increased volatility, as the difficulties and costs of building major new supply projects mount, and as environmental 'trump cards' such as global warming begin to place a heavier burden on the burning of fossil fuels, we expect more states up and down our ranking scale to turn to energy efficiency as a hedge as well as a good investment in its own right."

An investigation before the Indiana Utility Regulatory Commission (IURC) confirms Indiana’s below average ranking in spending for energy efficiency and in savings attained. An April, 2007 report commissioned by the IURC as part of the investigation characterizes Indiana as a state with low energy prices but high consumption compared to other states, resulting in moderate per-capita spending for electricity and high spending on energy overall compared to the rest of the country.

Concerning the energy efficiency opportunities for Indiana based on various statewide program models examined, the report concludes: "Fundamentally, it is more important for Indiana to initiate an effective statewide effort with explicit goals and objectives than to debate over how the effort is structured. States have had proven success under all versions of the models reviewed in this paper."

Recognizing that energy efficiency remains a critically underutilized resource in our national energy portfolio, more than 50 electric and gas utilities, state utility commissioners, state air and energy agencies, energy service providers, energy consumers, and energy efficiency and consumer advocates formed a Leadership Group, together with the U.S. Department of Energy and the U.S. Environmental Protection Agency, to address the issue.

The group's stated goal is "to create a sustainable, aggressive national commitment to energy efficiency through gas and electric utilities, utility regulators, and partner organizations." The Leadership Group released its recommendations on July 31, 2006 in the form of a National Action Plan for Energy Efficiency, and continues to report on its progress and identify next steps for the action plan. Its five key recommendations are as follows:

  • Recognize energy efficiency as a high priority energy resource;
  • Make a strong, long-term commitment to cost-effective energy efficiency as a resource;
  • Broadly communicate the benefits of and opportunities for energy efficiency;
  • Promote sufficient, timely, and stable program funding to deliver energy efficiency where cost-effective;
  • Modify policies to align utility incentives with the delivery of cost-effective energy efficiency and modify ratemaking practices to promote energy efficiency investments.

With serious debate in Congress leading to federal caps on CO2 emissions within the next several years, states that are the highest producers of CO2 air emissions, such as Indiana, are well advised to develop comprehensive energy efficiency policies and programs to "hedge" against the significant cost increases ratepayers will face as the costs associated with CO2 emissions are passed on to them by investor-owned electric utilities. The good news is that investments in energy efficiency have the potential to significantly reduce carbon dioxide and other greenhouse gas emissions responsible for global warming.

  • "The U.S. Department of Energy estimates that increasing energy efficiency throughout the economy could cut national energy use by 10% or more in 2010 and about 20% in 2020, with net economic benefits for consumers and businesses."
  • The American Council for an Energy-Efficient Economy (ACEEE) predicts energy savings of even greater magnitude. "ACEEE estimates that adopting a comprehensive set of policies for advancing energy efficiency could lower national energy use by 18% in 2010 and 33% in 2020. These policies, along with policies to advance renewable energy, could dramatically lower U.S. carbon dioxide emissions while saving consumers and business $500 billion net during 2000-2020."

Investments in energy efficiency programs and services are also cost-effective, and provide economic development opportunities throughout the region.

  • "At a cost of $0.03 per kilowatt-hour saves (a realistic assumption based on research of recent program practices), efficiency improvements are significantly less expensive than building new plants and power lines and burning more fuel. Increasing energy efficiency also reduces the harm to public health and the environment from air and water pollution, mining, and other aspects of power production. In addition, efficiency improvements enhance the reliability of electricity supplies by reducing system loads and stresses."
  • Duke Energy Indiana’s own President and CEO agrees: "Efficiency programs can deliver at a lower cost than new power plants, we can deploy them faster than new power plants and they can provide savings over relatively short periods of one to three years, as well as over the longer term. From an environmental perspective, we should view energy efficiency as a basic building block in reducing the industry's emissions profile. In 2004 alone, efficiency programs in place saved more than 29 million metric tons of carbon equivalent greenhouse gas emissions."
  • "From a state's perspective, energy efficiency can be a key to economic development activities. Greater efficiency investments can build jobs and improve state economics. These programs can also create long lasting infrastructure changes to buildings, and property improvements delivering long-term economic value."

Energy efficiency has been characterized as one of the "twin pillars of sustainable energy." The other, discussed in the next chapter, is renewable energy (i.e., wind, solar and biomass). Together, development of these resources can lead the way to a lasting and cost-effective "low carbon policy" future for Indiana and the nation.

"Energy efficiency (EE) and renewable energy (RE) are the 'twin pillars' of sustainable energy policy. Both resources must be developed aggressively if we are to stabilize and reduce carbon dioxide emissions in our lifetimes. Efficiency is essential to slowing the energy demand growth so that rising clean energy supplies can make deep cuts in fossil fuel use. If energy use grows too fast, renewable energy development will chase a receding target. Likewise, unless clean energy supplies come online rapidly, slowing demand growth will only begin to reduce total emissions; reducing the carbon content of energy sources is also needed. Any serious vision of a sustainable energy economy thus requires major commitment to both efficiency and renewables."


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