Unless you live in a cave, you’ve probably heard about McKinsey & Company’s new report called Unlocking Energy Efficiency in the U.S. Economy. Starting in 2008, a research team from McKinsey began working with companies, experts, agencies, and NGOs to (1) understand the net present value (NPV) positive potential of energy efficiency gains, (2) identify barriers to realizing these gains, and (3) outline practical solutions to unlock the potential energy efficiency gains. This comprehensive report documents that effort.
Although energy efficiency isn’t as sexy as, say, a roof capped with solar panels and urban wind turbines, it’s sexy. Especially if you’re keeping yourself from spending extra money going forward. McKinsey’s research shows that the U.S. economy has the potential to reduce annual non-transportation energy consumption by ~23% by 2020, which would eliminate more than $1.2 trillion in waste.
But what’s it going to take for the U.S. to realize this potential?
Well, first of all, there will be an upfront investment of ~$520 billion. And the investor has to be comfortable with the fact that the benefit / gain will accrue over a term of years.
Second, there are significant structural, behavioral, and availability barriers that impede energy efficiency gains. A structural barrier is one that prevents an end user from having the choice to make an attractive efficiency investment (i.e., a tenant that pays utilities who didn’t pay for the HVAC system). A behavioral barrier is one where there is a lack of awareness or inertia or some behavior that precludes the pursuit of a better option (i.e., replacing a pump with the cheapest pump, rather than the more efficient one that will be cheaper over time). An availability barrier is one where there is a desire to pursue a measure or investment but the end-user can’t for some reason (i.e., the capital is unavailable or the efficient appliance is paired with luxury amenities not wanted by the end-user).
McKinsey’s research shows a number of strategies for combatting barriers to unlocking energy efficiency gains in the U.S. These strategies or solutions require, generally speaking, information and education, incentives and financing, codes and standards, and third-party involvement. But more specifically, a national strategy with the following five elements is needed to unlock the full potential of energy efficiency:
- Recognize energy efficiency as an important energy resource that can help meet future energy needs while the nation concurrently develops new no- and low-carbon energy sources;
- Formulate and launch at both national and regional levels an integrated portfolio of proven, piloted, and emerging approaches to unlock the full potential of energy efficiency;
- Identify methods to provide the significant upfront funding required by any plan to capture energy efficiency;
- Forge greater alignment between utilities, regulators, government agencies, manufacturers, and energy consumers; and
- Foster innovation in the development and deployment of next-generation energy efficiency technologies to ensure ongoing productivity gains.
A reduction in energy use (or a realization of the full potential of energy efficiency gains) as contemplated by the McKinsey report would have the effect of taking an entire U.S. fleet of passenger vehicles and light trucks off the roads. So we’re talking about a different way of doing things. Make sure to give the report a chance:
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