Energy efficiency wants more energy for the same amount of fuel. This means both energy bills and pollution from burning fossil fuels fall – to the delight of government and environmental agencies alike.
There are three key sectors within which efficiency gains can have a significant impact in both the developed and developing world: transportation, buildings and electricity.
Simply replacing old cars and trucks with newer versions reduces overall oil usage per vehicle. New vehicles are built to higher fuel efficiency standards as the technology continues to improve, so that you can drive your car further and further using less and less petrol. Manufacturers were busily engineering new models whose improved fuel use and decreased gasoline bills made them attractive to consumers, even before regulation insisted on higher fuel efficiency. Inefficient and dirty, (but cheap) diesel is now highly regulated in the developed world. It is all but obsolete for passenger vehicles. Low-quality fuels for marine transportation and long-distance trucking have yet to be attacked with the same rigour.
It’s also about not wasting energy. Inefficient buildings release huge amounts of unused heat. Simple measures include nailing shut the last few millimetres between insulation boards – this final step brings the greatest benefits – or using straight, fat water pipes rather than slim, angular ones. These are not universally understood or implemented.
Insulation, heat pumps and newer appliances compliant with current efficiency standards make a huge difference. The invention of light emitting diodes (LED) revolutionised lighting. Previously incandescent light bulbs lost most of their power as heat. Solar and geothermal installations can make buildings energy neutral or turn them into prosumers.
Although this involve additional costs, many energy savings measures pay for themselves within a few years, as heat and electricity bills are cut.
Retrofitting older buildings and replacing appliances is necessary to address standing building stock. Unlike cars, buildings are not replaced every few years. Most of today’s buildings will still be standing in fifty years – but we suffer from an agency problem. Landlords do not pay the energy bills and tenants do not wish to invest in someone else’s property. Yet, even property-owning households and businesses hesitate to retrofit. This is where government incentives can play a role. Heating, cooling and electrifying buildings makes up a third of global energy consumption, so lifting efficiency by just a few percentage points gets purchase and demonstrates the worth of such efforts.
Efficiency was transforming electricity production until renewables shook up the model making even the most flexible and efficient Combined Cycle Gas Turbine (CCGT) plants, which save and reuse heat produced during power production, unprofitable. Nevertheless efficiency can still give thermal power producers an edge on the competition, since decreased fuel use cuts operating costs. Further, governments are imposing tariffs on heavy polluters including inefficient diesel and coal-fired relics. This additional marginal cost crowds some of them out of the marketplace saving energy and reducing pollution.
Demand-side management can address some of the short-fallings of today’s decentralised electricity system. With smart metering industrial and household consumers can react when electricity is scarce (wind or solar production is low). The higher prices signal factories to run less energy-intensive processes or wait for off-peak prices and hours, and household consumers can decide to take a shower or do their washing later on. In fact smart grids can even automate some of these decisions, at both the local and national level.
Once upon a time, rising energy consumption was an accurate indicator of how fast an economy was growing. No longer. In the OECD, efficient technologies and smarter policies have decoupled energy consumption and development, proving that environmental concerns need not frustrate economic ones.