Energy efficiency – doing more with less

Energy efficiency means using less energy to provide the same energy services. Energy conservation means using less energy by reducing energy services. In the power sector, efficiencies can be made at every point along the production chain from improvements in power plant technology, to reductions in the power lost through transmission, to changes in the end use of energy. The greatest potential for energy efficiency is in the residential and commercial sectors with many of the potential reductions coming from the design of appliances and buildings.
Both energy efficiency and conservation offer many low and negative net cost options. For consumers the large economic savings from energy efficiency can pay for a major part of the additional costs of renewable energy.
Numerous studies envisage energy efficiency and conservation doing much of the ‘heavy lifting’ to reduce greenhouse emissions.
A 2007 Australian Bureau of Agricultural and Resource Economics study estimated energy efficiency would directly account for 55% of Australia’s carbon abatement by 2050 and 58% of global abatement (Gurney et al., 2007). The report notes: “The majority of abatement in the short term is achieved through the uptake of currently available energy efficient technologies in production and end use sectors such as households, transport, services and industry. These short term improvements play a critical role in reducing requirements for new energy infrastructure. The decreased requirement for new emissions intensive energy infrastructure in the short term potentially plays an important role in achieving large emission reductions in the long term.”
The International Energy Agency (2008) estimates that energy efficiency will account for around 43% of global emission abatement to 2030 in a scenario where global carbon dioxide levels stabilise at 450 ppm. Renewable energy sources are expected to generate 21% of the emissions reductions and nuclear power just 6%.
McKinsey & Co (2008) ranked carbon abatement strategies from cheapest to most expensive, and showed many energy efficiency strategies have a negative ‘cost’. The McKinsey report maps out greenhouse emissions reductions opportunities leading to a 30% reduction in overall emissions by 2020 and 60% by 2030. The report assumes uptake of carbon capture and storage but not nuclear power. Energy efficiency does much of the ‘heavy lifting’:
“Significant quantities of ‘negative-cost’ opportunities are available. These opportunities would allow Australia to reduce emissions in 2020 by 20 percent below 1990 levels at no net cost to the economy. This is because the contribution to the economy of the negative cost opportunities is enough to pay for other abatement measures up to a marginal cost of A$62 per tonne CO2e … For 2030, an equivalent analysis suggests reductions of 35 percent are achievable at no net cost. …
“We estimate that by 2020, almost 80 Mt, or 25 percent of the total reductions potential, can be realised with positive returns. Most of these positive return (or ‘negative-cost’) opportunities are energy-efficiency measures related to improvements in buildings and appliances. Many can be categorised as market failures arising from misaligned incentives, for example, those between builders and tenants, where it benefits the tenant but not the builder to install insulation or energy efficient lighting. … For 2030, almost 20 percent of the measures examined present net economic benefits …”