Energy Efficiency is the Solution, Not Coal

by Mary

Climate change and what to do about it has been a contentious topic for some time now. Although Al Gore’s film, An Inconvenient Truth, did a terrific job of telling the story about the threat of global warming, too many people don’t believe they can or should do anything about it.

A recent controversy comes from Steven Levitt and Stephen Dubner’s new book, Superfreakonomics, where they posit that we should stop bothering with weaning ourselves off a fossil fuel economy. They quote Nathan Myhrvold, former CTO of Microsoft, as saying: “coal is so cheap that trying to generate electricity without it would be economic suicide, especially for developing countries.” And, “They [the environmentalists] want to divert a huge amount of economic value toward immediate and precipitous anti-carbon initiatives, without thinking things through. This will have a huge drag on the world economy.”

But Myhrvold and others who believe we must use coal plants to produce energy are looking at the problem the wrong way. They see the problem as a supply-side problem: because the planet has more people, we need to find more energy to keep up with demand which means we need to build more power plants and drill more oil.

Yet today, experts driving energy planning understand the problem is a demand-side problem: the reason we need so much energy is because we waste so much. This insight comes from recognizing that we aren’t looking for energy as an end-product, but for the services we get from it: warm water for our showers, light for our homes, the ability to get to where we need to go.

Even better, by getting more out of the energy we use, we have more to invest elsewhere. Art Rosenfeld, winner of the Enrico Fermi award for his innovation and leadership regarding energy efficiency in California, says that through energy efficiency programs put in place in California between 1976 and 2004, California families saved over $1000 per year by not having to build new power plants.

Amory Lovins, founder of Rocky Mountain Institute, has been preaching the benefits of energy efficiency for decades and he says that if the United States used energy as efficiently as the top ten states did 4 years ago, we would eliminate our need for 62.5% of the coal powered energy produced today.

A big fallacy around energy conservation is that it has to be hard, expensive and, as former Vice President Dick Cheney said, dependent on someone’s personal commitment to using less energy. But realistically, using energy efficiently comes from regulation-driven product designs that deliver more for less. In the 1970s, California set rigorous energy usage targets for refrigerators and the result is that since 1975, refrigerators are 75% more energy efficient than they used to be.

The biggest impediment to a more energy-efficient economy is the lack of a smart regulatory environment that creates the right market incentives to engage manufacturers and utilities in helping their customers save energy. After all, for an energy utility following the traditional profit model of charging their customers for the amount of energy they use, selling less hurts their bottom line.

When a state doesn’t get the incentives right, utilities and their customers can find themselves working against each other. In October Ohio’s FirstEnergy sent CFLs (Compact Fluorescent Lightbulbs) to their customers, and then charged them significantly more than the market price for the bulbs. FirstEnergy’s reason for charging more for the energy efficient lightbulbs was that they had to recoup what they would lose when their customers used less electricity. Other states which have had more success, have put in place regulations that “decouple” the profits from the amount of energy delivered, and divide the savings between the utility and its customers.

Bottom line: we know how to make our American economy more energy efficient. And for the developing world this works better in providing enough energy for their needs than building more coal power plants.

Of all the excuses for not strongly pursuing energy efficiency and alternative renewable energy resources, concerns about bankrupting our economy and condemning the poor to an energy-starved future by not exploiting coal has to be one of the dumbest.

[I wrote this originally for the Commonweal Institute Progressive OPED program.]