In the face of this summer’s debates on how to manage the nation’s current debt load – which came to a temporary cease fire on Tuesday with the passage of a bill that will raise the government’s debt ceiling – I found myself looking back at speeches made by President Obama where he emphasized how we might be able to not only stabilize, but also strengthen, the United States economy. In this process, I rediscovered a speech he made in 2009 that resonated with me. The focus of this speech was the power of energy efficiency.
In this post I explore how Americans might be able to save $169 billion dollars per year on their electricity bills by mirroring energy efficiency gains realized in California. And, the cost of each kilowatt-hour saved would be significantly cheaper than building new power plants to meet the nation’s increasing electricity demand.
A More Efficient Economy is a Stronger Economy
On June 29, 2009 President Obama stood with Secretary of Energy Steve Chu and spoke of the role of energy in efforts to “build a new foundation for sustained and lasting economic growth” in the United States. This speech came just three days after the Democratic-majority U.S. House of Representatives passed carbon cap-and-trade legislation (that would later fail in the Senate), but the President’s focus was not solely on cleaning up the country’s power generation fleet. Instead, he zeroed in on the power of energy efficiency. Because, as the President said:
“In fact, one of the fastest, easiest, and cheapest ways to make our economy stronger and cleaner is to make our economy more energy efficient”
As our demand for electricity increases with both rising individual consumption and a growing population, energy efficiency can provide a cheaper alternative to building new power plants. At a cost of $350 per kilowatt avoided versus $900 or more per kilowatt of new generation capacity, energy efficiency programs, policies and technologies might allow us to realize significant energy savings (and environmental benefits) without making major shifts in our activities and behaviors.1,2
But, how much energy – and money - can we save with efficiency? And could this affect the bigger picture of US debt?
Energy Efficiency vs. Conservation
Energy efficiency differs from conservation in that it does not require us to stop doing things that we enjoy in order to reduce our energy use, but rather allows us to do the same with less. For example, increased efficiency can be achieved by using a new technology (e.g. a more advanced air conditioner system), whereas conservation is achieved by doing without (e.g. setting the thermostat for the air conditioner to a higher temperature during hot summer months).3 Noted here is that, because we are not “doing less” with energy efficiency, it is not a feasible way for us to bring total electricity demand to zero.
So, if it can’t bring electricity demand to zero using energy efficiency, how far can efficiency take us?
One practical estimate might be drawn from gains seen in California.
Energy Efficiency in California – The Rosenfeld Effect
California’s demand for electricity has, like the rest of the nation, been on an upward trajectory, as shown below.3
On the surface, this trend looks pretty normal. It’s what we expect to see with the expanded use of household appliances, invention of personal computers, arrival of cell phones on the consumer electronics market, etc. during this time frame. But, when we overlay state population numbers, we see a different picture appear.3
In the graph above we can see that, before the early 1970s, electricity sales were increasing at a faster rate than California’s population. But, after this time, population and electricity sales in California appear to parallel each other. When we take this a step further, we can see that increases in electricity sales in California is the result of an increasing population, and not increasing individual demand. And, by overlaying values for the entire United States, we can see that California’s stability is not the norm.3
Over the past 40 years, annual per capita electricity consumption in the United States – the amount of electricity that we each consume over the course of a year - has more than doubled (54% increase). But, in California, per capita electricity demand has been almost constant (8% increase). This fact – dubbed the “Rosenfeld Effect” – has been studied by researchers throughout the U.S. to identify the factors that helped the state become more efficient.3
In the President’s 2009 speech, he directly referred to California’s distinct consumption profile, indicated the role of policy in reducing per capita electricity demand:
“In the late 1970s, the state of California enacted tougher energy-efficiency policies. Over the next three decades, those policies helped create almost 1.5 million jobs. And today, Californians consume 40 percent less energy per person than the national average – which, over time, has prevented the need to build at least 24 new power plants.”
Looking closely at the President’s word choices – it’s interesting to note that he does NOT state that California’s energy efficiency policies led to the 40% lower consumption than the national average. Rather, he says that these policies “helped” to create jobs and then implies that these policies might have led to energy savings.
According to research out of Stanford University, energy efficient policies are only responsible for approximately 1.2 MWh in electricity savings per Californian per year4. The “tougher energy-efficiency policies” that the President mentioned included a string of building codes and other programs that promote (or require) efficiency in both electricity production and use in California. The resulting success of these policies could provide a roadmap for other states in the U.S. to follow in order to stabilize their electricity demand.
Background/History – Dr. Arthur H. Rosenfeld
The Rosenfeld Effect is named in honor of energy efficiency godfather, Dr. Arthur H. Rosenfeld, former Senior Advisor at the U.S. Department of Energy (1994-1999) and Commissioner of the California Energy Commission (2000-2010). The same Dr. Rosenfeld is also honored by his own unit – one Rosenfeld is defined as an electricity savings of 3 billion kilowatt-hours (kWh) per year, or the amount of efficiency savings needed to replace a 500 Megawatt coal-fired power plant.5
In 2006, Dr. Rosenfeld gave a presentation on the electricity savings that had been realized in California as a result of6:
- Utility Efficiency Programs
- Energy Efficiency Standards
- Appliance Standards
In this presentation, he concluded that these three categories of policies and standards had resulted in an annual savings for the state of California of more than 40,000 Gigawatt-hours, or about $5 billion annually.*
A National Rosenfeld Effect
If the electricity savings identified by Dr. Rosenfeld were realized throughout the United States, we could potentially reduce electricity demand by more than 500,000 Gigawatt-hours (GWh) - enough to replace 14% of the nation’s coal-fired power plants.** This alone would be an impressive accomplishment, but what if we could create a national Rosenfeld Effect?
In 1970, the national average per person electricity sales was hovering at about 7 Megawatt-hours per year (MWh/year). Today, this number has risen to over 12 MWh/year.3 Over the same period of time, the population in the United States has risen from just over 200 million people to over 300 million. Given these numbers, if the nation had been able to stabilize its per capita electricity use, we would be using about 41% less electricity.***
In economic terms – this is an annual savings of almost $169 billion dollars - an undeniably significant impact.
Putting this into context with the recent debt talks – the current U.S. national debt is hovering at about $12.5 trillion dollars (just over $46,000 per person). So, the annual savings potential of recreating the Rosenfeld Effect throughout the nation is a little over 1% of the current national debt. While this amount might seem small – remember, that the $169 billion dollars is an annual savings (not a one time deal). Further, this does not take into account the fact that increased energy efficiency could help the nation avoid building new power plants, leading to higher future savings.
Now, some researchers who have studied the Rosenfeld Effect believe that regional characteristics, including climate and level of urbanization acted as significant factors in contributing to California’s electricity savings compared to the United States.3 Therefore, it is perhaps unrealistic to believe that we could recreate the types of efficiency gains seen in California by using exactly the same approach.
But, given the advances that we’ve made in technology, green design, and optimization over the past 40 years, perhaps it is also not unrealistic to expect that the nation could do even better than California has. And, by doing so, Americans could save money and energy, while simultaneously reducing the environmental impact of our electricity consumption.
*Assumes an average rate of $0.1381 per kWh. Calculation as follows: (40,000 GWh/year)x(1,000,000 kWh/GWh)x($0.1381/kWh) = $5.524x109 per year = $5,524,000,000 per year ~$5 billion per year
**(500,000 Gigawatt-hours)x(0.84)x(1 year/365 days)x(1 day/24 hours) = 48 Gigawatts. Given 338,723 MW of coal-fired power plant capacity in the United States, this is 14% of the current coal capacity.
***This would, roughly, be a savings of (12-7 MWh/year-person) = 5 MWh/year-person. Multiplying this difference by today’s population of approximately 300 million à (5 MWh/year-person)x(300 million people) = 1,500 million MWh/year in potential savings. Given that total U.S. electricity sales are approximately 3,700 million MWh/year à (1,500/3,700) = 41%.
****(1,500 million MWh/year)x(1000 kWh/MWh)x($0.1126/kWh) = $168,900,000,000 per year ~ $169 billion per year
1. Gillingham, K., R.G. Newell and K. Palmer. (2005). The effectiveness and cost of energy efficiency programs. Resources. 155. 22-25. [web]
2. National Academies. Real Prospects for Energy Efficiency in the United States. s.l. : National Academies, 2010
3. Lott, Melissa Christenberry. Quantifying the economic and environmental tradeoffs of electricity mixes in Texas, including energy efficiency potential using the Rosenfeld Effect as a basis for evaluation. Masters Thesis. The University of Texas at Austin, 2010. [web]
4. Sudarshan, Anant and Sweeney, James. Deconstructing the "Rosenfeld Curve". s.l. : Stanford University, 2008. [web]
6. Rosenfeld, Arthur H. Summing Up. Energy Symposium: The Rosenfeld Effect. s.l. : California Energy Commission, 2006 [web]