McKinseyReportJuly09
McKinsey Energy Efficiency Report
July 2009 report on future energy efficiency opportunities found that by 2020 Americans could reap $1.2 trillion in savings by unlocking the potential of this "vast, low cost energy resource". Download full report here.
Unlocking Energy Efficiency in the U.S. Economy
A recent McKinsey & Company report, Unlocking Energy Efficiency in the U.S. Economy, found that over the next 10 years, more than one trillion dollars in savings is possible through increased energy efficiency, but education efforts like TexasIsHot are critical to ensure this energy saving potential is realized. In fact, education is promoted throughout the report as one of the most significant ways to remove barriers and increase efficiency on all fronts, particularly residential. (See August 2009 TexasIsHot e-mail newsletter).
The report focuses on the nationwide opportunity of energy efficiency, the barriers to its implementation, and how these barriers can be overcome. It finds that “an integrated set of solutions … including information and education, incentives and financing, codes and standards, and deployment resources well beyond current levels” is necessary to take full advantage of energy efficiency savings. Such a solution would need to:
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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 |
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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 |
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Identify methods to provide the significant upfront funding required by any plan to capture energy efficiency |
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Forge greater alignment between utilities, regulators, government agencies, manufacturers, and energy consumers |
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Foster innovation in the development and deployment of next-generation energy efficiency technologies to ensure ongoing productivity gains |
The report found that “if executed at scale, a holistic approach [to energy efficiency] would yield gross energy savings worth more than $1.2 trillion, well above the $520 billion need through 2020 for upfront investment (not including program costs).”
Opportunity
The report finds that by 2020, the US could reduce annual energy consumption by 23% from a business as usual projection. Broken down by sector, residential accounts for 35% of end-use efficiency potential (33% of primary energy potential), industrial for 40% (32% primary), and commercial for 25% (35% primary).
The report uses an economic analysis method to determine the “NPV-positive” potential of energy efficiency, which includes direct energy, operating, and maintenance cost savings over the equipment’s useful life, net of equipment, and installation costs, regardless of who invests in/benefits from efficiency measures.
Barriers
The benefits of energy efficiency are well established and documented – so why is this resource not fully utilized? The report finds that the nature of efficiency measures – large upfront investments, fragmented (i.e. spread across millions of locations and devices), and difficult to measure and verify – lead to opportunity-specific barriers to implementation. These barriers can be broken down into three categories:
- Structural
- Behavioral
- Availability
The report suggests addressing these barriers in a holistic fashion with an overarching strategy.
Solutions
The report identifies three categories of solutions available to address the barriers above:
- Information and education
- Incentives and financing
- Codes and standards
- Third party involvement
For various “clusters” of efficiency potential, the report addresses the multiple solutions (which fall into one of the four categories above) required to address the set of barriers facing the cluster.
Download full report here.
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