THE BENEFITS OF ENERGY EFFICIENCY WHY WAIT?

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1 THE BENEFITS OF ENERGY EFFICIENCY WHY WAIT? Improving energy efficiency has many benefits. Energy efficiency will lead to massive cost savings. Energy efficiency improvement can play an important role in reviving economic growth and put the world on a sustainable development pathway. In the United States (US), energy efficiency investments can trigger the creation of 750,000 jobs and add $100 billion to GDP by A report brought together by Ecofys and Philips for the Climate Week NYC 2013 New York City, USA, September 23 30, 2013 Kornelis Blok, Pieter van Breevoort (Ecofys) and Harry Verhaar (Philips Lighting) Utrecht/Eindhoven, September 2013 The benefits of energy efficiency why wait?

2 The benefits of energy efficiency why wait? Improving energy efficiency has many benefits. First and foremost, improved energy efficiency of equipment, buildings, vehicles and industrial processes will reduce consumption of electricity and fuels. This will benefit employment and the overall sustainability of the energy system. Moreover, this will save large amounts of money and contributes to US energy independence. The aim of this report is to estimate the scale of these benefits for the US, based on assessments from the world s most authoritative organizations in this field. In addition, we indicate how even greater improvements in energy efficiency could be stimulated. In 2030, energy efficiency in the US can save up to 23% of primary energy compared to a business-asusual development scenario. Potential annual savings in US primary energy consumption could reach up to 11 quads in 2020 and between 16 and 22 quads in 2030 for the various scenarios I. According to the IEA, energy intensity can be reduced at an average rate of 3% annually, with substantial economical, societal and environmental benefits. The US Department of Energy (2010) estimated that with deployment of LED lighting, annual energy consumption for illumination can be reduced by 190 TWh by 2030 II. This is the equivalent electricity Business-as-usual Savings with respect to a business-as-usual scenario Overview of primary energy demand in different energy scenarios for the USA. The entire bars indicate business-as-usual energy use. The grey area indicates the energy that can be saved. See endnote i for details on the scenarios. 2

3 production of nearly 100 medium-sized power plants. The highest I n the WEO Efficient World Scenario, oil imports could saving potential for efficient lighting is present in the commercial be more than halved by 2035, compared to current sector, where life-cycle costs are taken into account and operational imports, improving energy independence. hours are longer II. Domestic spending benefits from this reduction. In this scenario, total oil consumption in 2035 is Energy efficiency will save on annual costs: it can reduce fuel bills in the US by $300 billion per year by 2020 and $550 billion by Improved energy efficiency will obviously lead to decreased energy more than one-third below its present value. T he IEA foresees a particular growth in the service sector, triggered by reduced spending on energy bills costs. Saving electricity and fuels will result in reduced expenditures and an associated increased domestic spending. on coal, oil and natural gas amounting to $150 billion by 2020 and $330 Additionally, the energy intensive industries, billion by such as the iron and steel and chemical sectors, can III In addition, a reduction of global energy demand will have a moderating impact on global energy prices, reducing energy costs even further. These indirect energy cost savings could equal direct cost savings in experience growth as they become more competitive due to reduced energy costs. According to the ACEEE, a dollar of avoided utility bill Decreased fuel prices will lead to an additional decrease of the costs has 2.24 times the effect on domestic employ- national energy bills by $150 billion in 2020 and $220 billion in 2030IV. ment and wagesvi. Energy efficiency will also save on capital costs. For example, Investing in energy efficiency can create more than energy efficiency improvement can avoid $ billion in capital one million jobs by investments in power production infrastructure by While investing in coal-fired power plants creates Improving efficiency of electricity use 1-2% per year will reduce about 110 jobs per TWh of electricity generated, electricity demand by more than 900 to 1,700 TWh by This amount energy efficiency measures could create 380 jobs is the equivalent production of 500 to 900 medium sized power plants. per TWh of electricity savedvii. The associated capital investments economized total over $ Improved energy efficiency has direct and indirect billion. Up to a fifth of these savings can be achieved by improving impacts on employment. Jobs are created directly efficiency of lighting. in manufacturing and implementation. But there is V also an indirect effect: energy efficiency saves costs The reduced spending on energy bills and infrastructure facilitate and frees up money for other consumption and in- economic growth. Aggressive energy efficiency deployment could add vestment. Both effects together lead to an estimated $100 billion in 2020 and $500 billion in 2030 to the national GDP. employment impact of 750,000 jobs by 2020 and up According to the International Energy Agency (IEA), the GDP of the US to one-and-a-half million jobs in the US by 2030VIII. will be 1.7% higher in 2035 when global energy efficiency efforts are intensified (a decrease in energy intensity of 3% per year). sustainable energy for everyone 3

4 How to achieve greater energy efficiency? While improving energy efficiency obviously has many benefits, progress over the last decade has been limited compared to the potential IX. To take energy efficiency to the next level, action is needed. First of all higher ambition levels are needed. These ambitions can be translated into for example strengthened overall performance standards for buildings in building codes. Performance standards could trigger a range of building efficiency investments, ranging from insulation to replacement of inefficient lighting. Efficiency developments can be accelerated by developing retrofitting programs, both for private, governmental and commercial buildings, where for example windows, air-conditioning systems or lighting is replaced by more efficient technologies. Street and parking lot lighting also offers a great opportunity for such a program, replacing inefficient lighting with efficient LED technologies. These programs have immediate results, such as the instant reduction of energy bills and direct employment and bridge the gap between present investments and future benefits. The proposed Shaheen-Portman Bill includes these type of measures to kick-start energy efficiency improvements, for example the Commercial Building Energy Efficiency Financing Initiative. for example by requiring to certify every year. In developing and improving technology standards, this should be taken into account as it increases costs. Where possible and effective, technology standards could be voluntary. Furthermore, the requirements to extensively test innovative technologies sometimes delay the introduction of new, more efficient technologies to the market. Optimally designing the test requirements and prevention of unnecessary testing will reduce the time to implement innovative energy efficiency technologies and the associated savings of energy. Taking these actions and improving energy efficiency will reduce energy bills of households, businesses and the government, improves prosperity and enhances US energy independence. Energy efficiency will strengthen the US and makes way for a sustainable future. In order to stimulate innovation and quick market deployment of innovative technologies, an international harmonization of standards is desired. This will reduce costs of efficient and innovative appliances and speedup the international deployment of such technologies. Examples are standards on the color temperature and electrical standards for lighting. While standards can stimulate the deployment of efficient appliances, they could also introduce administrative burden for producers, 4

5 Methodology, assumptions & references I. The following energy scenarios were considered: World Energy Outlook (WEO) ppm (IEA, 2012). The associated BAU (business-as-usual) scenario is the Current Policy Scenario. Energy [r]evolution 2012 (Greenpeace, 2012), in this study the associated BAU scenario was based on the Current Policy Scenario of the WEO Here, we converted the provided data on North America to US data by multiplying the energy consumption with the ratio (2010) of energy consumption in the US and energy consumption in North America. ACEEE, 2012 Phoenix scenario. From the same report (ACEEE, 2012), the reference scenario is also used. Only 2050 data are provided in this study. To obtain the energy savings, we subtract the total primary energy supply (TPES) in the ambitious scenarios from the TPES of the BAU scenario. In the convention applied by international statistics, for wind and solar energy the primary energy supply is taken to be equal to their final energy production, consequently an increase in electricity production from wind and solar PV will save primary energy as well. These renewable energy based savings are excluded in the cost savings presented here. We do this by calculating the renewable energy based savings based on the conversion efficiencies in the BAU scenarios and subtracting those from the total savings in order to arrive at the efficiency based savings. In the Energy [r]evolution scenario, the highest TPES saving is achieved by energy efficiency improvements: 11quads in 2020 and 22 quads in These numbers are used for the further analysis. sustainable energy for everyone 5

6 IEA, World Energy Outlook International Energy Agency (IEA), Paris ACEEE, The Long-Term Energy Efficiency Potential: What the Evidence Suggests. ACEEE, Washington, D.C. Greenpeace/GWEC/EREC, Energy [r]evolution - A sustainable World Energy Outlook. Greenpeace International, Amsterdam, Global Wind Energy Council (GWEC), Brussels & European Renewable Energy Council (EREC), Brussels. II. US DoE, Energy Savings Potential of Solid-State Lighting in General Illumination Applications 2010 to Lighting Research and Development Building Technologies Program Office of Energy Efficiency and Renewable Energy U.S. Department of Energy (US DoE). Prepared by Navigant Consulting, Inc., Washington, D.C. See footnote vi for the definition of a medium-sized power plant. III. Here, we assume energy savings are at the expense of fossil fuels and we start with the abovementioned 11 quads and 22 quads savings in 2020, respectively The energy prices in the BAU scenario are taken from WEO Current Policies Scenario. The saved amount of fossil fuels is multiplied with the energy prices in the BAU scenario to obtain the cost savings from reduced consumption. IV. To calculate the decrease in energy prices, we start with the prices in the BAU case (see previous note) as well as the prices in the WEO ppm scenario. From these prices and the consumption of coal, oil and natural gas in the two scenarios, we obtain a relation between fuel consumption and energy prices, which we assume to be linear (within the studied demand range). With this relation and the difference in energy consumption, the energy prices in the ambitious scenario and the difference with the BAU prices are calculated. The remaining consumption of fossil fuels in the ambitious scenario is multiplied with the difference (with the BAU scenario) in fuel prices to obtain the energy cost savings from the reduced fuel prices. V. We applied the efficiency improvements to the electricity consumption in the WEO-2012-Current Policy Scenario and assumed a plant that produces 2 TWh per year (400 MW, 5000 FLH). Costs are based on the average of an advanced pulverized coal power plant and a combined cycle gas turbine (steam extraction), as indicated in: Black & Veatch/ NREL, Cost and performance data for power generation technologies - Prepared for the National Renewable Energy Laboratory (NREL). 6

7 VI. ACEEE, Energy Efficiency and Economic Opportunity Factsheet. VII. ACEEE, Appliance and Equipment Efficiency Standards: A Moneymaker and Job Creator. American Council for an Energy-Efficient Economy (ACEEE), Washington D. Engel and D. Kammen, Green Jobs and the Clean Energy Economy. Copenhagen Climate Council, Copenhagen VIII. Estimations on energy efficiency job benefits are based on data from ACEEE (2008) and ACEEE (2011). ACEEE (2011) estimates a net increase of about 6 jobs per million US$ saved. This would translate to about 63,000 jobs per quad of saved energy. ACEEE, American Council for an Energy-Efficient Economy. American Council for an Energy-Efficient Economy (ACEEE), Washington ACEEE, Appliance and Equipment Efficiency Standards: A Moneymaker and Job Creator. American Council for an Energy-Efficient Economy (ACEEE), Washington IX. IEA, Energy Technology Perspectives International Energy Agency (IEA), Paris sustainable energy for everyone 7

8 For further information, please contact: Kornelis Blok or Pieter van Breevoort Ecofys Experts in Energy Established in 1984 with the mission of achieving sustainable energy for everyone, Ecofys has become the leading expert in renewable energy, energy & carbon efficiency, energy systems & markets as well as energy & climate policies. The unique synergy between those areas of expertise is the key to its success. Ecofys creates smart, effective, practical and sustainable solutions for and with public and corporate clients all over the world. With offices in Belgium, the Netherlands, Germany, the United Kingdom, China and the US, Ecofys employs over 250 experts dedicated to solving energy and climate challenges. ECOFYS Netherlands Kanaalweg 15-G 3526 KL Utrecht Postbus RK Utrecht T: +31 (0) F: +31 (0) E: I: ECOFYS Worldwide ECOFYS Group Utrecht The Netherlands ECOFYS Belgium Brussels Belgium ECOFYS Netherlands Utrecht The Netherlands ECOFYS Germany Cologne Berlin Germany ECOFYS United Kingdom London United Kingdom ECOFYS China Beijing China ECOFYS US Corvallis Oregon USA