Driven by technological improvements, strengthening policy, and behavior change, the U.S. economy is becoming less energy-intensive. But it could do much more. One prominent policy group ranks America ninth in efficiency among the twelve largest economies.
So what would it take to double energy productivity over the next two decades? "Untying" economic growth from energy demand and creating a scenario that looks like this:
A new commission chaired by U.S. Senator Mark Warner (D-VA) and National Grid US President Tom King has just released a detailed report with some recommendations on how to achieve such a scenario.
The group, called the Alliance Commission on National Energy Efficiency Policy, says it's possible to double energy efficiency across the U.S. economy by 2030 while increasing economic output by 2 percent and creating 1.3 million jobs in the manufacturing and service sectors.
So how do we get there?
The report maps out a detailed set of recommendations on reforming the U.S. tax structure, increasing R&D for new techologies, setting up "race to the top" programs to encourage competition among local governments, and developing innovative financing programs to bring a more diverse range of investors into the market. Individually, they could do a lot to increase efficiency; together, they add up to a comprehensive plan that policymakers should take seriously.
There are dozens of ideas in the report that go beyond simply setting state or national efficiency targets. Here are a few interesting ones:
Create on-bill repayment programs
Some utilities have rolled out on-bill financing (OBF) programs that allow ratepayers to pay for efficiency retrofits through their bills. The programs are paid for by spreading the costs around to all ratepayers. But on-bill repayment programs (OBR), currently in the early stages of development, would bring in third parties to finance the retrofits. Customers would still pay back the loan on their utility bill, but other ratepayers wouldn't be paying for it. The Environmental Defense Fund estimates that rolling out OBRs nationwide would save ratepayers $120 billion over the next decade. The commission recommends wide adoption of OBRs and other innovative financing tools like property assessed clean energy.
Fix the tax code
Key energy efficiency tax credits are set to expire at the end of this year. Extending those credits would be a start. But the commission also recommends that Congress work with the Department of Energy and the Environmental Protection Agency to develop tax incentives that more effectively take into account technology changes and market shifts in order to promote innovation. More boringly, the commission says that accelerating tax depreciation schedules -- deferring taxes on recently purchased equipment in order to encourage companies to make new investments -- would help accelerate investments in efficiency retrofits and transportation.
Implement disclosure policies
Six cities and two states around the country have adopted laws that require commercial building owners to disclose the energy consumption of their buildings -- either publicly in the market or privately to a potential tenant. The commission recommends expanding these laws on the state or national level, while also improving energy labeling for consumer products. Opening up energy consumption data to the marketplace could have a huge economic and efficiency impact. The Institute for Market Transformation estimates that a national energy disclosure law could save $18 billion in costs for building owners by encouraging new efficiency upgrades, thus saving 0.2 quadrillion Btus (the rough equivalent of taking 3 million cars off the road per year) by 2020.
So what if the commission got its way and we adopted the broad range of efficiency policies outlined in the report? This is what our energy productivity might look like compared to the path we're on today:
Of course, achieving this target would require a sizeable chunk of money. The commission estimates that doubling energy efficiency over the next two decades would require more than $160 billion per year from local, state, federal governments. (That's about one quarter of the yearly defense budget.) But the payback would be substantial.
According to calculations from the Rhodium Group, by 2030 American companies would save $169 billion per year in energy costs, while the average American household would save $1,039 in yearly energy costs. Additional improvements to government buildings could save taxpayers another $13 billion per year by that date.
The report was released in Washington, D.C. yesterday in an effort to raise the profile of efficiency among lawmakers. It's an awkward time to be asking for such a big boost in efficiency spending, just as Congress looks to cut more than a trillion dollars in spending. But the group is hoping to convince lawmakers that "doing more with less" is just as important for our energy intensity, not just our fiscal budget.
The commission was reportedly scheduled to meet with the White House this week to pitch the recommendations.