Despite a large increase in the United States’ overall greenhouse gas emissions during the last several decades, the United States has slowly but surely been able to produce more with less energy. Our energy efficiency has improved by leaps and bounds, but a new report authored by McKinsey Global Energy and Materials says that the full potential of energy efficiency initiatives has yet to be realized. If the United States were to implement a comprehensive strategy aimed at increasing energy efficiency, the resulting monetary and emissions’ savings would be enormous.

According to the report, a “holistic approach executed at scale” would yield gross energy savings worth more than $1.2 trillion, more than double the amount needed upfront for investment in these energy efficiency measures. This program is estimated to “reduce energy consumption by 2020 by 9.1 quadrillion BTUs, roughly 23 percent of projected demand, potentially abating up to 1.1 gigatons of greenhouse gases annually.”

The report seeks to simultaneously pinpoint the barriers of unlocking the potential for energy efficiency while also reviewing solution strategies. If a directed and comprehensive strategy in the United States was implemented, companies involved in all areas of energy efficiency could reap huge benefits. Manufacturers of energy-efficiency related products, energy auditors, builders, and contractors, among others, could see business skyrocket. But even if a comprehensive plan is not initiated, the report can be used by companies heavily invested in the energy efficiency field to focus their efforts towards areas with the most potential.

According to the report, a comprehensive strategy addressing energy efficiency opportunities would need to:

1.    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.
2.    Formulate and launch at both national and regional levels an integrated portfolio of prove, piloted, and emerging approaches to unlock the full potential of energy effiency.
3.    Identify methods to provide the significant upfront funding required by any plan to capture energy efficiency.
4.    Forge greater alignment between utilities, regulators, government agencies, manufacturers, and energy consumers.
5.    Foster innovation in the development and deployment of next-generation energy efficiency technologies to ensure ongoing productivity gains.

The report identifies and maps “in detail the complex and persistent set of barriers that have impeded capture of energy efficiency at the level of individual opportunities.” As noted earlier, significant gains have been made in energy efficiency in the United States, but decisive barriers still exist. For instance, most energy efficiency measures require significant upfront investment, which deters many. “Efficiency potential,” the report says, is highly fragmented as a result of more than 100 million locations and billions of devices used in residential, commercial, and industrial settings. “This dispersion,” the report says, “ensures that efficiency is the highest priority for virtually no one.” And lastly, quantifying amounts of energy not consumed (potential savings) can be extremely difficult.

These hurdles can be overcome, but the solutions must be implemented in a holistic, rather than piecemeal fashion. Most simply, the report lists four categories of “proven, piloted, and emerging” solutions: (following is quote)

1.    Information and education. Increasing awareness of energy use and knowledge about specific energy-saving opportunities would enable end-users to act more swiftly in their own financial investment. Options include providing more information on utility bills or use of –in-building displays, voluntary standards, additional device- and building-labeling schemes, audits and assessments, and awareness campaigns.

2.    Incentives and financing. Given the large upfront investments needed to capture efficiency potential, various approaches could reduce financial hurdles that end-users face. Options include traditional and creative financing vehicles (such as on-bill financing), monetary incentives and/or grants, including tax and cash incentives, and price signals, including tiered pricing and externality pricing.

3.    Codes and Standards. In some clusters of efficiency potential, some form of mandate may be warranted to expedite the process of capturing the potential, particularly where end-user or manufacturer awareness and attention are low. Options include mandatory audits and/or assessments, equipment standards, and building codes, including improving code enforcement.

4.    Third-party involvement. A private company, utility, government agency, or non-governmental organization could support a “do-it-for-me” approach by purchasing and installing energy efficiency improvements directly for the end-user, thereby essentially addressing most non-capital barriers. When coupled with monetary incentives, this solutions strategy could address the majority of barriers, though some number of end-users might decline the opportunity to receive the efficiency upgrade, preventing capture of the full potential.

For these initiatives to be completely successful, close collaboration needs to occur between governments, businesses, and non-profits. But regardless of whether a comprehensive nationwide approach is implemented, businesses of all sizes in the energy-efficiency field can pinpoint solutions outlined in the study and work on those in their local communities. They should work with their local utility companies and governments to start awareness campaigns that provide simple and user-friendly information for the public and business, while at the same time working with those same utility companies to provide tax credits or grants. Businesses should also work with local municipal governments and state governments to instate mandatory energy efficiency requirements such as audits and building codes. California has the highest standards for energy efficiency in the country and energy-efficiency related businesses prospered as a result.

These are just a few of the opportunities for energy-efficiency related businesses, but as you can see, the possibilities seem endless.