The Missing Piece

Peering into the future, the federal Energy Information Administration recently released a kaleidoscopic collection of 57 computer-generated scenarios for how the nation might produce and consume energy over the next 25 years.

Through all the complex options and projections, one big message stands out: Systematic efforts to increase the nation’s energy efficiency could deliver a big economic and environmental payoff. And that means that efficiency deserves a bigger role in the energy debate than it has received.

With little notice, the United States has actually made enormous progress at using energy more efficiently. The nation’s energy consumption, measured against the size of the economy, has fallen steadily since the first oil embargo in 1973. Today, total energy consumption per dollar of national output—what economists call energy intensity—is less than half of its level then. The economy’s shift away from manufacturing, which guzzles power, explains some of that success. But “it’s mostly that we continue to figure out ways to do things better,” says Steven Nadel, executive director of the American Council for an Energy-Efficient Economy. “People are always figuring out how to make equipment more efficient, how to make processes better and reduce costs.”

Even in its baseline projection, EIA forecasts continued improvement: Through 2035, the nation’s total energy consumption will decline when measured as a share of either population or economic output. That’s partly because the economy will continue its shift away from manufacturing but also because of federal policies that require products from refrigerators to cars to use energy more efficiently.

However, a key message from EIA’s projections is that we can squeeze out much greater gains with policies that demand and reward further innovation. One scenario the energy agency studied postulated that Washington would continue to regularly update its efficiency requirements for appliances; prompt states to draft (and enforce) significantly more demanding building codes; and steadily increase fuel-economy standards for cars and light trucks to 46 miles per gallon (up from 27 now) by 2025.

Under those policies, EIA calculates, we could cut the amount of energy we use to heat and light commercial and residential buildings by a stunning 15 percent over the next 25 years, compared with a scenario where we make no technological advances. By 2035, oil consumption would also be about 10 percent less than it would be otherwise. Overall, if the federal government demands these steady efficiency gains, the agency predicts that the amount of energy we burn to produce each dollar of economic output would fall by more than two-fifths from its level today. Such savings could energize the economy.

None of this would require radical technological breakthroughs. Many studies, Nadel notes, have shown that big efficiency gains are possible “from existing technologies that are already cost-effective.” Those range from better fluorescent lights to improved controls over air-conditioning-and-heating systems. There isn’t one answer, but many. “We call them silver BBs, not silver bullets,” he says.

For all its potential, efficiency has been relegated to a surprisingly peripheral role in the energy debate. The principal congressional initiative to promote greater efficiency is the legislation from Senate Energy and Natural Resources Committee Chairman Jeff Bingaman, D-N.M., to stiffen appliance standards.

That’s a necessary but hardly sufficient response to the opportunity.

Much more could be done. Congress could fund the Homestar program to provide home¬owners with tax incentives to invest in energy-saving technologies. It could establish overall national energy efficiency improvement goals, as Nadel’s group is touting. It could revive proposals in the House’s 2009 climate-change legislation to require states to improve their building codes. It could build on President Obama’s innovative ideas to use the federal government’s purchasing power to accelerate breakthroughs in efficiency. And it could abandon the House GOP’s shortsighted efforts to block further mandated increases in automotive fuel economy after 2016.

Efficiency won’t solve all of our energy challenges. Under EIA’s greater-efficiency scenario, for instance, U.S. emissions of carbon dioxide and other gases associated with global climate change would still be higher in 2035 than today.

To significantly shift the energy mix, the agency’s projections suggest, we need to put a price on the carbon emissions from fossil fuels through such mechanisms as a cap-and-trade system. (With a price on carbon, EIA forecasts, coal use would plummet and reliance on renewable sources would rapidly expand; that would cut our carbon emissions from generating electricity in half.)

Because U.S. energy consumption will increase under any scenario, any comprehensive energy strategy would also need to increase production of our domestic fossil-fuel resources.

Yet by focusing almost entirely on greater production, the congressional debate is obscuring the enormous openings that EIA highlights for smarter and more cost-effective use of energy. None of the agency’s forecasts, of course, are written in stone. But they capture the opportunities that are slipping from our grasp, as Washington remains trapped in a partisan and regional energy standoff that seems set in concrete.

(Ronald Brownstein writes the Political Connections column. This article appeared in the Saturday, May 14, 2011 edition of National Journal.) -cw