In theory, the economic and environmental outcomes from energy efficiency (EE) represent a sizable investment opportunity for individual consumers as well as for society as a whole. At the micro level, EE projects are slated to be cash-flow positive with attractive payback periods[1]. Yet, at a macro level, electric power like other fuels faces the Jevon's Paradox: the proposition that technological progress that increases efficiency of resource use tends to increase (rather than decrease) aggregate consumption of the resource (even if it decreases input fuel consumed per unit of output).
It has therefore been argued that increased efficiency could improve material living standards while also actually increasing energy use in its wake. Historical evidence suggests that improved technology has stimulated demand, resulting in mor e energy being purchased for conversion into light[2], for instance. It is estimated that solid-state lighting (viz., LED) could increase consumption of light by a factor of ten by the year 2030[3]. In other words, if cost were no barrier, some outdoor areas might be illuminated at night to be as bright as day! Some of the sporting events traditionally held during the day are already being organized during the evening / night.
Studies conducted within narrowly defined project boundaries, and lacking a definition of the baseline scenario, ignore common problems encountered in the practice of energy efficiency (demand side management - DSM) programs:
Payback periods on demand side management (DSM) / energy efficiency (EE) programs are generally unfavorable in markets where retail prices do not reflect total costs of production and delivery of energy; consequently domestic consumers are not always motivated to investing into conservation.
This is compounded by the 'split incentive' problem across categories of buildings where owners are required to invest into the more efficient hardware while the savings would accrue to the tenants using the facility.
In jurisdictions where some sections of residential and industrial / commercial consumers cross-subsidize consumption by rural / urban poor consumers, power distribution utilities face significant conflicts of interest in attempting to enhance efficiency of consumption in urban areas and among commercial consumers, as these segments contribute a significant proportion of their overall revenues. For EE programs to make a tangible difference, regulatory enforcement and oversight need to be strong and building codes and norms followed to the last detail, while baselines need to be defined as accurately as possible.
Disclaimer: The mini-cases and opinion posts are intended to help guide discussion on the underlying issues and are definitely not meant to serve as an endorsement, or to judge regulatory prescriptions, management styles, decision-making or outcomes. The cases and posts are designed to provide perspectives on a given situation, to aid discourse, and to help evolve alternative recommendations subject to relevant assumptions relating to the future. These case and opinion entries may not be used as a source of original data or opinion of any sort and authors claim no responsibility for outcomes from citing or reproducing parts of the entries, or for actions taken on the basis of the contents of these posts.