1 Making US Industry More Competitive: Increasing Energy Efficiency Lester B. Lave Electricity Industry Center Carnegie Mellon University

2 USA

3

4

5

6 High # is worst Mark Levine, Lawrence Berkeley Lab

7 Low # is worst Mark Levine, Lawrence Berkeley Lab

8 High # is worst Mark Levine, Lawrence Berkeley Lab

9 High # is worst Mark Levine, Lawrence Berkeley Lab

10 Low # is worst Mark Levine, Lawrence Berkeley Lab

11 High # is worst Mark Levine, Lawrence Berkeley Lab

12

13 McKinsey Analysis: $100 Bills on the Floor? McKinsey: Many projects have a negative cost of abating CO2 emissions Internal rate of return (IRR) of many energy efficiency projects is > 10% This implies that Companies are not making profitable investments – can this be? Ignorance, not SOP, dont have $, dont disrupt production, no managerial time

14 Economists Vs. McKinsey Companies make all profitable investments! Consumers dont – landlord vs. tenant, time horizon, ignorance, etc. California spends $700 million/yr to get efficiency increases – payback in 3 years Energy efficiency is not easy, simple or cheap – major investment in time & talent Need to pay utilities for conservation

15

16 Electricity use per person in California and in the USA

17 Increasing Electricity Efficiency In generation: –Lowering heat rates 15,000 to 7,000 BTU/kWh –Combined heat & power, distributed generation In use: –CFL, refrigerators, air conditioners, etc. –Parasitic loads, plasma TV –Automatic shutoff switches

18 USA Energy Intensity (BTU/GDP)

19 What is Sensible Policy? Is 1.1 cars per licensed driver enough? 2002 BTU/GDP BTU/pop GDP/pop Denmark Austria France Sweden USA