Understanding the Economic Imperative of Energy Efficiency * John A. - PowerPoint PPT Presentation

Economic and Human Dimensions Research Associates ::.. Reframing Energy for the 21 st Century: Understanding the Economic Imperative of Energy Efficiency * John A. “Skip” Laitner (@EconSkip) In Conversation with the AESS 2017 Conference University of Arizona-Institute of the Environment Tucson, Arizona June 22, 2017 * In the spirit and tradition of Nobel Laureate and former Caltech physicist Richard Feynman, in his 1959 visionary talk, “There’s Plenty of Room at the Bottom.” See, http://www.its.caltech.edu/~feynman/plenty.html.

A Five-Step Thought Experiment to Help Understand the Imperative • Explore worrisome long-term economic trends. • Examine the critical difference between energy as a “commodity” versus energy as “work.” • Examine the magnitude of current energy waste. • Understand the possible link between greater energy productivity and per capita economic activity. • And offer finals thought with suggested next steps ahead. Economic and Human Dimensions Research Associates ::.. 1

How Small Differences in Assumptions Can Make a Very Real Difference in Outcomes. . . Economic and Human Dimensions Research Associates ::.. 2

Comparing Economic Projections and Actual Outcomes: United States 2005 to 2017 22,000 $20,300 Billion GDP What is not understood? That the ~200 Million Jobs inefficient use of resources has been 20,000 among the weakening influences of our social and economic well-being... Billion 2009 Dollars 18,000 16,000 $17,100 Million GDP ~195 Million Jobs 14,000 $14,115 billion GDP ~173 Million Jobs 12,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Calculations using projections from the U.S. Energy Information Administration and other sources, May 2017. Economic and Human Dimensions Research Associates ::.. 3

The Connection Between U.S. Energy Productivity and Per Capita Income (1950-2015) 50,000 Per Capita Income (2009 Dollars) 40,000 2015 30,000 20,000 1970 10,000 1950 0 40 60 80 100 120 140 160 180 Energy Productivity (2009 $ GDP/MBtu of Energy) Source: Calculations by John A. “Skip” Laitner using EIA and BEA data for the U.S. Economic and Human Dimensions Research Associates ::.. 4

U.S. Trend in Per Capita GDP 1970 to 2050 Historic Future With the prospect of perhaps 15-40 million fewer jobs than needed by 2050 because of lagging energy and resource productivity… Source: John A. “Skip” Laitner based on Woods and Poole Projections, May 2017. Economic and Human Dimensions Research Associates ::.. 5

With two different perspectives on the U.S. Economy. . . Economic and Human Dimensions Research Associates ::.. 6

Let’s First Begin by Talking About . . . Economic and Human Dimensions Research Associates ::.. 7

The Sustainability Elephant in the Room Both driven by the inefficient use of resources—whether materials, food, water, and especially energy… Economic and Human Dimensions Research Associates ::.. 8

We Continue with Two Views on Energy • Typical: Energy as commodities that are sold on the market (e.g., barrels of oil or kilowatt-hours of electricity) – tracked by the various statistical entities and governmental agencies. • More Vital: Energy as the capacity to do useful work , the effort necessary to transform matter into the requisite goods and services for a local economy, and to distribute or make them available as required. • Result: To ensure the appropriate development of innovations that ensure sustainable social and economic activity, the emphasis needs to be on energy as work . Economic and Human Dimensions Research Associates ::.. 9

Exploring Energy as Work Energy = Exergy + Anergy = Constant Source: Kümmel (2011) Work = Exergy * Efficiency Source: Ayres and Warr (2009), and Laitner (2014, 2015) Waste = Exergy * (1-Efficiency) Source: By definition Economic and Human Dimensions Research Associates ::.. 10

Comparing reported energy, applied exergy, and useful work Total “Energy Total Exergy Commodities” Reported Applied as Effort Useful Work Completed Where the difference between the useful work that is completed, and the total exergy that is consumed, amounts to waste or anergy. . . Economic and Human Dimensions Research Associates ::.. 11

85% Source: Laitner http://www.aceee.org/blog/2013/08/thinking-big-about-energy-efficiency Economic and Human Dimensions Research Associates ::.. 12

A Further Thought on the Tough Choices “Individuals have a natural tendency to choose from an impoverished option bag. Cognitive research in problem solving shows that individuals usually generate only about 30 percent of the total number of potential options on simple problems, and that, on average, individuals miss about 70 percent to 80 percent of the potential high-quality alternatives (emphasis in the original).” Dr. Jeffrey S. Luke Catalytic Leadership: Strategies for an Interconnected World , 1998 Economic and Human Dimensions Research Associates ::.. 13

Key Insight: The Energy Efficiency Resource Is Larger than Generally Believed or Understood 160 Typical Pre-1980 Forecasts U.S. Primary Energy Use in Quads AEO 2005 Projection 140 120 Catalyzed by Smart Policies and Productive Investments AEO 2017 Projection 100 Enabled by ICT, new materials, new technologies, 80 and innovative behaviors… Actual Historical Consumption 60 Low-Energy Future Based Upon 1980 DOE Analysis 40 1970 1980 1990 2000 2010 2020 2030 2040 2050 Sources: DOE 1980 Policy Analysis, AEO 2005, AEO 2017, and Laitner estimates 2017. Economic and Human Dimensions Research Associates ::.. 14

Conventional assumptions about the efficiency potential Exploring the full energy efficiency potential: ~250 billion barrels of oil equivalent for the United States through the year 2050. Sufficient to reduce MORE total U.S. energy consumption by half! BY WASTE With the prospect for a THAN more robust, a more resilient and a more INGENUITY? sustainable economy. . . . . . an anemic ~15% energy (in)efficiency Economic and Human Dimensions Research Associates ::.. 15 Source: Long-Term Energy Efficiency Potential . http://www.aceee.org/press/2012/01/aceee-report-us-better-thinking-big-

A Reasonable Comparison of Energy Supply vs Energy Efficiency Job Impacts A thought experiment? Giving these values, a 40% redirection of spending away from energy today, might create a net gain of 5 million jobs tomorrow. . . Economic and Human Dimensions Research Associates ::.. 16

A Final Thought on a New Reality?? The continued economic recovery and robust development of the World’s long-term prosperity will not be possible without large increases in purposeful investment and greater levels of resource and energy efficiency – enabling the significant reduction in the full costs of energy services, and motivated by informed attitudes and more productive behaviors. It can be done. The opportunities are there. But they require imagination, effort, and new business models together with new ways of managing resources. Economic and Human Dimensions Research Associates ::.. 17

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The difficulty lies not with the new ideas, but in escaping the old ones. . . John Maynard Keynes Economic and Human Dimensions Research Associates ::.. 19

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Selected References • Ayres, Robert U. and Benjamin Warr. 2009. The Economic Growth Engine: How Energy and Work Drive Material Prosperity . Northampton, MA: Edward Elgar Publishing, Inc. • International Energy Agency. 2014. Energy Efficiency Market Report . Paris, France: OECD/IEA (also EEMR 2015 and 2016). • Kümmel, Reiner . 2011. The Second Law of Economics: Energy, Entropy, and the Origins of Wealth . New York, NY: Springer. • Laitner, John A. “Skip.” 2014. “The Link between Energy Efficiency, Useful Work, and a Robust Economy.” In: Byrne, John, and Wang, Young-Doo, eds. Green Energy Economies . New Brunswick, NJ: Transaction Publishers. • Laitner, John A. “Skip.” 2015. “Linking Energy Efficiency to Economic Productivity: Recommendations for Improving the Robustness of the U.S. Economy.” Wiley’s Energy Environ 2015. doi: 10.1002/wene.135. • Laitner, John A. “Skip.” 2017. Working Note on Energy Efficiency as the Big Economic Hitter. https://theresourceimperative.com/wp-content/uploads/2017/06/Notes-on- Energy-Efficiency-Versus-Energy-Supply-June-3-2017.docx • Laitner, John A. “Skip”, Steven Nadel, R. Neal Elliott, Harvey Sachs and Siddiq Khan. 2012. Long-Term Energy Efficiency Potential: What the Evidence Suggests . http://www.aceee.org/press/2012/01/aceee-report-us-better-thinking-big- Economic and Human Dimensions Research Associates ::.. 21

Contact Information John A. “Skip” Laitner Principal Economist and Consultant Economic and Human Dimensions Research Associates Senior Research Fellow Russian Presidential Academy for National Economy and Public Administration Immediate Past-President Association for Environmental Studies and Science (AESS) Tucson, Arizona USA 85750 c: (571) 332-9434 Email: EconSkip@gmail.com And check out our website: https://theresourceimperative.com/ Economic and Human Dimensions Research Associates ::.. 22