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

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John A. “Skip” Laitner (@EconSkip) In Conversation with the AESS 2017 Conference

University of Arizona-Institute of the Environment

Tucson, Arizona June 22, 2017

Reframing Energy for the 21st Century:

Understanding the Economic Imperative of Energy Efficiency*

* 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.

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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.

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How Small Differences in Assumptions Can Make a Very Real Difference in Outcomes. . .

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Comparing Economic Projections and Actual Outcomes: United States 2005 to 2017

12,000 14,000 16,000 18,000 20,000 22,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Billion 2009 Dollars

$14,115 billion GDP ~173 Million Jobs $20,300 Billion GDP ~200 Million Jobs $17,100 Million GDP ~195 Million Jobs

Source: Calculations using projections from the U.S. Energy Information Administration and other sources, May 2017.

What is not understood? That the inefficient use of resources has been among the weakening influences of our social and economic well-being...

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The Connection Between U.S. Energy Productivity and Per Capita Income (1950-2015)

10,000 20,000 30,000 40,000 50,000

40 60 80 100 120 140 160 180

Per Capita Income (2009 Dollars) Energy Productivity (2009 $ GDP/MBtu of Energy)

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1950 2015 1970

Source: Calculations by John A. “Skip” Laitner using EIA and BEA data for the U.S.

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5 Source: John A. “Skip” Laitner based on Woods and Poole Projections, May 2017.

Historic Future

U.S. Trend in Per Capita GDP 1970 to 2050

With the prospect of perhaps 15-40 million fewer jobs than needed by 2050 because of lagging energy and resource productivity…

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With two different perspectives on the U.S. Economy. . .

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Let’s First Begin by Talking About . . .

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The Sustainability Elephant in the Room Both driven by the inefficient use of resources—whether materials, food, water, and especially energy…

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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.

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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

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Total Exergy Applied as Effort Total “Energy Commodities” Reported Useful Work Completed

Comparing reported energy,

Where the difference between the useful work that is completed, and the total exergy that is consumed, amounts to waste or anergy. . .

applied exergy, and useful work

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Source: Laitner http://www.aceee.org/blog/2013/08/thinking-big-about-energy-efficiency

85%

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“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

• riginal).”
• Dr. Jeffrey S. Luke

Catalytic Leadership: Strategies for an Interconnected World, 1998

A Further Thought on the Tough Choices

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14 40 60 80 100 120 140 160 1970 1980 1990 2000 2010 2020 2030 2040 2050 Typical Pre-1980 Forecasts Low-Energy Future Based Upon 1980 DOE Analysis AEO 2017 Projection Actual Historical Consumption

Sources: DOE 1980 Policy Analysis, AEO 2005, AEO 2017, and Laitner estimates 2017.

AEO 2005 Projection Enabled by ICT, new materials, new technologies, and innovative behaviors… Catalyzed by Smart Policies and Productive Investments U.S. Primary Energy Use in Quads

Key Insight: The Energy Efficiency Resource Is Larger than Generally Believed or Understood

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MORE

BY WASTE

THAN

INGENUITY? Exploring the full energy efficiency potential: ~250 billion barrels of oil equivalent for the United States through the year 2050. Sufficient to reduce total U.S. energy consumption by half!

Conventional assumptions about the efficiency potential

. . . an anemic ~15% energy (in)efficiency

With the prospect for a more robust, a more resilient and a more sustainable economy. . .

Source: Long-Term Energy Efficiency Potential. http://www.aceee.org/press/2012/01/aceee-report-us-better-thinking-big-

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A Reasonable Comparison of Energy Supply vs Energy Efficiency Job Impacts

16 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. . .

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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.

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The difficulty lies not with the new ideas, but in escaping the old ones. . .

John Maynard Keynes

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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
• f 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-

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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/

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