Energy EfficiencyLessons Learnt from the US

Arun MajumdarStanford University

3

0

20

40

60

80

100

120

140

160

180

200

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Qu

ad

rill

ion

Btu

Total Energy Consumed

Data Source: EIA, Monthly Energy Review

Actual Path of US Energy Consumption

4

0

20

40

60

80

100

120

140

160

180

200

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Qu

ad

rill

ion

Btu

Total Energy Consumed

Total Energy UnderPrevious Trend --0.55% per year less than GDP Growth

Actual vs No-Energy-Efficiency Trends

Energy Efficiency Impacts ($100s Billion)

US Energy use in 2014 same as in 2000, even though US economy grew 28%.

Data Source: EIA, Monthly Energy Review

5

US Net Energy Imports: Actual vs w/o Supply or Efficiency Changes, from 1973

-10

0

10

20

30

40

50

60

70

80

90

100

110

Qu

ad

rill

ion

Btu

Actual Change in Net Imports (NI)

Change in NI w/o Supply or Efficiency Changes

6

Decomposition of Changing Net Energy Imports US Since 1973

-10

0

10

20

30

40

50

60

70

80

90

100

110

Qu

ad

rill

ion

Btu

Energy EfficiencyChange in Fossil Fuel ProductionChange in NuclearChange in RenewablesStock Changes

Actual Change in Net Imports (NI)Change in NI w/o Supply or Efficiency Changes

Energy Efficiency

Energy Production

Transportation

What has worked?• Price signal• Regulatory signal

1975: RAISE IT FROM 12.5MPG TO 27.5MPG BY 1985

1986: REDUCE TO 26 MPG

1990: INCREASE TO 27.5 MPG

2009: INCREASE TO 54.5 MPG BY 2025

1975: RAISE IT FROM 12.5MPG TO 27.5MPG BY 1985

1986: REDUCE TO 26 MPG

1990: INCREASE IT 27.5 MPG

2009: INCREASE IT 54.5 MPG BY 2025

0

10

20

30

40

50

60

70

80

90

100

110

120

1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016

Annual Imported Crude Oil Pricedollars per barrel

Nominal Price Real Price (Jul 2015 $)

EIA Short-Term Energy Outlook, July 2015

$10/barrel2030405060708090

100

Lessons Learnt

• Demand is inelastic - fuel price signals don’t work

• Regulatory signal is the only thing that works– Corporate average fuel efficiency (CAFE) standards

• Public transportation as a common good is not in the best interest of automobile and fuel companies

Batteries & Vehicle Transportation

Cost has reduced 3 times between 2008-2015

Materials and packaging research and innovations

Mass-market all-electric cars

Stationary Power Systems

Buildings

Buildings Matter

Buildings use 72% of nation’s electricity and 55% of its natural gas.

Source: Buildings Energy Data Book 2007

Components• Heating & Cooling• Lighting• Appliances• Plug Loads

System• Whole Building

Use the most efficient components and try keeping them off as much as possible, while improving energy services and indoor environment

Utility bill about $400B/yr

Haitz law for LED Technology

CFL ($2/klm)

Incandescent ($0.3/klm)

LED Lighting

Arun Majumdar, LBNL/UCB

U.S. Refrigerator Energy Use

500 kWh/yr @ $0.15/kWh= $75/yr or $6.25/month

Room AC

C

5 25 50 250

Central AC

D

Cumulative Shipments (millions)

250

500

750

1000

2500

5000

7500

10000

Refrigerators

A

Pric

e a

nd

LC

C

(2

00

8$

)

25 50 75 100 250 500

750

1000

2500

5000

7500

10000

Clothes Washers

B

Pric

e a

nd

LC

C

(2

00

8$

)

Cumulative Shipments (millions)

50 75 100 250 500100

250

500

750

1000

E

EU 15 Cumulative Shipments (millions)

Neth

erl

an

ds R

efr

igera

tors

Price

and L

CC

(2008$)

Pre-standards Price Post-Standards Price Pre-standards LCC Post-Standards LCC Two power law fit

50 75 100 250 500100

250

500

750

1000

E

EU 15 Cumulative Shipments (millions)

Net

her

lan

ds

Ref

rig

erat

ors

Pric

e an

d LC

C (

2008

$)

Pre-standards Price Post-Standards Price Pre-standards LCC Post-Standards LCC Two power law fit

1978

1980

1987

1990

1993

2001

1979

1981

1983

1985

1992

2005

1979

1981

20001990

1988

2004

1994

1999

2002

Pri

ce a

nd

LC

C p

er 100 L

vo

lum

e (2008$)

Van Buskirk, Kantner, Gerke, Desroches, Chu Science (submitted) (2012)

Appliance Standards as Economic Drivers

Behavioral NudgesEnergy Use Labeling

Lessons Learnt• When operating cost is a small fraction of monthly income

and purchase is price is high, purchase price really matters.

• When purchase price is competitive, consumers will choose cleaner option (e.g. LED). LED prices becoming competitive because of technology, driven by display industry and very significant energy savings compared to CFL and incandescent bulbs

• When both purchase price and operating cost are small fraction monthly income, price signal is irrelevant. Regulatory signal (performance standards) matter, and if designed properly, they reduce both purchase price and operating cost.

• Behavioral nudges, voluntary programs and energy labeling matter

Whole Bi• Insulation• Lighting• Heating, cooling, ventilation• Appliances• Design• Operations

Can we make them work together to reduce energy consumption and offer high quality energy services and indoor environment?

Building as a System

Heating & Cooling in UPenn campus building

0

50000

100000

150000

200000

250000

7月 8月 9月 10月 11月 12月 1月 2月 3月 4月 5月 6月

GJ 冷量

热量

0

20

40

60

80

100

120

140

160

180

200

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

0

20

40

60

80

100

120

140

160

180

200

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

cool ing l oadheating l oad

Why is this building heating and cooling at the same time?

Cooling

Heating

The SpreadEUI in kBTU/sq.ft.-yr

Analysis of 121 LEED-Rated Buildings Low-to-Medium Energy Use Intensity Buildings

Measured to Design Ratio

Towards Zero-Net Energy

M. Frankel, “The Energy Performance of LEED Buildings,”presented at the Summer Study on Energy Efficient Buildings, American Council of Energy Efficiency Economy, Asilomar Conference Center, Pacific Grove, CA, August 17-22, 2008.

Building codes are for Design Performance, NOT based on Measured Performance.

The Challenge

Gaps• Lack of Measurements & Policies Requiring it• Fragmentation of Process: Design, Build, Delivery,

Operation• Fragmentation of Market

Fragmentation of Buildings Industry and Process

Courtesy: World Business Council for Sustainable Development (WBCSD) Report on Energy Efficiency in Buildings, July 2008

Need to: • Integrate process & communities• Integrate building system• Align incentives

Policy Innovation:

National Standards Based on Measured Energy and Indoor Environmental Quality Performance

Barriers and Opportunities1. Value of energy efficiency is uncertain

and unappreciated2. Actual performance does not often

correlate to design intent 3. Buildings industry is fragmented4. Lack of systems integration in building

design and operation5. Lack of quantitative energy consumption

evaluation6. Incentives for energy efficiency are not

aligned (split incentives)

a. IT infrastructure for data gathering, processing, management

b. Building standards based on measured performance and organized by building type benchmarking statistics

c. Financial instruments, valuation and performance-based compensation

d. Align incentives – tax rebates & utility programs

A. Majumdar , “Reducing Energy Consumption in Buildings,” Testimony to US Senate Energy & Natural Resources Committee (SENR), February 26, 2009

Cost & Finance• Upfront cost, financing, payback

period– Zero-net building at zero-net cost over X

years

• Energy service performance contracts– Bank financing– Take cut from energy savings

• Tax policy (rebates, cost of capital)

Stock Market

Taxes

Energy Efficiency Projects

Real Estate Investment

Trusts (REITs)

Public Capital

Return 2

Return 1

Project Finance

Corporation

Pass through tax structureLowers cost of capitalPublic capital expands investor baseGenerally higher rate of return

Whole Building System Benchmarking and Incentivizing

kWh/m2-yr

Office Building

kWh/m2-yr

Hospitals

Incentivize

Utility Decoupling & Energy Efficiency Standards

D. Steinberg and O. Zinaman, “State energy efficiency resource standards: Design, Status & Impacts ,” NREL Report (2014)

Summary• What is the signal – price or

regulation?• Technology, regulations, economics,

finance and behavior/decision making – each necessary, but not sufficient

• Informed policies to align and combine them to achieve energy efficiency at scale