McKinsey Report Says Energy Efficiency Could Save $130B/Year

By Sari Krieger

July 30, 2009

Management and consulting firm McKinsey & Co. released a report Wednesday saying the U.S. could reduce non-transportation energy consumption by 23% by 2020 through energy efficiency measures, but only if the U.S. can overcome significant barriers.

“Energy efficiency should be elevated to a national priority,” said Kenneth Ostrowski, a senior partner at McKinsey, in a statement. “The potential to reduce the energy we waste is compelling.

“The report says the U.S. could reduce energy consumption from 36.9 quadrillion British thermal units in 2008 to 30.8 quadrillion BTUs in 2020, saving 9.1 quadrillion BTUs. The firm says in its report that this reduction in energy consumption could yield $130 billion in annual energy savings and reduce greenhouse gas emissions by 1.1 gigatons annually.

The report says such a reduction would cost $520 billion in upfront investment for efficiency measures.

Neil Suslak, managing director at Braemar Energy Ventures said in an email to Clean Technology Insight that his firm has been heavily focused on energy efficiency investments.

“Energy efficiency has always been the low hanging fruit on the technology side since one can capitalize on the investment that has been made in existing infrastructure and fine tune the resources to reduce overall energy consumption and emissions,” Suslak said. “At Braemar, more than half of our portfolio and some of our most successful investments are investments in efficiency which includes demand response and smart communications for the power grid, energy efficient lighting, energy storage and improving the energy content of fuel for power plants. It remains an area of great interest for us.”

The report focuses on using existing energy efficiency measures like weatherizing homes, upgrading lighting or using waste heat recovery technologies. But one of the main challenges the U.S. faces in achieving this reduction is the fact that these efficiency measures require changes at millions of locations and billions of devices, the report said.

Also, energy efficient technologies can be more expensive upfront and require an understanding and acceptance of payback time, the firm said in the report.

The report calls for a national energy efficiency strategy from local to national levels; the creation of alliances between consumers, utilities, governments and manufacturers; and encouragement of innovation to create new technologies.

“Increasing our nation's energy efficiency is an economic, environmental and national security imperative that requires bold public policy,” said Rick Fedrizzi, president, chief executive and founding chairman of the independent non-profit U.S. Green Building Council, in a statement. “As Congress debates climate change legislation, these findings make an overwhelming case that we must dramatically strengthen provisions that support and scale green building.”

The USGBC was a co-sponsor of the report, along with Austin Energy, the Department of Energy, DTE Energy Co., Energy Foundation, the Environmental Protection Agency, Exelon Corp., Natural Resources Defense Council, Pacific Gas & Electric Corp., Sempra Energy, Sea Change Foundation and Southern Co.

The new report builds on Washington, D.C.-based McKinsey's 2007 report that showed energy efficiency measures can often save money per ton of carbon dioxide saved, whereas many renewable energy technologies cost money to cut carbon dioxide emissions.

Source: Dow Jones Clean Technology Insight