Study Reveals U.S. Could Reduce Energy Costs by $1.2 trillion

July 30, 2009

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McKinsey & Company released a new research report that shows how the United States can save more than $1.2 trillion in energy costs, which is well above the $520 billion investment needed to implement energy-efficiency measures through 2020. According to the report, the U.S. could reduce annual non-transportation energy consumption by roughly 23 percent by 2020 and reduce greenhouse gas emissions annually by 1.1 gigatons.

The report, Unlocking Energy Efficiency in the U.S. Economy, covers several strategies for energy savings across residential, industrial and commercial sectors, along with a significant set of barriers, which include incentives and financing, codes and standards and deployment resources.

According to the report, the residential sector accounts for 35 percent of end-use efficiency (33 percent of primary energy potential); the industrial sector accounts for 40 percent (32 percent of primary energy potential), and the commercial sector accounts for 25 percent (35 percent of primary energy potential).

The study indicates that using existing products and practices, such as weatherizing homes or installing combined heat and power systems, could result in significant savings by 2020, however, there are number of barriers, including the up-front cost, a fragmented array of products covering hundreds of thousands of buildings and billions of devices, and a lack of awareness that efficiency exists as a “fuel source” itself, McKinsey consultants said during a press conference, reports CNET news.

According to the study, individual homes and businesses could save about 28 percent off their current energy spending, while the industrial sector could save 20 percent, reports CNET News. McKinsey partner Ken Ostrowski said in the article that although the up-front investment would be $50 billion a year, about five times the investment today, it will pay back in environmental benefits and economic cost returns.

Ostrowski also noted in the CNET article that standby power alone is 6 percent to 8 percent of the total, and putting in place efficiency standards to cut standby power could result in energy savings equivalent to the annual electricity consumption of the Netherlands.

“The McKinsey report reveals new possibilities for energy efficiency, and will be instrumental in engaging consumers, businesses and everyone else to cut energy consumption, reduce harmful emissions, and save money on electricity,” said EPA Administrator Lisa P. Jackson, in a statement.

Five key strategy highlights from the report include:

Recognize energy efficiency as an important energy resource that can help meet future energy needs while the nation concurrently develops new no- and low-carbon energy sources.
Formulate and launch at both national and regional levels an integrated portfolio of proven, piloted, and emerging approaches to unlock the full potential of energy efficiency.
Identify methods to provide the significant upfront funding required by any plan to capture energy efficiency.
Forge greater alignment between utilities, regulators, government agencies, manufacturers, and energy consumers.
Foster innovation in the development and deployment of next-generation energy efficiency technologies to ensure ongoing productivity gains.

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Reader Comments

It’s an interesting report, but concludes that the reductions are impossible to achieve. Every person in American needs to drastically change their habits and make a major investment. IMHO, it’s irresponsible for scientists to publish a report with unattainable forecasts.

LizR | July 31st, 2009

1.2 trillion can be easily tripled by applying twice the code insulation ONLY for pennies more. Our codes are sadly still pre 70’s numbers.
Our projects lately reduce their energy needs 75% (to 95% with Geo and PV)with very minor cost addition to general construction budget.
From space programs and oil exploration one principal aspect is found a must. Reduce the load first, then apply necessary minimal climate controls.
Comfort is one largest payback, and our clients are the happiest ones in comparison to those who insist on cutting cost and insualtion to save on first cost.

Tapani Talo | August 2nd, 2009

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