Does a cleaner environment matter to you? Is return on investment something you care about?
Since 1997, utility demand-side investments such as efficient lighting programs, heat recovery systems and advanced electric motor drives have yielded returns for consumers that far exceed the cost. Since 1997, every 3 cents worth of conservation investment by utilities has reduced demand by 1 kilowatt-hour. Electricity costs about 9 cents per kilowatt-hour. Thus, for every 3 cents worth of conservation investments, consumers avoid paying 9 cents and thus obtain a 6-cent gain.
Oddly, Washington has done almost nothing to support and develop such conservation investment programs, even though they also provide immediate reductions in carbon dioxide and greenhouse gas emissions, lessen our dependency on foreign sources of energy, and leave everyone with a little more coin.
Why is there no federal support? Because Washington understands the impact of programs that involve tax credits, subsidies and government expenditures that increase energy supplies rather than reducing demand. Support for these programs provides paybacks for specific industries. Unfortunately, conservation initiatives provide benefits to all, yet not to any particular group.
Has the situation always been this way? No. In the 1970s, prices were high and energy security was a pressing issue as Middle East oil supplies were at times curtailed. The national government responded by promoting energy conservation on several fronts such as tax credits for domestic conservation investments, energy-use labeling of appliances and automobiles, and frank talk about the value of saving energy for economic and security reasons.
By 1985, U.S. imports from OPEC fell to 1.8 million barrels per day from a peak level of 6.2 million in 1977, a decline of 70 percent.
Remember President Jimmy Carter and those sweaters? We laughed at him, but guess what – it worked. According to the Department of Energy’s Annual Energy Review, from 1978 to 1982, energy consumption per household declined by 26 percent, and in the major consuming region in the nation, the Midwest, it declined by 32 percent.
From 1973 to 1982, industrial consumption of natural gas declined by 32 percent. The industrial sector is the major user of this most environmentally benign hydrocarbon. During the same period, fuel consumption per vehicle declined by 19 percent.
Why did things begin to change in the 1980s? One reason is that economists occupying the newer, more politically focused think tanks deconstructed the idea of a market involving the interaction of supply and demand to emphasize supply rather than demand – an approach known as supply-side economics. Also, energy prices declined significantly during the 1980s and 1990s while energy-intensive products were increasingly obtained from overseas markets. Thus, energy expenditures became a decreasing proportion of gross national product. Consequently, initiatives to conserve or reduce demand were ignored.
Will the new Congress change things? If Republicans pick up the beat sounded by some Democrats, the answer is clearly yes. If Republicans ignore the issue, then conservation initiatives may face opposition from such important gatekeepers of energy legislation as House Energy and Commerce Committee Chairman John D. Dingell, a Michigan Democrat who is a big supporter of a federally funded oil refinery reserve and naturally would want this program near the top of the political agenda. However, the Senate Environment Committee, headed by Democratic Sen. Barbara Boxer of California, and the Energy and Natural Resources Committee, headed by Democratic Sen. Jeff Bingaman of New Mexico, appear ready to support conservation and energy savings targets.
Other recent developments have also been positive. Philips, a major producer of appliances, is lobbying government, producing TV commercials and very actively promoting the benefits of compact fluorescent lighting. Philips has a plan to promote sales of 25 “green flagship products.” Other major producers of energy appliances, such as General Electric Co. and Siemens AG, are in step with Philips in promoting energy saving. Wal-Mart has joined the bandwagon, vowing a major push to persuade its customers to purchase compact fluorescent bulbs.
Six days after the November elections and after years of inaction, the Department of Energy agreed in a court settlement to boost energy-efficiency requirements for almost two dozen appliances. Also, state programs such as New York’s “Energy Smart Loan Fund” and “Efficient Vermont” are being actively promoted this winter.
Will these pro-conservation developments lead to a major shift in Washington’s normal approach to our energy dependency? Or will we stay entrenched in the known comforts of energy dependency and legislation written by lobbyists supportive of particular groups? The smart money may be on the latter, but there will be more money and security for everybody if we give conservation another whirl.
John H. Herbert, a former senior economist at the U.S. Energy Information Administration, is a consultant on energy issues and the author of “Clean Cheap Heat.” His e-mail is email@example.com.
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