Center for Energy, Development, and the Global Environment

DUKE University

October 6, 2010Durham, NC

Brian T. CastelliExecutive Vice President

Programs and Development

PathwaysPathways to to

Energy EfficiencyEnergy Efficiency

What is the Alliance to Save Energy?

- Non-profit organization headquartered in U.S.; operations world-wideNon-profit organization headquartered in U.S.; operations world-wide

- Led by Led by Senator Jeanne Shaheen (D-NH) Senator Jeanne Shaheen (D-NH) and and Peter Darbee, President and Peter Darbee, President and CEO of Pacific Gas and ElectricCEO of Pacific Gas and Electric

- Includes 15 Members of Congress – Bi-Cameral; Bi-PartisanIncludes 15 Members of Congress – Bi-Cameral; Bi-Partisan

- Also includes environmental, consumer, and trade associations heads, state Also includes environmental, consumer, and trade associations heads, state and local policy makers, corporate executivesand local policy makers, corporate executives

Working with and Across All Sectors of the Economy

170 companies, organizations, and institutions in Associates Program170 companies, organizations, and institutions in Associates Program Associates Program membership represents all economic sectorsAssociates Program membership represents all economic sectors Initiatives underway in research, policy advocacy, education, technology Initiatives underway in research, policy advocacy, education, technology

deployment, market transformation and communicationsdeployment, market transformation and communications

Features of the Global Energy Market

Tight Supplies Growing Demand Limited Spare Capacity Heightened Geopolitical and Investment risk Higher Prices Climate Concerns

……an an

UNSUSTAINABLE UNSUSTAINABLE TRACKTRACK

CLIFF CLIFF AHEADAHEAD(sorry)(sorry)

Source: Frank Verrastro, CSISSource: Frank Verrastro, CSIS

Energy use has a direct effect on…

Global Emissions: Energy use directly linked to

GHG emissions..U.S. example:

SecuritySecurity:Unchecked growth in energy demand can:Unchecked growth in energy demand can:• Accelerate fossil fuel depletionAccelerate fossil fuel depletion• Increase our reliance on foreign sources Increase our reliance on foreign sources

of energyof energy

Economy:• According to a McKinsey estimate: According to a McKinsey estimate:

“Business as usual” energy use will “Business as usual” energy use will waste more than $1.2 trillion between waste more than $1.2 trillion between now and 2020 in the U.S. alone – and now and 2020 in the U.S. alone – and this does not include transportation this does not include transportation energy consumption.energy consumption.

Why EE? Why Now? Global “Business as Usual” is Unsustainable

Global energy demand grows by 33 percent over the next 20 years, Global energy demand grows by 33 percent over the next 20 years, with coal use rising the most in absolute terms.with coal use rising the most in absolute terms.

Quadrillion Quadrillion btubtu

Why More EE? Why Now?Energy Use is a Global Climate Issue

China, 19%

Russia, 6%

Japan, 4%

India, 4%Western Europe,

13%

, 0

Others, 32%

US Other Sectors, 13%

US Buildings, 8%

Share of Global Energy-Related CO2 Emissions by Country (2005)

Source: Energy Information AdministrationSource: Energy Information Administration

As an energy resource, efficiency is: CHEAPER- Each $1 invested in Energy Star program = $75 in energy

cost savings and $15 of investment in new efficiency technologies

QUICKER- In 2001, California cut peak electricity use by 10% in less

than a year

CLEANER- “Negawatts” produce NO ENVIRONMENTAL FOOTPRINT

MORE SECURE- A “homegrown” resource!

Why Energy Efficiency?

2626

2828

3030

3232

3434

3636

3838

4040

4242

20102010 20152015 20202020 20252025 20302030

GtGt

Reference ScenarioReference Scenario

450 Scenario450 Scenario

End-useEnd-useefficiencyefficiency

Power plantsPower plants

RenewablesRenewablesBiofuelsBiofuels

NuclearNuclear

CCSCCS

52% of the required cuts in GHG emissions to achieve the 450 scenario is 52% of the required cuts in GHG emissions to achieve the 450 scenario is estimated to come from energy efficiency savings by 2030 (WEO 2009)estimated to come from energy efficiency savings by 2030 (WEO 2009)

World Energy Outlook 2009 450 Scenario

Energy Efficiency – America’s Greatest Energy Resource

44

Plenty of Opportunity for Improving Energy Intensity

Source: Frank Verrastro, CSISSource: Frank Verrastro, CSIS

Potential Demand Reduction with Industrial EE

Source: McKinsey & Company, 2007.Source: McKinsey & Company, 2007.

Energy efficiency is the most cost-effective carbon reduction optionEnergy efficiency is the most cost-effective carbon reduction option• Stated in an Independent Study by McKinsey & CompanyStated in an Independent Study by McKinsey & Company

Huge EE Potential RemainsHuge EE Potential Remains

Energy Efficiency Potential 40%Energy Efficiency Potential 40%

Adapted from McKinsey AnalysisAdapted from McKinsey Analysis

Energy efficiency should be fully considered in Energy efficiency should be fully considered in GHG reductions. All items to the left of the GHG reductions. All items to the left of the arrow represent “negative marginal costs”, i.e. arrow represent “negative marginal costs”, i.e. profitable investments profitable investments

Energy Efficiency: the 1st Fuel Average Utility Cost of New Electric Resources

0

2

4

6

8

10

12

14

16

EnergyEfficiency (a)

Wind Biomass Nat. GasCombined

Cycle

PulverizedCoal

Nuclear Coal IGCC

Lev

eliz

ed

Co

st (

cen

ts/k

Wh

)

w/o Carbon W/ $20/Ton Carbon

Source: UCS 2009 except (a) ACEEE 2009Source: UCS 2009 except (a) ACEEE 2009

Energy Efficiency: the 1Energy Efficiency: the 1stst Fuel Fuel

Many “Non-Price” BarriersMany “Non-Price” Barriers

Industrial Systems Energy Efficiency

Industrial firms tend to invest in process changes for EE and productivity – long term and high cost

Cross-cutting energy systems (motors-driven, steam, process heating) offer 20-50% savings potential

- Inefficient systems found in nearly every plant

- Near-term, lower-cost savings are from optimizing systems not components (only 2-5% savings)

Customize system energy efficiency for each site US DOE strategy since 1992 (BestPractices):

- Educate plant engineers – training, software, technical publications

- Industry partnerships

- Cost-shared plant energy assessments

U.S.: Save Energy Now

““25 in 10”25 in 10”

Drive a 25% reduction in Drive a 25% reduction in industrial energy intensity industrial energy intensity

by 2017by 2017

Saving 8.4 quads each year Saving 8.4 quads each year —— an amount of energy an amount of energy

equal to that consumed by equal to that consumed by CaliforniaCalifornia

How About Buildings?

66

• • Buildings consume 39% of all energy in the U.S., Buildings consume 39% of all energy in the U.S., including 72% of electricity, and account for 38% of including 72% of electricity, and account for 38% of carbon emissions.carbon emissions.

• • EIA projects that buildings-related CO2 emissions will EIA projects that buildings-related CO2 emissions will increase by 270 million tons by 2030, and 82% of the increase by 270 million tons by 2030, and 82% of the total projected electric load growth is from buildings.total projected electric load growth is from buildings.

• • Massive improvements in both existing and new Massive improvements in both existing and new buildings are needed at large scale & quickly.buildings are needed at large scale & quickly.

Commercial Buildings Sector – Where Are We Today?

““Net-Net-Zero”Zero”

Source: R. Anderson, NRELSource: R. Anderson, NREL

Thanks to Doug Gatlin, USGBC at Thanks to Doug Gatlin, USGBC at National Association of Realtors May 13, 2008National Association of Realtors May 13, 2008

The Business The Business BenefitsBenefits

The Business Benefits

Operating CostsOperating Costs Average Expected Decrease = Average Expected Decrease = 8%-9%8%-9% Main motivator for green in all sectorsMain motivator for green in all sectors

Energy UseEnergy Use Average Expected Decrease = Average Expected Decrease = 30%30%

Building ValueBuilding Value Average Expected Increase = Average Expected Increase = 7.5%7.5%

Operating IncomeOperating Income Average Expected Increase = Average Expected Increase = 6.6%6.6%

Occupancy and Rent RatiosOccupancy and Rent Ratios Increased Occupancy = Increased Occupancy = 3.5%3.5% Rent Ratio Increase =Rent Ratio Increase = 3% 3%

Thanks to Doug Gatlin, USGBC at Thanks to Doug Gatlin, USGBC at National Association of Realtors May 13, 2008National Association of Realtors May 13, 2008

Example Green Building Savings

Thanks to Doug Gatlin, USGBC at Thanks to Doug Gatlin, USGBC at National Association of Realtors May 13, 2008National Association of Realtors May 13, 2008

Municipal EE Challenges and Opportunities

Water systems - Aging infrastructure Leaky distribution systems

- System inefficiencies (pumps, motors)

Municipal infrastructure and operations- Inefficient buildings (housing, government offices, schools)

- Lack of energy/water metering

- Institutionalized purchasing of energy-inefficient equipment

- Inefficient street-lighting

CASE STUDY: Fortaleza, in Brazil’s Arid NE

PROBLEMS • • Many households not connected to service

•• Many inefficiencies: pumps, O&M, system management

•• Utility couldn’t afford energy costs

PROJECT: automated controls on pressure & pumping

improved data collection & analysis improved motor efficiency (replaced or re-wound them)

RESULTS • • 88 million kWh saved over 4 years

• • …while adding 88,000 new connections using same amount of water

• • $2.5 M saved every year w/investment of only $1.1 M

• • Payback: 7 months

Deploying EE at Scale Requires: A Foundation of Public Policy

To encourage technological innovation

To gain foothold in To gain foothold in marketmarket

To achieve market To achieve market penetrationpenetration

To lock in savings for To lock in savings for consumers and businessesconsumers and businesses

Key Strategies for EE Deployment1) POLICY

Improve Legal & regulatory frameworks…

Create incentives for promoting energy efficiency

Open the energy sector to private participation

Promote metering and DSM measures

Eliminate subsidies ~ Energy tariffs should recover costs ~

Modernize energy standards & technical regulations

Promote energy efficiency services market

Key Strategies for EE Deployment2) CAPACITY and AWARENESS

• Strengthen national agencies for: setting energy efficiency targets developing programs ensuring implementation• Train energy managers and auditors• Cultivate partnerships among: energy consumers, service providers, financiers• Provide Information: test EE models, document case studies, prepare guidelines, advocate.

3) FINANCING - Initiate mechanisms, such as… loan funds vendor credits leasing credit guarantees carbon finance

Why is all this important? We only have one World…

2828

Thank you!Thank you!

Brian T. CastelliBrian T. CastelliExecutive Vice PresidentExecutive Vice President

bcastelli@ase.orgbcastelli@ase.org202-857-0666202-857-0666www.ase.orgwww.ase.org