Energy Economy and the Environment

Power Efficiency Guide

Ultimate Guide to Power Efficiency

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An Introduction

Energy development is a barometer of economic progress. The substitution of energy for human power in the performance of agriculture, industry and domestic services has contributed to the process of economic growth. The increased availability of energy services stimulates economic activity along different stages of the development process. Economic development accelerates when a society uses energy in new forms, adaptable to a range of needs based on its social and cultural characteristics.

Understanding energy demand and how efficiently energy is used is of interest for policy makers as both aspects influence economic development, environment and sustainability. Throughout history and across the globe, energy utilization has followed a highly uneven process and has demonstrated dramatic variations in energy sources, use and growth rates. For example, in 2000, an average member of the American economy used hundred times more energy than his counterpart in Bangladesh. While in some countries, the per capita energy consumption is increasing rapidly, in others it has shown a decrease.1 In developing countries, fuel wood stoves can be found alongside nuclear reactors. Likewise, space vehicles coexist with bullock carts.

1 McNeill et al. 2001.

The world's future energy path is uncertain. At the beginning of the 20th century, nuclear energy was unheard of, but, today, more than 400 nuclear power plants are in operation worldwide. Similarly, the present-day society cannot imagine life without petroleum products and electricity. However, the environmental implications of increased fossil fuel use and the risk of climate change in particular, will place limits on the use of fossil fuel resources. The progressive exhaustion of the easily accessible supplies will cause significant price increases by the turn of this century.

The magnitude and speed of climate change is likely to be significant, but not completely certain. Increased greenhouse gas (GHG) concentrations are very likely to raise the Earth's average temperature, influence precipitation and some storm patterns as well as raise sea levels.2 However, the amount and speed of future climate changes will ultimately depend on: whether GHGs and aerosol concentrations increase, stay the same or decrease; how strongly the features of the climate (for example, temperature, precipitation and sea level) respond to changes in GHG and aerosol concentrations; and how much the climate varies as a result of natural influences (for example, from volcanic activity and changes in the sun's intensity) and its internal variability (referring to random changes in the circulation of the atmosphere and oceans).3 The fact is that the 10 warmest years in the instrumented temperature record (1861—the present day) have all occurred since 1990.4 However, the likelihood of deleterious impacts, as well as the cost and difficulty of adaptation, are expected to increase with magnitude and speed of the global climate change.5 The speed at which climate change is occurring and the uncertainty of the exact nature or timing of the impacts mean that a flexible and responsive approach to climate preparation will be needed.6

Faced with these challenges of climate change, economic development and sustainability, the future of energy and environmental policies have been a hot topic among policy makers and academics. Debates continue on the best energy source, with considerations of availability and cost of the resource, efficiency of production, public safety and health. Policy makers grapple with these decisions as well as with the consequences of use of different energy sources. Environmental concerns about global warming, acid rain, radioactive waste and other issues influence energy policies around the world. Understanding energy use in our society means understanding resources, their limitations and the environmental consequences of their use.

2 IPCC 2007d.

4 Forestry Commission 2005.

5 Stern 2007.

6 CCIG 2008; IPCC 2007a.

Increasingly, researchers and policy makers have begun to focus on the more efficient utilization of existing energy supplies to help meet society's energy needs. Depending on the system and user investigated it may be more economical to make efficient use of the existing energy resources and to reduce waste rather than to develop new energy supplies to meet growing energy demand. Energy efficiency (EE) has broader societal benefits in addition to reduced energy costs. More efficient utilization of energy often leads to improved productivity and competitiveness in business and helps avoid or reduce environmental impacts associated with development, combustion and delivery of fossil fuels. Yet, policies or programmes to increase EE often face daunting institutional, behavioural, financial and cultural barriers to their adoption. Consequently, researchers and policy makers are often confronted with an 'energy efficiency gap'7 between the potential for energy savings and what is being realized in practice.

The aim of this book is to provide a systematic framework for students, policy makers, academics and others interested in the efficient utilization of energy. The topic of EE is approached with the aim of understanding the barriers to and the drivers for EE investments. Particular emphasis is laid on the mobilization of private capital and the commercialization of energy-efficient technologies (EETs). This private sector perspective is critical in order to reduce the burden on state budgets, which are creaking under the weight of enormous public expenses. Also, a business perspective on EE is necessary to tap the dynamism, innovation and power of markets for promoting environmental concerns.

The environmental implications of EE investments as potential drivers for improved efficiency are a key focus of this book. The goal is to disseminate information on the development of policy instruments for promoting EE investments that can begin to bridge the gap between EE potential and practice.

An attempt has been made in this volume to include the whole gamut of issues related to EE, development and environment. The introductory chapter ventures into the world of energy and EE by providing background, as well as context. Historically, supporters of energy efficiency defended the need for rational use of energy primarily on the basis of economic efficiency. However, the emergence of evidence of energy use contributing to climate change reinforces the case for EE. Chapter 2 on the great climate debate presents an independent assessment of the global level arguments both in favour and against climate change in terms of its causes, outcomes, policy initiatives, mitigation and adaptation methodologies. Chapter 3 examines a

Koopmans and te Velde 2001.

climate policy, which encourages win-win situations for both the environment and the economy. EE alternatives are considered as win-win opportunities for greenhouse gas mitigation. To familiarize the readers with the fundamentals of EE, Chapter 4 deals with the concept and unravels the complex linkages in terms of technology, policy, stakeholders and politics. A critical evaluation of energy efficiency is presented in Chapter 5 through an assessment of the benefits and drawbacks of adopting EETs and approaches. This assessment is made from the perspective of all stakeholders, namely, government, consumers, society, business, and so on. If the benefits of adopting EE are enormous, then, naturally, one is tempted to ask why this is not happening. In attempting to resolve this issue, Chapter 6 presents the theory behind the barriers that prevent and the drivers that promote the adoption of EE measures. In addition, a theoretical framework is provided to causally relate EE investments and existence of barriers. Chapter 7 pre-sents a discussion on the implications of international laws on climate change, environmental pollution, intellectual property rights, and so on, in the commercialization of EE. The benefits of EE cannot be realized until a large-scale diffusion of efficient technologies takes place. However, this can happen only if EE attains commercial status and spreads without any programmatic support. Chapter 8 discusses these aspects and presents a collaborative approach to achieve the goal of commercialization of EETs. A critical evaluation of financial mechanism is presented in Chapter 9 through an assessment of methods, channels and approaches in financing EE. Chapter 10 presents the role of multilateral institutions in promoting the adoption of EE measures.

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