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Lack of incentives, barriers to market keep U.S. energy savings in low gear -- panel

Nathanael Massey, E&E News
Published: Wednesday, August 1, 2012

The United States continues to lag behind most other developed countries -- and a number of developing countries -- in terms of energy efficiency, a panel of experts said yesterday.

Lack of financing options, barriers to energy markets and the incremental growth of the housing sector have all impeded the spread of energy-efficient technologies, despite the potential for significant profits and widespread market interest, according to the panel, which convened yesterday at the invitation of the Congressional Renewable Energy and Energy Efficiency Caucus.

"Our international competition is beating the pants off us," said Dick Munson, senior vice president for the company Recycled Energy Development (RED). "They're capturing heat, they have less waste and, therefore, they're more productive, more competitive."

Americans are projected to consume 9 percent more energy by 2035 than they do today, said Robert Mosher, director of government relations for the Alliance to Save Energy, which co-sponsored the event. While that increase may be dwarfed by the expected growth of energy consumption in the developing world -- China alone expects to double its levels in the next two decades -- it falls far short of the potential energy savings available to the American public and industry.

A recent report by Deutsche Bank and the Rockefeller Foundation says those savings could amount to as much as $1 trillion over the next 10 years, equivalent to a 30 percent reduction in energy.

One of the principal barriers to tapping that potential lies in the upfront cost of installing energy-saving technology or retrofitting existing structures, said Jordan Doria, manager of stakeholder engagement at Ingersoll Rand/Trane.

"It's not that [energy efficiency] doesn't provide an attractive return on investment -- it does. The problem is, people don't want to wait to recoup those savings," he said.
Few incentives for long-term investment

A federal or state financial mechanism that pays for installation costs up front, and can then be repaid over the course of the installed technology's lifetime, would create incentives for consumers to move toward energy efficiency, he said.

A similar problem exists at a larger scale among industries, said RED's Munson. Although many industries create excess heat energy that could be converted into electricity, there's little incentive to do so without a market for that energy.

"[Industries] can't sell it retail because utilities have a monopoly that doesn't let me sell it across the street," he said. "They could try to sell it wholesale, but the regional grids only allow me to sell my energy on a contract basis the day ahead or an hour ahead, and I need a long-term contract" to receive financing from a bank.

Programs to award long-term energy-supply contracts to participating industries have already been enacted in California and the Canadian province of Ontario, he added.

Despite an absence of federal incentives, cogeneration -- the use of a heat engine to provide both electricity and useful heat energy -- accounts for some 12 percent of U.S. energy output, more than solar, wind, geothermal and biomass energy combined.

After receiving a boost from the American Recovery and Reinvestment Act, the energy efficiency sector is in a period of gradual decline as it comes into balance with the market. Investment in the sector has remained fairly steady, unlike renewable energy markets, which have oscillated widely in the past several years.

One sector that continues to perform strongly is smart grid technology, said Ted Hesser, energy smart technology analyst for Bloomberg New Energy Finance. Over the last four years, the industry has grown 45 percent compound annually, he said.

That growth is expected to taper off to around 12 percent -- still an "impressive level," he added.