McKinsey finds $700 billion lying on the ground

Written by adam


I had hoped to have time by now to actually read the splashy new McKinsey report on the potential for energy efficiency measures to slash the national carbon footprint. But I haven’t, so I’m just going to quote from the report’s main finding:

> Energy efficiency offers a vast, low-cost energy resource for the U.S. economy – but only if the nation can craft a comprehensive and innovative approach to unlock it. Significant and persistent barriers will need to be addressed at multiple levels to stimulate demand for energy efficiency and manage its delivery across more than 100 million buildings and literally billions of devices. If executed at scale, a holistic approach would yield gross energy savings worth more than $1.2 trillion, well above the $520 billion needed through 2020 for upfront investment in efficiency measures (not including program costs). Such a program is estimated to reduce end-use energy consumption in 2020 by 9.1 quadrillion BTUs, roughly 23 percent of projected demand, potentially abating up to 1.1 gigatons of greenhouse gases annually.

Put in somewhat plainer English, energy efficiency measures could allow the U.S. to meet the entire emissions reduction goal proposed by 2020 under Waxman-Markey, at a net savings to the economy. (The report doesn’t even consider energy savings from transportation, which could of course yield even further reductions.)

Getting there isn’t trivial, though. The report lays out a number of broad barriers to implementation that have so far hampered adoption of energy- and money-saving measures, as well as some potential strategies for pushing through these barriers. Very briefly, these strategies boil down to:

1. Find financing mechanisms that get energy efficiency projects off the ground
2. Remove regulatory roadblocks and coordinate policy at national and regional levels
3. Foster innovation in the development and deployment of new efficiency measures

Energy efficiency is usually presented as a big freebie, a prize that’s just there for the taking. But that’s probably the wrong way to think about this stuff. In a competitive economy, you don’t get to choose to be inefficient. Inefficient enterprises fail. Far from a freebie, energy efficiency is something we’re going to have to get serious about if we want to keep up.

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  1. Jesse

    As someone who works in the industry as an engineer conducting energy audits and developing efficiency measures, there is another barrier to implementation that is often overlooked: getting the people who actually operate buildings to buy in to efficiency.
    A common example is a building owner has installed a complex temperature control system, only to have a worker decide its too hot and override the thermostat controls. Or for an inexpensive sensor to break, rendering the system inoperable, and nobody replaces it, because they don’t know what it does.
    The lack of efficiency in buildings is a demonstration of how the invisible hand of the market can fail. I’m sitting in an office right now that is not using high efficiency fluorescent lighting, even though the payback on those types of improvement measures is usually under one year (I keep them switched off because of my nice big window with natural light). Forget about money on the ground, that’s like somebody trying to put money in your pocket and you punch them in the groin.

  2. Chad

    I have to agree. The fact that I am wearing my lab coat in order to stay warm DURING THE SUMMER tells you how far we are from where we should be. My lab area was 58 degrees yesterday.
    Oh, and our facilities are managed by major company that brags about how much energy it saves and how green it is.

  3. James Shelton

    Yes, I would like to feel comfortable in shorts at work in the summer and sweaters in the winter. It would be easier to talk a walk outside at lunch in the same clothes.

  4. Shannon K

    Oddly enough, it’s not just private owners ignoring the green opportunities. I’ve noticed recently that public projects (new paving, for example) are done without considering the environmental impact. It seems to me like the private sector is looking for a leader and after all the public funds invested in learning about green technologies, it seems like public projects should be the first to demonstrate the benefits. I live in Portland for goodness sake! We’re supposed to be the leaders in green technologies but when I look around, I see how far we’ve still got to go.

  5. Tom

    McKinsey Report sounds like a grant proposal waiting to happen.
    I agree with Jesse. Having been brought up in a maintenance environment, I project into costs of operation, not glizzy up front promises.
    The local level is where changes will occur, where the capital buck meets the SOP expenditure, and, lest we forget, the bottom line.
    Who will fund capital expenses for the sake of energy?
    Surely when oil costs are up to $ 150/barrel and $ 5.00/gallon, the economic ripples will generate many changes. But also, then, costs of changes will go up too.
    What percentage gain will a small business earn by such expense? And will it be feasible(fiscally possible) in a depression or recession environment?
    I drive a 1986 Mercury Marquis. No capital expense, some repair expense, moderate mileage, according to national stats. Who will pay me to purchase a new, 30 mpg car, when savings on fuel amount to two payments/year?
    I want to go solar at home & work, but capital expense is $ 20,000 +or-. No payback imminent in that investment, as it will require approx. eight years to amortize.
    When oil is $ 150/barrel and gas $ 5.00/gallon, changes will be attractive. But so, too, the costs will rise in step.
    National – blah, blah. Regional – blah, blah. Local(with proper funding) – can do.

  6. Greg

    Additionally, many many people I know are not even remotely interested in energy efficiency. They don’t care about pollution or waste. Even if you take the ‘global warming’ debate out of the equation, it is scary the number of people who just do not think about resource and energy consumption or waste.
    Trying to sell the idea of environmentalism to folks like them fails miserably. These folks only listen to their wallets. When increased costs come from switching infrastructures or innovating technologies to prevent future problems, these folks don’t care. They only care when they’re faced with $5.00/gallon gas.
    While increased efficiency could lead to savings, those savings are going to be realized over time and have little immediate impact to folks that don’t embrace environmentalism. And, I’m sad to say, I believe this encompasses the majority of people on the planet.

  7. Tom

    Right, Greg! I must not care…..
    I live in a passive solar house, farmed organically for fifteen years, started the first organic landscaping company in North Carolina, founded the compost industry here, was the first commercial composter in the state, founded a large water quality group still in existence.
    OH, and I happen to care about my fellow citizens who have lost their jobs, have no income, no promise of work, and who pay taxes spent frivolously to make us spend money we don’t have on luxuries we may or may not want. Luxuries being things beyond food, shelter, clothing for our families.
    Yes, in that light, I don’t care.
    It’s time to register what the “environment” truly is. Is it the people with whom we live or the things we own that defines the human race? Is it PC or is it ‘Potentially Cares?’

  8. Greg

    Notice I said, “..many many people I know,” which was not to suggest anyone here. I merely am pointing out that we all have a long struggle ahead of us to bring people into the fold.

  9. Barbara Appelbaum

    More people should support the USGBC – the United States Green Building Council – they draft standards for sustainability in new construction and also for the maintenance of existing buildings. They certify new buildings and also give courses and certify various professional groups. The New York Chapter is currently providing a course for 1000 building managers. I have been told by real estate people that many prospective renters both commercial and residential are asking for USGBC (LEED) certification.
    There are also several excellent websites devoted to the green movement in major corporations, as well as those that deal with small businesses and homes. There may be a lot of people out there who don’t care, but given the polls I see, their numbers are shrinking. It may be that many Americans only respond to financial considerations – if so, everyone on this list should be spreading the word: Save money by conserving energy!!!

  10. Dorothy Allen

    The biggest and perhaps ONLY obstacle to the implementation of energy efficiency in the electric power sector is the existance of the IOUs, or the investor owned utilities, whose business model is based on ever increasing use of electricity by customers. There are two ways that this can be remedied, one is to base the electric tariffs or rates on other measures of IOU performance than the sale of kilowatt hours, and second making these private businesses public.
    Another issue not on the “green” radar screen of general public is the need for individuals, business and especially industry to exmine not just their energy use but also the supply chains. The emergence and standardization of life cylce anaylsis is critical to allow everyone to make the right purchasing choices. The knowledge of embedded carbon in materials and products could drive innovation in manufacturing and market forces through informed consumption.

  11. Barbara Appelbaum

    What I am seeing here (in New York City) is more and more public displays of going green. Yesterday I saw a large food service supply truck that had a display on the sides about its sustainable food containers – “plastic” made out of corn, etc. And today a fruit stand that has a salad bar had a new dispenser for “green” paper napkins and utensils. When these things seep into the main stream, they make people (even non-believers) feel that greening is an inevitable part of life. The market speaks! Many things – like women doctors and inter-racial couples – used to make some people intensely uncomfortable, but at a certain point, there they are, they seem normal, and everyone gets over it. It’s not like the battle is won, but acceptance in everyday life, particularly in our capitalism-driven culture, is a prerequisite to radical change.

  12. Wayne Dickson

    The suggestion that we need to remove regulatory roadblocks makes me nervous. We’ve all seen how well that worked out in the financial industry. What roadblocks? How will they be removed without leaving gaps that can be exploited by unscrupulous predators?
    Incidentally, I just retired from a university. In my department everyone, I’m sure, publicly supports wind energy, solar energy, etc. But I couldn’t convince them of the helpfulness of turning off the lights when leaving a classroom. We need to think both Big and Small.

  13. David

    Regarding the capital expense, several companies offer leases. This allows people to lower their electric bill and go green without the expensive investment in equipment. Check out

  14. Alex

    I must reluctantly agree. I live in Seattle, and while many people make a concerted effort to make better choices for the environment, there are a surprising number of people who will not walk the extra 50 feet to place an item in the compost or recycling rather than the garbage (let alone make any bigger changes to their lives).

  15. Scott

    Having looked at the report, I think the key points it raises are aligned with those raised in the comments. If standby power on all devices dropped to the best-in-class of existing products, you get a big chunk of savings. But how do you get there? Spend $10 billion on advertising Energy Star only to have half the population ignore still ignore it? Probably not. Implement a phased National mandate that doesn’t raise too much manufacturing lobbying opposition? Maybe that would work. Similarly, changing the building code likely has billions in opportunity.

  16. dlmchale

    Hello all, I was pleased yesterday to find Wahoo’s had converted to recycled cardboard containers for take out. I like eating there, but not the molded ‘to go’ death boxes; they were making me eat the entire double combo, packing on the pounds. It’s my money that makes it go; locally. I like a double expresso in the afternoon, but not pleased with Starbucks plastic lid; so I just reuse the cup and stick and say no when the server wants to put on a new plastic lid. Saves me 10 cents a cup. When the cup gets old, I tear it up and put it in the paper recycle bin at home (I did put them in the composter but they just took to long to break down). A friend of mine in the Surfrider Foundation commented at the recent hearing regarding the extention of the SR241 that would go through a State Campground. He said: “… this is not an inovative plan (in commenting about the developers overall construction, SEIR mitigation and preservation plan), or even a good plan it is a lazy plan.” That’s us in a nut shell, I’m thinking. Star Energy is great if we make GE to do a ‘cash for clunkers’. To have SCE provide the incentives they just get to pollute and use the offsets of the Energy Star rebate plan coupled with wind and solar in the new Cap and Trade: ACES plan. Then the consumer gets a 2 cent Kw increase and no ones jumps. Is there green balance here or just plain capitalism? Central delievery of our energy is doomed to higher costs, not because oil prices will peak, but because its much eaiser to flip the ‘ciggie’ out the window and have someone else pick up the trash or someone else will take the trash out, thinking that got us here already. “not a good plan, a Lazy plan.” We are good at these things. Friends; local, decentralize has to be in your mind when you go into the voting booth because as peak demand comes on line locally – when the a/c kicks on and it’s 107 in the shade, it doesn’t matter if the stat is set to high or to low, the power is going to be sent down a long grid line to that device to keep our laziness-this is what has to change.