Energy efficiency is often referred to as the third fuel type, the other two being fossil fuels and renewable energy. No one definition or measure of energy efficiency is available. However, it is generally agreed that energy efficiency refers to changes that decrease the amount of energy used to produce a unit of a certain output, for example GDP, a production process and so on.
One of the most commonly used measures of energy efficiency is energy intensity – a measure of energy consumed per unit of GDP where countries with a high value are very inefficient and countries with a low value are very efficient. The inverse of energy intensity, energy productivity, is also used to compare energy efficiency. Other measures used include carbon intensity (CO2 emissions per unit GDP), although this also reflects the fuel mix used as well as the energy consumed, and ‘negawatts’ – displacement of the equivalent amount of energy capacity in megawatts. Note that energy efficiency is different from energy conservation, which is a reduction in the total amount of energy consumed.
The US is the largest energy consumer in the world. Hence it is known as potentially the “Saudi Arabia” of energy efficiency, due to the potential size of the market and effects it can have. China and India are large, growing energy consumers and thus have a lot of potential for energy efficiency projects.
The advantage of energy efficiency is that it is the often the ‘lowest hanging fruit’, both in terms of meeting CO2 emission reduction targets and reducing energy consumption. It can be used by utilities to defer new investment in energy generation capacity and by electricity consumers to lower their electricity bills. Energy efficiency can be used to delay equipment upgrades and save energy costs.
The payback time for some energy efficient technologies can be less than two years, and much less than renewable energy technologies. In California it is estimated that in the first six months of 2001 the state’s energy efficiency measures saved up to USD 20 billion in projected costs for summertime rolling blackouts and USD 660 million in spot market electricity purchases.
Unfortunately, the sector has not attracted the same interest in the public eye as renewable energy projects. Due to confusion over payback times, lack of upfront capital and in the case of rented accommodation, there is no incentive for the tenant or landlord to invest in the technology.