A new denier myth is born, this time for energy efficiency

The Breakthrough Institute has midwived another denier myth with Jesse Jenkins’ Michael Shellenberger’s introduction to a blog post, “Why Energy Efficiency Does Not Decrease Energy Consumption.” The sensational headline caught my eye, and I found another unfortunate example of BTI’s sometimes incendiary approach to being provocative.

Will the earth grow brighter as we save energy?

AND … the spin advanced by BTI here completely undermines their “idea“: renew the economy, reduce global warming, and achieve energy independence by “Making Clean Energy Cheap.” So I am at a total loss as to why BTI would put a little spin into the denialist info-cycle.

Evan Mills of Lawrence Berkley Laboratory first noted the potential for a new study on the “rebound effect” to become a new tool in the climate denial arsenal of tricks on the Climate Progress blog, which resulted in The Economist acknowledging error and retracting some of the most alarming soundbites.

In the paper that sparked the debate, Dr. Saunders and his colleagues have put forward some worthwhile points. It is correct that as we save money through energy efficiency, that will free up income to purchase things that use more energy. As even the Heritage Foundation’s blog points out, “But if you are actually concerned with improving human welfare, it’s quite good news.”

(Of course, I tend to think of the Heritage Foundation as being concerned with improving shareholder welfare, but I digress.)

Sensationalism is a widely-acknowledged bias in media coverage, with new, counterintuitive research being one of the ways to increase reader interest in a story. But the sensational, counterintuitive  idea that energy efficiency doesn’t save energy (also expressed in The Economist), prompted a sharp rebuttal from the study authors: “Your amusing but hopefully tongue-in-cheek conclusions about the “greenness” of incandescent lighting would be, if serious, off-base and in our view potentially harmful.”

But really, have Dr. Saunders and his colleagues really proven that “Energy Efficiency Does Not Decrease Energy Consumption”?  And should the study authors offer that same rebuttal to Michael Shellenberger for his sensational headline? There are two reasons that people should be extremely skeptical of this ill-advised declaration: study method and industry practice.

Econometric models – vulnerable to garbage in, garbage out issues

The value of econometric models in evaluating the effectiveness of energy efficiency investments depends on data quality. Economists who favor this method have made several attempts to evaluate energy efficiency programs using these methods over the past couple of decades. For example, a recent discussion paper by Resources for the Future suggested that costs of energy efficiency programs were much higher than measured in regulatory proceedings or other direct reporting methods. However, it is our understanding that the RFF paper has not made it into peer reviewed publications because of these very issues which have been provided in peer reviews.

The basic problem with applying econometric study methods to the field of energy efficiency is that the systematic reporting of energy efficiency cost and impact data is severely deficient. In order to understand whether utilities are offering least-cost solutions in their energy efficiency programs, for example, SACE has resorted to conducting extremely tedious benchmarking with original source data.

The second problem is that the econometric findings can’t be replicated in the real world. Consider the counter-factual: if we *don’t* promote energy efficiency, will energy consumption be about the same as if we do?

How energy efficiency success is actually measured

The way that energy efficiency programs are operated and evaluated involves assuming a “measure life.” Installing that LED light bulb (thanks to an EE program) saves energy up to the point at which the customer would have installed that LED bulb anyway. Typical measure lives for something like that are 5-15 years.

Longer measure lives are credited to programs that involve modifications to infrastructure up front. For example, installing daylighting in a new commercial building, something that will save energy over the entire life of the building and something that would be impossible to install as a retrofit. A program that assists builders with this installation will result in energy savings that are typically rated at 40 years.

So to conclude that, “Energy Efficiency Does Not Decrease Energy Consumption,” one would have to find that the energy savings over the measure lives of that equipment are canceled out by additional energy use that would never have occurred if those energy efficiency measures had not been encouraged. This is very different than checking to see if the reduction in energy use by switching from a 100 watt bulb to a 10 watt bulb (for the same amount of light) is exactly a 90% energy savings, and if the study isn’t designed with an accurate understanding of how energy efficiency programs work, well, it won’t be a study of energy efficiency programs.

There are three ways that these measures help save energy. The first is direct – by saving energy in the sockets where the bulbs are replaced or the buildings where the unnecessary lighting is never installed. This is the primary area where “rebound” research has focused, and as Michael Shellenberger acknowledges, the increased direct use of energy in that same building tends to result in about a 5% reduction in the technical estimate for energy savings.

In their paper, Dr. Saunders and his colleagues seem to be saying that the upstream impacts of the financial savings for that building owner (and other beneficiaries) will be to increase consumption and thus drive overall economic consumption. Use less energy, buy more stuff (which needs energy to be made). Lighting points out a conceptual flaw in this otherwise persuasive model – energy savings is often a small percentage of the economic benefits of installing efficient lighting for many customers. One of the other significant benefits of efficient lighting is buying fewer lightbulbs. Use less energy, buy less stuff (which also saves energy). I’ve never seen an efficiency program that takes credit for this indirect energy savings.

The second is much smaller: reduced demand on the electric grid results in efficiency gains in transmission and generation (electricity is made and delivered a bit more cheaply for everyone). What Dr. Saunders seems to be saying is that the global reduction in energy costs will free up enough capital to invest in equipment that will use more energy. Here’s where we have to rely on econometric analysis, which can be very powerful, but only if the data and models have demonstrated an ability to reflect reality.

Maybe The Breakthrough Institute should read this book?

Maybe The Breakthrough Institute should read this book?

Market transformation is the third way that these measures save energy. It isn’t clear to me whether Dr. Saunders and his colleagues are engaging this topic directly. But the basic idea here is that by investing in energy efficiency, less wasteful technologies are adopted by the market in general more quickly.

It is really hard to see how accelerating the adoption of energy efficient technologies will be a zero-sum game. (Take it the other direction: Would we use just as much energy if we regressed to whale oil?) Isn’t rapid deployment of new clean energy technology the “big idea” that The Breakthrough Institute is trying to promote?

Make Clean Energy Cheap

Drive down the price of clean energy technologies with large-scale public investments in research, development, demonstration, and deployment.

– from The Breakthrough Institute’s “Ideas” page on its website

So if making clean energy cheap just means that we use so much of it that it’s not clean, then what’s the point?

Update: Subsequent to posting this blog, The Breakthrough Institute revised its post with attribution to “Breakthrough Staff” rather than Jesse Jenkins. I am advised that Michael Shellenberger, not Jesse Jenkins, wrote the introduction with which I am mainly concerned in this commentary, and have made appropriate revisions above.

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There are several confusing (to me, at least) assertions made here by John Wilson. Let me respond to three, with the up-front qualifier that I am only doing my best to interpret what he is trying to say.

First, while not presuming to speak for the Breakthrough Institute, I believe Wilson’s assertion that the “spin” advanced by BTI “completely undermines their ‘idea’” is without any foundation. In fact, I believe the Journal of Physics paper on solid-state lighting I co-authored, and the econometric analysis to which Wilson refers, both simply add greater urgency to the BTI message—climate change solutions must come from the development, on the supply side, of clean, cheap, abundant energy sources—physical energy sources. The news from this new analysis is that we cannot count on energy efficiency as the frequently-advocated “free” energy “supply” source many have hoped, and claimed, it will be. This moves me, personally, toward being a stronger adherent of the BTI “idea,” as I understand it.

Second, our “rebuttal” to The Economist was not a rebuttal of the idea that “energy efficiency does not decrease energy consumption.” Speaking for myself at least, it was a rebuttal to the (we suspect whimsical) claim they made that reverting to incandescent lighting represented a step forward. Our analysis showed that new lighting technologies will instead be a strong step forward because they will increase economic welfare (and particularly for the developing world). And although not explicitly stated in our letter to The Economist, a further implication is that to the extent energy consumption restriction policies become ever more necessary, energy efficiency gains will mitigate the economic blow. Energy efficiency gains are a good thing.

Third, Wilson makes two presumptions about the econometric analysis he refers to that are simply incorrect. First, it does not rely on reports of energy efficiency cost and impact data. Rather, historical energy efficiency gains are measured from what is arguably the most meticulously prepared and clean data set available anywhere, prepared by Dale Jorgenson and his colleagues at Harvard. These data, in themselves, contain no derived or reported estimates of technology gains of any kind. Second, to Wilson’s point that econometric estimates cannot definitively tell us what would have happened in the absence of energy efficiency gains, he is fundamentally correct. Unlike in science, we don’t have a “control” case against which to measure what would have happened had things been different. However, what this econometric analysis does is emulate the “with energy efficiency gains” and “without energy efficiency gains” cases, based on careful measurement of the underlying characteristics of the some 30 US economic sectors.

That is the best that can be done with econometrics—and by the way is what Wilson is essentially doing in making his verbal assertions based on his “measure lives.” And what the econometric analysis shows is that indeed his “counter-factual” of what would have happened in the absence of energy efficiency gains is a counter-factual that shows energy consumption would have been about the same as it actually was in the presence of observed energy efficiency gains.

It is becoming increasingly difficult to avoid the conclusion that energy efficiency gains cannot be counted on to provide the reductions in energy consumption many have hoped for.

Comment by Harry Saunders on September 30, 2010 1:35 am

Thank you Dr. Saunders for clarifying your positions on this.

If I interpret your comments correctly, you are saying that the RFF paper “does not rely on reports of energy efficiency cost and impact data.” That is simply incorrect, the paper states quite clearly that it is based on data from EIA Form 861, which is replete with data reporting problems for certain types of data, most notably inconsistency in reported costs and cumulative impacts. (Other data fields in EIA Form 861 appear to be reported in a generally consistent manner.)

Regarding your comments on the counter-factual, as you point out in your paper, there is a reasonable case to be made that “demand for light may be nearing saturation.” I think this level of uncertainty regarding the applicability of your findings to long-term forecasts should compel a more measured approach to the sweeping conclusions you urge your readers to draw from a study of one class of energy-using technology.

Again, I think your research points in some very important directions, and is a useful reminder that there is “no free lunch.” But this point has never been lost on serious analyses of global warming and energy policy solutions. The growth in demand for energy in developing countries is a major factor in global energy models, and is well-addressed in the IPCC syntheses. These studies all implicitly assume improving efficiency through technology gain, and make at least some adjustment for the economic rebound effects of the associated cost savings. Perhaps your point is that those studies do so imperfectly, and they require further adjustment. I have no quarrel with that, or even sufficient expertise to engage in that debate.

What you seem to miss, however, is that the way in which you and BTI have sensationalized your findings will suggest to many that energy efficiency programs offer no benefits, and perhaps should be abandoned. A key distinction here is the “natural” adoption of new, more efficient technology (which I think is the focus of your analysis) and the efforts to encourage more rapid development and deployment of energy efficient practices and technologies using public and private programs. My concern is that the BTI blog uses language and framing that suggest energy efficiency programs are ineffectual.

You may scoff, and encourage me to quote your statements to the contrary (e.g., “Energy efficiency gains are a good thing.”), but in our experience Mark Twain was right when he said “a lie can travel halfway around the world while the truth is still putting on its shoes.” And in venues where entrenched interests have much to gain from maintaining or even encouraging energy waste and inefficiency, the lie will travel richly clothed while the truth will be poorly shod.

In this case, the “lie” that energy efficiency programs don’t save energy does begin with thoughtful, serious research. But you and BTI have seriously misjudged how others will make use of the way you have framed this discussion. And considering that BTI styles itself as a “paradigm-shifting think tank committed to rejuvenating liberal thought,” I’m disappointed that it failed to give more careful consideration to whether its framing would rejuvenate anything, or merely cement the status quo a bit further.

Comment by John D. Wilson on September 30, 2010 8:49 am

Here’s an example of how the “embodied energy” concept is misused–and impedes progress in building understanding and support for new developments on the electric power supply side as well.

“It takes as much energy to make a solar panel as it likely generates in its entire life.” Florida State Sen. J.D. Alexander, Sep-2010

The Florida Truth-O-Meter Rating: Pants on Fire!

Solar panels have long earned their keep. The truth: for an investment of 1-4 years worth of energy output, rooftop systems can provide 30 years or more of clean energy.


Comment by Tom Larson on September 30, 2010 10:57 am

I was not referring to the RFF paper, but my own econometric analysis, which was referenced in the BTI posting and to which I assumed you were referring. This is different from the Journal of Physics article and addresses 30 US economic sectors, not lighting.

I object to your use of the term “sensationalized.” This is an extremely serious issue having major implications for climate change remedies. The IPCC takes no account of rebound issues. They basically assume the answer.

Comment by Harry Saunders on October 2, 2010 3:27 pm

Dr. Saunders, the IPCC does take account of rebound issues, both directly, as well as extensively within the literature consulted to establish the costs and benefits of long-term stabilization scenarios, for example model synthesis reports (Edenhofer et al., 2006 being a good example).

Sorry that you assumed the post was all about you. I thought the link to the RFF paper would be enough to indicate my broader scope of discussion.

Comment by John D. Wilson on October 4, 2010 9:03 am

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