Energy Efficiency – Real Usage Reductions or Simply a Mirage?

by Bob Shively, Enerdynamics President and Lead Instructor

According to the Energy Information Administration (EIA), peak electric loads in the U.S. are 20,800 MW lower than they would be without utility energy efficiency programs[1].  If it is correct it represents perhaps 100 power plants that did not need built that would have otherwise been required.  Similarly, the EIA data shows that electric usage is 86,926,000 MWh lower than it would be without these programs[2]

But others argue this is a mirage due to the “rebound effect,” a theory that says people that reduce energy consumption through efficiency then simply take their saved money and spend it on other energy consuming devices thus pushing their demand and usage back up.  For instance, a report prepared for the Breakthrough Institute[3] suggests that rebound effects can erode energy efficiency gains by 10-30% in developed countries and as much as 40-80% in developing nations[4].

Their belief is that the effect will much higher in developing countries because, for example, someone who installs an efficient heater in one room of their house may take the savings and heat other rooms in the house that previously they could not afford to heat. The theory, if proven true, is important not because it suggests we should stop doing energy efficiency, but because it suggests the value of energy efficiency programs may be significantly lower than initially thought thus making many programs no longer beneficial.

The American Council for an Energy Efficient Economy (ACEEE) surveyed studies of the rebound effect in a white paper released in August 2012[5].  They studied both direct rebound effects (i.e. if I weatherize my house I might now turn my thermostat in winter to 74o instead 70o degrees since it will cost less to heat my house to 74o) and indirect effects (i.e. if I save lots of money on my heating bill after weatherizing I might take the money and use it to build a new addition on my house that will consume new amounts of energy).  The ACEEE concluded that different uses have different rebound effects:

Passenger vehicles 10%
Space heating  1-12%
Space cooling  1-13%
Residential lighting and appliances  0-12%

Thus the ACEEE suggests that for each unit of reduction through energy efficiency investment, we get 0.9 units of reduced overall energy use.  And indeed, looking at EIA data for average consumption we see that the average consumption per household has declined significantly since 1980 even while the average size of a house has increased:

Source:  Average consumption per household EIA Residential Energy Consumption Survey[6]

Average size EIA Residential Energy Consumption Survey[7]

Based on this data, we can conclude that at least for the U.S., increasing energy efficiency has allowed to increase the size of our homes while using less energy.  And we can say that at least for households, any rebound effect is not overwhelming the benefits of more efficient homes.

About Enerdynamics

Enerdynamics was formed in 1995 to meet the growing demand for timely, dynamic and effective business training in the gas and electric industries. Our comprehensive education programs are focused on teaching you and your employees the business of energy. And because we have a firm grasp of what's happening in our industry on both a national and international scale, we can help you make sense of a world that often makes no sense at all.
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