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Economic Case for Energy Efficiency

By Mark Jacobson

By Mark Jacobson

While many solutions to our current energy challenges are being developed in laboratories at Georgia Tech and across the nation, one may not realize that energy solutions with quick financial paybacks already exist today. In addition to the renewable energy resources that are accelerating the global transition towards a clean energy future, the lighting aisle at Home Depot is also producing significant environmental and economic benefits.

Marilyn Brown, a professor in the School of Public Policy at Georgia Tech, 2007 co-recipient of the Nobel Prize, and co-founder of the Southeast Energy Efficiency Alliance, made a strong case for the value of efficiency projects during her presentation “Selling Energy Efficiency in a Climate-Conscious World”. Her discussion highlighted the importance of educating consumers, businesses, and politicians about practical policy solutions that drive increased adoption of energy efficiency projects.

The first point of evidence offered by Dr. Brown was a straightforward financial comparison of LED vs. incandescent lightbulbs. Even though the average US household would breakeven within 300 days, many individuals do not consider buying LEDs due to the higher upfront cost. However, once people are educated about the exponential energy savings realized over a lightbulb’s 20-yr lifetime, the financial payback story becomes much easier to sell. As more utility companies and lighting manufacturers educate consumers on ways to defray the upfront cost burden, LED adoption will likely increase.

Another related concept discussed during the presentation was Levelized Cost of Energy (LCOE). This energy industry metric is often used to analyze and compare the lifetime financial costs (capital expenditures, fuel, maintenance, etc.) of different generation technologies using standard methodologies. Some progressive states such as California and New York, along with the Tennessee Valley Authority, are starting to evaluate energy efficiency projects using these metrics, and have discovered that efficiency projects can often be implemented for costs well-below any source of energy generation.

Few consumers, outside of those with strong environmental motivations, would willingly choose to pay more for the same electricity service. Since the rates of regulated utilities are calculated based on the cost of services plus a return-on-investment, it’s easy to understand that lower utility expenditures would lead to lower rates for consumers. As such, if the cost of implementing efficiency projects were less than the cost of building new power plants, wouldn’t that be the best option to pursue? As policy-makers increasingly utilize unbiased technical and financial information to sell the energy efficiency business case, more people are benefiting from the win-win outcomes these projects produce.

To me, one of the most exciting aspects of the clean energy economy is that it employs and unites a wide range of Americans, regardless of different economic backgrounds, political beliefs, and awareness of environmental issues. I was fortunate to have developed and financed renewable energy and building efficiency projects across the country during my pre-MBA career. Through this experience, I learned that solar homeowners in California, wind turbine installers in Texas, and HVAC technicians in Georgia can all realize benefits from renewable energy and energy efficiency projects.

There’s no denying the environmental benefits of these technologies are critical for bending the global emissions curve, and reducing the severity of climate change. Perhaps more importantly, we must continue to build upon Dr. Brown’s work to advance the economic and job creation narrative, in order to drive the mass market adoption that’s needed to tackle the climate crisis.

Mark Jacobson is an MBA student at the Scheller College of Business. 

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