Energy Efficiency Can Loosen America's Energy Straitjacket

April 11, 2006


Washington, D.C. — Runaway energy demand is outstripping markets’ ability to deliver, binding America in an “energy straitjacket,” according to the American Council for an Energy-Efficient Economy (ACEEE). ACEEE today released a new report, America’s Energy Straitjacket, which finds that the resulting high energy prices show no early prospects for relief, spurring inflation and threatening economic growth. This unprecedented situation, in which interrelated forces are squeezing oil, gas, coal, and electricity markets at the same time, calls for a new and more aggressive policy response,


“When we look across all energy markets, we see an alarming picture,” stated author Dr. Neal Elliott, ACEEE’s Industrial Program Director. “In past energy crunches, U.S. consumers could switch to another fuel when supplies were tight. Today demand for petroleum fuels, natural gas, and coal is surging beyond the markets’ ability to deliver. High coal and natural gas prices are in turn driving electricity prices higher in many regions.”


ACEEE finds not so much a “supply” crisis, but a “deliverability” crisis. This means that while in-ground resources are not fully depleted, the energy quantities delivered to market are not keeping up with demand. “The energy industry is investing in wells, mines, pipelines, and refineries,” stated Elliott, “but energy demand is growing faster than most of these markets can add capacity.”


In this environment, the only near-term policy solution is to moderate demand through energy efficiency and conservation. Experience has shown that aggressive efficiency and conservation efforts can reduce demand growth and allow energy supply markets to catch up. And efficiency is not just a stop-gap solution—it must be sustained for the long term, because energy suppliers face continuing challenges in trying to bring increasing energy quantities to market fast enough. Constraints on capital and materials, environmental concerns, regulatory approvals, and other factors will continue to limit the rate at which supply infrastructure can be deployed.


“Energy efficiency is the cornerstone of sustainable energy policy,” stated Bill Prindle, ACEEE’s Deputy Director.  “Our continuing straitjacket situation shows that without moderating energy demand, no supply strategy will be able to keep up. And with persistent market barriers hobbling energy efficiency investment, we need much bolder efficiency policies to meet these unprecedented energy challenges.”


“A good start would be to fund the energy efficiency elements in the last year’s Energy Policy Act for which the administration has not requested appropriations,” said Prindle.  ACEEE recommends four key steps that could be taken:


  1. The President should call on governors, legislators, utility regulators, utility companies, and the energy efficiency industry to join him in a national campaign to action encouraging energy efficiency and conservation. This campaign should be funded through the $90 million per year public awareness campaign authorized in last year's EPAct legislation (see http://www.aceee.org/research-report/e053).


  2. Restore funding for energy efficiency budgets cut in the FY2007 budget request to FY2002 levels and add 20% to put funding on track to meet EPAct 2005 authorizations by FY2008 (see http://www.aceee.org/press/2006/02/presidents-budget-slashes-efficiency-first-step-oil-addi).


  3. Enact an energy efficiency resource standard as considered by the Senate in developing EPAct 2005 (see http://www.aceee.org/press/2006/03/efficiency-resource-standards-next-big-bang-energy-polic).


  4. Enact oil savings legislation with enforceable provisions, designed to save at least 2.5 Mbd by 2015.


“While these measures are not enough, they would make a real start, particularly if states respond in kind," added Prindle.


ACEEE also cautions that while moderating demand can address the current “deliverability” crisis, a broad and balanced mix of demand and supply policies is needed  to chart a longer-term course for meeting our energy challenges. Increasingly, global energy markets will chase increasingly limited supplies, and deliverability challenges will mushroom if energy demand keeps running out of control. “To avoid truly dire consequences down the road, the U.S. must start serious planning now for a sustainable energy future,” said Elliott. “Energy efficiency and conservation are the keys to buy us time to bring future energy markets into sustainable balance.”


America’s Energy Straitjacket is available for free download at www.aceee.org/pubs/e065.htm or a hard copy can be purchased for $16 plus $5 postage and handling from ACEEE Publications, 529 14th St, N.W., Suite 600, Washington, D.C. 20045, phone: 202-507-4000, fax: 202-429-2248, e-mail: aceee_publications@aceee.org.