McKinsey Projects US Energy Efficiency Savings
New report suggests the United States could save $1.2 trillion by investing $50 billion a year through 2020.
Management consulting firm McKinsey & Co. released a report today suggesting the U.S. could reduce its non-transportation related energy consumption by as much as 23 percent by 2020 if
it invests enough political and financial capital.
The report indicates that reducing energy consumption by 23 percent by 2020 could eliminate more than $1.2 trillion in waste (at a rate of $130 billion annually), which would dramatically exceed the $520 billion investment required, i.e. $50 billion each a year over the next decade, plus program costs that would be required to put such energy efficiencies in place.
“If we do nothing we will waste $1.2 trillion of energy,” said Ken Ostrowski, a senior partner from McKinsey’s Atlanta office, in a briefing at the U.S. National Press Club in Washington, D.C.
But the report’s authors caution that these energy savings can only be realized if the United States adopts a comprehensive strategy to overcoming significant barriers. Solutions should include information and education, incentives and financing, codes and standards, and third-party involvement, the report said.
“The awareness levels aren’t there today, and that’s one of the barriers we have to overcome,” Ostrowski said.
“It’s not that we haven’t been making progress,” said Ostrowski. “We haven’t been making progress fast enough relative to the magnitude that’s out there.”
Ostrowski said today’s report builds on a previous McKinsey study released in 2007 on U.S. greenhouse gas abatement. Today's report includes a GHG abatement cost curve through 2030, showing the potential costs and benefits of using various means to reduce GHG emissions.
McKinsey is known for its abatement cost curves—calculations showing how much it will cost or generate for the economy to take emission cuts from particular sectors or using certain technologies. The curve shows that much of the energy efficiencies can be achieved through residential and commercial devices, such as Energy Star appliances (see Saving energy at the U.S. DOE).
Today’s report only looks at stationary energy uses across residential, commercial, and industrial sectors, including combined heat and power. It also focuses on existing and readily available technologies that can be deployed, rather than those in development, Ostrowski said.
“We identified the potential for energy efficiency, not how much will actually be achieved,” he said. “How much is out there, how much gets captured will be decided by policymakers and business leaders.”
The report’s authors include Hannah Choi Granade, Jon Creyts, Anton Derkach, Philip Farese, Scott Nyquist, and Ken Ostrowski. The team said it modeled more than 650 technologies and analyzed more than 20,000 micro-segments of energy consumption.
The United States, including utilities and private companies, is currently spending between $10 billion to $12 billion on energy efficiency programs, said Choi Granade, a partner in McKinsey’s Stamford, Conn., office. But that doesn’t include $13 billion in additional stimulus funds (see Smart grid could be early winner in U.S. stimulus package). She said the U.S. government would need a four-to-five fold scale up in stimulus funding to achieve the potential outlined in the report.
If executed at scale, a comprehensive energy savings strategy could reduce the annual non-transportation energy consumption addressed in the report from 36.9 quadrillion BTUs in 2008 to 30.8 quadrillion BTUs in 2020—saving 9.1 quadrillion BTUs relative to a business-as-usual baseline, according to McKinsey estimates. The energy use reduction could also result in the abatement of 1.1 gigatons of greenhouse gas emissions annually.
Read a full copy of McKinsey's new report, Unlocking Energy Efficiency in the U.S. Economy, here.
The investment community is already indicating it is backing some of the report’s goals. One week in May alone, five startups pulled in $32 million in venture capital financing for energy efficiency plays in manufacturing, lighting and solar (see Energy efficiency rules week's cleantech roost).
The report’s focus on energy efficiency is also what Cleantech Group’s Executive Chairman Nicholas Parker picked in December, 2008 as the top trend to watch in 2009 (see Nine clean technology predictions for 2009).
Management consulting firm McKinsey & Co. released a report today suggesting the U.S. could reduce its non-transportation related energy consumption by as much as 23 percent by 2020 if
it invests enough political and financial capital.
The report indicates that reducing energy consumption by 23 percent by 2020 could eliminate more than $1.2 trillion in waste (at a rate of $130 billion annually), which would dramatically exceed the $520 billion investment required, i.e. $50 billion each a year over the next decade, plus program costs that would be required to put such energy efficiencies in place.
“If we do nothing we will waste $1.2 trillion of energy,” said Ken Ostrowski, a senior partner from McKinsey’s Atlanta office, in a briefing at the U.S. National Press Club in Washington, D.C.
But the report’s authors caution that these energy savings can only be realized if the United States adopts a comprehensive strategy to overcoming significant barriers. Solutions should include information and education, incentives and financing, codes and standards, and third-party involvement, the report said.
“The awareness levels aren’t there today, and that’s one of the barriers we have to overcome,” Ostrowski said.
“It’s not that we haven’t been making progress,” said Ostrowski. “We haven’t been making progress fast enough relative to the magnitude that’s out there.”
Ostrowski said today’s report builds on a previous McKinsey study released in 2007 on U.S. greenhouse gas abatement. Today's report includes a GHG abatement cost curve through 2030, showing the potential costs and benefits of using various means to reduce GHG emissions.
McKinsey is known for its abatement cost curves—calculations showing how much it will cost or generate for the economy to take emission cuts from particular sectors or using certain technologies. The curve shows that much of the energy efficiencies can be achieved through residential and commercial devices, such as Energy Star appliances (see Saving energy at the U.S. DOE).
Today’s report only looks at stationary energy uses across residential, commercial, and industrial sectors, including combined heat and power. It also focuses on existing and readily available technologies that can be deployed, rather than those in development, Ostrowski said.
“We identified the potential for energy efficiency, not how much will actually be achieved,” he said. “How much is out there, how much gets captured will be decided by policymakers and business leaders.”
The report’s authors include Hannah Choi Granade, Jon Creyts, Anton Derkach, Philip Farese, Scott Nyquist, and Ken Ostrowski. The team said it modeled more than 650 technologies and analyzed more than 20,000 micro-segments of energy consumption.
The United States, including utilities and private companies, is currently spending between $10 billion to $12 billion on energy efficiency programs, said Choi Granade, a partner in McKinsey’s Stamford, Conn., office. But that doesn’t include $13 billion in additional stimulus funds (see Smart grid could be early winner in U.S. stimulus package). She said the U.S. government would need a four-to-five fold scale up in stimulus funding to achieve the potential outlined in the report.
If executed at scale, a comprehensive energy savings strategy could reduce the annual non-transportation energy consumption addressed in the report from 36.9 quadrillion BTUs in 2008 to 30.8 quadrillion BTUs in 2020—saving 9.1 quadrillion BTUs relative to a business-as-usual baseline, according to McKinsey estimates. The energy use reduction could also result in the abatement of 1.1 gigatons of greenhouse gas emissions annually.
Read a full copy of McKinsey's new report, Unlocking Energy Efficiency in the U.S. Economy, here.
The investment community is already indicating it is backing some of the report’s goals. One week in May alone, five startups pulled in $32 million in venture capital financing for energy efficiency plays in manufacturing, lighting and solar (see Energy efficiency rules week's cleantech roost).
The report’s focus on energy efficiency is also what Cleantech Group’s Executive Chairman Nicholas Parker picked in December, 2008 as the top trend to watch in 2009 (see Nine clean technology predictions for 2009).
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