Efficiency, Meet Elasticity

by Richard T. Stuebi

I sometimes receive criticism for not sufficiently promoting energy efficiency as a means of reducing our reliance on fossil fuels. I don’t think that the criticism is justified – I do strongly support the pursuit of energy efficiency – but I am willing to admit that I spend more time and attention focusing on energy supply technologies.

This is for two reasons. One is that we can’t realistically shrink our way to zero energy requirements – or even close. Yes, we must stop wastage, but for continued human progress over the centuries to come, we will always need a substantial supply of energy, from more benign and everlasting sources than the fossil fuels we depend upon today.

Second, and more subtly, the adoption of energy efficient technologies often begets a perverse reaction from the market – increased energy consumption — due to the effect of the economic concept of income elasticity.

This concept is illustrated by a paper entitled “Solid-State Lighting: An Energy-Economics Perspective” by Dr. Jeff Tsao and colleagues at Sandia National Laboratories in the Journal of Physics D: Applied Physics, assessing the long-run implications of the adoption of more efficient lighting technologies. Their study indicates that, by 2030, LED lighting will be three times more efficient than fluorescent lights – but that customer demand for lighting (as measured in lumens) will increase by a factor of ten, meaning that electricity requirements to supply lighting demand would have to double, even with elimination of incandescents and replacement with LEDs.

Again, I support the transition to LEDs. It should be noted that LEDs have much less of a thermal footprint, so even if the paradoxical results suggested by Dr. Tsao et al come to pass, there may still be a substantial reduction in energy requirements associated with air conditioning as LEDs come to replace incandescent lights.

The moral of this story is that energy efficiency is not a panacea for our environmental challenges. It is easy for advocates of energy efficiency to overlook consumer behavior when considering the aggregate impacts of a new technology – and thereby may overstate the potential environmental benefits associated with energy efficiency innovations. As a result, the search for new and better energy supply approaches remains an imperative – even while more aggressively promoting more efficient energy consumption technologies.

Richard T. Stuebi is a founding principal of NorTech Energy Enterprise, the advanced energy initiative at NorTech, where he is on loan from The Cleveland Foundation as its Fellow of Energy and Environmental Advancement. He is also a Managing Director in charge of cleantech investment activities at Early Stage Partners, a Cleveland-based venture capital firm.

2 replies
  1. Tim Kovach
    Tim Kovach says:

    Richard, your post brings up valid points and really gets to the heart of the efficiency vs. conservation debate that occurs frequently among energy and sustainability circles. The debate is an important one to have and may help to drive us to better solutions; my only issue with it is that it too often ends in an either/or conclusion, instead of both/and. We don't need efficiency or conservation, we need both. Add those to a huge amount of innovation and then we are working our way towards a solution to the problems.Alternative energy and innovation are not a panacea to solve our energy woes. We need to reduce the amount of energy that we use in order to make them viable to replace hydrocarbons. But we can't get to that point without a reduction in energy consumption, and we can't get to that point simply through conservation or efficiency. As you point out, efficiency runs the risk of leading to greater consumption, which could mitigate or even eliminate savings. But conservation also runs the risk of producing lower output and stifling innovation and production. We need an all of the above approach on these three items.- Tim Kovach,Product Coordinator, Energy at COS Ewww.cose.org/blogwww.twitter.com/COSEenergy

  2. Anonymous
    Anonymous says:

    THAT is indeed at the root of evil; justifying MORE and continuing the damage. It is necessary that we in the west improve our footprint (whatever you call it) .. the growth in light demanded will largely in the emerging markets where they have not had light .. so they will be cutting out the use of FIRE as a source of light and REPLACE it with LEDs .. THAT does NOT mean that the demand has gone up unless you factor in the stuff that went down. Same logic as "cleantech creates jobs", well it also destroys jobs, so you need the net efect on all factors you impact before you can make claims about the effects of your technology. Same idea as we all are familiar with: creative destruction.

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