Energy-efficiency skeptics and advocates: the debate heats up as the stakes rise

Abstract

Energy efficiency (EE) is rapidly growing in many markets today, but its its cost-effectiveness and potential for growth are being hotly debated. These controversies impede public and private investment in efficiency programs, products, and services. As the stakes rise, the debate has heated up and the need grows to clarify the disagreements and disputes. We review the arguments of skeptics and advocates on 10 key questions concerning energy efficiency, attempting to answer three overriding questions: does an EE gap exist, how big is the gap, and how can the gap be shrunk? We tackle 10 areas of contention: the significance of market failures, the efficiency of investment levels, energy intensity as a measure of efficiency, the treatment of naturally occurring EE, the application of discount rates, accounting for transaction costs, treatment of the rebound effect, the practice of EE delivery, the integration of EE into utility business models, and opportunities for EE growth. Research needs in each of these areas are also described. By examining the divergent views of skeptics and advocates and by addressing the limitations of current knowledge, policymakers and stakeholders can make better-informed decisions supported by more defensible analysis.