Long-Term Energy Efficiency Potential

American Council for an Energy-Efficient Economy
Last updated: 1/18/2012

In 2010 the U.S. used just under 100 Quads of total energy resources to power our economy. Using the Energy Information Administration’s (EIA) Annual Energy Outlook we project that our total energy needs might rise to about 122 quads of energy by the year 2050. In this report we explore a set of energy efficiency scenarios that emphasizes a more productive investment pattern, one that can enable the U.S. economy to substantially lower overall energy expenditures—should we choose to invest in and develop that larger opportunity. Building on the historical record of energy efficiency
investments and their contribution to the nation’s economic well-being, we highlight three economy-wide, long-term scenarios to explore the potential contributions that more energy-efficient behaviors and investments might play in reducing overall energy use by the year 2050. These three are:
1. Reference Case—a continuation of trends projected by EIA for the 2030-2035 period;
2. Advanced Scenario—includes penetration of known advanced technologies; and
3. Phoenix Scenario—in addition to advanced technologies, also includes greater infrastructural improvements and some displacement of existing stock to make way for newer and more productive energy efficiency technologies, as well as configurations of the built environment that reduce energy requirements for mobility.
To achieve these savings will require major changes in how we use energy in each sector. For example, in the residential and commercial sectors we estimate reductions of space heating and cooling loads due to building shell improvements of 40% (Advanced) to 60% (Phoenix) in existing buildings and 70-90% in new buildings. We eliminate duct energy losses due to conversion to water- or refrigerant-based distribution systems, or at a minimum putting ducts within the conditioned space so that duct losses contribute toward heating and cooling. We use advanced heating and cooling
systems (e.g., advanced electric, gas, and ground-source air conditioners and heat pumps; and condensing furnaces and boilers), advanced solid-state lighting, and also significantly more efficient appliances. For existing buildings achieving these savings will require major retrofits, typically at the time of building renovation. One area where we made only modest improvements was in miscellaneous/other uses such as office equipment and other “plug loads.” Data on energy use and savings opportunities for this equipment are limited. This area requires more attention in the future,
since after heating, cooling, water heating, and lighting loads are reduced, these miscellaneous loads can be the majority of building energy use. 
For the industrial sector, energy intensity is projected to improve in the Reference Case by about 1% per year through 2050, but leading companies have been achieving continued improvements at more than double this rate. In our Advanced Scenario we project a 2% per year improvement rate for overall industrial energy intensity, which increases to 2.75% in our Phoenix Scenario. Future energy efficiency opportunities will come less from seeking out individual sources of waste and more from optimization of complex systems enabled by advances in information, communication, and computational infrastructure. Most of the energy use in industry is in processes, not individual equipment, so improving processes represents the largest opportunity for energy intensity improvements. Current focus has been on process optimization, but we anticipate that even greater opportunities exist in the optimization of entire supply chains that may span many companies and supply chain integration that allows for efficient use of feedstocks and elimination of wasted production. 
In the transportation sector, the Reference Case includes new light-duty vehicle fuel economy increases out to 2020, as mandated by the Energy Independence and Security Act of 2007, and minimal increases thereafter. Other transportation modes experience modest efficiency increases out to 2050. In the Advanced Scenario, fuel economy of conventional petroleum-fueled vehicles continues to grow while hybrid, electric, and fuel cell vehicles gain large shares, totaling nearly three-quarters of all new light-duty vehicles in 2050. Aviation, rail, and shipping energy use declines substantially through a combination of technological and operational improvements. The Phoenix Scenario assumes a shift toward more compact development patterns, greater investment in alternative modes of travel, and other measures that reduce both passenger and freight vehicle miles traveled. This scenario also phases out conventional light-duty gasoline vehicles entirely, increases hybrid and fuel cell penetration for heavy-duty vehicles, and reduces aviation energy use by 70% from the Reference Case. 
While end-use electricity represents a fraction of the total energy use in the U.S. economy, currently it takes more than three units of fuel to produce a unit of electricity. The delivered efficiency of the U.S. electricity sector is projected to improve modestly in our Reference Case. Part of this increase is due to improvements in generation efficiency and reductions in transmission and distribution (T&D) losses, combined with a significant increase in the share of electricity produced by Combined Heat
and Power (CHP), whose power output is predominately near its point of use thus avoiding some of the T&D losses. As we dramatically reduce the electricity use in the other sectors of the economy in our Advanced and Phoenix Scenarios, we anticipate that these reductions will result in important shifts in the generation mix in the electric sector, with many old plants retiring. We also anticipate that the delivered electricity efficiency will improve as we invest in more efficient new generation and
highly-efficient CHP accounts for a greater share of the overall generation mix. We project that the delivered electric system efficiency in 2050 will increase from about 36% in the Reference Case to The Long-Term Energy Efficiency Potential, © ACEEE about 40% in the Advanced Scenario and approach 48% in the Phoenix Scenario. This improvement in overall delivered efficiency greatly reduces the losses associated with supplying electricity to other sectors of the economy.
The greater emphasis on energy efficiency would sharply reduce total energy requirements within the U.S. (especially for fuels such as natural gas and petroleum). However, we project that end-use demand for electricity will decline less than direct fuel use. The reason for this apparent difference is that the many more demands for high-quality electrical energy would hold power consumption steady as more of our economic activity is driven by a greater share of electric generation resources. By improving the delivered efficiency of electricity, we can actually hold electricity demand relatively steady and end up using significantly less total energy while meeting our overall electricity needs. 
Overall, as noted previously, we estimate that energy use in 2050 can be reduced by 42% in the Advanced Scenario and 59% in the Phoenix Scenario. Savings are roughly similar in each sector. The 2050 industrial sector savings, for example, range between 36 and 51% for the two policy cases
while residential and commercial buildings might realize overall energy savings from 45 to 69% savings. Transportation savings, moving closer to buildings in the scale of efficiency improvements, fall in between with suggested savings of 38 to 56%, respectively. 
The levels of efficiency improvements in either the Advanced Scenario or the Phoenix Scenario will generate a productive boost to the economy. There are two primary ways in which this will happen. First, households and businesses will see lower energy bills as the level of energy efficiency improves over time. As they maintain (or even increase) their own economic activity through these productivity improvements, the growing energy bill savings will act much like an extra form of income that provides an important stimulus for other sectors of the U.S. economy. Second, and related to this first improvement, the efficiency gains will allow households and businesses to redirect the flow of spending away from the more costly energy sectors. The net result is that households and businesses will have more money available for the purchase of other goods and services. As it turns out, those other sectors of the economy tend to be more labor intensive. Hence, the increased spending, in turn, provides a larger net employment benefit for the nation’s economy—we estimate that the combined effect of the efficiency investments over time, together with a growing energy bill savings, will drive a steady increase in the demand for labor so that by the year 2050 the economy will provide a net increase of 1.3 to 1.9 million jobs. Net gains to the nation’s Gross Domestic Product
(GDP) in 2050 are estimated to be on the order of 100 to 200 billion dollars per year. Both the employment and GDP benefits are on the order of tenths of a percent above the 2050 Reference Group.

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