Jul 30 2009

The Saudi Arabia of Energy Efficiency

Posted by: Katie Romans

McKinsey & Company this week released a report on energy efficiency opportunities in the United States -- not solutions, which the report authors say will be up to policy makers, businesses and academia.

The report outlines widespread barriers to energy efficiency potential over the last several decades, including:

• substantial upfront investment in exchange for long-term savings
• fragmented potential -- across millions of locations and billions of devices in varied sectors
• inherent challenge of measuring and verifying energy not used

There are also opportunity-specific barriers relating to structural barriers, behavioral barriers and barriers of simple availability.

If we can overcome some of these barriers, how much energy efficiency potential are we talking?

At the press briefing, McKinsey Director Ken Ostrowski said, "The United States is the Saudi Arabia of energy effiicency." You get the idea.

More specifically, the full energy efficiency potential of the United States is greater than Canada's current non-transporation energy consumption, than either Mexico or South Korea's entire energy consumption and equal to "shutting down the world for two weeks." Wow.

Wondering how McKinsey came to such grand conclusions?

The team modeled more than 650 technologies and analyzed more than 20,000 micro-segments of energy consumption. They also benefited from the expertise and participation of PG&E, along with other government, non-government and private entities.

In fact, PG&E is already working hard to meet the challenges presented in McKinsey's report:

1. PG&E has about 85 energy efficiency programs to meet our customers' varying energy needs.

2. PG&E formulated and launched a $1 billion integrated portfolio of energy efficiency solutions for 2006-2008, and we have formulated a robust porfolio for 2009-2011.

3. In California, the decoupling of sales from revenues for electric and gas utilities, alongside performance-based incentive mechanisms, encourage the necessary upfront energy efficiency investment.

4. PG&E is committed to working alongside others in the industry to share best practices and drive the dialogue necessary to capture energy efficiency opportunities nationwide. We regularly work with other utilities, the CPUC and the CEC, DOE and US EPA, manufacturers of energy-efficient technologies such as lighting and electronics and, of course, our customers.

5. PG&E's Emerging Technologies team is dedicated to testing the quality and scalability of the next generation of energy-efficient technologies. This, in turn, helps develop PG&E's next generation of energy efficiency programs for our customers.

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