The Importance of Energy Efficiency

Energy use accounted for 82 percent of U.S. greenhouse gas (GHG) emissions in 2006, according to the Department of Energy (DOE). Energy efficiency is the best and quickest way to reduce GHG emissions. A report released last week by the American Council for an Energy Efficient Economy detailed how deploying semiconductors technologies generated “sizeable energy productivity benefits.”

The U.S. economy has grown by over 60 percent in 20 years, but energy demand only increased by 20 percent. The energy needed to produce $1 of the U.S. GDP continually decreased because of technological innovations. The ACEEE report predicts future innovations will continue the trend.

The report calculated that the “cumulative electricity bill savings enabled by semiconductors” may be greater than $1.3 trillion through 2030, and reduce carbon emissions by 700 million metric tons. In 2006, the “entire family of semiconductor-enabled technologies” created net savings of about 775 billion kilowatt hours (KWh). If 1976 technologies were used now another 184 power plants would need to be built.

Overcoming barriers to energy efficiency

There are barriers to overcome in regards to increasing energy efficiency. One of the main barriers is the lack of knowledge about efficiency opportunities, according to Midwest Energy. Midwest conducts free energy audits for their customers in order to demonstrate the importance of energy efficiency.

Another barrier is large upfront capital expenditures. Midwest pays the upfront cost of their customers’ efficiency upgrades, and customers repay the utility company via a monthly charge on their energy bill. However, the repayments are less than monthly energy savings, so the customers will still see a reduction in their bill.

The stimulus funds for power companies

The American Recovery and Reinvestment (ARRA) provides billions of dollars in federal funding and tax incentives for power companies to increase energy efficiency. Power companies can improve their infrastructure and facilities, or deliver efficiency programs and energy savings to customers with ARRA funds.

In 2008, the State Energy Program (SEP) received $44 million. ARRA waived a 20 percent cost share for states, and waived the provision that had limited capital investments to 50 percent of SEP funds. The funds from SEP are given to state energy offices. Energy efficient projects are funded through SEP.

The Energy Independence and Security Act of 2007 authorized the Energy Efficiency and Conservation Block Grant (EECBG), whose main purpose is to improve energy efficiency. Previously unfunded, ARRA provided $3.2 billion for EECBG.

The Weatherization Assistance Program has been around since the 1970s. ARRA provided $5 billion for the program in order to meet President Obama’s campaign promise to weatherize a million homes a year.

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U.S. Ranked 8 in Innovation

"Nothing is more important than innovation. The minute we stop innovating, we die," said an executive interviewed for a recently released report by the Boston Consulting Group and National Association of Manufacturers, titled The Innovative Imperative in Manufacturing: How the United States Can Restore Its Image. The report ranked the U.S. eight among innovative-friendly countries. Singapore made the top spot.

The report cited ways the U.S. is disadvantaged when it comes to innovation, including work force quality, and economic, immigration and infrastructure policies. The U.S. government can help foster innovation by "boosting" the payback on innovation, supporting innovation activities, and improving the innovation environment.

Research and development (R&D) tax credits are important. The American Recovery and Reinvestment Act (ARRA), signed into law by President Obama in February, provides tax credits for R&D. Government grants are just as important, and the ARRA provides them for "green" projects such as renewable energy and energy efficiency.

Four ways companies can succeed in innovation

American companies know they are behind in innovation. Less than half of the executives interviewed for the report said they were satisfied with their companies innovation performance. The report suggests four ways companies can succeed in innovation: idea generation, structured processes, leadership, and skilled workers.

Idea generation. The report states simply, "Ideas matter." They do indeed matter and companies are smart to invest in innovation. Understanding customers is key, as is establishing a "company culture that supports innovation." Another key to succeeding in innovation is working with suppliers. Suppliers can be a valuable source in developing innovative products.

Structured processes. According to the report, the most innovative companies in their index are ones that excel at "generating and benefiting from new ideas." Companies need to create processes for generating ideas.

Leadership. The differentiating factor for companies that succeed at innovation is "strong, focused leadership."

Skilled workers. The most critical element to succeeding in innovation is acquiring a skilled workforce.

Partnership between government and companies needed

Action in all the areas mentioned in the report, and highlighted in this article, are in the "mutual interest of companies and government." In a depressed economy, fostering innovation becomes very important. In the words of the report, all government levels need to make innovation a "top priority and prove their commitment with concrete action."

Investment in Innovation Needed

There is no denying the U.S. is in an economic crisis. It seems every day brings more news of major companies laying off employees. The Chinese word for crisis is made up of the characters for danger and opportunity. Maybe just maybe innovation is the opportunity that will not only lead the U.S. out of this crisis, but lay the foundation for a stronger economy.

The website, InnovationEconomics.org defines innovation as "the development and adoption of new products and services, more efficient production process­es, and new business models," and calls for innovation to be put "at the center of our nation's economic policies."

A report titled An Innovation Economics Agenda for the Next Administration states that the Congress and President need to "take concrete steps to ensure that the economy is on a robust growth path over the next decade." The report lists eight steps that should be taken:

1. Significantly Expand the Federal Research and Development Tax Credit
2. Create a National Innovation Foundation
3. Allow Foreign Students Receiving a graduate Degree to Receive a Green card
4. Reform the Patent System to Drive Innovation
5. Let companies expense new investments in information technology in the first year
6. Establish a federal chief information officer
7. Implement a national nroadband strategy
8. Implement an Innovation-based national trade policy

A recent BusinessWeek article proclaims that there is a "daring new direction in economic strategy sweeping U.S. states." States have been investing in innovative projects, blurring the line between public and private. The areas states have invested in include renewable energy, which is needed to stop climate change.

A report by the National Governors Association and the Pew Center on the States lists steps the states can take:

1. Develop a statewide research and innovation
strategy that not only puts in place all the
components for innovation, but aligns them
in ways that provide advantages to in-state
companies;
2. Make investments to gain talent, build topnotch
research enterprises and compete for
federal dollars in those focused areas where
the state can be world-class;
3. Encourage, even mandate, collaboration
among universities, the private sector and
other institutions;
4. Put world-class professionals, not political
pals, in key positions;
5. Create an organization and consistent
funding source that facilitates a continuity
in R&D partnering and spending; and
6. Hold the recipients of public investments
accountable for delivering on promised
benefits.

The current economic crisis has hit the states hard and most of them have huge budget deficits. Clearly, federal investment is needed. The stimulus bill passed by the House this week includes funds for research and development.