In a strong southern accent, my grandmother always used to say, “If it looks too good and sounds too good, then it probably ain’t true.” According to a senior fellow at the Institute for Energy Research, this seems to be the story with energy efficiency. Robert Michaels, in his Wall Street Journal editorial, The Hidden Flaw of Energy Efficiency, writes “investments in energy efficiency raises rather than lowers energy consumption.”
Michaels assertion isn’t a novel idea: he is referring to an economic theory known as Jevon’s Paradox or the rebound effect, which holds that the intended consequence of an action will result in the opposite effect. In the case of energy efficiency measures, efforts to reduce energy use actually result in increased demand for energy. Michaels’ survey, “The Rebound Dilemma,” examines the findings of recent research on the rebound effect and uses these observations, statistical models, and test cases to expose the flaw in energy efficiency.
Energy efficiency enables consumers to use more power at a lower cost. The economics are pretty straightforward. “Technology that improves energy efficiency and reduces its cost means people can consume more goods and services that use energy — home electronics, appliances and the like,” says Mr. Michaels.
The flaw in energy efficiency also extends to public policy. Research by the Distributed Energy Financial Group suggests that government mandates (via renewable portfolio standards) lead to gross technological inefficiencies and higher costs. We need not look further than our own state to find evidence of this: despite aggressive public policy goals, wind and solar supplies less than three percent of New York’s bulk power needs. This is due to the high production costs and intermittent nature of these energy sources.
To its credit, the New York Power Authority (NYPA) recently drew a line in the sand on RPS mandates by “deep sixing” the GLOW project because “wind power is too expensive.” Although NYPA’s actions are a victory for ratepayers, New York needs more energy policies that support the efficient and cost-effective generation of power in order to meet the state’s growing demand.