$1.2 Trillion Possible Savings from Efficiency Improvements

Consulting firm McKinsey has released a report indicating that by investing $520 billion in building improvements and energy-saving appliances, the U.S. could save $1.2 trillion through 2020.

The savings would be greater than projected load growth for the country, representing a reduction of 23 percent in the nation’s predicted 2020 energy use.

Over a third of the gains in efficiency would be achieved through improvements in homes, with 40 percent of gains accounted for by the industrial sector and 25 percent by the commercial sector.

The study did not examine the transportation sector, nor did it attempt to account for the additional cost-savings in the event that carbon dioxide emissions caps are implemented.

An investment of $520 billion would represent four to five times the annual efficiency investment of 2008, maintained over a period of ten years.

In addition to a lack of capital for improvements among home and business owners, the study identified poorly aligned incentives—such as landlords not choosing to replace outdated appliances because they don’t pay the electric bill—as a barrier to change.

Recommendations included educating consumers about potential efficiency savings and providing stronger financial incentives for efficiency improvements, as well as implementing tighter codes and efficiency requirements for appliances.

The report is available here.

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