1	How Far Energy Efficiency: Practical Limits or Policy Choices? John A. “Skip” Laitner EPA Office of Atmospheric Programs Washington, DC EEWP Expert Workshop Energy Efficiency: Past Development and Future Potential International Energy Agency Paris, France April 26-27, 2004
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5	Lessons Learned from Long Range U.S. Energy Price and Quantity Forecasts Five projections in early 1980s of U.S. energy forecasts, 1982-2000: Energy Demand Median error for year 2000: -5.2% U.S. Gross Domestic Product year 2000 Median: -13.2% Roughly the right quantities but the wrong year 2000 prices: Median error of +125% for industrial electricity, +197% for world oil price, and +324% for natural gas. Hence, the economy has more-or-less met the demand projections with much weaker price signals than were anticipated. This suggests a serious underestimation of technological change and energy efficiency improvements.
6	How Much Immediate Past Efficiency? Over the period 1990-2001, Gross World Product has grown 32 percent while world energy consumption has grown only 16 percent (from 368 EJ in 1990 to 426 EJ in 2001). Based on 1990 technologies and market structures, “efficiency” supplied 57.4 EJ of new energy services while energy supply provided 58.6 EJ in new services.
7	Recent Trends in U.S. Energy Intensity
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9	An Unfortunate Digression in the Dialogue There are some who argue that, however good efficiency may be for both the economy and the environment, there are practical limits to future efficiency improvements over the next 100 years. Drawing on what they refer to as thermodynamic limits, Lightfoot and Green (2003), argue: Maximum improvements in fuel economy are limited to no more than 2.14 L/100 Km (110 mpg), combined heat and power with a minimum role at no more than 50 percent total efficiency, and other sectoral improvements of no more than 2-3 times over current efficiency levels; Assuming a world economy that expands 2.3 percent annually, and a maximum practical limit of a ~1.0 percent annual decline in energy intensity; then A world economy that is 9.7 times larger in 2100 compared to the year 2000 will require 3.6 times more energy — with a clear need for big technology. However, as Laitner (2004) shows, a full appreciation of the chemistry rather than the combustion efficiency of the second law of thermodynamics indicates energy intensity reductions of 2.0 percent annually are possible, especially when future technology systems include: Not only efficiency gains but also social preferences and policy choices that affect the type and level of service demands such as preferred transportation modes, land use patterns, and distances traveled; and The development of new materials, electronics, and productions systems. A close examination of real thermodynamic limits (rather than mere combustion efficiency), and changing patterns of energy service demands, suggest that Energy Efficiency can take us just about as far as we choose to go over the next 100 years.
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11	Standard Energy Projections versus the Recent EPA-TechCast Delphi Survey AEO 2004 Outlook Hybrid and Fuel Cell Vehicles — 6% by 2025 Non-Fossil Energy Resources — 23% by 2025 Distributed Generation — 16% by 2025 EPA-TechCast Survey Hybrid and Fuel Cell Vehicles — 30% by 2019 (+/- 4 years) Non-Fossil Energy Resources — 30% by 2017 (+/- 6 years) Distributed Generation — 30% by 2021 (+/- 5 years)
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17	From the Merely Complicated to the Complex Standard forecasts of future energy use suggest that world energy consumption might roughly double by the year 2050, to perhaps ~1,000 EJ. A 95 percent “confidence interval” around such forecasts might suggest a lower and upper range from 850 to 1,150 EJ. But these formal models tend to reflect only complicated data rather than the many complex and emergent relationships as well as policy choices that may surprise and confound standard forecasts. Recognizing the enormous complexities inherent within both the information age and a highly networked society – operating in what Kevin Kelly (1997) has called the “crunch economy” (e.g., increased globalization, hypercompetition, and an accelerated rate of change) – the range of possible futures might range from 500 to more than 1,500 EJ of primary energy use by 2050. Understanding the many problems associated with an anticipated 1,000 EJ economy, how might we deal with the prospect of either a 500 or a 1,500 EJ world economy?
18	Final Reflections The “practical opportunities” for energy efficiency may be two or even three times the conventional wisdom. This is especially true as the analysis is more properly broadened to reflect both new materials and technologies as well as changes in demographics, social perceptions, and cultural norms. Moreover, the opportunities may be broadened even more when we think in terms of policies and price signals that can accelerate the pace of innovation and market penetration. Rather than espousing practical limits of one technology compared to another, it would make more sense to encourage the appropriate market conditions and public policies that accelerate innovation across all technologies.
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