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IEA 1997: International Energy Agency, IEA Energy Technology R&D Statistics, 1974-1995 (Paris: OECD/LEA, 1997).

Kadama 1995: Pumio Kadama, Emerging Patterns of Innovation: Sources of Japan's
Technological Edge (Boston, MA, Harvard Business School Press, 1995).

NSB 1996: National Science Board, National Science Foundation, Science and Engineering
Indicators 1996 (Washington, DC: U.S. Government Printing Office, 1996).

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OECD 1997: Organisation for Economic Cooperation and Development, Technology and
Industrial Performance. Technology Diffusion, Productivity, Employment and Skills, and
International Competitiveness (Paris: OECD, 1997).

OMB 1997: Office of Management and Budget, Executive Office of the President of the United
States, Budget of the United State Governmens, Fiscal Year 1998 (Washington, DC: U.S.
Government Printing Office, 1997).

Pye and Nadel 1997: M. Pye and S. Nadel, “Energy Technology Innovation at the State Level:
Review of State Energy Research, Development, and Demonstration Programs" (Washington, DC:
American Council for an Energy-Efficient Economy, 1997).

Roberts 1995: Edward B. Roberts, “A New Look at Technology Management", presented at the
International Electric Research Exchange Symposium (Cambridge, MA: MIT, 1995).

SEAB 1995: Secretary of Energy Advisory Board, Task Force on Strategic Energy R&D, Energy
R&D: Shaping Our Nation's Fwture in a Competitive World (Washington, DC: Government
Printing Office, 1995).

Williams 1995: R. Williams, "Making Energy R&D an Effective and Efficient Instrument for
Meeting Long-Term Energy Policy Goals”, presented at the Workshop on Long-Term Energy
Strategies for the Ewropean Union (Brussels, Belgium: E.U. Directorate General for Energy,
1995).

CHAPTER 3
ENERGY EFFICIENCY

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The most ugent, long-term security requirement for the United States is to reduce our
dependence on imported oil by developing clean, safe, renewable energy systems, and energy
conservation programs.

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R&D investments in energy efficiency are the most cost-effective way to simultaneously reduce the risks of climate change oil import interruption and local air pollution, and to improve the productivity of the economy. Improvements in the use of energy have been a major factor in increasing the productivity of U.S. industry throughout the 1980s and early 1990's. Between 1973 and 1986, the nation's consumption of primary energy stayed at around 75 quads, whereas the GNP grew by more than

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35 percent.

MOTIVATION AND CONTEXT

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The decoupling of energy growth and economic growth is an important factor for the future: it shows that the nation can improve energy efficiency and increase economic productivity. The energy intensity of the economy, measured in terms of energy use per dollar of GDP, has dropped by almost a third since 1970 (Figure 3.1). If energy intensity had remained at the same level as in 1970, DOE estimates that the country would be spending $150 to $200 billion more on energy each year. Even so, consumers and businesses spend some $500 billion per year on energy, a significant fraction of which could be used more productively in other areas of the economy. And, although the economy continues to become more energy efficient, the decline in energy prices that begon in 1986 has caused this trend to slow, so that energy demand grew considerably—to more than 91 quads-by 1995.

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Between 1978 and 1996, the Federal government invested some $8 billion (1997 dollars) in research, development, and deployment of energy efficiency technologies. This work, in conjunction with other policies (such as standards and incentives), private R&D, and the pressure of high energy costs, helped spur a private sector investment achieving the $150 billion in annual savings

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tremendous return on investment. Besides these financial savings. DOE-supported technologies bave led to significant improvements in the environment and human health.

In recent years, however, energy consumption has begun to rise again, and with that rise comes greater oil imports, air pollution, and emissions of carbon dioxide (or carbon), the principal greenhouse gas, as well as other pollutants (Figure 3.2). But this trend is by no means inevitable: technological improvements in buildings, industry, and transportation could drastically cut energy consumption.

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Figure 3.1: Energy Intensity of the U.S. economy, 1970-19%. Source: EIA (1997, p. 15).

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Figure 3.2: Actual and projected U.S. carbon emissions. Source: EIA (1997, p. 337).

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Energy efficiency programs are aimed at three sectors: buildings (both residential and commercial); industry (manufacturing and nonmanufacturing); and transportation. Though total energy use in the three sectors is about equal, the transportation sector is expected to be the fastest growing of the three in the near future. There is vast potential for improving the productivity of energy use in these sectors of the U.S. economy (see Figure 3.3). Efficiency improvements simultaneously reduce carbon emissions, costs of energy services paid by consumers and industry, and the risk of oil interruption. The issues, problems, and solutions for energy efficiency are different for each of the three end-use sectors and are discussed separately in the following pages.

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Figure 3.3: Energy efficiency potential. The baseline is the EIA Reference Forecast
(EIA 1996). The five-lab Study scenarios depict two cases, one in which cost-effective
efficiency technologies are deployed, and the other including these technologies and
specifically low-carbon technologies (DOE 1997).

The buildings sector, which includes new construction and renovation as well as material and equipment suppliers, is large, valued at more than $800 billion per year—almost 13 percent of GDP. This sector alone employs more than 3.5 million workers.

Buildings consume one-third of total U.S. energy, and almost two-thirds of electricity. Even though energy prices are low, the average household spends almost $1,300 per year on energy, or 6 percent of gross annual income. Low-income households have a higher relative burden, spending up to 15 percent of gross income on energy.

Past building energy R&D focused on the major energy uses (Figure 3.4) refrigeration, lighting, insulation, windows, and heating, ventilating and air conditioning (HVAC). These efforts bave achieved extraordinary energy savings. The best windows on the market, for example, insulate three times as well as their double-glazed predecessors. The next generation of technologies such as advanced electronics and controls, advanced materials, integrated appliances, and advanced design and construction techniques can accelerate this improvement and spread it throughout the building industry.

* LBL (1995), OP (1996).

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The industrial sector is complex and heterogeneous. The manufacturing industries range from those that transform raw material into more refined forms (e.g., primary metals and petroleum refining industries) to those that produce highly finished products (e.g., the food processing, pharmaceuticals, and electronics industries). Hundreds of different processes are used to produce thousands of different products. The U.S. chemical industry alone produces more than 70,000 different products at more than 12,000 plants. Even within a manufacturing industry, individual firms vary greatly in the output they produce and their methods of production.

The DOE program focuses on seven material and process industries that consume about 20 percent of the nation's energy at a cost of about $100 billion per year (Figure 3.5). These are the chemical, petroleum-refining, forest products, steel, aluminum, metal-casting and glass industries. They account for 80 percent of the manufacturing sector's end-use energy consumption.

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Figure 3.5: Percentage of primary energy used in the manufacturing sector by
major industrial category, 1994. Source: ELA (1996, p. 43).

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