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NATIONAL ACADEMY OF SCIENCES

NATIONAL ACADEMY OF ENGINEERING

INSTITUTE OF MEDICINE

NATIONAL RESEARCH COUNCIL

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PAPERBACK (2010)

Real Prospects for Energy Efficiency in the United States 

America's Energy Future Energy Efficiency Technologies Subcommittee; 

National Academy of Sciences; National Academy of Engineering; National 

Research Council 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

America’s Energy Future Panel on Energy Efficiency Technologies 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

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Support for this project was provided by the Department of Energy under Grant Number DEFG02-07-

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Support was also provided by the Presidents’ Circle Communications Initiative of the National Academies and by the National Academy of Sciences through the following endowed funds created to perpetually support the work of the National Research Council: Thomas Lincoln Casey Fund, Arthur L. 

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Real Prospects for Energy Efficiency in the United States 

The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of 

science and technology and to their use for the general welfare. Upon the authority of the charter 

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federal government on scientific and technical matters. Dr. Ralph J. Cicerone is president of the 

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also sponsors engineering programs aimed at meeting national needs, encourages education and 

research, and recognizes the superior achievements of engineers. Dr. Charles M. Vest is president 

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The National Research Council was organized by the National Academy of Sciences in 1916 to 

associate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both 

the National Academy of Sciences and the National Academy of Engineering in providing services 

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Dr. Charles M. Vest are chair and vice chair, respectively, of the National Research Council.

www.national-academies.org
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

iv

PANEL ON ENERGY EFFICIENCY TECHNOLOGIES

LESTER B. LAVE, Carnegie Mellon University, Chair

MAXINE L. SAVITZ, Honeywell, Inc. (retired), Vice Chair

R. STEPHEN BERRY, University of Chicago 

MARILYN A. BROWN, Georgia Institute of Technology 

LINDA R. COHEN, University of California, Irvine 

MAGNUS G. CRAFORD, Philips LumiLeds Lighting 

PAUL A. DeCOTIS, Long Island Power Authority

JAMES H. DeGRAFFENREIDT, JR., WGL Holdings, Inc. 

HOWARD GELLER, Southwest Energy Efficiency Project 

DAVID B. GOLDSTEIN, Natural Resources Defense Council 

ALEXANDER MacLACHLAN, E.I. du Pont de Nemours & Company (retired)

WILLIAM F. POWERS, Ford Motor Company (retired)

ARTHUR H. ROSENFELD, California Energy Commission

DANIEL SPERLING, University of California, Davis 

Liaison from the Committee on America’s Energy Future

JOHN B. HEYWOOD, Massachusetts Institute of Technology

America’s Energy Future Project Director

PETER D. BLAIR, Executive Director, Division on Engineering and Physical Sciences

America’s Energy Future Project Manager

JAMES ZUCCHETTO, Director, Board on Energy and Environmental Systems

Staff

MADELINE G. WOODRUFF, Senior Program Officer, Study Director

GREG EYRING, Senior Program Officer, Study Director

THOMAS R. MENZIES, Senior Program Officer

E. JONATHAN YANGER, Senior Program Assistant

KATHERINE BITTNER, Senior Program Assistant (until July 2008)
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Foreword

Energy, which has always played a critical role in our country’s national 

security, economic prosperity, and environmental quality, has over the last 

two years been pushed to the forefront of national attention as a result of 

several factors:

•	 World demand for energy has increased steadily, especially in developing nations. China, for example, saw an extended period (prior to the 

current worldwide economic recession) of double-digit annual increases 

in economic growth and energy consumption.

•	 About 56 percent of the U.S. demand for oil is now met by depending 

on imports supplied by foreign sources, up from 40 percent in 1990. 

•	 The long-term reliability of traditional sources of energy, especially oil, 

remains uncertain in the face of political instability and limitations on 

resources.

•	 Concerns are mounting about global climate change—a result, in large 

measure, of the fossil-fuel combustion that currently provides most of 

the world’s energy.

•	 The volatility of energy prices has been unprecedented, climbing in mid2008 to record levels and then dropping precipitously—in only a matter 

of months—in late 2008.

•	 Today, investments in the energy infrastructure and its needed technologies are modest, many alternative energy sources are receiving insufficient attention, and the nation’s energy supply and distribution systems 

are increasingly vulnerable to natural disasters and acts of terrorism.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

vi Foreword

All of these factors are affected to a great degree by the policies of government, both here and abroad, but even with the most enlightened policies the overall energy enterprise, like a massive ship, will be slow to change course. Its complex mix of scientific, technical, economic, social, and political elements means 

that the necessary transformational change in how we generate, supply, distribute, 

and use energy will be an immense undertaking, requiring decades to complete.

To stimulate and inform a constructive national dialogue about our energy 

future, the National Academy of Sciences and the National Academy of Engineering initiated a major study in 2007, “America’s Energy Future: Technology 

Opportunities, Risks, and Tradeoffs.” The America’s Energy Future (AEF) project 

was initiated in anticipation of major legislative interest in energy policy in the 

U.S. Congress and, as the effort proceeded, it was endorsed by Senate Energy and 

Natural Resources Committee Chair Jeff Bingaman and former Ranking Member 

Pete Domenici.

The AEF project evaluates current contributions and the likely future 

impacts, including estimated costs, of existing and new energy technologies. It was 

planned to serve as a foundation for subsequent policy studies, at the Academies 

and elsewhere, that will focus on energy research and development priorities, strategic energy technology development, and policy analysis.

The AEF project has produced a series of five reports, including this one 

on energy efficiency technologies, designed to inform key decisions as the nation 

begins a comprehensive examination of energy policy issues this year. Numerous 

studies conducted by diverse organizations have benefited the project, but many 

of those studies disagree about the potential of specific technologies, particularly 

those involving alternative sources of energy such as biomass, renewable resources 

for generation of electric power, advanced processes for generation from coal, and 

nuclear power. A key objective of the AEF series of reports is thus to help resolve 

conflicting analyses and to facilitate the charting of a new direction in the nation’s 

energy enterprise.

The AEF project, outlined in Appendix A, included a study committee and 

three panels that together have produced an extensive analysis of energy technology options for consideration in an ongoing national dialogue. A milestone in the 

project was the March 2008 “National Academies Summit on America’s Energy 

Future” at which principals of related recent studies provided input to the AEF 

study committee and helped to inform the panels’ deliberations. A report chronicling the event, The National Academies Summit on America’s Energy Future: 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Foreword vii

Summary of a Meeting (Washington, D.C.: The National Academies Press), was 

published in October 2008.

The AEF project was generously supported by the W.M. Keck Foundation, 

Fred Kavli and the Kavli Foundation, Intel Corporation, Dow Chemical Company Foundation, General Motors Corporation, GE Energy, BP America, the U.S. 

Department of Energy, and our own Academies.

Ralph J. Cicerone, President Charles M. Vest, President

National Academy of Sciences National Academy of Engineering

Chair, National Research Council Vice Chair, National Research Council
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

ix

Preface

As part of the National Academies’ America’s Energy Future (AEF) project (see Appendix A), the Panel on Energy Efficiency Technologies (Appendix B) was appointed to assess the potential of technologies to 

save money as well as energy within the buildings, transportation, and industrial 

sectors during three time periods: 2009–2020, 2020–2035, and beyond 2035. 

Box P.1 contains the charge to the panel.

The focus of the panel’s assessment was the potential of technology for 

improving energy efficiency, which the panel defined as accomplishing a given 

objective with less energy (see Appendix D for an extended technical definition). 

Conservation is generally understood to mean saving energy by changing behavior, 

such as by driving a smaller car or setting back the thermostat in winter. Given its 

task, the panel did not examine how much energy savings could be achieved by 

conservation. Instead, the panel identified energy savings that could be achieved 

through energy efficiency.

In fact, energy efficiency technologies have been available for decades, but 

unfortunately, few have been implemented. The panel identified myriad barriers 

to getting these technologies adopted. It noted that if society were to give a higher 

priority to efficiency, perhaps because of higher energy prices, energy shortages, or 

concern about greenhouse gas emissions, deployment would be faster and the savings would be greater.

As the panel discovered, energy efficiency occupies a unique place in the 

energy debate. Energy efficiency requires none of the environmental disruption 

seen in extracting coal, petroleum, natural gas, or uranium; depends on no wind 

turbines or hydroelectric dams or thermal power plants; emits no greenhouse 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Preface

gases or other pollutants; and can mitigate energy security risks associated with 

imported oil. The obvious benefits of energy efficiency technologies in making 

America’s energy supply more secure and environmentally sustainable, and the 

U.S. economy more competitive by reducing the prices of goods and services, 

deserve additional public attention. 

The panel’s chair and vice chair thank the panel members and John 

Heywood for their hard work and insightsand apologize again to their family 

members for taking them away from other activities. The panel appreciates inputs 

provided in presentations by experts at its meetings (see Appendix C) and in writing (Anup Bandivadekar, International Council on Clean Transportation; Peter 

Biermayer, Sam Borgeson, Rich Brown, Jon Koomey, and Alan Meier, Lawrence 

BOX P.1 Statement of Task for the AEF Panel on 

Energy Efficiency Technologies

This panel will examine the potential for reducing energy demand through 

improving efficiency in transportation, buildings, and industrial processes using (1) 

existing technologies, (2) technologies developed but not yet used widely, and (3) 

prospective technologies. In keeping with the charge to the overall scope of the 

America’s Energy Future Study Committee, the panel will not recommend policy 

choices, but will assess the state of development of technologies. The energy efficiency panel will evaluate technologies based on their estimated times to readiness for deployment and will provide the following information for each:

•	 Initial deployment times of less than 10 years: costs, performance, impacts;

•	 Deployment times of 10 to 25 years: barriers, implications for costs, R&D 

challenges/needs;

•	 Deployment times greater than 25 years: barriers, R&D challenges/needs 

(especially basic research needs).

The primary focus of the study will be on the quantitative characterization of 

technologies likely to be available for deployment within the next 10 years. The 

panel will provide details on the technical potential of improving efficient use 

of energy in the United States using existing technologies as well as consider the 

applicability of existing technologies in other nations. It will also assess the potential for improving energy efficiency by using technologies developed but not yet 

used widely in the United States or abroad, and by using prospective technologies 

with substantial likelihood of commercial use during the three deployment timescales described above. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Preface xi

Berkeley National Laboratory; Lynette Cheah, Massachusetts Institute of Technology; Steve Dunn, Southwest Energy Efficiency Project; Mark Frankel, New Buildings Institute; Mauricio Justiniano and Nancy Margolis, Energetics, Inc.; Mike 

Messenger, Itron, Inc.; and Christopher Weber, Carnegie Mellon University). 

Madeline Woodruff, the study director, was indefatigable and cheerful 

throughout the writing of the report and responding to reviewer comments. Greg 

Eyring helped pull the report together at the end. Tom Menzies supplied valuable 

material, comments, and data. Jonathan Yanger provided staff assistance throughout the project. Peter Blair, Jim Zucchetto, and Kevin Crowley guided the panel 

through the Academies’ processes and coordinated its work with that of the other 

panels and the AEF Committee.

 Lester B. Lave, Chair

Maxine L. Savitz, Vice Chair

Panel on Energy Efficiency Technologies
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

xiii

This report has been reviewed in draft form by individuals chosen for their 

diverse perspectives and technical expertise, in accordance with procedures 

approved by the Report Review Committee of the National Research 

Council (NRC). The purpose of this independent review is to provide candid and 

critical comments that will assist the institution in making its published report as 

sound as possible and to ensure that the report meets institutional standards for 

objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the 

deliberative process. We wish to thank the following individuals for their review 

of this report:

Philip Anderson, Princeton University,

William Brinkman, Princeton University,

Andrew Brown, Jr., Delphi Corporation,

Clark Bullard, University of Illinois at Urbana-Champaign,

Jonathan Creyts, McKinsey & Company, Inc.,

J. Michael Davis, Pacific Northwest National Laboratory,

John DeCicco, Environmental Defense Fund,

Theodore Geballe, Stanford University (professor emeritus),

Susan Hanson, Clark University,

Trevor Jones, ElectroSonics Medical, Inc.,

Mark Levine, Lawrence Berkeley National Laboratory,

Richard Morgenstern, Resources for the Future,

Peter H. Pfromm, Kansas State University,

Acknowledgment of Reviewers
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

xiv Acknowledgment of Reviewers

Bernard I. Roberston, DaimlerChrysler (retired),

Marc Ross, University of Michigan (professor emeritus),

Jeffrey Siirola, Eastman Chemical Company,

Anne E. Smith, CRA International,

Robert Socolow, Princeton University,

Dale F. Stein, Michigan Technological University,

James E. Woods, Sain Engineering Associates, Inc., and

Ernst Worrell, Lawrence Berkeley National Laboratory and Ecofys.

Although the reviewers listed above have provided many constructive comments and suggestions, they were not asked to endorse the conclusions or recommendations, nor did they see the final draft of the report before its release. The 

review of this report was overseen by Elisabeth M. Drake, Massachusetts Institute 

of Technology, and Robert A. Frosch, Harvard University. Appointed by the NRC, 

they were responsible for making certain that an independent examination of this 

report was carried out in accor­dance with institutional procedures and that all 

review comments were carefully considered. Responsibility for the final content of 

this report rests entirely with the authoring panel and the institution.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

xv

SUMMARY 1

1 ENERGY USE IN CONTEXT 21

1.1 Energy Use in the United States, 22

1.2 The Potential for Improved Energy Efficiency, 26

1.3 Approach to and Scope of This Study, 27

1.4 References, 39

2 ENERGY EFFICIENCY IN RESIDENTIAL AND COMMERCIAL BUILDINGS 41

2.1 Energy Use in Buildings, 41

2.2 Energy Efficiency Trends, 50

2.3 The Potential for Energy Efficiency in Buildings, 54

2.4 Approaches to Understanding Energy Efficiency Potential, 61

2.5 Conservation Supply Curves, 68

2.6 Advanced Technologies and Integrated Approaches, 80

2.7 Barriers to Improving Energy Efficiency in Buildings, 96

2.8 Market Drivers, 105

2.9 Findings, 109

2.10 References, 110

3 ENERGY EFFICIENCY IN TRANSPORTATION 121

3.1 Scope and Content of This Chapter, 121

3.2 Energy Use in Transportation, 125

Contents
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

xvi Contents

3.3 The Potential for Energy Efficiency Improvement in Passenger 

Transportation, 128

3.4 Freight Transportation, 158

3.5 Fuels Old and New, 167

3.6 System-Level Issues, 172

3.7 Challenges and Barriers, 175

3.8 Findings, 176

3.9 References, 178

4 ENERGY EFFICIENCY IN INDUSTRY 185

4.1 Energy Use in U.S. Industry in a Global Context, 185

4.2 Potential for Energy Savings, 192

4.3 Opportunities for Energy Efficiency Improvements in Four 

Major Energy-Consuming Industries, 203

4.4 Crosscutting Technologies for Improved Energy Efficiency, 226

4.5 Barriers to Deployment and Use, 245

4.6 The Business Case for Energy Efficiency, 250

4.7 Findings, 252

4.8 References, 253

5 OVERARCHING FINDINGS AND LESSONS LEARNED FROM FEDERAL AND 261

STATE ENERGY EFFICIENCY POLICIES AND PROGRAMS

5.1 Overarching Findings, 262

5.2 Energy Efficiency Policies and Programs, 264

5.3 The California Experience, 279

5.4 The New York Experience, 284

5.5 Lessons Learned, 289

5.6 Changing Consumer Behavior, 291

5.7 References, 292
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Contents xvii

Appendixes

A America’s Energy Future Project 299

B Panel Biographical Information 305

C Presentations and Panel Meetings 313

D Definitions of Energy Efficiency 315

E Estimating the Net Costs and Benefits of Energy Savings 317

F Equivalences and Conversion Factors 319

G Acronyms and Abbreviations 325
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 



Summary

Energy from fossil fuels and nuclear and renewable sources provides power 

for the myriad activities that take place in residences and commercial 

buildings, the transportation of people and goods, and both light and 

heavy industrial manufacturing. In 2008, U.S. primary energy use totaled 99.4 

quadrillion Btu (Figure S.1), making the United States the world’s largest consumer of energy. Yet although energy is essential to the U.S. economy, technologies 

exist today that can help make it possible to achieve significant energy savings and 

still maintain current lifestyles. The 1973–1974 oil embargo and each subsequent 

energy crisis prompted studies showing that the United States could save energy 

and money by investing in energy efficiency. But although U.S. energy use per dollar of GDP has declined over the past 30 years (EIA, 2008b), many of the energy 

efficiency technologies identified in those studies have not been implemented.

Today, efficiency in energy use has taken on special urgency. Price fluctuations, national security concerns over U.S. dependence on imported oil, and growing recognition of the need to reduce emissions of greenhouse gases have transformed energy efficiency from an option to a necessity.

The Panel on Energy Efficiency Technologies, convened as part of the 

National Academies’ “America’s Energy Future” project (see Appendix A), was 

asked to examine the potential for technologies available today or soon to enable 

Americans to use energy more efficiently; the costs of accomplishing this; and the 

hurdles and barriers that impede adoption of the technologies. Because saving 

energy and mitigating the environmental impacts of energy production and use—

especially, emission of greenhouse gases—is a long-term challenge and technology 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

 Real Prospects for Energy Efficiency in the United States

FIGURE S.1 Total U.S. energy use by sector, 2008 (in quadrillion Btu, or quads). For 

each sector, “total energy use” is direct (primary) fuel use plus purchased electricity 

plus apportioned electricity-system losses. Economy-wide, total U.S. primary energy use 

in 2008 was 99.4 quads. Totals may not equal sum of components due to independent 

rounding. 

Source: EIA 2009a, as updated by EIA, 2009b. 

Transportation

28%

(28 Quads)

Residential Buildings

22%

(21.6 Quads)

Commercial

Buildings

19%

(18.5 Quads)

Industry

31%

(31.3 Quads)

1.1 Efficiency

continues to develop, the panel was also asked to look beyond 2035 in assessing 

the technological potential for increasing U.S. energy efficiency.

Although the terms “energy efficiency” and “energy conservation” are often 

used interchangeably, they refer to different concepts. Improving energy efficiency involves accomplishing an objective—such as heating a room to a certain 

temperature—while using less energy. Energy conservation can involve changing 

one’s behavior so as to use less energy—e.g., driving a smaller car, or lowering 

the thermostat in winter. The panel’s work focused on technology and energy efficiency, rather than energy conservation. 

As a result of its broad look at energy use in other nations (Chapter 1); a 

detailed examination of the buildings (Chapter 2), transportation (Chapter 3), and 

industrial (Chapter 4) sectors and of numerous studies of energy use and poten-
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Summary 

tial savings in each; and its review of experience with and lessons learned from 

U.S. federal and state policies and programs (Chapter 5), the panel concluded 

that the potential for U.S. energy savings is large. Synthesizing the discussions and 

details presented across the chapters, the panel developed four overarching findings, which are presented below. The sector-specific findings given in Chapters 2 

through 4 are also listed. 

THE POTENTIAL FOR ENERGY SAVINGS

Table S.1 gives the panel’s conservative and optimistic estimates of potential 

cost-effective annual energy savings in U.S. buildings, transportation, and industry for 2020 and 2030. These estimates represent technology assessments, not 

projections—that is, the estimates are assessments of the potential energy savings 

achievable with the use of energy efficiency technologies, assuming a rapid rate of 

deployment, but one nevertheless consistent with past deployment rates. 

As indicated in Table S.1, the panel found that energy efficiency in buildings 

offers the greatest possibility for U.S. energy savings; by 2020, in the optimistic 

scenario, buildings would account for 53 percent of the total estimated savings, 

TABLE S.1 Panel Estimate of the Potential for Cost-Effective Annual U.S. Energy Savings (in 

quads) Achievable with Energy Efficiency Technologies in 2020 and 2030

Conservative Estimate Optimistic Estimate

2020 2030 2020 2030

Buildings, primary (source) electricity 9.4 14.4 9.4 14.4

Residential 4.4 6.4 4.4 6.4

Commercial 5.0 8.0 5.0 8.0

Buildings, natural gas 2.4 3.0 2.4 3.0

Residential 1.5 1.5 1.5 1.5

Commercial 0.9 1.5 0.9 1.5

Transportation, light-duty vehicles 2.0 8.2 2.6 10.7

Industry, manufacturing 4.9 4.9 7.7 7.7

 Total 18.6 30.5 22.1 35.8

Note: Savings are relative to the reference scenario of the EIA’s Annual Energy Outlook 2008 (EIA, 2008a) or, for 

transportation, a similar scenario developed by the panel. See Table 1.2 for more information on the baselines used in the panel’s 

analysis of the buildings, transportation, and industry sectors.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

 Real Prospects for Energy Efficiency in the United States

industry for 35 percent, and transportation for 12 percent.1 If all the potential 

energy savings the panel identified for residential and commercial buildings could 

be achieved, the effects on U.S. electricity generation needs could be dramatic. 

Instead of increasing from 99 quadrillion Btu (99 quads) in 2008 (EIA, 

2009a,b), to 111 quads in 2020, and then to 118 quads in 2030 (EIA, 2008a), 

U.S. energy use could, with full deployment of cost-effective, energy-efficient technologies, fall to 89–92 quads in 2020 and 82–88 quads in 2030. 

The importance of the values in Table S.1, however, is not the specific numbers; rather, the point is that taking advantage of technologies that save money as 

well as energy to produce the same mix of goods and services could reduce U.S. 

energy use to 30 percent below the 2030 forecast level, and even significantly 

below 2008 energy use. The result would be lower costs and a more competitive 

economy that uses less fossil fuel, has lower emissions of greenhouse gases, and 

puts less pressure on environmental quality.

OVERARCHING FINDINGS

Overarching Finding 1

Energy-efficient technologies for residences and commercial buildings, transportation, and industry exist today, or are expected to be developed in the 

normal course of business, that could potentially save 30 percent of the 

energy used in the U.S. economy while also saving money. If energy prices 

are high enough to motivate investment in energy efficiency, or if public policies are put in place that have the same effect, U.S. energy use could be lower 

than business-as-usual projections by 19–22 quadrillion Btu (17–20 percent) 

in 2020 and by 30–36 quadrillion Btu (25–31 percent) in 2030.2,3

1The transportation fraction would be higher if heavy-duty vehicles and aviation had been 

included in the panel’s analysis.

2The basis for comparison for the buildings and industry sectors is the reference scenario of 

the U.S. Department of Energy’s Annual Energy Outlook 2008 (EIA, 2008a) and the panel’s 

similar but slightly modified baseline for the transportation sector. 

3The AEF Committee’s report (NAS-NAE-NRC, 2009) estimated the amount of possible savings as 15–17 quads (about 15 percent) by 2020 and 32–35 quads (about 30 percent) by 2030. 

Since the release of that report, further analysis by the panel refined the amount of possible savings in 2020 to 17–20 percent.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Summary 

Saving this amount of energy by using energy-efficient technologies would 

reverse the growth in energy use forecasted by the U.S. Department of Energy’s 

(DOE’s) Energy Information Administration (EIA, 2008a) and thus have a positive 

impact on needed U.S. electricity generation capacity. 

As the report America’s Energy Future: Technology and Transformation 

(NAS-NAE-NRC, 2009) points out, energy efficiency costs less than building new 

energy production facilities, which typically take years longer to start up than do 

energy efficiency measures and also have substantial environmental impacts (e.g., 

increased CO2 emissions). 

Overarching Finding 2

The full deployment of cost-effective, energy-efficient technologies in buildings alone could eliminate the need to add to U.S. electricity generation 

capacity. Since the estimated electricity savings in buildings from Table S.1 

exceeds the EIA forecast for new net electricity generation in 2030, implementing these efficiency measures would mean that no new generation would 

be required except to address regional supply imbalances, replace obsolete 

generation assets, or substitute more environmentally benign generation 

sources.

As indicated by the differences between the conservative and optimistic estimates presented in Table S.1, there are considerable uncertainties in projections of 

both the timing and the quantity of potential energy savings. Formidable barriers 

impede the deployment of energy-efficient technologies, even if their adoption is 

projected to save money over time. These barriers include potentially high upfront costs; alternative uses for investment capital that are deemed more attractive; 

volatility of energy prices, leading to uncertainty in the payback time; and the lack 

of information available to consumers about the relative performance and costs of 

technology alternatives.

 Although the panel was not able to review all the barriers to implementing energy-efficient technologies, it did review some of the experience gained at 

the national level with policies and programs aimed at overcoming the barriers. 

Many policy initiatives have been effective, including efficiency standards (for 

vehicles and appliances) combined with DOE research and development; promotion of combined heat and power (largely through the Public Utilities Regulatory 

and Policy Act of 1978); the ENERGY STAR® product-labeling program; building 

energy codes; and utility- and state-sponsored end-use efficiency programs (see 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

 Real Prospects for Energy Efficiency in the United States

Chapter 5). Large states such as California and New York have also succeeded in 

overcoming many of the barriers to use of energy-efficient technologies, achieving 

high levels of energy savings (Chapter 5). 

Overarching Finding 3

The barriers to improving energy efficiency are formidable. Overcoming 

these barriers will require significant public and private support, as well 

as sustained initiative. The experience of leading states provides valuable 

lessons for national, state, and local policy makers in the leadership skills 

required and the policies that are most effective.

The long lifetimes of buildings and some capital equipment present a particularly important barrier to implementing energy-efficient technologies. These 

investments—particularly buildings—can last for decades or even centuries, blocking the implementation of more efficient substitutes. Hence, actions now and over 

the next decade to use (or not use) energy-efficient technologies and design practices that are available today have long-term consequences for energy use. 

Overarching Finding 4

Long-lived capital stock and infrastructure can lock in patterns of energy use 

for decades. Thus, it is important to take advantage of opportunities (during the design and construction of new buildings or major subsystems, for 

example) to insert energy-efficient technologies into these long-lived capital 

goods.

SECTOR ANALYSIS AND FINDINGS

Buildings

As shown in Figures S.1 and S.2, the myriad activities associated with residential 

and commercial buildings consumed about 40 quads, or 41 percent of the primary 

energy used in 2008 in the United States, including three-quarters of the electricity 

and half of the natural gas. Space heating, cooling, and ventilation are the largest 

consumers of energy in buildings, followed by lighting.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Summary 

FIGURE S.2 Total energy consumption in the United States in 2008, by sector and fuel. 

Shown are electricity consumption—with the losses in generation, transmission and 

distribution allocated to the end-use sectors—and the fuels used on-site in each sector. 

Electricity is generated off-site using fossil, renewable, and nuclear energy sources.

Source: EIA 2009a, as updated by EIA, 2009c. 

Many studies cited in Chapter 2 that have evaluated the quantity of realistically achievable savings as a function of the cost of saved energy show consistent 

results, despite differences in assumptions and approaches. As determined by the 

panel from its review of such studies, median predictions of achievable and costeffective energy savings are 1.2 percent per year for electricity and 0.5 percent 

per year for natural gas, amounting to a 25–30 percent energy savings for the 

U.S. buildings sector as a whole over 20 years. If this level of savings were to be 

achieved, it would offset the EIA (2008a) projected increase in energy use in the 

buildings sector.

Conservation supply curves are a tool for displaying the results of detailed 

assessments of the energy savings that could be achieved with specific technologies as a function of cost. The curves developed for buildings in this report (see 

Chapter 2) indicate that the projected baseline energy use in 2030 (EIA, 2008a) 

can be reduced by about 30 percent at a cost less than current average retail 

energy prices. 

Quadrillion Btu (Quads)

Electricity

(including losses)

Petroleum

Natural Gas

Coal

Renewables

35

30

25

20

15

10

5

0

Residential Commercial Industrial Transportation

1.2 Efficiency
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Real Prospects for Energy Efficiency in the United States

As shown in Table S.2, the estimated average costs of the energy saved (usually termed the “cost of conserved energy,” or CCE) in residential and commercial buildings for electricity and natural gas use as a result of energy efficiency 

measures were dramatically lower than the corresponding average retail prices for 

electricity and natural gas in 2007, indicating that large savings in energy costs 

were available.

Not reflected in Table S.2 are the results of integrated approaches designed 

to yield system-wide or building-wide savings. These approaches can involve integrating the design of the heating, ventilation, and air-conditioning system with 

that of the envelope system and the lighting system and its controls, all at the 

beginning of the design process. A small but growing number of new commercial buildings incorporate these design approaches to reach a 50 percent savings 

in energy use—mainly in heating, cooling, air-conditioning, water heating, and 

lighting—compared with prevailing building codes. With appropriate policies and 

programs in place, such energy-efficient buildings could become the norm in new 

construction.

Beyond the savings that could be realized through wider use of existing, 

energy-efficient technologies, advanced technologies, including light-emitting diode 

(LED) lamps, innovative window systems, new types of cooling systems, and 

power-saving electronic devices, are under development and are likely to become 

commercially available within the next decade. 

TABLE S.2 Estimated Average Cost of Conserved (Saved) Energy in Residential 

and Commercial Buildings Compared with National Average Retail Energy Prices, 

2007

Average Cost of Conserved 

(Saved) Energy

National Average 

Retail Energy Price

Residential

Electricity 2.7¢/kWh 10.6¢/kWh

Natural gas $6.9/million Btu $12.7/million Btu

Commercial

Electricity 2.7¢/kWh 9.7¢/kWh

Natural gas $2.5/million Btu $11.0/million Btu

Note: For the specific savings, see Figures 2.8 and 2.9.

Source: Brown et al., 2008. Energy prices are from EIA, 2008c.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Summary 

Findings for Buildings

B.1 Studies assessing the potential for energy savings in buildings take several different approaches, looking at whole-building results as well as 

results by end-use and technology. Nevertheless, their results tend to be 

consistent.

B.2 The potential for large, cost-effective energy savings in buildings is 

well documented. Median predictions of achievable, cost-effective savings are 1.2 percent per year for electricity and 0.5 percent per year for 

natural gas, amounting to a 25–30 percent energy savings for the buildings sector as a whole over the next 20–25 years. If this level of savings 

were to be achieved, it would offset the EIA (2008a) projected increase 

in energy use in this sector over the same period.

B.3 Studies of energy efficiency potential are subject to a number of limitations and biases. On the one hand, factors such as not accounting for 

new and emerging energy efficiency technologies can lead such studies 

to underestimate energy-savings potential, particularly in the midterm 

and long term. On the other hand, some previous studies were overly 

optimistic about the cost and performance of certain efficiency measures, thereby overestimating energy-savings potential, particularly in 

the short term. Although these limitations must be acknowledged, they 

do not affect the panel’s overall finding that the potential for energy 

savings in buildings is large.

B.4 Many advanced technologies under development and likely to become 

commercially available within the next decade—including LED lamps, 

innovative window systems, new types of cooling systems, and powersaving electronic devices—will further increase the energy-savings 

potential in buildings. In addition, new homes and commercial buildings with relatively low overall energy use have been demonstrated 

throughout the country. With appropriate policies and programs, they 

could become the norm in new construction.

B.5 Despite substantial barriers to widespread energy efficiency improvements in buildings, a number of countervailing factors could drive 

increased energy efficiency, including rising energy prices, growing concern about global climate change and the resulting willingness of consumers and businesses to take action to reduce emissions, a movement 

toward “green buildings,” and growing recognition of the significant 

nonenergy benefits offered by energy efficiency measures. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

10 Real Prospects for Energy Efficiency in the United States

Transportation

The 28 percent of the nation’s primary energy used for transportation comes 

almost entirely (97 percent) from petroleum (see Figure S.2). Transportation consumes 14 million of the 20 million barrels per day of petroleum used in the United 

States. Since 12 million barrels per day of petroleum are imported, the energy used 

for transportation is a major factor in national security. Moreover, transportation 

accounts for 30 percent of all U.S. carbon emissions arising from energy use, as 

well as for significant fractions of other air pollutants.

The potential for displacing petroleum in U.S. transportation resides both in 

increasing the efficiency with which liquid fuels (especially petroleum) are used 

and in shifting some of the vehicle fleet to alternative fuels such as electricity 

(including that generated using hydrogen fuel cells) and biofuels. 

Most of the energy used in transportation—some 75 percent—is consumed 

in moving passengers and goods on highways, leading to a focus on highway vehicles. An extensive menu of technologies is available today (see Chapter 3)—and 

additional technologies will likely be available in the future—that could reduce 

highway fuel consumption by cars and light trucks (light-duty vehicles; LDVs).4

Improvements in internal-combustion engines (ICEs) and transmissions, reductions 

in rolling resistance and aerodynamic drag, and reductions in vehicle weight and 

size are all achievable with technologies that are available now but are used only 

at a low level, or with technologies that will be available soon. 

If the energy savings from improvements in passenger vehicles are to be 

large, Americans’ penchant for increasing vehicle size and performance will have 

to give way to the goal of reducing fuel consumption—that is, improvements in 

fuel efficiency must have priority over increases in vehicle size and performance. 

The panel found that evolutionary improvements in gasoline vehicles using 

ICEs are likely to prove the most cost-effective technology for improving fuel 

efficiency and reducing petroleum consumption, at least through 2020. Because 

changing the manufacturing, servicing, and fuel infrastructure to serve electric or 

fuel cell vehicles would be expensive and time-consuming, the new technology 

would have to offer major advantages. For the medium term, plug-in hybridelectric vehicles (PHEVs) and the associated electricity fueling infrastructure could 

be deployed more rapidly and more cheaply than hydrogen fuel-cell vehicles and 

the associated hydrogen fuel production and distribution infrastructure. Thus, if 

4Light-duty vehicles include passenger cars and trucks less than 8500 lb.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Summary 11

high-energy-storage battery technology progresses sufficiently, PHEVs would be a 

promising mid- to long-term option. In contrast, it would take decades—perhaps 

until 2050—for hydrogen fuel-cell vehicles (HFCVs) to have a major impact on 

U.S. oil use. 

Table S.3 shows plausible reductions in fuel consumption and CO2 emissions 

stemming from evolutionary improvements in LDVs as well as the use of new 

vehicle types, assuming that most of the gain does not go to increases in vehicle 

size and performance. As shown, evolutionary improvements could reduce the fuel 

TABLE S.3 Potential Relative Vehicle Petroleum Use and Greenhouse Gas Emissions from 

Vehicle Efficiency Improvements Through 2035

Petroleum Consumption 

(gasoline equivalent) Greenhouse Gas Emissionsa

Propulsion System

Relative to 

Current Gasoline 

ICE

Relative to 

2035 Gasoline 

ICE

Relative to 

Current Gasoline 

ICE

Relative to 

2035 Gasoline 

ICE

Current gasoline 1.00 1.00

Current turbocharged gasoline 0.90 0.90

Current diesel 0.80 0.80

Current hybrid 0.75 0.75

2035 gasoline 0.65 1.00 0.65 1

2035 turbocharged gasoline 0.60 0.90 0.60 0.90

2035 diesel 0.55 0.85 0.55 0.85

2035 HEV 0.40 0.60 0.40 0.60

2035 PHEV 0.20 0.30 0.35–0.45 0.55–0.70

2035 BEV None 0.35–0.50 0.55–0.80

2035 HFCV None 0.30–0.40 0.45–0.60

Note: These estimates assume that vehicle performance (maximum acceleration and power-to-weight ratio) and size remain the 

same as today’s average new-vehicle values. That is, the improvements in propulsion efficiency are used solely to decrease fuel 

consumption rather than to offset increases in vehicle performance and size. Estimates have been rounded to the nearest 0.05. 

BEVs and HFCVs are expected to have shorter driving ranges than PHEVs between rechargings or refuelings.

BEV, battery-electric vehicle; HEV, hybrid-electric vehicle; HFCV, hydrogen fuel-cell vehicle; ICE, internal combustion

engine; PHEV, plug-in hybrid vehicle. aGreenhouse gas emissions from the electricity used in 2035 PHEVs, 2035 BEVs, and 2035 HFCVs are estimated from the 

projected U.S. average electricity grid mix in 2035. Greenhouse gas emissions from hydrogen production are estimated for 

hydrogen produced from natural gas. 

Source: Bandivadekar et al., 2008. Estimates based on assessments by An and Santini, 2004; Wohlecker et al., 2007; Cheah et 

al., 2007; NPC, 2007; and NRC, 2004.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

12 Real Prospects for Energy Efficiency in the United States

consumption of gasoline ICE vehicles by up to 35 percent over the next 25 years. 

Hybrid-electric vehiclesboth HEVs and PHEVscould deliver deeper reductions 

in fuel consumption, although they would still depend on gasoline or other liquid 

fuels. Vehicles powered by batteries and hydrogen fuel cells need not depend on 

hydrocarbon fuels; if they ran on electricity or hydrogen, they could have zero 

tailpipe emissions of CO2 and other pollutants. If the electricity or hydrogen were 

generated without CO2 emissions, they would have the potential to reduce total 

life-cycle CO2 emissions dramatically.

To have a significant effect, advanced-technology vehicles must garner a sizable share of the market. Generally, a decade or more is required to develop a 

technology to the stage that it can be deployed, to introduce it on a commercial 

vehicle, and then to achieve significant sales. There are also technical constraints 

on the speed with which the market shares of advanced technologies can grow, 

such as the need for breakthroughs in battery performance and for a hydrogendistribution infrastructure.

The panel examined the available literature to assess how the performance 

and costs of LDV technologies might change over time. It then developed both 

conservative and optimistic scenarios for technology penetration and examined 

their impacts on fuel consumption in the U.S. LDV fleet. Annual fuel savings in 

the conservative scenario could reach 16 billion gallons in 2020 and 66 billion 

gallons in 2035; in the optimistic scenario, the savings could be 21 billion gallons 

and 86 billion gallons, respectively.

The panel also examined other forms of highway transportation, as well as 

aircraft, railroad, and marine transport. Because ships and railroads are highly 

efficient, substantial efficiency improvements are unlikely. Jet aircraft efficiency 

improved 70 percent from 1960 to 2000 with promises of continuing improvement. For example, the new designs for the Boeing 747 and 787 are 20–25 percent more efficient. In addition, minimizing fuel costs has been a high priority 

for trucking companies, and reductions of 10–20 percent in the fuel economy of 

heavy- and medium-duty vehicles appear feasible over the next decade or so as a 

result of improved technology. Further opportunities to save fuel are presented by 

shifting some long-haul freight from truck to rails. A broad examination of the 

potential for improved freight system effectiveness is needed.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Summary 13

Findings for Transportation

T.1 In the transportation sector, the potential for energy savings and petroleum displacement resides both in increasing the efficiency with which 

liquid fuels (especially petroleum) are used and in shifting some of the 

vehicle fleet’s energy demand to electricity (including hydrogen fuel-cell 

vehicles). The overall energy use and greenhouse gas emissions (and 

other environmental effects) associated with such a shift depend on how 

the electricity or hydrogen is generated. 

T.2 An extensive menu of technologies exists today for increasing energy 

efficiency in transportation. Achieving the average new-vehicle fuel 

economy targets for 2020 set by the Energy Independence and Security 

Act of 2007 (EISA; P.L. 110-140), which represent a 40 percent increase 

over today’s value (and a 30 percent reduction in average fuel consumption), is thus a feasible, although challenging, objective. Reaching the 

EISA targets, and continuing to decrease fuel consumption, will require 

a shift from the historic U.S. emphasis on ever-increasing vehicle power 

and size to an emphasis on using efficiency improvements to improve 

vehicle fuel consumption.

T.3 In the near term, fuel-consumption reductions will come predominantly 

from improved gasoline and diesel engines, improved transmissions, and 

reduced vehicle weight and drag. Through at least 2020, evolutionary 

improvements in vehicles with gasoline internal-combustion engines are 

likely to prove the most cost-effective approach to reducing petroleum 

consumption. Gasoline-electric hybrids will likely play an increasingly 

important role as their production volume increases and their cost, 

relative to that of conventional vehicles, decreases. Meeting the EISA 

standards is likely to require that, over the next decade or two, an everlarger fraction of the new vehicle fleet be hybrids or plug-in hybrids.

T.4 Beyond 2020, continuing reductions in fuel consumption are possible. 

Plausible efficiency improvements in light-duty vehicles, alongside 

weight reduction and more extensive use of hybrid and plug-in hybrid 

(and possibly battery-electric) vehicles, could reduce transportation 

fuel consumption to below the levels implied by the higher 2020 fueleconomy standards mandated by the EISA. An especially important 

R&D focus is developing marketable vehicles that use electricity, which 

will require improving the performance and reducing the cost of highenergy-storage batteries.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

14 Real Prospects for Energy Efficiency in the United States

T.5 A parallel longer-term prospect is fuel cells with hydrogen as the energy 

carrier. To be attractive, major improvements, especially in reducing costs, are needed. Widespread implementation requires significant 

investment in efficient, low-greenhouse-gas-emissions hydrogen supply 

and distribution systems. Onboard hydrogen storage is a key R&D 

issue. Establishing a new propulsion system technology and new fuel 

infrastructure on a large scale is a formidable task, and significant 

deployment of fuel-cell vehicles is unlikely before 2035.

T.6 There are opportunities to reduce energy use in freight transportation 

by improving both vehicle efficiency and freight system logistics and 

infrastructure. Reductions of 10–20 percent in the fuel economy of 

heavy- and medium-duty vehicles appear feasible over a decade or so. 

A broad examination is needed of the potential for improving the effectiveness of the freight system to reduce energy consumption further. 

T.7 Air transport and waterborne shipping have become more energyefficient in response to higher fuel prices. Jet engine and aircraft technology has the potential to improve the efficiency of new aircraft by 

up to 35 percent over the next two decades. However, improvements 

in aviation efficiency for passenger transport are unlikely to fully offset projected growth in air travel. Major additional issues are the full 

greenhouse gas and other environmental impacts of aviation fuel use at 

high altitude and of growing airline travel; the potential for using biomass-based fuels in jets; and whether the use of low-grade residual fuel 

in ocean-going vessels will continue.

T.8 Most transportation efficiency studies and proposals have focused on 

the considerable energy efficiency gains that could be achieved with 

improved vehicles rather than in the transportation system as a whole. 

This emphasis is appropriate given the potential for and impact of such 

gains. However, major insights and improvements can result from a 

broader and deeper understanding of transportation system issues. The 

potential overall impact of such broader, system-based changes, such 

as densifying and reorganizing land use and collective modes of travel, 

needs further exploration and quantification. Developing better data 

and tools that can be used to analyze and forecast how different policies 

and investments might affect vehicle use and travel is thus an important 

task. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Summary 15

Industry

Figure S.1 shows that U.S. industry consumes almost one-third of the energy used 

in the United States. Between 1985 and 2004, real GDP in U.S. industry increased 

by nearly 45 percent while total energy use was virtually unchanged, leading to a 

decrease in energy intensity by nearly one-third. However, much of this improvement in energy intensity was due to a change in the composition of manufacturing 

in the United States. The share of industrial GDP accounted for by energy-intensive industries such as petroleum refining and paper manufacturing declined and 

was replaced by less-energy-intensive sectors such as computers and electronics.

Independent studies (cited in Chapter 4) using various approaches show that 

the economic potential for improved energy efficiency in industry is large. On 

the basis of its assessment of those studies, the panel concluded that of the 34.3 

quads of energy forecasted to be consumed by U.S. industry in 2020 (EIA, 2008a), 

14–22 percent (4.9–7.7 quads) could be saved through cost-effective energy efficiency improvements (those with an internal rate of return of at least 10 percent 

or that exceed a company’s cost of capital by a risk premium). A large part of this 

savings—2 quads at the upper end of the range—would be supplied by further 

use of combined heat and power systems. Table S.4 summarizes the potential for 

energy savings in industry as estimated by various studies.

Beyond 2020, a wide array of advanced industrial technologies could make 

significant contributions to reducing industrial energy consumption and CO2

emissions. Possible revolutionary changes include novel heat and power sources, 

as well as innovative processes for new products that take advantage of developments in nanotechnology and micro-manufacturing. Examples include the 

microwave processing of materials and nano-ceramic coatings, which show great 

potential for boosting the efficiency of industrial processes. In addition, advances 

in resource recovery and utilization—e.g., aluminum recycling—could reduce the 

energy intensity of U.S. industries. 

Findings for Industry

I.1 Independent studies using different approaches agree that the economic 

potential for improved energy efficiency in industry is large. Of the 

34.3 quads of energy forecasted to be consumed by U.S. industry in 

2020 (EIA, 2008a), 14–22 percent could be saved through cost-effective 

energy efficiency improvements (those with an internal rate of return of 

at least 10 percent or that exceed a company’s cost of capital by a risk 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

16 Real Prospects for Energy Efficiency in the United States

TABLE S.4 Economic Potential for Energy Efficiency Improvements in Industry in the Year 

2020: Sector-wide and by Selected Subsectors and Technologies

Estimates for U.S. Industry

CEF Study (IWG, 2000)

Scaled to AEO 2008 

(quads)

McKinsey and 

Company (2008)

(quads)

Other U.S. 

Studies

(quads)

Global 

Estimates from 

IEA (2007)

(%)

Petroleum refining n.a. 0.3 0.61–1.21

to

1.40–3.28a

13–16

Pulp and paper 0.14b 0.6 0.37 to 0.85c 15–18

Iron and steel 0.21d 0.3 0.79e 9–18

Cement 0.08f 0.1 0.29g 28–33

Chemical manufacturing n.a. 0.3 0.19h to 1.1i 13–16

Combined heat and power 2.0 0.7 4.4–6.8j

Total, industrial sector 7.7

(22.4%)

4.9

(14.3%)

18–26

Note: This table appeared in Lave (2009) before this report was completed. The data in Table S.4 have been updated since the 

Lave (2009) article was published. CEF study, Scenarios for a Clean Energy Future (IWG, 2000); AEO 2008, Annual Energy 

Outlook 2008, with Projections to 2030 (EIA, 2008a); n.a., not available. aBased on a range of 10–20 percent savings (LBNL, 2005) to 23–54 percent savings (DOE, 2006a) from a baseline forecast 

of 6.08 quads. b6.1 percent of the 2.31 quads of energy consumption forecast for the paper industry in 2020 by the Annual Energy Outlook 

2008 (EIA, 2008a).

c

Based on 16 percent savings (Martin et al., 2000a) and 37 percent savings (DOE, 2006b) from the baseline forecast of 2.31 

quads. d15.4 percent of the 1.36 quads of energy consumption forecast for the iron and steel industry in 2020 by the Annual Energy 

Outlook 2008 (EIA, 2008a). e

Based on 58 percent savings (AISI, 2005) from the baseline forecast of 1.36 quads. 

f

19.1 percent of the 0.43 quads of energy consumption forecast for the cement industry in 2020 by the Annual Energy 

Outlook 2008 (EIA, 2008a). gBased on 67 percent savings (Worrell and Galitsky, 2004) from the baseline forecast of 0.43 quads.

hNational Renewable Energy Laboratory, 2002. 

i

DOE, 2007.

j

Bailey and Worrell, 2005.

premium). These innovations would save 4.9–7.7 quads annually by 

2020. 

I.2 Additional efficiency investments could become cost-competitive 

through energy RD&D. Enabling and crosscutting technologies, such 

as advanced sensors and controls, microwave processing of materials, 

nanoceramic coatings, and high-temperature membrane separation, can 

provide efficiency gains in many industries as well as throughout the 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Summary 17

energy system—for example, in vehicles, feedstock conversion, and electricity transmission and distribution.

I.3 Industry has experienced a significant shift to offshore manufacturing 

of components and products. If the net energy embodied in imports and 

exports is taken into account, the energy consumption attributable to 

industry would be increased by 5 quads.

I.4 Energy-intensive industries such as aluminum, steel, and chemicals have 

devoted considerable resources to increasing their energy efficiency. 

For many other industries, energy represents 10 percent or less of costs 

and is not a priority. Energy efficiency investments compete for human 

and financial resources with other goals such as increased production, 

improved productivity, introduction of new products, and compliance 

with environment, safety, and health requirements. Outdated capital 

depreciation schedules, backup fees for combined heat and power systems, and other policies also hamper energy efficiency investment.

I.5 More detailed data, collected more frequently, are needed to better 

assess the status of and prospects for energy efficiency in industry. Proprietary concerns will have to be addressed to achieve this.

I.6 Drivers for energy efficiency in industry include rising and volatile 

energy prices, intense competitive pressure to lower costs, and an 

increased focus on corporate sustainability.

RELATED CONSIDERATIONS

Experience with Policies and Programs

As noted above, the most cost-effective energy efficiency policies and programs of 

the last three decades (see Chapter 5) were vehicle and appliance efficiency standards, regulatory reforms to promote the adoption of combined heat and power 

systems, ENERGY STAR® product labeling and promotion, building energy codes, 

and utility and state end-use efficiency programs. Common characteristics of the 

most effective policies include:

•	 Periodic analysis and revision to assess effectiveness and to account for 

new technologies and opportunities;
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

18 Real Prospects for Energy Efficiency in the United States

•	 Financial incentives (if used) structured so that they reward performance and stimulate further action by consumers and businesses, rather 

than simply subsidize “efficiency” indiscriminately; and 

•	 Integration of policies into market transformation strategies that 

address the full range of barriers present in a particular situation.

Research and Development

Finally, the panel concluded that, based in part on a prior National Research 

Council study (NRC, 2001), U.S. DOE-funded R&D on energy-efficient technologies has been highly productive. 

Energy efficiency is a dynamic resource. Basic and applied research can continue to develop technologies that deliver large energy savings. If the potential 

for energy efficiency technologies is to be realized beyond the next decade, the 

dynamic nature of the resource must be recognized and supported.

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Real Prospects for Energy Efficiency in the United States 

Summary 19

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Martin, N., N. Anglani, D. Einstein, M. Khrushch, E. Worrell, and L.K. Price. 2000. 

Opportunities to Improve Energy Efficiency and Reduce Greenhouse Gas Emissions in 

the U.S. Pulp and Paper Industry. LBNL-46141. Berkeley, Calif.: Lawrence Berkeley 

National Laboratory.

McKinsey and Company. 2008. The Untapped Energy Efficiency Opportunity of the U.S. 

Industrial Sector: Details of Research, 2008. New York: McKinsey and Company.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

20 Real Prospects for Energy Efficiency in the United States

NAS-NAE-NRC (National Academy of Sciences-National Academy of EngineeringNational Research Council). 2009. America’s Energy Future: Technology and 

Transformation. Washington, D.C.: The National Academies Press.

NPC (National Petroleum Council). 2007. Technologies for Transportation Efficiency. 

Topic paper of the Transportation Efficiency Subgroup. Council Committee on Global 

Oil and Gas. Washington, D.C.: NPC. July.

NRC (National Research Council). 2001. Energy Research at DOE: Was It Worth It? 

Washington, D.C.: National Academy Press.

NRC. 2004. The Hydrogen Economy: Opportunities, Costs, and R&D Needs. 

Washington, D.C.: The National Academies Press.

NREL (National Renewable Energy Laboratory). 2002. Chemical Industry of the Future: 

Resources and Tools for Energy Efficiency and Cost Reduction Now. DOE/GO102002-1529; NREL/CD-840-30969. October. Available at http://www.nrel.gov/docs/ 

fy03osti/30969.pdf.

Wohlecker, R., M. Johannaber, and M. Espig. 2007. Determination of weight elasticity of 2007. Determination of weight elasticity of

fuel economy for ICE, hybrid and fuel cell vehicles. SAE Technical Paper 2007-01-

0343. Warrendale, Pa.: SAE International.

Worrell, E., and C. Galitsky. 2004. Energy Efficiency Improvement and Cost Saving 

Opportunities for Cement MakingAn ENERGY STAR (R) Guide for Energy 

and Plant Managers. LBNL-54036. Berkeley, Calif.: Lawrence Berkeley National 

Laboratory.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

21

This report of the Panel on Energy Efficiency Technologies reviews the 

technologies that could increase energy efficiency1 in U.S. buildings, 

transportation, and industry over the next few decades, especially during 

the period 2010–2020. It describes the technologies’ state of development; the 

potential for their use to achieve energy savings in buildings, transportation, and 

industry; and their performance, costs, and environmental impacts, most notably 

emission of greenhouse gases.2 The panel was convened as part of the National 

Academies’ America’s Energy Future (AEF) project (described in Appendix A). The 

panel’s charge is given in the preface in Box P.1.

Because continued technological advances make energy efficiency a dynamic 

resource, this report also reviews advanced technologies—some of which could 

become available and cost-effective in the 2020–2035 timeframe and beyond—and 

the research and development (R&D) needed to support their development.

To make a difference, energy efficiency technologies will have to be adopted 

widely, and so this report also addresses the sometimes formidable barriers to 

1The terms “energy efficiency” and “energy conservation” are often used interchangeably, 

but although both can save energy, they refer to different concepts (see Box 1.4 and Appendix 

D). Improving energy efficiency involves accomplishing an objective, such as heating a room to a 

certain temperature, while using less energy. Energy conservation involves behavior expressed in 

actions taken to reduce energy use and can involve lifestyle changes—e.g., lowering the thermostat in winter. This report focuses on energy efficiency. 

2Although greenhouse gas emissions are the primary environmental impact considered in this 

report, the full evaluation of a specific application of a technology or measure should consider 

many other effects, including local effects, on the environment and natural resources.

1 Energy Use in Context
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

22 Real Prospects for Energy Efficiency in the United States

achieving high market penetration, and it outlines some of the experience gained 

with key policies and programs aimed at overcoming these barriers.

1.1 ENERGY USE IN THE UNITED STATES

The United States is the world’s largest consumer of energy. In 2008 it used 99.4 

quadrillion Btu (99 quads) of primary energy (Figure 1.1), 20 percent of world 

consumption. The next largest user, China, accounted for 15 percent of world 

consumption, but its per capita use was less than one-fifth that of the United 

Transportation

28%

(28 Quads)

Residential Buildings

22%

(21.6 Quads)

Commercial

Buildings

19%

(18.5 Quads)

Industry

31%

(31.3 Quads)

1.1 Efficiency

FIGURE 1.1 Total U.S. energy use by sector, 2008 (in quadrillion Btu, or quads). For 

each sector, “total energy use” is direct (primary) fuel use plus purchased electricity 

plus apportioned electricity-system losses. Economy-wide, total U.S. primary energy use 

in 2008 was 99.4 quads. Totals may not equal sum of components due to independent 

rounding. 

Source: EIA 2009a, as updated by EIA, 2009b. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Use in Context 23

States.3 In 2008, about 40 percent of the energy consumed in the United States 

was used in the myriad activities and services associated with residential and commercial buildings; 28 percent was used in transportation; and 31 percent was used 

in industry. U.S. energy consumption in 2008 by sector and by fuel type is shown 

in Figure 1.2. 

Additional details on the sources and sectoral uses of energy in the United 

States are shown in Figure 1.3, which indicates for 2008 the amount of primary 

energy used for electricity generation (40.0 quads) and how much generated electricity and other energy was used in residential and commercial buildings (20.1 

quads), transportation (27.9 quads), and industry (23.9 quads). In 2008, 73 

percent of the generated electricity was used in the residential and commercial 

buildings sector and almost all of the rest by industry, with only a small amount 

used for transportation. Figure 1.3 also shows on the far right how much of the 

3Energy Information Administration (EIA) data on the energy consumption of various countries are available from EIA at http://www.eia.doe.gov/emeu/aer/txt/ptb1103.html.

Quadrillion Btu (Quads)

Electricity

(including losses)

Petroleum

Natural Gas

Coal

Renewables

35

30

25

20

15

10

5

0

Residential Commercial Industrial Transportation

1.2 Efficiency

FIGURE 1.2 Total energy consumption in the United States in 2008, by sector and fuel. 

Shown are electricity consumption—with the losses in generation, transmission and 

distribution allocated to the end-use sectors—and the fuels used on-site in each sector. 

Electricity is generated off-site using fossil, renewable, and nuclear energy sources.

Source: EIA 2009a, as updated by EIA, 2009c. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

24 Real Prospects for Energy Efficiency in the United States

Solar

0.08

Nuclear

8.41

Hydro

2.46

Wind

0.31

Geothermal

0.35

Electricity

Generation

40.46

Net Electricity

Imports

Residential

11.43

20.83

7.04

8.41

2.44

0.31

0.31

0.46

0.10

2.28

169

4.74

9.14

0.02

4.84

0.07

12.67

Solar

0.09

Nuclear

8.45

Hydro

2.45

Wind

0.51

Geothermal

0.35

Natural

Gas

23.84

Electricity

Generation

39.97

Net Electricity

Imports

Residential

11.48

Commercial

8.58

Industrial

23.94

Transportation

27.86

Energy

Services

42.15

Rejected

Energy

57.07

Coal

22.42

20.54 (q)

6.82 (o)

8.45 (c)

2.43 (d)

0.51 (g)

0.31 (h)

0.42 (u)

0.46 (z) 0.67 (l) 0.83 (y)

2.03 (x)

0.06 (s)

0.49 (v)

0.10

(w)

0.11 (nn)

27.39 (oo)

2.29 (pp)

1.71 (qq)

4.78 (rr)

20.90

(ss)

19.15 (ll)

0.02 (ff)

3.35 (gg)

0.57 (bb)

1.17 (aa)

4.61 (hh)

4.70 (ii)

6.96 (mm)

6.86 (kk)

9.18 (jj)

0.02 (i)

0.01 (j)

3.20 (n)

1.79 (t)

4.99 (p)

0.08 (a)

0.01 (b)

12.68 (ee)

0.01 (e)

8.14 (m)

8.58 (cc)

26.33 (dd)

Biomass

3.88

Petroleum

37.13

1.3 Efficiency

FIGURE 1.3 Energy flows in the United States in 2008, quadrillion Btu (quads). The 

figure illustrates the delivery of energy from primary fuel sources, shown in the boxes 

on the left, to the residential, commercial, industrial, and transportation sectors, which 

are shown in the boxes at the center-right. Energy is delivered to these sectors primarily in three forms: (1) electricity, which is produced principally from coal, natural gas, 

and nuclear sources, and to a much lesser extent from renewable sources (hydro, solar, 

wind, and biomass); (2) liquid fuels, principally petroleum, with a small contribution 

from biomass-derived fuels (such as corn ethanol); and (3) natural gas for heating and 

as an industrial feedstock. Small quantities of coal and biomass are also used as industrial feedstocks. The width of each bar indicates the relative contribution of that energy 

source; the absolute contribution (in quads) is indicated by the numerical labels next 

to each bar. The bar for electricity represents retail electricity sales only and does not 

include self-generated electricity. The boxes on the right side of the figure show that a 

total of about 99 quads of energy were consumed in the United States in 2008, but only 

42 percent (42 quads) was used to provide energy services. The remaining 58 percent (57 

quads) was rejected—i.e., not used to provide energy services—because of inefficiencies 

in energy production, distribution, and use. 

Source: Lawrence Livermore National Laboratory and the U.S. Department of Energy, 

based on data in the Annual Energy Review 2008 (EIA, 2009a). Available at https://

publicaffairs.llnl.gov/news/energy/energy.html.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Use in Context 25

primary energy input resulted in actual energy services and how much was lost 

because of inefficiencies in energy production, distribution, and use.

Energy use in the United States has grown steadily since 1949, although 

with a dip in the 1970s during the oil crisis; today energy consumption is double 

what it was in 1963 and 40 percent higher than it was in 1975 (the low point 

following the oil crisis). At the same time, U.S. energy intensity—the amount of 

energy used per dollar of gross domestic product (GDP)—has fallen steadily over 

many decades, with the exception of 1890 to 1920 and a few years after 1945 

(Figure 1.4). Energy intensity decreased even as the United States became an 

industrial giant and built its railroads, highways, and other infrastructure. From 

1973 to 2006, energy intensity fell by half, a rate of reduction of 2.1 percent per 

year.

Year

Btu per Dollar of GD

P

185018701890190219061910191419181922192619301934193819421946195019541958196219661970197419781982198619901994199820022006

60,000

50,000

40,000

30,000

20,000

10,000

0

1.4 Efficiency

FIGURE 1.4 U.S. energy intensity (energy use per dollar of GDP), 1850–2006. Note the 

scale change on the x-axis between 1890 and 1902. Values for energy use before 1900 

are inconclusive, because they depend on an estimate of the amount of wood used, 

which was the predominate energy source in 1850.

Source: Lave (2009), based on data in Schurr and Netschert (1960) and EIA (2008b).
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

26 Real Prospects for Energy Efficiency in the United States

About 70 percent of the decline in energy intensity since 1973 is estimated 

to have resulted from improvements in energy efficiency (IEA, 2004). If the 

trend toward lower energy intensity seen from 1973 to 2006 were to continue 

as a result of greater energy efficiency, by 2030 U.S. energy intensity would have 

dropped by 36 percent. 

U.S. GDP is forecast to grow by 2.5 percent per year—slightly more than the 

2.1 percent per year drop seen in U.S. energy intensity—and thus by 68 percent 

over the period from 2009 to 2030. With no change in U.S. energy intensity, U.S. 

energy use would grow by 68 percent. But if energy intensity continued to drop by 

2.1 percent per year, by 2030 the energy intensity of the U.S. economy could be 

30 percent lower than it is today, and total energy use in 2030 would increase by 

only 8.7 percent. And if the United States could accelerate the reduction in energy 

intensity to 2.5 percent per year, it could enjoy the projected 68 percent increase in 

GDP by 2030 without using any more energy than in 2009. 

Can the United States achieve greater energy efficiency so that its energy 

intensity slows in relation to growth in U.S. GDP? What are the prospects for 

using energy more efficiently so as to reduce overall U.S. energy use as well?

1.2 THE POTENTIAL FOR IMPROVED ENERGY EFFICIENCY

Using energy more efficiently became a national concern during the first half of 

2008 as energy prices hit record highs. It has also been gaining in importance as 

a result of growing concern about how to reduce emissions of greenhouse gases. 

Greater energy efficiency would reduce the need for fossil fuels, which provide 86 

percent of the U.S. energy supply, and would thereby enhance not only environmental quality but also national security. Fortunately, the potential for greater U.S. 

energy efficiency is high. 

It is the case that, despite the impressive gains made by the United States 

over the last 30 years, almost all other developed nations use less energy per 

capita and less energy per dollar of GDP (see Table 1.1 for examples). Denmark’s 

levels of usage, for example, are about half those of the United States by both 

measures. While there are structural variations that account for part of this gap, 

studies have consistently shown that some 50 percent of the observed differences 

in energy intensity result from differences in energy efficiency (Darmstadter et al., 

1977; Schipper, 2004; Weber, 2008). Box 1.1 provides some information on comparisons of energy intensity across nine nations.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Use in Context 27

Moreover, energy-efficient and cost-effective technologies are available today 

to supply services (such as lighting, heating, cooling, refrigeration, transport, 

industrial motor drive, and computing) that are integral to modern life and that 

constitute the underlying drivers of the demand for energy. Hundreds of technologies, some already available commercially and others just beginning to enter the 

market, can provide these services more efficiently than is the case today, and they 

can collectively save large amounts of energy. Box 1.2 provides an example. Others are discussed in detail in Chapters 2 through 4.

Nevertheless, achieving greater energy efficiency in the United States will take 

considerable time and effort because, among other impediments, long-lived infrastructure, plants, and equipment—such as buildings, automobile assembly lines, 

and industrial and residential boilers—will have to be replaced or retrofitted. The 

range and number of other barriers to fuller use of energy efficiency technologies 

are suggested in Box 1.3 and discussed more fully in Chapters 2 through 4.

1.3 APPROACH TO AND SCOPE OF THIS STUDY

The panel’s assessment looks at energy use in U.S. buildings (both residential and 

commercial), transportation, and industry over three timeframes—the present 

to 2020, 2020–2035, and 2035–2050. The first period receives major attention 

because so many cost-effective technologies are ready for implementation today 

or will be ready within a few years. The panel examined the literature on energy 

TABLE 1.1 Energy Use in 2006 in Selected Nations, Per Capita and Per Dollar 

of Gross Domestic Product, Using Purchasing Power Parities (2000 dollars)

Million Btu per Person Btu per Dollar of GDP

United States

France

Japan

Germany

Denmark

335

181

179

178

161

8841

6596

6492

6428

5267

Note: Purchasing power parity exchange rates take into account the relative cost of living in the countries 

being compared. A similar table in Lave (2009) for energy use 2005 used data that reflected market 

exchange rates and that were taken from the EIA’s interactive website (http://tonto.eia.doe.gov/cfapps/

ipdbproject/IEDIndex3.cfm), in which data are continuously updated. 

Source: EIA, 2006.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

28 Real Prospects for Energy Efficiency in the United States

BOX 1.1 Comparing Energy Intensity Across Nations

Early work by Darmstadter et al. (1977) and Schipper (2004) examined energy 

efficiency across nine developed nations. Adjusting for the mix of goods and services 

produced, heating- and cooling-degree days, and distance traveled, Schipper (2004) 

showed the results of the comparison (Figure 1.1.1). 

In comparison with Denmark, for example, the United States uses 53 percent 

more energy per dollar of GDP. If the two nations had the average structure of the 

other nations but their own level of energy efficiency (comparing the second bars), 

the United States would still use 19 percent more energy per dollar of GDP than 

Denmark. In other words, the U.S. GDP mix is inherently more energy intensive than 

that of the average nation. If both nations had their current structures but had the 

same level of energy efficiency as the average among the nine nations shown in 

Figure 1.1.1 (comparing the third bars), the United States would use 28 percent more 

energy per dollar of GDP than Denmark. Another way of interpreting these estimates 

is that the U.S. economy would use about 19 fewer quads each year (about 19 percent of its total energy use) if it had the average energy efficiency of the other nine 

nations shown in Figure 1.1.1. The work by Darmstadter et al. (1977) suggested that 

the United States would use 25 fewer quads, remarkably similar results for comparisons made two decades apart. 

Correcting for structural differences, the International Energy Agency has shown 

that between 1973 and 1998 the energy intensity of the United States and the eight 

major European economies fell 34 percent, and the energy intensity of Japan fell 30 

percent (IEA, 2004). In Japan, strong declines in the energy intensity of manufacturing and the services sectors led the way, while the energy intensity of passenger 

transport and the residential sector actually increased. In Europe, manufacturing 

had the strongest decline in energy intensity, followed by declines in the service and 

household sectors. 

By 2030, Europe is likely to be less energy intensive than today, and so the United 

States is likely still to lag behind. Some technologies that are cost-effective today in 

Europe are not cost-effective in the United States because energy prices in Europe are 

much higher due to high taxes. Until U.S. energy prices are comparable to prices in 

Europe, or other factors have the same effect, Europe is likely to remain less energy 

intensive. 

efficiency, was briefed on the results of recent energy efficiency studies, and in 

some cases performed its own analyses to fill the gaps. 

For buildings, the panel developed energy efficiency supply curves for electricity and natural gas in the residential and commercial sectors that show the 

amount of energy that could be saved over a range of costs below the current 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Use in Context 29

Energy Use per Dollar of GDP

(1990 U.S. Dollars)

Japan

France

West

Germany

United

Kingdom

Sweden

Denmark

United

States

Canada

Australia

16

14

12

10

8

6

4

2

0

1.1.1 Efficiency

Actual

Average Structure

Average Intensities

FIGURE 1.1.1 Summary and comparison of nine nations’ energy intensity across all sectors and 

uses. The first bar for each nation indicates its overall energy intensity—expressed as energy use per 

dollar of GDP—in 1995. The value reflects such factors as each nation’s economic structure (production of goods by heavy industry and light manufacturing, and provision of services), its weather, 

and distances traveled. The second bar indicates what each country’s overall energy intensity would 

be if it had the average economic structure of the nations shown but its existing set of energy 

intensities. The third bar represents what the overall energy intensity would be if a country kept its 

own economic structure but had the energy intensities of the average among the nations shown.

Source: Reprinted from Schipper (2004), copyright 2004, with permission from Elsevier.

price of energy. For transportation, the panel focused on the alternative technologies that could power the nation’s cars and light trucks. By estimating the 

cost and energy savings associated with each technology and how R&D might 

improve the technology over time, as well as the timeframes in which specific 

technologies might be expected to penetrate the market, the panel was able to 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

30 Real Prospects for Energy Efficiency in the United States

BOX 1.2 The Benefits of More Efficient Products: An Illustration 

Appendix E of this report provides information on how to calculate the net costs 

and benefits of energy savings. Figure 1.2.1 illustrates that the overall energy efficiency of providing light using incandescent lamps—starting from the burning of coal 

to produce electricity and continuing through to the production of visible light—is 

about 1.3 percent: about two-thirds of the energy in the coal is lost in generating 

electricity, about 9 percent is lost in transmitting and distributing the electricity, and 

an incandescent lightbulb’s efficiency in transforming electricity to visible light is only 

4 percent (Tsao et al., 2009).

In comparison, compact fluorescent lamps (CFLs) are about four times as efficient 

in transforming electricity to light as is an incandescent lamp (Azevedo et al., 2009; 

Tsao et al., 2009). Across the residential, commercial, and industrial sectors, a switch 

from incandescent lighting to CFLs today would save nearly 6 percent of the total 

amount of electricity generated in the United States today.1 With further R&D, solidstate lamps (light-emitting diodes, LEDs) are expected to become 10 times as efficient 

as an incandescent lamp (Azevedo et al., 2009; Tsao et al., 2009).2

 Across the residential, commercial, and industrial sectors, a switch from incandescent lighting to CFLs today would save approximately 228 terawatt-hours (TWh) of 

electricity per year relative to today’s consumption, or nearly 6 percent of the total 

amount of electricity generated in the United States. 

1.2.1 Efficiency

Coal

Power Plant

E1 = 0.35

Transmission Lines

E2 = 0.90

Light

E3 = 0.04

Overall

Efficiency

= 1.3%

Overall Efficiency for

Conversion of Chemical Energy

to Light Energy

= E1 × E2 × E3

= 0.35 × 0.90 × 0.04 = 0.013

FIGURE 1.2.1 Example of how end-use efficiency influences overall fuel conversion efficiency. 

In this example, the efficiency of converting the chemical energy stored in coal to the electricity 

entering a building is about 32 percent (0.35 × 0.9). But after accounting for the low efficiency 

of the incandescent lightbulb, the efficiency of converting chemical energy to light energy is only 

1.3 percent. (All values are approximate.) 

Source: Adapted and updated from Hinrichs and Kleinbach, 2006.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Use in Context 31

Assuming that the LEDs become twice as efficient (on average) as CFLs and other 

types of currently efficient lamps in 5 years, replacing all lamps with LEDs at that 

time would save an additional 230.5 TWh. Based on the current average carbon dioxide (CO2

) emissions rate for the U.S. electricity sector, about 650,000 metric tons of 

CO2 per TWh consumed, the switch from incandescent lighting to CFLs would reduce 

U.S. CO2 emissions by about 148 million metric tons per year (about 2 percent). If 

all fluorescent and other lighting were subsequently converted to LEDs at twice the 

energy efficiency of fluorescent and other high-intensity discharge lamps and fixtures 

on average, an additional 56 million metric tons of CO2 emissions would be avoided 

annually.3

All of the above calculations use 2001 data from Navigant Consulting, Inc. (2002) 

(see also Table 1.2.1). The residential sector used 208 TWh of electricity in 2001, 10 

percent of which went to fluorescent lights. Because of the growing adoption of 

CFLs, the panel’s analysis assumes that the fluorescent share in 2008 was 15 percent 

and the incandescent share 85 percent. Thus, the amount of electricity consumed 

by incandescent lamps was about 176.8 TWh. Shifting to fluorescent lighting would 

reduce electricity use by 75 percent to 44.2 TWh. Together with the 15 percent of 

lighting that is already fluorescent, the 2008 usage would have been 75.4 TWh if all 

lights were efficient. If CFLs and other fluorescent lamps are replaced with LEDs in, 

say, 5 years, half as much electricity, or 37.7 TWh, would be used. Table 1.2.1 has the 

other calculations.

1The calculation is based on data in Navigant Consulting, Inc. (2002).

2The purchase price of a CFL is higher than that for an incandescent lamp, and the cost of 

an LED lamp is still higher. While both the CFL and LED save money and energy, compared with 

the incandescent lamp, whether the LED saves money compared with the CFL is sensitive to the 

number of hours each year the lamp is used, the purchase price, and the discount rate. 3The United States emitted 5.89 billion metric tons of CO2

 in 2006 as a result of all energy 

consumption.

TABLE 1.2.1 Annual Electricity Use for Lighting (TWh)

Estimated 2008 

Electricity Use 

for Lighting

Electricity Use 

for Inefficient 

Incandescent 

Lighting

Electricity Use 

for Fluorescent 

and Other 

Efficient 

Lighting 

Electricity Use 

for Formerly 

Inefficient 

Lighting If 

Replaced by 

CFLs

Total 2008 

Electricity Use 

for Lighting If 

All Lamps Were 

Efficient

Electricity Use 

for Lighting If All 

Lamps Are Later 

Replaced with 

LED Lamps 

Residential 208 176.8 (85%) 31.2 44.2 75.4 37.7

Commercial 391 125.1 (32%) 265.9 31.3 297.2 148.6

Industrial 108 2.2 (2%) 105.8 0.6 106.4 53.2

Total 707 304.1 (43%) 402.9 76.1 479.0 239.5

Saved TWh 228.0 467.5
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

32 Real Prospects for Energy Efficiency in the United States

BOX 1.3 Why Aren’t Energy-Efficiency Opportunities 

More Attractive to Consumers and Businesses?

Why don’t consumers and businesses take greater advantage of “cost-effective” 

energy efficiency opportunities? If so much energy can be saved, why doesn’t everyone do it, especially when the cost savings over time tend to well outweigh the initial 

costs?

The answer is complex, as there is no one reason for this seeming “behavior gap.” 

Each of this report’s sector discussions, as well as the policy discussion at the end of 

the report, identify factors that impede the full use of energy efficiency technologies 

and measures. Such barriers fall into several categories; the following examples illustrate how some of them affect decisions:

•	 Cost savings may not be the only factor influencing a decision to invest in an 

energy efficiency measure. For example, consumers purchase vehicles based on 

many factors, such as size, performance, and interior space, in addition to fuel 

economy. Fuel economy may not come into the picture at all.

•	 Although energy and cost savings might be achievable with only a low first 

cost (investment), such savings may be a small-enough part of the family or 

company budget that they are not really relevant to decisions.

•	 The up-front financial investment might be small, but substantial investments 

in time and effort may be required to find and study information about the 

potential energy-saving technologies, measures, and actions.

•	 It is well established that purchasers tend to focus much more on first costs 

than on life-cycle costs when making investments. This behavior is no different when it comes to energy efficiency. There is also the phenomenon of 

risk aversion—new products may be unfamiliar or not work as expected. The 

default behavior is often simply the status quo. Knowing this, producers may 

never design and develop energy-efficient products.

•	 Some of the “behavior gap” can be attributed to structural issues. For example, landlords of rental residential buildings are not motivated to pay for more 

develop illustrative scenarios of how total energy consumption in the light-duty 

vehicle (LDV) fleet could evolve.4 For industry, the panel focused on the four most 

4Technologies to increase the fuel efficiency of LDVs (automobiles and light trucks) have been 

studied extensively, so the panel focused on the energy savings that could be achieved with these 

technologies. There has been less study of efficiency in medium- and heavy-duty vehicles (MHDVs). 

An NRC committee is currently assessing the potential for efficiency improvements in these vehicles. The panel also did not treat aviation in depth. The potential energy savings in transportation 

would be higher if MHDVs and aviation had been included in the panel’s analysis.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Use in Context 33

efficient technologies when their tenants pay the utility bills. And builders 

whose incentive is to minimize the cost of new homes may not install highefficiency heating and cooling equipment and systems that increase purchase 

prices but save buyers money over time.

• Other factors may involve retailers of equipment and appliances. If there is 

low demand for efficient products, retailers may not stock them. Even purchasers who might be motivated to search elsewhere for an efficient product may 

have to deal with limited choices in the event of an emergency purchase, such 

as when a refrigerator fails.

• Other reasons for the behavior gap are the subject of much social science 

research. They involve factors such as habits in purchasing or use, which can 

be very difficult to change. Some apparent consumer preferences—typically 

learned from parents, neighbors, and friends—may change very slowly, if at 

all.

• Energy-savings investments by businesses and industries are not always seen as 

beneficial. If energy accounts for only a small part of total costs, or if the available capital is limited, other investments may be preferred—e.g., in reducing 

other costs, improving products, or developing new ones. If the consequences 

of a new-product or production-method failure are large, this in itself can 

maintain the status quo. 

• Firms may not be aware of the potential savings achievable by replacing 

equipment such as motors with more efficient or variable-speed versions. 

When motors, large or small, are used throughout a facility, the savings from 

upgrading them can be substantial.

•	 Energy-efficiency investments by companies are made in the context of complex business cultures. “Champions,” or commitment at the highest levels, may 

be required.

More details on how barriers such as these play out in the buildings, transportation, and industrial sectors are given in Chapters 2 through 4. Chapter 5 examines 

some of the policies and programs that have been aimed at overcoming these 

barriers.

energy-intensive U.S. industries and also reviewed studies that assessed the potential for energy efficiency across all of manufacturing. 

1.3.1 Baselines and Key Assumptions

The panel began by identifying a “baseline” or “business-as-usual” case. For 

buildings and industry, this was the reference case scenario of the Energy Informa-
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

34 Real Prospects for Energy Efficiency in the United States

tion Administration’s (EIA’s) Annual Energy Outlook 2007 (EIA, 2007)5 or 2008 

(EIA, 2008a). For transportation, the panel developed its own baseline. For each 

of the three sectors, the panel estimated the level of energy-efficiency improvement 

beyond the baseline or reference case that could be attained with better technologies. Table 1.2 summarizes the key assumptions used in the panel’s analyses of the 

three sectors; more details can be found in Chapters 2, 3, and 4.

1.3.2 Key Energy-Related Terms and Measures Used 

Box 1.4 provides definitions of some of the key energy-related terms and measures 

used throughout this report.

In addition, the panel notes the importance of distinguishing between “primary energy” and “delivered energy,” depending on the aspect of energy use being 

considered or analyzed.6 “Delivered energy” is the energy value of the fuel or electricity that enters the point of use (e.g., a building). Primary energy accounts for 

the total amount of fuel needed to provide this delivered energy. Note that “primary energy” and “delivered energy” are often referred to as “source energy” and 

“site energy,” respectively. The Department of Energy’s (DOE’s) EIA, in its statistical reports, uses the former terminology; this report does the same.

When discussing electricity or natural gas bills, or assessing the electricity 

demand that must be met by electricity production, delivered energy is the metric 

of interest. When determining the ultimate impact on total fuel consumption and 

energy resources of the energy demand by residences, commercial buildings, transportation, and industry, and related effects on the economy and the environment, 

primary energy is the appropriate metric. When quoting values for energy demand 

and production, it is important to specify which measure is being used.

The EIA defines primary energy as energy in the form that it is first 

accounted for in a statistical energy balance, before any transformation to secondary or tertiary forms of energy (see Box 1.4). The fuels counted by the EIA in U.S. 

primary energy consumption are given in Box 1.5. Distinguishing between primary 

and delivered energy is most useful for electricity, where the difference between 

5With an assessment of whether the results might have differed if the EIA’s Annual Energy 

Outlook 2008 had been used.

6This section draws on information in U.S. Department of Energy, Energy Information Administration: “Energy Efficiency Measurement Discussion: Source Versus Site Energy,” available 

at http://www.eia.doe.gov/emeu/efficiency/measure_discussion.htm#Site%20Energy%20Versus%

20Primary%20Energy, and “Glossary,” available at http://www.eia.doe.gov/glossary/index.html.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Use in Context 35

TABLE 1.2 Sources and Key Assumptions Used to Develop Energy Savings and Cost Estimates

Buildings

(Chapter 2)

Transportation

(Chapter 3)

Industrya

(Chapter 4)

Reference 

scenario

AEO 2007 reference scenario 

(EIA, 2007), but with an 

assessment of whether using 

the AEO 2008 (EIA, 2008a) 

reference scenario would have 

changed the results

Developed by the panel,b

but similar to the AEO 

2008 reference scenario 

(EIA, 2008a)

AEO 2008 reference scenario 

(EIA, 2008a)

Source of cost 

estimates

Critical assessment of the 

literature

Critical assessment of the 

literature

Critical assessment of the 

literature

Source of 

savings 

estimates

Critical assessment of the 

literature 

Panel-derived conservation 

supply curve analysis

Critical assessment of the 

literature on specific 

technologies

For light-duty vehicles 

(LDVs), the panel 

derived illustrative 

scenarios of overall 

savings in fleet fuel 

consumption

Critical assessment of the 

literature on:

•	 Industry-specific savings

•	 Industry-wide savings

•	 Savings from specific crosscutting technologies

Key costeffectiveness 

criteria

Levelized cost of energy 

savings is less than the 

national average electricity 

and natural gas prices

Recovery of discounted 

costs of energy savings 

over the life of an LDVc

Energy savings provide 

an internal rate of return 

on investment of at least 

10 percent or exceed the 

company’s cost of capital by a 

risk premium

Technology 

lifetimes

Technology specific Average vehicle lifetime Technology specific

Before-tax 

discount rate 

(%, annual)

7 7 15

Other 

considerations

Assessment accounts for stock 

turnover in buildings and 

equipment

For LDVs, assessment 

considers how the 

distribution of specific 

vehicle types in the newvehicle fleet affects the onthe-road fleet

Assessment of savings in 

specific industries used 

to confirm industry-wide 

estimates

aManufacturing only.

bThis is a “no-change” baseline in which, beyond 2020 (when the original targets set by the Energy Independence and 

Security Act of 2007 are assumed to have been met), any fuel efficiency improvements are fully offset by increases in vehicle 

performance, size, and weight.

c

A cost-effectiveness criterion was not applied in the illustrative scenario analysis for transportation. Rather, the panel 

estimated, using the criteria in this table, whether an initial investment in the specific technologies assessed was likely to be 

recouped over the life of the vehicle.

Source: Adapted from Table 3.A.2 in NAS-NAE-NRC, 2009.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

36 Real Prospects for Energy Efficiency in the United States

BOX 1.4 Definitions

Energy, in its forms as work, heat, and electric power, provides such services as 

powering a car or providing light. It can come from renewable sources, such as the 

sun or wind; from chemical reactions, such as combustion of fossil or renewable 

fuels; or from nuclear reactions. Energy is usually measured in British thermal units 

(Btu) or kilowatt-hours (kWh) (or joules; 1 watt-hour is equivalent to 3600 joules). 

Delivered energy is a measure at the point-of-use (site) of the amount of energy 

delivered to a consumer without adjusting for the energy lost in transforming a 

fuel or other form of energy to electricity, transmitting the energy to the point 

where it will be used, and then distributing it to individual users. Primary energy 

is the amount of delivered energy adjusted upward to account for the energy that 

is lost in the transformation and delivery of that energy to an end user, such as a 

residential housing unit.

Energy intensity is a measure of the amount of energy used per unit of output for 

a company, industry, or the whole economy. For example, the energy intensity of 

steel production represents the amount of energy used to produce a ton of steel, 

or Btu per ton. Energy intensity can also represent the amount of energy used per 

dollar of outputor, for the whole economy, per dollar of gross domestic product 

(GDP). For example, the energy intensity of the U.S. economy is about 9000 Btu 

per dollar of GDP, equivalent to a bit less than one pound of coal or a bit more 

than one cup of gasoline per dollar. 

Energy efficiency is a measure describing how much useful work can be obtained 

from a system from a given amount of input energy. (A more formal definition 

derived from thermodynamics is given in Appendix E.) This report deals primarily with technologies for realigning improvements in energy efficiency, which 

the panel defines as accomplishing a specified objective using less energy. The 

objective might be to heat a room to a certain temperature, or provide a certain 

amount of light. For example, a compact fluorescent lamp is more efficient than 

an incandescent lamp, in that it provides the same number of lumens and quality 

of light as an incandescent lamp for only one-quarter to one-third of the energy 

input. Energy efficiency can be expressed directly as a dimensionless ratio—in this 

case, the ratio of the energy fed into a lightbulb to that which is radiated as light.

Conservation is usually understood to mean action taken to reduce the amount of 

energy used by changing behavior, such as turning off personal computers when 

not in use or setting back the thermostat in winter. It can also involve using technologies, such as room occupancy sensors for lighting, which reduce energy use 

without someone having to remember to turn off the light.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Use in Context 37

the two can be large. (For example, about two-thirds of the fuel energy used in a 

thermal power plant is lost in generating electricity. About 9 percent of the generated electricity is lost during transmission and distribution of the electricity. So the 

amount of electricity entering a building or facility represents only 30 percent or 

less of the original fuel energy.) The EIA distinguishes primary energy from delivered energy only for electricity. For other fuels, delivered energy consumption is 

assumed to equal primary energy consumption. For these fuels, the energy used to 

transform fuels from one form to another, such as from crude oil to gasoline, is 

counted as energy consumed by the industry that performs the transformation—in 

this case, petroleum refining. 

BOX 1.5 Forms of Primary Energy 

Consumption Included in EIA Statistics

•	 Coal consumption; coal coke net imports

•	 Petroleum consumption (petroleum products supplied, including natural gas 

plant liquids and crude oil burned as fuel, but excluding ethanol blended 

into motor gasoline)

•	 Dry natural gas consumption—excluding supplemental gaseous fuels 

•	 Nuclear electricity net generation, converted to British thermal units (Btu) 

using the heat rate for nuclear plants

•	 Conventional hydroelectricity net generation, converted to Btu using the 

heat rate for fossil-fueled plants 

•	 Geothermal electricity net generation, converted to Btu using the heat rate 

for geothermal plants, and geothermal heat-pump energy and geothermal 

direct-use energy

•	 Solar thermal and photovoltaic electricity net generation, converted to Btu 

using the heat rate for fossil-fueled plants, and solar thermal direct-use 

energy

•	 Wind electricity net generation, converted to Btu using the heat rate for 

fossil-fueled plants

•	 Wood and wood-derived fuels

•	 Biomass waste (municipal solid waste from biogenic sources, landfill gas, 

sludge waste, agricultural byproducts, and other biomass)

•	 Fuel ethanol and biodiesel; losses and co-products from the production of 

fuel ethanol and biodiesel

•	 Electricity net imports, converted to Btu using the electricity heat content of 

3412 Btu/kWh.

Source: EIA, 2007, p. 34. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

38 Real Prospects for Energy Efficiency in the United States

Analysts have debated the usefulness of measuring delivered (or site) energy. 

Many object to adding the energy value (as measured in British thermal units, 

or Btu) of delivered electricity to that of the fuels (such as natural gas) used 

directly at a site to arrive at a total value for “delivered energy” use at a site. This 

approach can lead to misleading conclusions—for example, that an all-electric 

building with resistance heating uses less energy than a comparable building with 

gas heated, because the delivered electricity, as measured in Btu, can be lower than 

the Btu value of the delivered natural gas. But the effects of electricity consumption on total energy use, and therefore the effects of consumer technology choices 

and upgrades, depend also on how the electricity is generated, which is not 

accounted for in delivered energy.

In this report, “delivered energy” refers to consumption of only a single fuel 

at a time for the buildings and industry sectors. In other words, energy delivered 

in different forms is not summed to produce a total value for delivered energy. 

For transportation, all petroleum-based fuels—gasoline, diesel oil, and others—are 

sometimes summed to obtain a total value for petroleum consumption. 

This report identifies electricity consumption as primary (source) energy use 

whenever this is the metric being used. Otherwise, the value being quoted is in 

terms of delivered (site) energy. 

1.3.3 Scope and Content

Chapters 2 through 4 provide the panel’s detailed assessment of the technologies 

that could improve energy efficiency in the buildings, transportation, and industrial sectors of the U.S. economy. Each chapter estimates the cost of technologies 

that offer improved energy efficiency, the amount of energy each could save, and 

the timeframe in which the technologies are likely to be available. The panel’s 

findings are presented at the end of each chapter. An important aspect of the 

panel’s analysis was the factors that impede putting energy-efficient technologies 

to use. Past studies have identified many technologies that, despite their potential 

to lower costs and save energy, were never implemented widely. Why seemingly 

attractive technologies are not deployed is explored for each sector in Chapters 

2 through 4 (see Box 1.3 for examples). Chapter 5 reviews key policies and programs that have been aimed at overcoming barriers to improving energy efficiency, 

including some that led to large energy savings, and it recounts some of the positive experiences of two large states in achieving increased energy savings. In addition, the panel presents in Chapter 5 four composite or overarching findings based 

on discussion presented throughout the chapters. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Use in Context 39

1.4 REFERENCES

Azevedo, I., M. Morgan, and F. Morgan. 2009. The transition to solid-state lighting. 

Proceedings of the IEEE 97(3):481-510. March.

Darmstadter, J., J. Dunkerley, and J. Alterman. 1977. How Industrial Societies Use Energy: 1977. How Industrial Societies Use Energy:

A Comparative Analysis. Johns Hopkins University Press, p. 189.

EIA (Energy Information Administration). 2006. Annual Energy Outlook 2006. DOE/

EIA-0383(2006). Washington, D.C.: Department of Energy, Energy Information 

Administration.

EIA. 2007. Annual Energy Outlook 2007. DOE/EIA-0383(2007). Washington, D.C.: 

Department of Energy, Energy Information Administration.

EIA. 2008a. Annual Energy Outlook 2008. DOE/EIA-0383(2008). Washington, D.C.: 

Department of Energy, Energy Information Administration.

EIA. 2008b. Annual Energy Review 2007. DOE/EIA-0384(2007); Washington, D.C.: 

Department of Energy, Energy Information Administration.

EIA. 2008c. Monthly Energy Review (April). Washington, D.C.: Department of Energy, 

Energy Information Administration.

EIA. 2009a. Annual Energy Review 2008. DOE/EIA-0384(2008); Washington, D.C.: 

Department of Energy, Energy Information Administration.

EIA. 2009b. Monthly Energy Review (June). Washington, D.C.: Department of Energy, 

Energy Information Administration.

EIA. 2009c. Monthly Energy Review (October). Washington, D.C.: Department of Energy, 

Energy Information Administration.

IEA (International Energy Agency). 2004. Oil Crises and Climate Challenges: 30 Years of 

Energy Use in IEA Countries. Paris, France: Organization for Economic Cooperation 

and Development.

Hinrichs, R.A., and M.H. Kleinbach. 2006. Energy: Its Use and the Environment, 4th 

Edition. Brooks/Cole Publishing Company.

Lave, L.B. 2009. The potential of energy efficiency: An overview. The Bridge 39(2):5-14. 

NAS-NAE-NRC (National Academy of Sciences-National Academy of EngineeringNational Research Council). 2009. America’s Energy Future: Technology and 

Transformation. Washington, D.C.: The National Academies Press.

Navigant Consulting, Inc. 2002. U.S. Lighting Market Characterization, Volume 1, 

National Lighting Inventory and Energy Consumption Estimates. Washington, D.C.: 

Department of Energy, Office of Energy Efficiency and Renewable Energy.

Schipper, L. 2004. International comparisons of energy end use: Benefits and risks. In 

Encyclopedia of Energy, Vol. 1. Elsevier.

Schurr, S., and B. Netschert. 1960. Energy in the American Economy, 1850-1975: An 

Economic Study of Its History and Prospects. Johns Hopkins University Press.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

40 Real Prospects for Energy Efficiency in the United States

Tsao, J., M. Coltrin, and M. Crawford. 2009. Solid-state lighting: An integrated human 

factors, technology and economic perspective. Quantifying past and potential-future 

trajectories. Proceedings of the IEEE, forthcoming.

Weber, C. 2008. An Examination of Energy Intensity and Energy Efficiency. Green Design 

Institute, Carnegie Mellon University.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

41

The efficiency of the appliances and equipment used in homes and businesses has increased greatly over the past three decades. However, there is still much that can be done to reduce the amount and slow the growth of 

energy consumption in residential and commercial buildings. 

This chapter describes how energy is used in buildings today and discusses 

the factors that have driven the growth of energy use. It then identifies opportunities for improving energy efficiency in the near term (through 2020) as well as 

the medium term (through 2030–2035). The chapter presents conservation supply 

curves that show the amount of energy that could be saved as a function of the 

cost of the saved energy and describes how whole-building approaches can produce new buildings with very low energy consumption. It reviews the market barriers to improving energy efficiency in buildings and presents some factors that are 

helping to overcome the barriers. Finally, the chapter presents the findings of the 

Panel on Energy Efficiency Technologies with regard to the potential for greater 

efficiency in residential and commercial buildings.

2.1 Energy Use in Buildings

In 2006, residential and commercial buildings accounted for 39 percent of the 

total primary energy used and 72 percent of the electricity used in the United 

States to supply power and fuel for heating, cooling, lighting, computing, and 

other needs. As Figures 2.1 (residential buildings) and 2.2 (commercial buildings) show, heating, ventilation, and air-conditioning (HVAC) consumed the most 

energy, followed by lighting.

Energy Efficiency in Residential and 

Commercial Buildings

2
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

42 Real Prospects for Energy Efficiency in the United States

*6.3%

Other 12%

Cooking 3%

Refrigeration 6%

Electronics and

Computers 10%

Water Heating 10% Lighting 18%

Heating,

Ventilation, and

Air-Conditioning

35%

2.1 Efficiency

FIGURE 2.1 Energy use in U.S. residential buildings by end-use, 2006.

Note: *, Energy Information Administration (EIA) adjustment factor that accounts for 

incomplete data in EIA’s sampling and survey methodology. 

Source: Pew Center on Climate Change, based on data in DOE/EERE (2008), available at 

http://www.pewclimate.org/technology/overview/buildings.

*7%

Other 13%

Cooking 2%

Refrigeration 4%

Electronics and

Computers 12%

Water Heating 6% Lighting 25%

Heating,

Ventilation, and

Air-Conditioning

32%

2.2 Efficiency

FIGURE 2.2 Energy use in U.S. commercial buildings by end-use, 2006.

Note: *, Energy Information Administration (EIA) adjustment factor that accounts for 

incomplete data in EIA’s sampling and survey methodology. 

Source: Pew Center on Climate Change, based on data in DOE/EERE (2008), available at 

http://www.pewclimate.org/technology/overview/buildings.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 43

On the residential side, this energy was used in approximately 80.8 million 

single-family homes, 24.8 million multifamily housing units, and nearly 6.9 million mobile homes in the United States as of 2006 (EIA, 2008b). On the commercial side, there were approximately 75 billion square feet (7 billion square meters) 

of floor space in 5 million commercial buildings as of 2006 (EIA, 2008b). The 

building stock is long-lived: homes can last 100 years or more, commercial buildings often last 50 years or more, and appliances and equipment used in buildings can last 10–20 years (IWG, 1997). Nonetheless, there have been significant 

changes in energy use and energy efficiency in buildings over the past 30 years.

Energy use in buildings has increased over the past 30 years, but at a rate 

slower than the rate of increases in gross domestic product (GDP). As shown in 

Figure 2.3, in the residential sector over the period 1975–2005, delivered-energy 

2.3 Efficiency

Year

Quadrillion Btu (Quads)

25

20

15

10

5

0

1975 1980 1985 1990 1995 2000 2005

Primary Energy

Delivered Energy

FIGURE 2.3 U.S. residential energy use trends. Primary energy use (accounting for losses 

in electricity generation and transmission and distribution, and for fuels, such as natural gas, used on-site) has increased faster than delivered energy use (which does not 

account for such losses, but does include fuels used on-site) because use of electricity has 

increased faster than use of other fuels.

Source: Data from EIA, 2007b.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

44 Real Prospects for Energy Efficiency in the United States

use1 increased about 15 percent whereas primary energy use increased 46 percent. 

This difference is due to the growing electrification of energy use in homes. In 

1975, direct fuel use in homes was four times that of electricity use in terms of 

end-use energy content, but by 2005 this ratio had fallen to about 1.4 to 1.

Understanding the potential for improvements in building energy efficiency 

requires detailed energy-use data beyond those presented in Figures 2.1 and 2.2, 

because the sector potential is composed of a long list of appliance-specific and 

building-specific measures. Unfortunately, much of the available data on energy 

use in buildings is based on self-reporting or inferences rather than on direct measurement, and estimates of uncertainties around the data are seldom available. 

Expanded data gathering, particularly through direct measurement, would facilitate more rigorous evaluation of energy efficiency measures and would contribute 

to the accuracy and completeness of future studies.

Growth in the use of a variety of electrical appliances is one factor contributing to the growth of energy use in buildings in recent decades. Figure 2.4 shows 

the penetration (the percentage of U.S. households having an appliance) of selected 

appliances in U.S. households between 1980 and 2005. During this period the percentage of households having central air-conditioning more than doubled, and the 

penetration of microwave ovens increased by more than a factor of six and that of 

dishwashers by 57 percent. Personal computer use was essentially nonexistent in 

1980, yet by 2005, 68 percent of all U.S. households had a personal computer. In 

addition, 56 percent of households had cable television service, nearly 22 percent 

had a satellite dish antenna, and more than 27 percent of households had at least 

one large-screen television as of 2005 (DOE, 2009).

Compared with the residential sector, the commercial sector experienced 

much faster growth in energy use over the period 1975–2005: delivered-energy use 

in the commercial sector increased approximately 50 percent, and primary energy 

use increased 90 percent (Figure 2.5). As in the residential sector, the growing 

electrification of energy use in the commercial sector led to a faster rise in primary 

energy use than in delivered-energy use (DOE, 2008a).

Residential energy intensity, defined as energy use per square foot of living space, declined over the past 30 years in spite of the growing penetration of 

1 “Delivered” energy refers to the electricity delivered to a site plus the fuels used directly onsite (e.g., natural gas for heating water). This measure does not account for the losses incurred in 

generating and transmitting and distributing the electricity. Delivered energy plus these losses is 

referred to as “primary” energy. See Box 1.4 in Chapter 1.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 45

70

60

50

40

350

300

250

200

y REC Prices

 Megawatt-hour)

onthly REC Prices

 Megawatt-hour)

CT Class I (left axis)

MA (left axis)

NJ Class I (left axis)

RI New (left axis)

NJ Solar (right axis)

DC Class I (left axis)

MD Class I (left axis)

PA (left axis)

TX (left axis)

2.4 Efficiency

Year

Percent of U.S. Households

100

90

80

70

60

50

40

30

20

10

0

1980 1984 1987 1990 1993 1997 2001

Central Air 

Conditioner

Room Air 

Conditioner

Clothes Washer

Dishwasher

Clothes Dryer

(Electric or Gas)

Personal 

Computer

Microwave Oven

FIGURE 2.4 Household appliance penetration trends. “Penetration” is the percentage of 

U.S. households having the appliance specified. Data for personal computers are unavailable before 1990.

Source: U.S. Department of Energy, Energy Information Administration. Data through 

2001 are from Regional Energy Profiles, Appliance Reports, Table 1: Appliances in U.S. 

Households, Selected Years, 1980–2001, available at http://www.eia.doe.gov/emeu/reps/

appli/all_tables.html. Data for 2005 are from 2005 Residential Energy Consumption 

SurveyDetailed Tables, available at http://www.eia.doe.gov/emeu/recs/recs2005/hc2005_

tables/detailed_tables2005.html.

appliances (see discussion below). However, the rate of decline depends on how 

energy intensity is measured. Total delivered-energy use per household fell 31 percent over the period 1978–2005, while primary energy use per household fell 16 

percent (Table 2.1). Although household size in terms of square feet of floor area 

has been increasing, leading to a steeper decline in primary energy use per square 

foot of floor area (DOE, 2008a), the number of people living in a typical household declined from 2.8 in 1980 to 2.6 in 2001 (Battles and Hojjati, 2005). Thus 

primary energy use per household member remained relatively constant over the 

period 1980–2005. Smaller households use less absolute energy than larger households do, but more energy is used per person in the former. The 2005 residential 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

46 Real Prospects for Energy Efficiency in the United States

2.5 Efficiency

Year

Quadrillion Btu (Quads)

25

20

15

10

5

0

1975 1980 1985 1990 1995 2000 2005

Primary Energy

Delivered Energy

FIGURE 2.5 U.S. commercial energy-use trends. Primary energy use (accounting for 

losses in electricity generation and transmission and distribution and for fuels, such as 

natural gas, used on-site) has increased faster than delivered energy use (which does not 

account for such losses but does include fuels used on-site) because use of electricity has 

increased faster than use of other fuels.

Source: EIA, 2007b.

energy consumption survey showed that, on average, one-person households 

annually consumed 71 million Btu per capita; two-person households, 48 million 

Btu per capita; and three-person households, 35 million Btu per capita (DOE, 

2009).

A geographic shift in population (e.g., that from the northeastern and midwestern regions of the United States to the more temperate southern and western 

regions of the country) was one of the factors leading to the decline in residential 

energy intensity. Energy intensity tends to be lower in the latter regions, especially 

on a delivered-energy basis. Improvements in energy efficiency resulting from the 

adoption of efficiency standards for appliances and the offering of utility-sponsored and government-sponsored demand-side management (DSM) programs also 

helped reduce residential energy intensity (Battles and Hojjati, 2005). 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 47

TABLE 2.1 Residential Sector Energy Intensity Trends

Year

Delivered 

(million 

Btu/household)

Primary 

(million Btu/ 

household)

Primary 

(1000 Btu/ft2)

Primary 

(million 

Btu/household 

member)

1978 138 204 72

1980 114 176 101 63

1984 105 164 98 61

1987 101 163 94 63

1990 98 164 91 63

1993 104 172 92 66

1997 101 172 66

2001 92 164 79 64

2005 95 171 79 66

Note: Trend may look different depending on the metric used.

Source: DOE, 2009, available at www.eia.doe.gov/emeu/recs/recs2005/hc2005_tables/detailed_tables2005.

html.

TABLE 2.2 Household Energy Expenditures by Income Level in 2001

Household Incomea

Percentage of 

Households

Energy 

Expenditures 

(dollars)a

Percentage of 

Income Spent on 

Energy

Less than $9,999 10 1,039 16

$10,000 to $14,999 7 1,124 9

$15,000 to $19,999 8 1,290 7

$20,000 to $29,999 13 1,315 5

$30,000 to $39,999 13 1,398 4

$40,000 to $49,999 12 1,518 3

$50,000 to $74,999 20 1,683 3

$75,000 to $99,999 8 1,825 2

$100,000 or more 8 2,231 2

a2001 dollars.

Source: DOE/EERE, 2007. 

Residential energy use varies by household income, as shown in Table 2.2. 

Upper-income households earning more than $100,000 annually in 2001 used 

about twice the energy used by lower-income households earning under $15,000 

annually. But the energy burden (the fraction of income spent on energy) is much 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

48 Real Prospects for Energy Efficiency in the United States

higher for lower-income households compared with middle- or upper-income 

households.

Commercial energy intensity measured in energy use per square foot of floor 

area declined over the 1979–1986 period but has fluctuated since 1986, as shown 

in Table 2.3. Commercial energy intensity has increased in particular types of 

buildings, such as health care and educational facilities. Efficiency improvements 

in lighting and air-conditioning have tended to reduce overall energy intensity, 

whereas greater use of amenities and devices such as computers and other plug 

loads have tended to increase it. Overall energy intensity in commercial buildings has declined in spite of a 45 percent increase in electricity use per square foot 

between 1983 and 2005 (Belzer, 2007). Energy use per square foot declined more 

on a delivered-energy basis than on a primary-energy basis during 1979–2003 

owing to the increasing electrification of energy use.

There is great diversity in energy intensity in different commercial building 

types, as shown in Table 2.4. On the basis of delivered-energy and primary-energy 

use, food sales and food services facilities use more than two times as much energy 

per square foot of floor area as is used by office, retail, education, and lodging 

facilities. Likewise, health care facilities tend to have high energy use per square 

foot of floor area.

Table 2.5 presents a breakdown of energy end-use in residential and commercial buildings in 2005, as estimated by the Energy Information Administration (EIA). In housing, space heating represented about 48 percent of total energy 

TABLE 2.3 Commercial Sector Energy Intensity Trends

Year

Delivered 

(1000 Btu/ft2)

Primary 

(1000 Btu/ft2)

1979 114.0 203.2

1983 97.5 187.1

1986 85.5 170.2

1989 91.6 180.4

1992 80.0 158.5

1995 90.5 180.1

1999 85.1 178.0

2003 91.0 191.0

Source: Energy Information Administration. Data through 1999 from http://

www.eia.doe.gov/emeu/consumptionbriefs/cbecs/cbecs_trends/intensity.html. 

Data for 2003 from http://www.eia.doe.gov/emeu/cbecs/cbecs2003/detailed_

tables_2003/detailed_tables_2003.html#consumexpen03.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 49

use on a delivered basis and 31 percent on a primary basis. Water heating, space 

cooling, and lighting each represented 11–12 percent of total residential primary 

energy use. Electronic devices such as televisions, computers, and other types of 

office equipment represented about 8.5 percent of residential primary energy use 

in 2005, and this fraction increases as households acquire more and bigger electronic products.

Space heating in commercial buildings in 2005 accounted for 24 percent of 

delivered-energy use and 14 percent of primary energy use, on average. Lighting 

accounted for about 17 percent of delivered-energy use and more than 25 percent 

of primary energy use, on average. Likewise, the end-use of space cooling and 

ventilation accounted for nearly 13 percent of delivered-energy use and 19 percent 

of primary energy use, on average. The end-use data should be viewed as approximate owing to the lack of metered data by end-use. “Other” energy use in Table 

2.5 includes laboratory, medical, and telecommunications equipment; pumps; and 

fuel use for combined heat and power production. 

TABLE 2.4 Commercial Sector Energy Intensity by 

Principal Building Activity, 2003

Principal Activity

Delivered 

(1000 Btu/ft2)

Primary 

(1000 Btu/ft2)

Education 83 159

Food sales 200 535

Food service 258 523

Health care 188 346

Lodging 100 193

Mercantile and service 87 204

Office 93 212

Public assembly 94 180

Public order and safety 116 221

Religious worship 43 77

Warehouse 45 94

Other 164 319

Source: Energy Information Administration. Data from http://www.eia.

doe.gov/emeu/cbecs/cbecs2003/ detailed_tables_2003/detailed_tables_2003.

html#consumexpen03.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

50 Real Prospects for Energy Efficiency in the United States

TABLE 2.5 Energy End-Uses in Buildings, 2005

Residential Sector Commercial Sector

Primary Delivered Primary Delivered

End-Use (quads) (%) (quads) (%) (quads) (%) (quads) (%)

Space heating 6.69 (30.7) 5.61 (48.2) 2.55) (14.2 2.04 (24.0)

Space cooling and 

ventilation

2.67 (12.3) 0.84 (7.2) 3.42 (19.1) 1.09 (12.8)

Water heating 2.66 (12.2) 1.75 (15.0) 1.23 (6.8) 0.84 (9.9)

Lighting 2.40 (11.0) 0.75 (6.5) 4.57 (25.5) 1.44 (16.9)

Refrigeration 1.64 (7.5) 0.52 (4.4) 0.74 (4.1) 0.23 (2.7)

Electronicsa 1.86 (8.5) 0.58 (5.0) 1.70 (9.5) 0.53 (6.2)

Laundry and 

dishwashers

1.05 (4.8) 0.38 (3.2) NAb NAb

Cooking 0.98 (4.5) 0.48 (4.1) 0.35 (2.0) 0.27 (3.2)

Other 0.83 (3.8) 0.41 (3.5) 2.37 (18.2) 1.12 (13.2)

Adjustmentc 1.02 (4.7) 0.32 (2.8) 0.98 (5.5) 0.92 (10.9)

Total 21.78 (100) 11.63 (100) 17.91 (100) 8.49 (100)

aElectronics include TVs, computers, and other office equipment.

bNA, not available. 

c

Adjustment to reconcile discrepancies between sources.

Source: DOE/EERE, 2007.

2.2 ENERGY EFFICIENCY TRENDS

Improvements in energy efficiency are a key factor in the decline in energy intensity in buildings over the past 30 years. Driven largely by research, development, 

and demonstration (RD&D), building energy codes, ENERGY STAR® labeling, 

and state and federal efficiency standards (see Chapter 5), the efficiency of new 

appliances has improved dramatically since the 1970s. For example, the average 

electricity use of new refrigerators sold in 2007 was about 498 kWh per year, 

71 percent less than the average electricity use of new refrigerators sold 30 years 

earlier (AHAM, 2008). This is in spite of the fact that refrigerators have become 

larger and offer more features, such as automatic defrosting, ice makers, and 

through-the-door water and ice dispensers. Likewise, the average efficiency of 

other products, including air conditioners, gas furnaces, clothes washers, and dishwashers, has improved significantly over the past 30 years. Yet progress has been 

minimal for other products, such as water heaters. Less policy attention has been 

paid to the energy use of these other appliances and equipment, accounting in part 

for this divergence of trends in energy efficiency improvements.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 51

Significant energy efficiency gains have also been made in lighting. The sales 

and use of compact fluorescent lamps (CFLs), which use about 75 percent less 

electricity per unit of light output relative to incandescent lamps, have increased 

greatly in the past decade. As shown in Figure 2.6, CFL shipments (based on data 

on imports, since all CFLs are imported into the United States) increased from 

about 21 million units in 2000 to 185 million units by 2006. But as a result of 

various factors—growing state, regional, and utility energy efficiency programs, 

along with a federal procurement program aimed at reducing the size and improving the quality of CFLs; stepped-up marketing efforts by some large retailers; and 

national promotion campaigns led by the federal ENERGY STAR® program—

CFL shipments jumped to about 400 million units in 2007. This means that CFLs 

represented about 20–25 percent of all screw-in lightbulbs (incandescent and fluorescent) sold in 2007. Given that CFLs last 5 to 10 times longer than incandescent 

lamps, CFLs actually accounted for the majority of the total “light service” (i.e., 

lumen-hours) sold in 2007. CFLs do have some drawbacks, such as their use of 

mercury and difficulty with dimming. However, the small amount of mercury 

released to the environment if a CFL is disposed of in a landfill is much less than 

Number Shipped (Million)

450

400

350

300

250

200

150

100

50

0

2000 2001 2002 2003 2004 2005 2006 2007

Year

2.6 Efficiency

FIGURE 2.6 Shipments of compact fluorescent lamps.

Source: U.S. Department of Commerce data obtained from USA Trade Online, available 

at https://orders.stat-usa.gov/on_sam.nsf/fsetOrder/UTO.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

52 Real Prospects for Energy Efficiency in the United States

the mercury avoided through the reduction in electricity generation, given average mercury emissions associated with electricity generation in the United States 

(ENERGY STAR®, 2008). Solid-state lighting, which addresses these shortcomings 

of CFLs, is now emerging in the marketplace (see Section 2.6.1). 

Energy-efficient fluorescent lighting fixtures containing T8 fluorescent lamps 

(these have a diameter of 1 inch) and high-frequency electronic lamp ballasts used 

in commercial buildings use 30–40 percent less power per unit of light output 

compared with older fixtures containing T12 lamps (which have a diameter of 

1.5 inches) and electromagnetic ballasts (Suozzo et al., 2000). The U.S. Department of Energy (DOE) played a major role in the development of electronic 

ballasts during the early 1980s (NRC, 2001; Geller and McGaraghan, 1998). 

Utility and state DSM programs and the Environmental Protection Agency’s 

(EPA’s) “Green Lights” program (which developed into the ENERGY STAR®

program), helped move the product from the laboratory into the marketplace. As 

shown in Table 2.6, the market share for electronic ballasts increased from about 

1 percent in the late 1980s to 47 percent by 2000 and then to 73 percent in 2005 

(DOE/EERE, 2007). Minimum efficiency standards promulgated by the U.S. DOE 

in 2000 that took effect in 2005 are facilitating the transition from magnetic to 

more efficient electronic ballasts.

Periodic EIA surveys of commercial buildings show growth in the use of 

energy efficiency and conservation measures from 1992 to 2003, as indicated in 

Table 2.7. The increase in the use of energy-efficient lighting devices such as CFLs, 

electronic ballasts, and specular light reflectors is most noteworthy. At the same 

time, a significant fraction, and in some cases a majority of commercial buildings, 

still do not use common energy efficiency measures such as energy management 

and control systems or HVAC economizer cycles (which make use of outdoor air 

for cooling when temperature and humidity levels permit). 

The adoption of ENERGY STAR®-labeled products and new homes has also 

increased substantially in recent years. For example, the construction and certification of ENERGY STAR® new homes—which must be at least 15 percent more 

efficient for heating, cooling, and water heating than homes built to meet the 

International Energy Conservation Code (IECC) or 15 percent more efficient than 

the prevailing state energy code, whichever is more rigorous—grew from about 

57,000 new homes in 2001 to 189,000 new homes in 2006. That is, 11.4 percent 

of all new homes built in 2006 were certified as ENERGY STAR®-compliant. The 

market share for ENERGY STAR® new homes exceeded 25 percent in 10 states 

and 50 percent in 2 states—Nevada and Iowa, in 2006 (EPA, 2007a). 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 53

TABLE 2.6 Shipments of Fluorescent Lamp Ballasts

Year

Number of

Magnetic Type 

Shipped

(million)

Number of 

Electronic Type 

Shipped

(million)

Electronic Market Share

(%)

1986 69.4 0.4 1

1988 74.6 1.1 1

1990 78.4 3 4

1992 83.7 13.3 14

1994 83.5 24.6 23

1996 67 30.3 31

1998 63.9 39.8 38

2000 55.4 49.3 47

2001 46.9 52.5 53

2002 40.7 53.8 57

2003 35.2 54.4 61

2004 30.5 59.2 66

2005 22.2 61.3 73

Source: DOE/EERE, 2007.

TABLE 2.7 Growth in the Use of Energy Efficiency Measures in Commercial 

Buildings

Percentage of Floorspace with Measure

Efficiency Measure 1992 2003

HVAC economizer cycle 27 33

HVAC variable air volume system 21 30

Energy management and control system 21 24

Compact fluorescent lamps 12 43

Electronic lamp ballasts NAa 72

Specular light reflectors 22 40

Multipaned windows 44 60

Tinted or reflective window glass 37 59

Daylighting sensors NAa 4

aNA, not available.

Source: Energy Information Administration, 2003 Commercial Buildings Energy Consumption Survey: 

Building Characteristics Tables and Commercial Buildings Characteristics 1992, both available on the EIA 

website.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

54 Real Prospects for Energy Efficiency in the United States

2.3 THE POTENTIAL FOR ENERGY EFFICIENCY IN BUILDINGS

2.3.1 Review of Studies

Energy use in buildings embraces dozens of end-uses, and for each there are 

a variety of efficiency-improvement technologies (and levels of intensity of 

application—e.g., insulation thickness) available. The more rigorous and analytically valid studies of efficiency potential2 aggregate similar measures—often hundreds or thousands of them (especially if the research disaggregates the measures 

by building type, climate, and so on)—into supply curves of energy efficiency 

potential. The supply curves depict graphically the energy savings available from 

a given measure (or aggregation of measures) as a function of the cost of saved 

energy. Section 2.5 presents conservation supply curves for both residential and 

commercial buildings. 

This section presents a review of what the Panel on Energy Efficiency Technologies believes is a representative sample of the most credible such studies. Most 

of these studies concentrate only on the United States, but the one study reviewed 

by the panel that looked at worldwide savings potential (IEA, 2006) comes to 

conclusions very similar to those of the U.S. studies regarding percentage savings.

All of these studies rely on similar methodologies. They look at end-use 

data on a level of disaggregation and detail far higher than that available in most 

energy-demand forecasts. Efficiency measures are compared to the efficiency 

inherent in one or several average base cases. Capital stock turnover is explicitly 

considered: new appliances and buildings are added to the stock while old buildings and products are slowly retired, and retrofits are considered for items such as 

building envelopes. None of the studies assumes early retirement as an efficiency 

measure. Because some degree of “natural” improvement in energy efficiency is 

assumed in the “business as usual” case, some of the initially projected savings are 

in the end subtracted. 

The panel reviewed and synthesized several of the most important (though 

not all) relevant studies carried out at the national, regional, state, and utility 

levels. Some of the major national or regional energy-savings potential studies performed over the past 12 years include those by Optimal Energy, Inc. (2003); IWG 

2Analysts of building energy use often use the term “potentials” studies to refer to studies of 

the potential for energy savings. This report uses the latter terminology.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 55

(1997, 2000); Energy Innovations (1997); Nadel and Geller (2001); NPCC (2005); 

EETF (2006); and Creyts et al. (2007).

Studies of the potential for energy efficiency improvement in buildings typically assess this potential in terms of three categories: technical potential, which is 

the broadest and includes technologies with improved performance but not necessarily lower costs; economic potential, which includes those technologies that are 

judged to be economically attractive; and achievable potential, which is a subset 

of economic potential that takes account of various market failures and barriers. This section looks most closely at the economic potential: that is, how much 

potential there is for energy savings at prices of energy up to or moderately above 

current or projected electricity market prices.

The economic potential as assessed in any study depends on the following: 

how many end-uses are examined in detail (since it is hard to posit a supply curve 

for saved energy from the “miscellaneous” or “other” categories of energy use); 

the timeframe of the study; the policy authority of the agency that commissioned 

the study (e.g., a typical utility-sponsored study will not look at the technical and 

economic potential of codes and standards, and a state-funded study might not 

consider measures that require federal action); and how the study will be used 

(studies that lead to mandatory goals typically show less potential than studies 

with broader and more flexible uses).

The results of the studies also depend in part on the policies that the authors 

assume will be used to achieve the potential. If the authors assume that the use 

of a technology can be boosted through standards or through generous financial 

incentives that cause close to 100 percent adoption, they will have a larger efficiency resource potential than the studies that do not make this assumption. For 

example, a study carried out by five national laboratories (IWG, 1997) postulates 

penetration rates of 35 percent and 65 percent in its two scenarios; an assumption that cost-effective technologies could be implemented at near-100 percent 

levels would have produced substantially different results. The subsequent study 

Scenarios for a Clean Energy Future included explicit assumptions about policies, 

programs, and their impacts (IWG, 2000). 

If a study assumes that the adoption of strong standards or incentives that 

achieve near-100 percent market acceptance induces manufacturers or designers to 

invest in new product development to introduce a next-generation product (which 

studies generally do not assume), then the results will show more potential savings 

than if next-generation products are not included. Thus, for the limited number of 

products for which these policies were adopted, most studies understate the effi-
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

56 Real Prospects for Energy Efficiency in the United States

ciency advances that actually occurred (Goldstein and Hoffman, 2004). This issue 

is discussed further in the succeeding paragraphs.

Nadel et al. (2004) reviewed 11 studies of energy savings potential in buildings, covering the period 2000 through 2004. This meta-analysis indicated a 

potential in the United States for substantial technical, economic, and achievable energy savings (Table 2.8). Across all sectors (residential, commercial, and 

industrial), the studies reviewed by Nadel et al. (2004) showed a median technical 

savings potential of 33 percent for electricity and 41 percent for natural gas (see 

Table 2.8). The median achievable savings potential was 24 percent for electricity 

(an average of 1.2 percent per year) and 9 percent for natural gas (an average of 

0.5 percent per year). The review compared the findings on achievable potential 

to recent-year actual savings from portfolios of electricity and natural gas efficiency programs in leading states and found substantial consistency. (Note that the 

natural-gas savings potential suggested by these studies is less than that indicated 

TABLE 2.8 Summary of Results from the ACEEE Meta-Analysis: Studies of the 

Potential for Energy Savings in Buildings, 2000–2004

Potential (%)

Region Year No. of Years Technical Economic Achievable

Electricity

California 2003 10 18 13 10

Massachusetts 2001 5 24

New York 2003 20 36 27

Oregon 2003 10 31

Puget 2003 20 35 19 11

Southwest 2002 17 33

Vermont 2003 10 31

United States 2000 20 24

Median 33 21.5 24

Natural Gas

California 2003 10 21 10

Oregon 2003 10 47 35

Puget 2003 20 40 13 9

Utah 2004 10 41 22

United States 2000 20 8

Median 41 22 9

Source: Nadel et al., 2004.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 57

in the conservation supply curves presented in Section 2.5, because the studies 

assumed only limited policy and program interventions for the purpose of estimating achievable natural-gas savings potential.) 

Nadel et al. (2004) also reported on savings potential by sector. The median 

technical potential for saving electricity across the studies was 32 percent for the 

residential sector, 36 percent for the commercial sector, and only 21 percent for 

the industrial sector. The median achievable potentials were 26 percent, 22 percent, and 14 percent, respectively. For natural gas, savings potentials appear to be 

higher in the residential sector than in the commercial sector. The median technical potential for gas savings across the studies is 48 percent in the residential sector and 20 percent in the commercial sector. The median achievable gas-savings 

potential drops to 9 percent in the residential sector and 8 percent in the commercial sector. 

These savings percentages are based on the business-as-usual cases specific to 

each study. But because constructing a business-as-usual forecast is problematic, 

there is some uncertainty about what is the appropriate basis for calculating savings. However, such calculations are still useful for the purpose of rough estimates; 

they would have to be refined for use in program planning.3

The overall median achievable electricity savings potential across the studies 

is 1.2 percent per year, with similar medians for each of the sectors. However, the 

annual achievable potential is often lower for studies extending further in time 

(e.g., 20 years) than for shorter-term studies. Nadel et al. (2004) suggest that this 

is primarily because existing technologies can be heavily adopted over the first 

decade, and the new technologies and practices that would emerge during the second decade are not included in most studies. 

A detailed comparison of the results of various studies is desirable, but it is 

problematic because many studies examine hundreds or even thousands of discrete 

efficiency measures, making such a comparison difficult and costly to perform. 

3Each study of the potential for energy savings attempts to address the issue of reconciling the 

base case in the study (which involves much more detailed data than the base case in the energy 

forecast) with the overall results of the forecast. While such a process introduces some levels of 

uncertainty into the calculation, and greater levels of uncertainty to the casual reader who is trying to interpret the results without the help of the large spreadsheets used in the savings analysis, 

the studies reviewed seem to have done a good job of avoiding double counting or missed potentials. The errors that remain have little practical consequence because they do not affect supply 

resource planning, nor do they affect efficiency program planning or evaluation. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

58 Real Prospects for Energy Efficiency in the United States

There is to the panel’s knowledge no literature offering such comparison and contrast or even comprehensively reviewing individual studies.

Studies of technical and economic energy-savings potential generally capture 

energy efficiency potential at a single point in time based on technologies that are 

available at the time a study is conducted. But new efficiency measures continue to 

be developed and to add to the long-term efficiency potential. This trend is illustrated by comparing two studies on available electricity-savings opportunities that 

were prepared for New York State in 1989 and 2003 (see Figure 2.7).

In the first of the two studies, Miller et al. (1989) examined more than 70 

efficiency measures and found an economic potential of 27 percent electricity savings, based on a 5 percent real discount rate. This study included such measures 

Electricity Savings Potential (Percent)

Technical

Economic

40

35

30

25

20

15

10

5

0

1989 2003

Year

2.7 Efficiency

FIGURE 2.7 Comparison of the electricity-savings potential identified in two studies for 

New York State (percent of annual electricity consumption). Despite wide use by 2003 of 

many technologies considered in Miller (1989), which thus became part of the “baseline” 

for 2003, the economic potential for savings in 2003 remained large, primarily because 

new technologies had become available, including many that were still under development in 1989. “Technical potential” is the maximum amount of energy use that could be 

displaced by energy efficiency measures, disregarding factors such as cost-effectiveness 

and the willingness of end-users to adopt the measures. “Economic potential” is the 

subset of technical potential that is cost-effective compared with conventional energy 

supplies.

Source: ACEEE (2007), based on data in Miller et al. (1989) and Optimal Energy (2003). 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 59

as energy-saving fluorescent lamps (e.g., 34 W tubes replacing 40 W tubes) and 

efficient magnetic ballasts, as well as what at the time were called “very high efficiency” lamps and ballasts (e.g., T8 lamps with electronic ballasts). 

In the second study, Optimal Energy, Inc. (2003) examined more than 100 

efficiency measures, including many that had been added or updated after the 

1989 study. The 2003 study also found that, 4 years later, the economic savings 

potential remained around 27 percent because of promising new technologies. 

Many measures included in the 1989 study were dropped because they were 

already widely adopted by 2003 and were therefore included in the base-case 

forecast (e.g., 34 W fluorescent lamps and efficient magnetic ballasts). Instead, 

much of the savings in the 2003 study came from measures that were still under 

development in 1989 (e.g., new “super T8” lamps and “pulse start” metal halide 

lamps) or were otherwise not included in the 1989 study. 

As revealed by these studies, the potential for cost-effective energy efficiency 

improvements is very large. The exact potential is uncertain, but even if it is 30 

percent less or 30 percent greater than the median case presented in this report, it 

still represents the largest, least expensive, and shortest-lead-time resource for balancing energy supply and demand.

It should be noted that the plausible uncertainty around the median savings 

figures reported here is not symmetric. The risk of overestimating efficiency potential is minimal, owing to the methodologies that are used in the studies. Instead, 

the studies openly and intentionally make assumptions that lead to “conservatively” low estimates of the efficiency resource, as discussed in Section 2.3.2. 

Some states and utilities have achieved a significant share of the energy efficiency potential indicated by the studies. For example, a review was conducted 

recently of the degree to which the efficiency potential identified for California 

(Rufo and Coito, 2002) was realized through electric utility efficiency programs. 

Messenger (2008) found that utility DSM programs achieved about 25 percent of 

the projected 10-year energy-savings potential in the commercial sector and nearly 

27 percent of the projected energy-savings potential in the residential sector from 

just 3 years (2004–2006) of utility DSM program activity. The amount of savings 

potential achieved varied among end-uses and building types. The utilities spent 

about 2 percent of their sales revenue on DSM programs in order to capture this 

savings. Further information on utility DSM programs is provided in Chapter 5. 

A study of the energy savings to date by sector in New York State relative to the 

potential savings that were identified reveals that the greatest energy efficiency 

potential for buildings remains in the residential sector, despite recent achieve-
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

60 Real Prospects for Energy Efficiency in the United States

ments, because energy savings are more costly and more difficult to obtain in the 

residential sector than in the commercial sector (DeCotis et al., 2004). 

2.3.2 Limitations of Studies of Energy Efficiency Potential

Studies of the potential for energy efficiency are intended to provide specific 

answers to well-framed policy questions. But the question of how much efficiency 

is available at what price is not well framed, because the meaning of “available” is 

ambiguous with respect to several critical issues:

•	 The timeframe over which the potential is available. The efficiency 

potential within 3 years from retrofitting homes is a very different policy question from the potential within 30 years from retrofitting homes, 

both in terms of the number and the type of efficiency measures that 

can be implemented. 

•	 The level of incentive required for realizing the potential. The greater 

the incentives paid to achieve the savings, all else being the same, the 

greater the savings achieved. The limiting case is a 100 percent payment, that is, free installation (no cost to the building occupant), in 

which case a very high level of implementation is possible. 

•	 The motivation of society in pursuing the energy savings. The amount 

of savings available when a nation or region is facing a crisis—for 

example, the need to relieve the California electricity crisis in 2001, or 

the need in New York City to achieve reductions in electricity demand 

quickly in order to maintain reliability—is much larger than in a situation in which energy efficiency merely reduces normal utility bills. 

A number of biases can lead studies to understate energy efficiency potential 

(Goldstein, 2008), including (1) sponsoring agencies’ motivation to underestimate 

savings potential in order to avoid challenges to their energy-savings goals; (2) the 

exclusion of new and emerging technologies; (3) failure to consider that energy 

efficiency technologies are likely to improve in performance and decline in cost 

over time; (4) failure to consider the potential to adopt energy efficiency measures in an integrated manner with synergistic effects (such as the whole-building 

approach to improving efficiency); (5) failure to consider efficiency measures’ nonenergy benefits, which in some cases are substantial and can be valued more than 

the energy benefits (Romm, 1999); and (6) the development of studies of potential 

in contexts in which the risk to the researcher of making an error is asymmetric 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 61

(that is, a data point that overestimates savings or underestimates cost can be 

much more problematic than one that does the reverse).

There are, however, cases in which studies of energy efficiency potential 

have been overly optimistic. For example, although CFLs had been available in 

the marketplace and identified as a viable energy efficiency measure since the late 

1970s, they only started to gain widespread acceptance by consumers in about 

2000. This slow market penetration is attributed to a variety of early CFL deficiencies, including large size relative to incandescent lamps, performance issues, 

poor light quality, and high first cost of CFLs produced in the 1980s and 1990s 

(Sandahl et al., 2006). Once these deficiencies were addressed, CFLs became more 

appealing to consumers. However, studies that projected large energy-savings 

potential from CFLs during the 1980s and 1990s (Geller et al., 1986; Rosenfeld, 

1985) overestimated their potential, at least prior to 2000. 

Likewise, heat-pump water heaters have been produced on a limited basis 

since the early 1980s. These devices use one-third to one-half as much electricity 

as that used by electric-resistance water heaters, with the energy savings paying 

back the incremental first cost in 5 years or less (Ashdown et al., 2004). However, 

heat-pump water heaters are not being produced on a large scale and have had 

little market penetration in the United States. This is due to performance problems with early heat-pump water heaters (e.g., poor reliability), lack of a supply 

infrastructure (e.g., no production by major water heater manufacturers), and the 

nature of the water heater market (e.g., split incentives and many purchases made 

in a rush). Once again, studies which assumed that these problems would be overcome during the past two decades (Geller et al., 1986) overestimated achievable 

energy-savings potential. 

These examples do not reflect errors in estimates of the energy efficiency 

potential ultimately available. Rather, they reflect overly optimistic assumptions 

regarding technological maturity and/or underestimates of the difficulty of overcoming the market barriers and failures that prevent broad commercialization and 

market acceptance. 

2.4 APPROACHES TO UNDERSTANDING ENERGY EFFICIENCY POTENTIAL

There are several approaches to reviewing the technologies and design principles 

available today to make buildings more energy-efficient. Each illuminates a subset of important engineering and physics issues but obscures other subsets. Each 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

62 Real Prospects for Energy Efficiency in the United States

approach has its advantages and disadvantages. Therefore, this report does not 

adopt one preferred style of presentation but instead looks at three different 

approaches:

•	 An integrated whole-building or system-wide approach,

•	 An approach by end-use and technology description, and

•	 An approach by individual “widgets” or detailed energy efficiency technologies and measures.

2.4.1 Integrated Whole-Building or System-Wide Approach

The first approach looks at integrated whole-building or system-wide energy use 

and describes the types of technological improvements that could create savings 

of a given percentage for whole buildings or whole systems. For example, a small 

but growing subset of new commercial buildings achieve a savings of 50 percent 

(relative to prevailing model Energy Code ASHRAE 90.1) in regulated energy 

use (heating, cooling, air-conditioning, water heating, and lighting).4 Reviews of 

highly efficient commercial buildings (NBI, 2008; ASHRAE, 2008; Torcellini et 

al., 2006) show that such buildings incorporate the following measures:

•	 High-efficiency electrical lighting systems that not only incorporate 

state-of-the-art lamps, ballasts, and luminaires (lighting fixtures), but 

also use luminaires to provide the desired lighting in the right places 

(e.g., as task lighting) and use controls that limit electrical lighting when 

daylighting is available;

•	 Fenestration systems and designs that reduce heat gain in climates with 

high cooling requirements; 

•	 HVAC controls that provide for the effective operation of the HVAC 

system during part-load conditions;5 and

4“Regulated energy use” refers to energy use covered by building energy codes. Such codes do 

not apply to plug-in office equipment, for example.

5There are many reasons why efficiency at part load can be lower. Examples range from 

systems that do not modulate but simply turn on or off, to chiller designs that are optimized 

for efficiency at full load and work poorly at part load (perhaps because they are not tested or 

marketed on the basis of such performance), to overall systems controls that continue to operate 

one part of the system at full-power use even though other parts are at partial power and do not 

require that support.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 63

•	 On-site power generation such as combined heat and power systems or 

solar photovoltaic generation to reduce purchased energy.

Low-energy buildings do not always operate as they were designed to do. 

Experience shows that in order to maximize real-world energy savings, it is critical 

to properly commission and monitor the performance of low-energy buildings and 

to ensure that control systems are working properly and are adjusted to account 

for occupancy conditions (Torcellini et al., 2006; Mills, 2009).

The net incremental first cost of achieving a 50 percent reduction in energy 

use through an integrated approach6 can be at or near zero; the savings from 

downsizing and simplifying HVAC systems generally pay fully for the additional 

costs of measures such as additional insulation, better windows, and daylighting 

(Goldstein, 2008). But the next increment of savings, up to 60 percent, has very 

few exemplars. 

For residential buildings, a whole-house approach can result in a 50 percent 

or greater savings in heating and cooling and a 30–40 percent savings in totalhome energy use, and can do so cost-effectively (DOE, 2004a; Dunn, 2007).7 This 

conclusion is also supported by the fact that more than 8,000 applications were 

submitted for the federal tax credit for 50 percent savings for new, single-family 

homes during the first year of its availabilitycalendar year 2006despite substantial delays in the availability of guidance from the Internal Revenue Service 

on how to perform the savings calculations and computer software for doing so. 

Although comprehensive evaluations of the tax credit are not yet available, the 

market share of new homes qualifying for the credit grew from below 1 percent 

before the credit to 1 percent of eligible homes in 2006 and 3 percent in 2007. 

For 2008, the number of qualifying homes grew to more than 23,000 (about 4.6 

percent of all homes built), according to a survey of home energy raters (S. Baden, 

RESNET, personal communication, May 1, 2008). 

6An “integrated approach” involves integrating the design of the HVAC system with that of 

the envelope system and the lighting system and its controls. Current design practice involves designing the envelope of the building independent of such integrative consideration, then passing 

the design onto HVAC engineers, who design the HVAC system without looking back at what 

could be done differently at the envelope or without looking forward to how lighting designs 

could enable improved HVAC designs.

7The savings are relative to a new home built to just meet the prevailing model energy code, 

namely, the 2006 International Energy Conservation Code.
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Real Prospects for Energy Efficiency in the United States 

64 Real Prospects for Energy Efficiency in the United States

2.4.2 Approach by End-Use and Technology Description 

Because whole-building studies focus on the level of savings achieved and the 

cost of getting there, they often do not specify the kinds of energy-saving measures used and how relevant they would be to broad-scale application across the 

economy. Instead, the savings estimates sometimes are based on measured results 

from demonstration buildings or multibuilding projects, or on case studies; they 

sometimes consider simulated energy savings based on integrated designs of new 

buildings or retrofits; and they sometimes are based on more than one approach. 

 Other studies, however, rely on the end-use and technology description 

approach to identifying energy efficiency potential. This approach assigns energy 

use to major end-use categories and reviews the specific technologies and measures available for reducing energy use in each category (often ordered by costeffectiveness). The end-use approach is based on text and explanation of technologies and measures. Most of these technologies and measures could be incorporated 

into existing buildings.

As an example, space heating is the largest user of energy in residential 

buildings, and cooling is the second-largest or close to second-largest user. Similar 

energy-saving measures and strategies can be applied to both. These efficiency 

measures and strategies include the following (Scheckel, 2007; Amann et al., 

2007): 

•	 Increasing insulation in all components compared with what is done 

according to current practice, including the use of selective coatings on 

windows. These coatings are chosen on the basis of the local climate, to 

reduce thermal transmission (by increasing the thermal-infrared emissivity and reflectivity of the window). They are most effective on westand east-facing windows in climates requiring cooling or in transitional 

climates where an efficient shell can obviate the need to buy an air 

conditioner. 

•	 Moving ducts into the conditioned space for new construction, and 

reducing leakage through on-site pressure testing in both new and existing homes.

•	 Improving heating and cooling systems themselves, for example, by 

using programmable thermostats, by using higher-efficiency furnaces 

that condense water vapor produced by the combustion of methane (or 

other fuels) to extract additional energy and achieve efficiencies over 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 65

90 percent, by using variable-speed and higher-efficiency motors and 

fans for air circulation, and by using ground-source heat pumps (for 

electric heating) or gas-fired heat pumps. 

•	 Upgrading equipment for cooling, focusing on better heat transfer from 

evaporators and condenser coils in air conditioners and employing variable-speed drives that allow units to operate efficiently at partial loads 

(rather than turning on and off frequently). This measure can control 

humidity more effectively, as well as save energy.

•	 Changing ventilation systems to provide sufficient fresh air to a system 

that uses the proper amount of mechanical ventilation while sealing the 

home to nearly airtight standards. Controlling ventilation can greatly 

mitigate indoor air quality and mold problems while also offering the 

opportunity to recover both latent and sensible heat from the exhaust 

airstream.

•	 Using evaporative cooling. While once-through evaporative coolers 

work well only in desert climates, indirect systems that transfer sensible 

heat from the humidified airstream can provide comfort in a much 

broader zone of climate while using about one-quarter or less of the 

energy of compression-based cooling.

•	 Making greater use of passive solar heating and cooling, although this 

design technique has not yet found widespread acceptance in the marketplace owing to the difficulties of custom designing the orientation 

and thermal characteristics of each home.

After space heating and cooling, the next-largest user of energy in residences 

is water heating. Water-heating energy use can be reduced both by improving the 

efficiency of the water-heating device itself and by reducing the demands for hot 

water, including for clothes washing and bathing, throughout a home. Substantial gains have been made in the best-performing clothes washer and showerhead 

products compared with standard products. For example, the highest specification 

for utility incentives for washing machines has a modified energy factor (MEF) of 

2.2; current stock has an MEF of about 0.85. Heat-pump water heaters, which 

have become very popular in Japan, can reduce electricity use by two-thirds relative to an electric-resistance water heater. Older showerheads use 3.5 or more 

gallons per minute; newer ones meeting current standards use 2.5 or fewer gallons per minute, and a few newer models use about half this level of waterflow to 

provide a comfortable shower (Harrod and Hain, 2007). Similar lists of technolo-
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

66 Real Prospects for Energy Efficiency in the United States

gies for residential lighting and appliances are found in most studies of efficiency 

potential. Beyond technologies themselves, efficiency can be improved through 

residential lighting design that raises the ratio of productive light output (lux 

on the visual task) to power use in homes to a level comparable to that in office 

buildings. 

The major sources of energy use in commercial buildings are heating, ventilation, cooling, and lighting. Studies of energy efficiency potential usually look at 

specific measures within these categories, such as improving the rated efficiency 

of rooftop air conditioners by 20–30 percent or substituting 100 lumen per watt 

lamp-ballast combinations for existing product combinations that provide fewer 

than 70 lumens per watt.

2.4.3 Approach by Individual “Widgets” or Detailed 

Energy Efficiency Measures

The energy end-use approach to estimating potential savings suffers from the limited ability of readers to review critically the assumptions that are made and the 

models that are used to derive the costs and savings for specific energy efficiency 

measures. This problem is accompanied by often limited guidance to program 

administrators about how best to achieve the savings—that is, what types of 

equipment or designs should be promoted. 

In contrast, “widget”-based supply curves look at technologies and measures at a very detailed level. They can involve a spreadsheet of many hundreds or 

thousands of lines that tabulates detailed technical measures. They can cover both 

retrofits and new buildings by establishing separate sets of rows in the spreadsheets for retrofits compared with new buildings. This is the approach that relates 

most closely to the policies and programs used to obtain energy savings through 

improved energy efficiency.

Widget-based analyses look at the same types of technologies and measures 

as those considered in whole-building- or end-use-based analyses, but they also 

include the following for residential buildings:

•	 More efficient appliances, by efficiency rating;

•	 More efficient heating and cooling equipment, by efficiency rating;

•	 Additions of insulation (increasing “R” values) to ceilings, walls, and 

floors; and

•	 The substitution of CFLs and light-emitting diodes (LEDs) for incandescent lightbulbs.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 67

For commercial buildings, the more detailed approaches include the following:

•	 More efficient lamps, ballasts, and luminaires;

•	 The substitution of more efficient lighting sources for less efficient ones 

(such as compact fluorescent lamps for general-service incandescents or 

downlights, or ceramic metal halide lamps for incandescent reflectors, 

or the use of infrared-reflective incandescent reflector lamps instead of 

conventional ones, or the use of LEDs for colored light sources);

•	 Controls to reset air-conditioning system temperatures;

•	 Variable-speed fans/drives and pumps;

•	 Lower-pressure fan systems; and

•	 Occupancy sensors for lighting and air quantities.

While widget-based analyses are easier to review and interpret, they tend to 

exclude many cost-effective options for systems integration, such as the following:

•	 Using lighting designs that optimize the distribution of light so that it is 

brightest where the most light is desired and less intense elsewhere;

•	 Using envelope designs that permit daylighting, especially in commercial 

buildings;

•	 Using envelope measures that are intended to reduce the size or complexity of the HVAC system; 

•	 Using separate ventilation systems in which the benefits include occupant satisfaction and the ability to control the system under nontypical 

operating conditions; and

•	 Changing the building’s orientation to take advantage of passive heating 

or cooling.

The amount of efficiency available at any particular cost from a widgetbased, detailed end-use-and-technology analysis is generally lower than what 

would be estimated by a whole-building-based analysis. However, the results 

are easier to review and validate and may thus be more credible. The discussion 

of whole-building-based analysis noted that a number of commercial buildings 

achieve 50 percent savings with no increase in first cost. But buildings achieving such 50 percent savings are not normally included on supply curves, in part 

because buildings that achieve this can be seen as unrepresentative of the savings 

across the sector. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

68 Real Prospects for Energy Efficiency in the United States

2.5 CONSERVATION SUPPLY CURVES

This section presents conservation supply curves for residential and commercial 

buildings developed in 2008 by researchers from the Lawrence Berkeley National 

Laboratory (LBNL; Brown et al., 2008). The analysis starts with the reference case 

from the EIA’s Annual Energy Outlook (AEO) 2007 as a business-as-usual (BAU) 

scenario, with disaggregation by fuel and end-use (EIA, 2007a). The researchers 

adjusted the published AEO end-use consumption values for 2030 to allocate 

some of the consumption in the “other uses” category (mainly cooking and electronics) to the traditional end-uses in which that consumption appropriately 

belongs. This reallocation was based on data published by the Department of 

Energy (DOE/EERE, 2007). Tables 2.9 and 2.10 show the revised AEO reference 

case that is used as the BAU scenario, with energy consumption and cost of conserved energy (CCE) presented in terms of electricity and natural gas. 

The analysis considers only electricity and natural gas, which together 

account for approximately 92 percent of the primary energy used in U.S. 

buildings. Petroleum products—distillate fuel oil and liquefied petroleum gas, or 

LPG—account for most remaining energy use in buildings, with approximately 

12 percent of homes using one of these two petroleum products as the primary 

heating fuel (EIA, 2007b). The analysis of the natural gas space-heating-savings 

potential presented below most likely applies to homes heated by fuel oil and LPG 

as well, but this was not explicitly analyzed by Brown et al. (2008). 

The BAU scenario, which includes some level of energy efficiency improvement driven by market forces as well as by codes and standards, assumes that residential electricity use increases 1.4 percent per year and that commercial electricity 

use increases 1.9 percent per year on average during 2006–2030. For comparison, residential electricity use increased 2.4 percent per year and commercial use 

2.8 percent per year on average over the period 1990–2006 (EIA, 2007b). With 

respect to the use of natural gas, the BAU scenario assumes growth rates of 0.8 

percent per year in the residential sector and 1.6 percent per year in the commercial sector over the period 2006–2030. It should be noted that the effects of the 

Energy Independence and Security Act of 2007 (EISA; Public Law 110-140) are 

not included in the BAU scenario. 

2.5.1 Methodology and Efficiency Measures

To calculate cost-effective energy-savings potential in 2030, Brown et al. (2008) 

compiled percentage savings estimates by end-use, drawn from several prior stud-
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 69

TABLE 2.9 Summary of Residential Building Energy Consumption, Savings Potential, and 

Efficiency Measure Costs in 2030, by End-Use 

Technoeconomic Potential

Fuel and End-Use

Business as Usual

(BAU) 2030 U.S. 

Consumptiona

% Savings 

Relative 

to BAU Case

Consumption 

Savings

Cost of 

Conserved 

Energyb

Electricity (TWh) (TWh) (2007¢/kWh)

Space heatingc 164 17 28 3.5

Space coolingc 328 27 89 5.3

Water heatingc,d,e 149 27 39 2.0

Refrigerationc 121 31 38 4.6

Cookingc,e 103 0 0 N/A

Clothes dryersc,e 103 0 0 N/A

Freezersc 42 21 9 7.4

Lightingc 338 50 169 1.2

Clothes washersc 9 50 4 2.3

Dishwashersf 11 11 1 5.8

Color televisionsc 267 25 67 0.9

Personal computersf 68 57 39 4.3

Furnace fansf 40 25 10 3.7

Other usesc 154 48 74 1.9

Total electricity 1896 30 567 2.7

Natural Gas (Quads) (Quads) (2007$/million 

Btu)

Space heatingg 3.89 30 1.15 5.5

Space coolingg 0.00 0 0.00 N/A

Water heatingg 1.20 29 0.35 11.8

Cooking 0.26 0 0.00 N/A

Clothes dryersg 0.09 3 0.00 2.9

Other usesg 0.04 10 0.00 1.1

Total natural gas 5.47 28 1.51 6.9

Note: A corresponding table for 2020 can be found in Brown et al. (2008). a2007 AEO reference case (EIA, 2007a) end-use consumption for the “Other uses” end-use was reallocated to match the 

2007 DOE Buildings Energy Databook 2007 (DOE/EERE, 2007) end-use shares. 

bEnd-uses with cost of conserved energy (CCE) listed as N/A were not analyzed by the LBNL researchers.

c

Source for potential savings and CCE is CEF study Table D-1.1 (IWG, 2000). Values for CCE are from the CEF Advanced 

Case, calculated using a real discount rate of 7 percent and lifetimes as shown in CEF study Appendix C-1.

dCCE for electric water heating was incorrect in the original CEF study (IWG, 2000) and has been corrected here.

e

CEF study results (IWG, 2000) were adjusted to remove fuel switching (electric to gas) as a measure for water heaters, 

cooking, and clothes dryers.

f

Source for potential savings and CCE is the updated LBNL analysis documented in Brown et al. (2008).

gSource for potential savings and CCE is the New York State natural gas potential study (Mosenthal et al., 2006).

Source: Brown et al., 2008.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

70 Real Prospects for Energy Efficiency in the United States

TABLE 2.10 Summary of Commercial Building Energy Consumption, Savings Potential, and 

Efficiency Measure Costs in 2030, by End-Use

Technoeconomic Potential

Fuel and End-Use

Business as Usual

(BAU) 2030 U.S. 

Consumptiona

% Savings 

Relative to 

BAU Case

Consumption 

Savings

Cost of 

Conserved 

Energy

Electricity (TWh) (TWh) (2007¢/kWh)

Space heatingb 77 39 30 0.5

Space coolingb 238 48 115 2.8

Water heatingb 59 11 6 1.2

Ventilationb 131 45 59 0.5

Cookingc 11 30 3 8.3

Lightingb 543 25 137 5.2

Refrigerationb 89 38 34 1.3

Office equipmentPCsc 120 60 71 3.9

Office equipmentnon-PCsc 271 25 68 3.2

Other usesb 523 35 182 1.4

Total electricity 2062 34 705 2.7

Natural Gas (Quads) (Quads) (2007$/million 

Btu)

Space heatingb 2.30 47 1.09 1.9

Space coolingb 0.06 38 0.02 4.1

Water heatingb 1.06 15 0.16 2.3

Cookingc 0.47 31 0.14 7.3

Other usesb 0.47 20 0.09 1.9

Total natural gas 4.36 35 1.51 2.5

Note: A corresponding table for 2020 can be found in Brown et al. (2008). aAEO reference case (EIA, 2007a) end-use consumption for the “Other uses” end-use was reallocated to match the 2007 

DOE Buildings Energy Databook 2007 (DOE/EERE, 2007) end-use shares. 

bSource for potential savings and CCE is CEF Table D-1.1 (IWG, 2000). Values for CCE are from the CEF Advanced Case, 

calculated using a real discount rate of 7 percent and lifetimes as shown in CEF report Appendix C-1.

c

Source for potential savings and CCE is the updated LBNL analysis documented in Brown et al. (2008).

Source: Brown et al., 2008.

ies, and applied them to the BAU scenario. The approach was to consider specific 

energy efficiency measures for each end-use, as explained below. For most enduses, Scenarios for a Clean Energy Future (IWG, 2000; hereafter referred to as 

the CEF study), sponsored by the DOE, was used to estimate savings potential 

(Koomey et al., 2001). The CEF study8 adjusted the energy-savings potential for 

8See also Box 4.2, “The Scenarios for a Clean Energy Future Study” in Chapter 4.
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 71

different end-uses in order to account for energy efficiency improvements in the 

baseline scenario and thereby avoid double counting the energy savings. For the 

residential natural gas end-uses, a recent study of natural-gas-savings potential 

in New York was used as the principal reference (Mosenthal et al., 2006). For 

selected end-uses that were not analyzed in the CEF study (IWG, 2000), Brown et 

al. (2008) compiled technical data to estimate savings percentages and the CCE. 

The specific data source for each end-use is identified in Tables 2.9 and 2.10. 

To provide a better sense of the technologies that were used to estimate these 

potentials, Tables 2.11 and 2.12, respectively, list the principal residential-building 

and commercial-building measures or efficiency improvement assumptions used 

for each end-use. For the most part, the technologies are widely available in the 

marketplace today and are well proven. Technologies such as CFLs, T8 lamps and 

electronic ballasts, ENERGY STAR® appliances, horizontal-axis clothes washers, and high levels of building thermal integrity have been implemented by some 

consumers, but they have not been implemented in all applications in which they 

are technically and economically feasible owing to a wide range of market barriers and failures (see Section 2.7) A few of the technologies, such as heat-pump 

water heaters, are still produced on a limited scale and are considered near-term 

emerging technologies. However, other emerging technologies, such as LED lights, 

solar water heaters, and very high efficiency new buildings, are not included in 

the supply curves. Other excluded technologies include passive solar heating and 

cooling, gas-fired and geothermal heat pumps, the separation of ventilation from 

heating and cooling systems, products that must be special ordered (e.g., R-7 

windows), non-air-based heating and cooling distribution systems in commercial 

buildings, and the redesign of building envelopes for daylighting and cooling load 

minimization.

To estimate aggregate savings potential in 2030, Brown et al. (2008) multiplied the percentage energy-savings potential shown by end-use in Tables 2.9 and 

2.10 by the estimates of energy use by end-use in the BAU scenario. The CCE is 

reported as the levelized annual cost of the efficiency measures over their lifetime 

divided by the estimated annual energy savings. The CCE accounts for the costs 

of incremental measures only; no cost is included for public policies or programs 

aimed at stimulating the adoption of a measure. Consistent with the CEF study, 

a real discount rate of 7 percent was used to calculate these values. Cost-ofconserved-energy values from the CEF and New York studies were inflated to 

2007 dollars using the GDP implicit price deflator. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

72 Real Prospects for Energy Efficiency in the United States

TABLE 2.11 Residential Building Measures Included in the Conservation Supply Curve Analysis 

Fuel and End-Use Efficiency Measure Description

Electricity

Thermal shell Existing electric-heated homes: no efficiency measures; new homes: up to 40% 

savings compared to 2006 International Energy Conservation Code

Space heating equipment Electric furnace switched to heat pump, improved heat-pump efficiency

Space cooling equipment Improved-efficiency central and room air conditioners, variable speed room air 

conditioners

Water heating Reduced standby-loss electric-resistance water heater, heat pump water heater, 

horizontal axis clothes washer

Refrigeration Best-in-class ENERGY STAR® refrigerator, 2008

Freezers Best-in-class ENERGY STAR® freezer, 2008

Lighting Compact fluorescent fixtures, halogen-infrared lamps, reduced-wattage 

incandescents, motion sensors

Clothes washers Horizontal-axis washer with improved motor

Dishwashers Dishwasher with improved pump design and improved motor

Color televisions Reduced standby power use

Personal computers ENERGY STAR®-rated PC and monitor, power-management-enabled

Furnace fans Electronically commutated permanent magnet furnace-fan motor, single-speed 

operation

Other uses More efficient motors in ceiling fans, pool pumps, and other small motors; 

improved fan and pump design; reduced standby power use in set-top 

boxes and other electronics; improved insulation for water beds, spas, and 

other small heating loads

Natural Gas

Thermal shell Air sealing, R-19 floor insulation, R-21 wall insulation, R-49 attic insulation, 

integrated design for new construction (SF 30% > code, MF 50% > code), 

triple-pane low-e windows, insulated attic hatch

Space heating equipment Insulated/sealed/balanced ducts, ducts placed within thermal shell condensing 

furnace, sensible heat recovery ventilation, direct-vent fireplace, direct-vent 

boiler, programmable thermostat, boiler pipe insulation

Space cooling equipment Not applicable

Water heating On-demand water heater, 0.63 EF gas water heater, low-flow plumbing 

fittings, ENERGY STAR® clothes washer, reduced water heater tank 

temperature, gray water heat exchanger/GFX, pipe insulation

Cooking Not applicable

Humidity sensor control

Other uses Pool and spa covers

Source: Brown et al., 2008.
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 73

TABLE 2.12 Commercial Building Measures Included in This Analysis

 Fuel and End-Use Efficiency Measure Description

Electricity

Thermal shell No efficiency measures

Space heating equipment Up to 55% savings in existing buildings from improved HVAC equipment and 

controls

Space cooling equipment Up to 55% savings in existing buildings from improved HVAC equipment and 

controls

Water heating 20% savings compared to frozen efficiency baseline

Ventilation Up to 55% savings in existing buildings from improved HVAC equipment and 

controls

Cooking ENERGY STAR®-rated dishwasher, fryer, hot-food-holding cabinet, and 

steamer; more efficient broilers, griddles, and ovens 

Lighting T-8 lamps and electric ballasts; 32% combined savings from occupancy 

controls, daylight dimming, and improved lighting design

Refrigeration 20–45% savings compared to frozen efficiency baseline

Office equipmentPCs ENERGY STAR®-rated personal computer and monitor, power-managementenabling software

Office equipmentnon-PCs ENERGY STAR®-rated copies and printers

Other uses More efficient motors in ceiling fans, pool pumps, and other small motors; 

improved fan and pump design; reduced standby power use in electronics; 

improved insulation; small heating loads; up to 55% reduction in district 

services due to improved shell, equipment, and controls

Natural Gas

Thermal shell No efficiency measures

Space heating equipment Up to 55% savings in existing buildings from improved HVAC equipment and 

controls

Space cooling equipment Up to 55% savings in existing buildings from improved HVAC equipment and 

controls

Water heating 10% savings compared to frozen efficiency baseline

Cooking ENERGY STAR®-rated fryer and steamer; more efficient broilers, griddles, 

and ovens

Other uses 10% reduction in miscellaneous gas use; up to 55% reduction in district 

services due to improved shell, equipment, and controls

Source: Brown et al., 2008.

2.5.2 Information Sources

Technology costs were drawn by Brown et al. (2008) from the CEF advanced 

case, which assumed a greater penetration of more advanced efficiency technologies than in the moderate case. In using these savings potentials to estimate the 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

74 Real Prospects for Energy Efficiency in the United States

national savings potential in 2030, the researchers assumed that the CEF savings 

potential estimated for 2000–2020 would still be applicable for the 2020–2030 

time period. While some efficiency measures such as CFLs, more efficient lighting 

devices for commercial buildings, and ENERGY STAR® personal computers and 

other electronic devices have been adopted to a significant degree, new efficiency 

measures have entered the marketplace since 2000, and others are under development and expected to be commercialized in the near future. Thus, while today’s 

energy efficiency baseline has improved since 2000, Brown et al. (2008) assumed 

that the number of efficiency technologies and practices being developed and not 

yet adopted have kept pace with this improvement, keeping the overall efficiency 

potential roughly constant.

Because the CEF study did not model the savings potential of building-shell 

retrofits to existing homes, the LBNL researchers instead used estimates of residential natural-gas savings derived from a recent New York study (Mosenthal 

et al., 2006). The applicability of that study to the national context rests on the 

assumption that the percentage savings (relative to baseline energy use) in New 

York is representative of the country as a whole. The CCE, however, depends on 

the absolute energy savings for a given measure, so Brown et al. (2008) scaled the 

CCEs to account for differences in heating degree-days between New York and 

the national average.9 The CCEs were calculated using a 7 percent discount rate, 

to be consistent with the other end-uses in this analysis. The Brown et al. (2008) 

study provides the details of this analysis.

Several end-uses were not analyzed in the CEF study, and savings and cost 

data for them were not available from other studies at that time. These end-uses 

were commercial office equipment, commercial cooking, residential office equipment, residential furnace fans, and residential dishwashers. For these end-uses, 

LBNL researchers compiled data on technology performance and cost and developed savings-potential estimates specifically for this analysis. The summary results 

of this analysis are shown in Tables 2.9 and 2.10; details can be found in Brown 

et al. (2008).

9The researchers used the potential savings estimates for “downstate” New York (New York 

City and immediate vicinities) for this study. The climate scaling increased the CCEs by about 15 

percent and was only applied to the space-heating end-use.
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 75

2.5.3 Results

Figures 2.8 and 2.9 show the potential for electricity (Figure 2.8) and natural gas 

(Figure 2.9) efficiency improvements over the 2010–2030 period in the residential 

and commercial sectors. The x-axis shows the total reduction in 2030 energy use, 

and the Y-axis shows the CCE in fuel-specific units. Each step on the graphs in 

these two figures represents the total savings for a given end-use for all the costeffective efficiency measures analyzed for that end-use. These are referred to as 

“supply curves” because they indicate how much energy savings is available for a 

given cost. The CCE is calculated as the savings-weighted average for all the measures in that end-use cluster. End-uses that do not have technology costs reported 

in Tables 2.9 and 2.10 are not included in these plots (e.g., residential cooking). It 

should be noted that the space-heating and the space-cooling steps in Figures 2.8 

and 2.9 include efficiency improvements in both the thermal shell and the HVAC 

equipment, analyzed in an integrated manner. 

Each of the supply curves indicates that the projected BAU energy consumption in 2030 can be reduced by about 30–35 percent at a cost less than current 

retail energy prices. Table 2.13 compares the weighted-average cost of conserved 

energy from each supply curve with national average retail energy prices as of 

2007. The data in the table show that the average CCE is well below the retail 

energy price in all areas, meaning that adopting these efficiency measures is costeffective for households and businesses. In fact, the average CCE for these electricity-savings measures is only about one-quarter of the average retail electricity 

price. Of course, factors such as local energy prices and weather will influence 

cost-effectiveness in any particular location. 

Table 2.14 presents data on the aggregate costs and benefits of efficiency 

technologies for the entire buildings sector. The cumulative capital investment 

required to achieve these savings between 2010 and 2030 is about $440 billion.10

The value of annual energy-bill savings in 2030 is nearly $170 billion. Thus, these 

efficiency measures in aggregate have a 2.6 year simple payback period on average, or savings over the life of the measures that are nearly 3.5 times larger than 

10The investment includes both the full “add-on” cost for new equipment or measures (e.g., 

attic insulation) and the incremental cost of purchasing an efficient technology (e.g., a highefficiency boiler) compared with purchasing its conventional-technology equivalent (e.g., a standard boiler). These investments would be made by the individuals and private entities making the 

purchases. The costs of programs to support, motivate, or require these improvements are not 

included.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

76 Real Prospects for Energy Efficiency in the United States

12

10

8

6

4

2

0

0 100 200 300 400 500 600 700

Terawatt-hours per Year

Cost of Conserved Energ

y

(2007 Cents per Kilowatt-hour)

2.8 Efficiency

2007 National Average Residential 

Retail Electricity Price

2007 National Average Commercial 

Retail Electricity Price

1

1 2

3

3 4

6 7

8 9

10

11

12

1 Color Television

2 Lighting

3 Other Uses

4 Water Heating

5 Clothes Washer

6 Space Heating

7 Furnace Fan

8 Personal Computer

9 Refrigeration

10 Space Cooling

11 Dishwasher

12 Freezer

1 Space Heating

2 Ventilation

3 Water Heating

4 Refrigeration

5 Other Uses

6 Space Cooling

7 Office Equip. Non-PC

8 Office Equip. PC

9 Lighting

10 Cooking

4 5

6 7

8

9

10

2

5

Figure 2.8 Estimates of the cost of conserved energy (CCE) and energy-savings poten- 

tial for electricity efficiency technologies in buildings in 2030. The CCEs for potential 

energy efficiency measures (numbered) are shown versus the ranges of potential energy 

savings for these measures. The total savings potential is 567 TWh per year in the residential sector (blue solid line) and 705 TWh per year in the commercial sector (red solid 

line). For comparison, the national average 2007 retail price of electricity in the United 

States is shown for the residential sector (blue dashed line) and the commercial sector 

(red dashed line). For many of the technologies considered, on average the investments 

have positive payback without additional incentives. CCEs include the costs for add-ons 

such as insulation. For replacement measures, the CCE accounts for the incremental 

cost—for example, between purchasing a new but standard boiler and purchasing a new 

high-efficiency one. CCEs do not reflect the cost of programs to drive efficiency. All costs 

are shown in 2007 dollars.

Source: Data from Brown et al., 2008.

the investment required on a discounted net present value basis. These averages 

are based on combining efficiency measures with CCE values ranging from less 

than 1¢/kWh to 8¢/kWh in the case of electricity saving measures, and $1/million 

Btu to $12/million Btu in the case of natural-gas-saving measures. There is an 

up-front cost to achieving substantial energy savings, but this cost is paid back a 

number of times over the lifetime of the energy efficiency measures.

A few other studies have developed conservation supply curves or, equivalently, the cost of reducing carbon dioxide (CO2

) emissions for the United States. 

A recent study prepared by McKinsey and Company has received considerable 

attention (Creyts et al., 2007). The panel was unable to verify (owing to lack of 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 77

14

12

10

8

6

4

2

0

0 0.2 0.4 0.6 0.8 1.0 1.2 1.4

Quadrillion Btu per Year

Cost of Conserved Energ

y

(2007 Dollars per Million BTU)

2007 National Average

Residential Retail Natural Gas Price

1 1 2 3

3

4 1 Other Uses

2 Clothes Dryers

3 Space Heating

4 Water Heating

1 Space Heating

2 Other Uses

3 Water Heating

4 Space Cooling

5 Cooking

4

5

2

2007 National Average

Commercial Retail

Natural Gas Price

2.9 Efficiency

F igure 2.9 Estimates of the cost of conserved energy (CCE) and energy savings potential for natural gas efficiency technologies in buildings in 2030. The CCEs for potential 

energy efficiency measures (numbered) are shown versus the ranges of potential energy 

savings for these measures. The total savings potential is 1.5 quads per year in the residential sector (blue solid line) and 1.5 quads per year in the commercial sector (red solid 

line). For comparison, the national average 2007 retail price of natural gas in the United 

States is shown for the residential sector (blue dashed line) and the commercial sector 

(red dashed line). For many of the technologies considered, on average the investments 

have positive payback without additional incentives. CCEs include the costs for add-ons 

such as insulation. For replacement measures, the CCE accounts for the incremental 

cost—for example, between purchasing a new but standard boiler and purchasing a new 

high-efficiency one. CCEs do not reflect the cost of programs to drive efficiency. All costs 

are shown in 2007 dollars.

Source: Data from Brown et al., 2008.

data) the assumptions and results regarding energy efficiency potential in buildings. Nevertheless, the results of the McKinsey and Company study generally 

parallel those of the studies that the panel reviewed in terms of the magnitude and 

cost of saved energy in buildings. 

2.5.4 Limitations

Owing to time and resource constraints, the Brown et al. (2008) analysis relied 

on data from previous efficiency-potential studies. As a result, the analysis can be 

improved on in several respects, some of which are highlighted below.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

78 Real Prospects for Energy Efficiency in the United States

TABLE 2.14 U.S. Efficiency Investment and Savings by 2030 (for the Buildings 

Sector)

Sector and 

Energy Type

Cumulative Capital 

Investment 

(billion 2007 $)

Annual Utility Bill 

Savings in 2030

(billion 2007 $)a

Simple Payback 

Time (years)

Residential

Electricity 137 64 2.1

Natural gas 104 19 5.5

Commercial

Electricity 163 68 2.4

Natural gas 38 17 2.3

 Total 442 168 2.6

aAssumes 2007 retail electricity and natural gas prices. 

Source: Brown et al., 2008.

TABLE 2.13 Estimated Average Cost of Conserved (Saved) Energy in Residential 

and Commercial Buildings Compared with National Average Retail Energy Prices, 

2007

Average Cost of Conserved 

(Saved) Energy

National Average 

Retail Energy Price

Residential

Electricity

Natural gas

2.7¢/kWh

$6.9/million Btu

10.6¢/kWh

$12.7/million Btu

Commercial

Electricity

Natural gas

2.7¢/kWh

$2.5/million Btu

9.7¢/kWh

$11.0/million Btu

Note: For the specific savings, see Figures 2.8 and 2.9.

Source: Brown et al., 2008. Energy prices are from EIA, 2008c.

•	 The end-use technology data used in this study are mostly drawn from 

the CEF study (IWG, 2000), which reflects technology and market conditions in the late 1990s. Clearly, many factors have changed since then, 

including new technologies becoming available as well as costs falling 

for some energy efficiency measures owing to improved manufacturing 

processes, increased volumes, and the relocation of manufacturing facilities to countries where costs are lower. For example, one study found 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 79

that the average retail price of CFLs dropped about 75 percent between 

1999 and 2007 (Itron, 2008). 

•	 As explained in Section 2.5.2, it is assumed that new efficiency measures 

compensate for the loss of savings potential due to measures adopted 

since 2000. This is a simplifying assumption that introduces uncertainty 

in the point estimates of the savings potential presented above. 

•	 Energy prices have risen significantly since the CEF study (IWG, 2000), 

which increases the number of energy efficiency technologies that are 

cost-effective, thus increasing the energy efficiency potential. 

•	 For the residential natural-gas end-uses, the New York study 

(Mosenthal et al., 2006) is only a rough approximation of savings 

potential across the country. A national study that includes all relevant 

technologies (including shell retrofits) would add considerable value to 

a study extrapolated from New York.

•	 The effect of the Energy Independence and Security Act of 2007 is considered part of the remaining efficiency potential; that is, the effect of 

EISA is not included in the baseline. This assumption probably has the 

largest effect on the lighting end-use, because EISA contains aggressive 

provisions for lighting efficiency.

•	 The results of Brown et al. (2008) are point estimates of savings potential that ignore uncertainty about how energy use in the building sector will evolve during the next 20+ years. Some of the major areas of 

uncertainty include energy prices, the availability and price of efficiency 

technologies, and potential changes in consumer behavior. They also 

include the policy context—for example, whether or not limits on 

greenhouse gas emissions are enacted, and if so, with what degree of 

stringency.

•	 Studies of efficiency potential, such as the CEF and New York studies, 

are highly aggregated analyses that tend to ignore the great variability 

in the building stock with respect to climate, building configuration, 

equipment ownership, building occupancy and use, and other factors. 

Future studies should be conducted at a greater level of disaggregation 

to address variability in the building stock.

As noted above, the conservation supply-curve approach to estimating potential savings itself has limitations. The initial models of the cost of saving energy 

did not account for the life of energy-using equipment or for whether the new 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

80 Real Prospects for Energy Efficiency in the United States

technology would fit into the space available and perform the same functions, 

and these models generally lacked the detail to enable a determination of whether 

a particular technology would actually be attractive in a particular setting. The 

models assumed that the existing equipment needed to be replaced and could be 

replaced with a more efficient technology. The models were static in assuming 

that customers would want to buy the best technology today, instead of waiting 

until a better technology was available. The models did not account for the time 

and costs of disseminating information about the new technologies, the availability of capital to acquire the often more expensive equipment, the risks to existing 

production, and other barriers. Some economists expressed skepticism about the 

resultsespecially when businesses and consumers did not take advantage of the 

new, better technologies that promised large economic benefits. (See, for example, 

Stavins et al., 2007; Jaccard et al., 2003; Sutherland, 2000; Jacoby, 1999; and 

Jaccard and Montgomery, 1996.)

While current models are more sophisticated in considering these issues, they 

are still aggregate models that do not consider the specific circumstances of each 

energy-efficient replacement. They still do not fully account for educational and 

dissemination costs and other barriers. Thus, on the one hand, they tend to overstate the economic attractiveness of some new technologies; on the other hand, 

they are only dealing with a small number of energy-efficient technologies, so 

they neglect many other attractive alternatives, thus understating some potential 

benefits. 

2.6 ADVANCED TECHNOLOGIES AND INTEGRATED APPROACHES

The conservation supply curves presented in Section 2.5 do not take into account 

a number of newer technologies and whole-building-design approaches. These 

technologies and approaches add to the energy-savings potential identified in the 

conservation supply curves; thus, the panel judges that these supply curves represent lower estimates of energy-savings potential. 

This section reviews some of the advanced technologies that are the most 

promising for further improving the energy efficiency of buildings. These include 

discrete technologies such as solid-state lighting, advanced windows, and highefficiency air-conditioning equipment, as well as the full integration of the technologies into new, highly efficient whole buildings, both residential and commercial. 

These technologies demonstrate that energy efficiency is a dynamic resourcenew 
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 81

and improved technologies now under development will reach the marketplace 

in the future, thereby increasing the potential for energy efficiency and energy 

savings.

 The review below is not comprehensive; it does not address many advanced 

technologies related to building materials, design, and appliances. 

2.6.1 Solid-State Lighting

Solid-state lighting is an important emerging technology for energy savings, given 

that lighting accounts for about 18 percent of primary energy use in buildings. 

CFLs are a major improvement over incandescent lamps with respect to efficacy 

(about 60 lumens per watt versus 15 lumens per watt), but they contain mercury, 

are difficult to dim, are not a point light source,11 and are not “instant-on.” 

Light-emitting diodes do not suffer from these disadvantages. As shown in Figure 

2.10, the performance of white LED lamps has improved greatly in recent years. 

The best white LEDs are now more efficient than fluorescent lamps, with further 

gains expected within the next 5 years. Advances will come from improvements 

in the ratio of injected electrons to emitted photons in the active region, the 

efficiency of extracting generated photons out of the packaged part, phosphors, 

thermal efficiency, and scattering efficiency (Azevedo et al., 2009). The expectation is that white LEDs will reach 150 lumens per watt (Craford, 2008). LEDs 

last longer than fluorescent lamps do, are dimmable, and are becoming available 

in warm white with excellent color rendering. The dimmability and “instanton” capability of LEDs make them especially appealing for applications such as 

streetlighting, gas station lighting, and display case lighting in retail stores where 

occupancy sensors can be used to dim them or turn them off when people are not 

present.

The primary issue with LEDs is cost, but their cost is decreasing rapidly. A 

1000-lumen LED source that costs around $25 (wholesale cost) in 2008 is projected by the DOE to cost $2 in 2015 (DOE, 2008b). At a $50 retail cost, the 

CCE for an LED with a 20,000-hour lifetime and an efficacy of 60 lumens per 

watt replacing an incandescent lamp is about $0.13/kWh. The CCE would fall to 

$0.008/kWh if the cost goal of $2 wholesale ($4 retail) is achieved and performance improves to 150 lumens per watt along with a 50,000-hour lifetime. Given 

11Point light sources are easier to focus, which is important in some applications—for example, in retail stores.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

82 Real Prospects for Energy Efficiency in the United States

2.10 Efficiency

Year

Luminous Efficacy (lm/W)

200

150

100

50

0

1930 1950 1970 1990 2010

Light Source Description hL(lm/W)

500 W High-Pressure Na 150

140 W Metal Halide 122

TL HE Tube Fluorescent 105

Halogen-IR Incandescent 30

Standard Incandescent 16 High-Pressure Na

Best Low-Current LED

2008 DOE

Roadmap

Best

High-Power

LED

Metal Halide

Fluorescent

Power

LEDs

Halogen-IR

Halogen

Hg Vapor

Incandescent

FIGURE 2.10 White light source performance: light-emitting diodes (LEDs) compared 

with conventional light sources. Luminous efficacy is the ratio of luminous flux (in 

lumens) to power (in watts). 

Note: TL HE = tube light, high-efficiency; IR = infrared.

Source: Craford, 2008.

expected improvements, LEDs are projected to become competitive with CFLs by 

2012 even if the lights are used only 2 hours a day and a 20 percent annual discount rate is assumed (Azevedo et al., 2009).

High-quality LED replacement lamps are now becoming available, and over 

the next 5 years a wide variety of higher-power lamps is expected. The penetration rate into the illumination market is difficult to predict and will be different 

for different market segments. DOE has modeled several segments as well as the 

overall market penetration rate (Navigant Consulting, 2006). The model projects that LEDs will yield a 12 percent savings in lighting energy use in 2017 and 

a 33 percent savings by 2027, relative to projected lighting energy use without 

LEDs. The projected 2027 electricity savings are greater than the energy consumed 

to illuminate all the homes in the United States today.

The penetration rate for organic LEDs (OLEDs), an alternative form of 

solid-state illumination, has also been independently modeled and also yields 33 
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 83

percent lighting-energy savings by 2027. However, the OLED savings will occur 

later than the LED savings will (less than 6 percent in 2017 for OLED savings) 

and are much more speculative in view of impending technology hurdles and cost 

challenges. 

2.6.2 Advanced Cooling

Cooling is one of the largest uses of energy in residential and commercial buildings, responsible for about 10 percent of total U.S. electricity use and 25–30 percent of total peak electricity demand (EIA, 2007a; Koomey and Brown, 2002). 

Significant potential exists for reducing cooling demand in buildings—or eliminating it entirely in some climates—through strategies that combine measures to 

reduce building cooling requirements and peak loads (e.g., highly efficient building 

envelopes, shading, reflective surfaces and roofs, reductions in heat gains from 

lights and other equipment, natural ventilation, and thermal storage) with emerging cooling technologies. These technologies are designed to supplement or replace 

vapor compression-based cooling with low-energy, thermally driven cooling 

approaches. They include indirect evaporative cooling and indirect-direct evaporative cooling (IDEC), solar thermal cooling (STC) systems, advanced controls and 

low-lift cooling strategies, and thermally activated desiccants. Each of the technologies has already been used commercially as individual components, but further 

research and development and commercial demonstration projects are needed to 

develop the technologies as integrated systems and to optimize their performance. 

Indirect evaporative cooling systems use an evaporative process to cool a 

building’s interior without adding moisture to the indoor air. Various indirect 

evaporative systems are currently entering the marketplace, including systems 

that couple cooling towers with floor slabs and radiant ceilings. IDEC lowers air 

temperature by first passing air across a heat exchanger surface whose other side 

is cooled by evaporation. This precooled air then passes through a direct evaporative process, where it is cooled and humidified. Where applicable, IDEC units 

are capable of reducing cooling energy demand by 70–80 percent (PG&E, 2006). 

These advanced evaporative systems are now applicable in the dry climates of 

the western United States, with minimal net increase in total household water use 

(Kinney, 2004). 

STC combines solar thermal technologies with traditional chiller-based systems to produce hot water that drives heat-driven absorption, and absorption or 

adsorption chillers that generate chilled water for space conditioning. Currently, 
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Real Prospects for Energy Efficiency in the United States 

84 Real Prospects for Energy Efficiency in the United States

the systems are most cost-effective in commercial and industrial buildings with 

large roof areas, such as one- to three-story commercial buildings, hospitals, and 

food and beverage processing plants (Burns et al., 2006).

Low-lift cooling increases efficiency by reducing the temperature difference 

and thus the work performed by the cooling system. Options for low-lift cooling include the use of a dedicated outdoor air supply with enthalpy heat recovery 

from exhaust air, radiant cooling panels or floor systems, low-lift vapor compression equipment, and advanced controls. The technical energy savings potential is 

estimated to be 60–74 percent for temperate to hot and humid climates and 30–70 

percent in milder climates (Jiang et al., 2007).

Desiccants allow the independent control of temperature and humidity 

within the HVAC system, thereby providing greater control over humidity loads 

within the building, which can also improve indoor air quality. For more than 

a decade, desiccant systems have been used in combination with conventional 

HVAC systems in specialized markets where humidity control is important, such 

as in supermarkets and hotels (DOE, 2004b). In humid regions, desiccant-based 

dehumidification could reduce residential electricity demand by 25 percent, 

because less energy is used to achieve dehumidification (PNNL, 1997). Combining 

desiccants with STC systems could achieve additional energy savings (Stabat et al., 

2003). Researchers at DOE’s National Renewable Energy Laboratory are developing heat-driven liquid desiccant systems that are capable of being powered by 

solar thermal energy or through heat recovery from reciprocating engines, microturbines, and fuel cells (Lowenstein et al., 2006). 

The energy-savings potential of these technologies is substantial. It is estimated that they could reduce total cooling-energy demand in residential and commercial buildings by 15 percent (0.6 quad) in 2020 and 33 percent (1.5 quads) in 

2030, as shown in Figure 2.11. Incorporating advanced building-design practices 

that minimize cooling loads could save an additional 0.75 quad annually in 2030. 

Within the next decade, the most economically competitive cooling strategies include thermal envelope improvements to reduce cooling loads, desiccant 

dehumidification in humid climates, and indirect-direct evaporative cooling in hot, 

dry climates. STC systems will become increasingly competitive with electrically 

driven vapor compression systems as the cost of solar collectors declines. By 2030, 

thermally driven cooling systems that use renewable energy or waste heat for cooling could replace conventional cooling technologies in new buildings and could be 

used to retrofit existing buildings.

There is also potential to use advanced building sensors and controls to 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 85

reduce HVAC and lighting energy consumption. Currently, most advanced control 

approaches have a very small market share. These approaches include occupancy 

sensors, demand-controlled ventilation, photosensor-based lighting control, and 

continuous commissioning—that is, the ongoing testing of building equipment 

and systems to detect and diagnose faults. Brambley et al. (2005) estimate that 

the widespread adoption of advanced sensors and controls could reduce primary 

energy use by commercial buildings by about 6 percent.

2.6.3 Technologies to Reduce Energy Consumption in Home Electronics

Consumer electronics—that is, the products dealing with the processing of 

information—are responsible for about 13 percent of residential electricity use 

(Roth and McKenney, 2007; EIA, 2008a). This consumption is likely to increase 

simply because the growth in the number of products in homes shows little sign 

of abating (EIA, 2008a). Numerous efficiency improvements have been incorpo

2.11 Efficiency

Year

Quadrillion Btu

5

4

3

2

1

0

2005 2020 2030

Reference Case

Advanced Cooling

Advanced Cooling

and Building

Energy Efficiency

FIGURE 2.11 Potential reduction in cooling demand in U.S. buildings using advanced 

technologies.

Source: Courtesy of S. Dunn, Southwest Energy Efficiency Project, Boulder, Colo., 

November 2007; based on data from the Annual Energy Outlook 2007 (EIA, 2007a) and 

the Buildings Energy Data Book 2007 (DOE/EERE, 2007).
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

86 Real Prospects for Energy Efficiency in the United States

rated into—and ENERGY STAR® specifications have been adopted for—a wide 

range of products, but energy use continues to increase in a few important products, notably flat-panel televisions and set-top boxes. In March 2009, the Energy 

Information Administration projected that electricity use by televisions and set-top 

boxes would increase by 65 percent between 2006 and 2030 (DOE, 2009). New 

products are also appearing, such as digital picture frames, which will contribute 

to further increases in energy consumption. Many other kinds of appliances, such 

as dishwashers, furnaces, and water heaters, have electronic controls that are 

responsible for a small but noticeable fraction of those products’ overall energy 

consumption.

Electronic products typically consume energy both while active and while 

switched off. In many cases, the energy consumption while switched off exceeds 

that while in use, owing to the limited number of hours that many electronic 

devices are switched on (IEA, 2001). The average California home now contains 

more than 40 products that are continuously drawing power greater than 110 

watts (Meier et al., 2008). An increasing number of electronic products are also 

connected to networks (WiFi, Ethernet, USB, Bluetooth, and others). With present 

designs, many products must remain in a power-intensive, fully-on mode so as not 

to be disconnected from the network. As with standby power use, the network 

connectivity of new products may become the standard situation rather than the 

exception.

At least five strategies exist to reduce the energy use of consumer electronics, but they are not yet widely used. First, improvements in power supplies 

could reduce electricity use in all power modes. Second, many products can be 

redesigned to exploit smaller and more efficient circuitry, which usually results 

in lower energy use. Third, some products can incorporate an auto-power-down 

feature. This feature is already required in new ENERGY STAR® specifications 

for digital television adapters. Fourth, protocols can be employed to allow products on a network to operate with a low-power sleep level without losing network 

connectivity. Finally, “power strips” can be designed more cleverly to manage 

energy consumption in clusters of products. In such systems, the “power” switch 

has migrated from individual products to a much smarter device able to take into 

account many other variables. For example, such a device can sense when a computer is turned off and can shut off the electricity flow to the computer and to 

other devices plugged into the strip at the same time. These strategies are already 

employed in a few products but have had minimal impact on energy use to date.
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 87

2.6.4 Technologies to Reduce Energy Consumption in 

Servers and Data Centers

Servers and data centers were responsible for about 61 billion kWh of electricity 

use in 2006, 1.5 percent of total national electricity use and more than double 

the level of 2000 (EPA, 2007b). The bulk of this electricity consumption is for 

site infrastructure, including cooling systems (50 percent) and what are termed 

“volume servers” (34 percent). The installed base of servers and external hard 

drives is increasing very rapidly. If current trends in server and data-center expansion and energy efficiency continue, the EPA (2007b) projects that servers and 

data centers will consume approximately 107 TWh by 2011, 75 percent more 

than in 2006. 

There is large potential for cutting the electricity consumption of servers and 

data centers, and to do so cost-effectively. The techniques for improving efficiency 

include the following:

•	 Virtualization, which allows data processing to be accomplished with 

fewer servers;

•	 Improved microprocessors with higher performance per watt;

•	 Servers with more efficient power supplies, fans, and microprocessors; 

•	 More efficient data-storage devices; and

•	 More efficient cooling techniques, uninterruptible power supplies, and 

other “site infrastructure” systems.

The EPA (2007b) estimates that with the more widespread adoption of costeffective energy efficiency technologies and practices already in use in some servers 

and data centers today, the overall electricity use of servers and data centers could 

be limited to 48 TWh in 2011, 55 percent less than in the current trends scenario. 

Furthermore, the EPA estimates that if state-of-the-art technologies and practices 

were fully adopted in all servers and data centers, overall electricity use could be 

limited to about 34 TWh in 2011, nearly a 70 percent reduction from what is projected under current trends. 

In addition to saving the owners of servers and data centers money on their 

utility bills, utilities would benefit from reducing server and data-center electricity 

use because many servers and data centers are concentrated in areas such as New 

York City and San Francisco, which have congested transmission and distribution grids. Server and data-center energy efficiency is starting to be addressed by 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

88 Real Prospects for Energy Efficiency in the United States

utility and government energy efficiency programs such as the ENERGY STAR®

program, but these efforts are still in their infancy; for example, an objective and 

credible energy performance rating for data centers, as well as ENERGY STAR®

specifications for data-center equipment, are still under development. On May 15, 

2009, the EPA published its initial specification for ENERGY STAR® computer 

servers.12

2.6.5 Advanced Window Technologies

Windows are responsible for about 2.7 quads of energy use annually in homes 

and about 1.5 quads in the commercial sector, and they impact another 1.0 quad 

of potential lighting-energy savings (Apte and Arasteh, 2006). Advances have been 

made over the last two decades primarily in reducing the heat-transfer coefficient 

(U-value) of windows through the use of low-emissivity (low-E) coatings and by 

reducing the solar heat gain coefficient (SHGC) by means of the use of spectrally 

selective low-E coatings. The window U-value is the primary determinant of 

winter heat loss; the window SHGC is the primary determinant of summer cooling loads. Window U-values have changed little in mainstream markets in recent 

years, having become “stuck” at ENERGY STAR® values that typify performance 

values achieved starting in the 1980s. Two new window technology advances are 

now available in niche markets. They currently have higher-than-acceptable cost, 

but they could have far-reaching implications if they could become mainstream 

products and systems.

The first advance is highly insulating “superwindows” that achieve U-values 

in the range of 0.1–0.2, compared to a typical U-value of 0.5 for double glazing 

and 0.35–0.4 for ENERGY STAR® windows currently being sold in cold climates 

(Apte and Arasteh, 2006). Such windows are available in limited quantity in 

Europe and in the United States but are not yet mass-produced. While research 

efforts continue with highly insulating aerogel and vacuum glazings, each of these 

approaches requires fundamental changes in glazing and window assembly and 

massive investment in facilities for start-up. An alternative approach is to develop 

a family of highly insulating window systems based on the use of two low-Ecoated glazing layers in a triple-glazed assembly, with gas fills and improved edges. 

This combination of measures is capable of achieving overall glazing performance 

of U = 0.1–0.2 using existing production facilities and could have a price only 

12See http://www.energystar.gov/index.cfm?c=archives.enterprise_servers.
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 89

marginally above current gas-filled, double-glazed low-E units. These highly 

insulating glazings will also require a new series of companion insulating sashes 

and frames so that the whole window product meets target thermal performance 

requirements. These products are likely to have primary value in the residential 

sector but will find applications in commercial buildings as well.

The second opportunity is a new generation of dynamic products that 

reduces cooling loads in climates with substantial cooling loads and makes daytime lighting controls the preferred solution for reducing electric lighting in commercial buildings (Apte and Arasteh, 2006). The requirement here is for more 

dynamic control—the ability to modulate solar gain transmitted through the 

windows (thus minimizing cooling load), but also to admit sufficient daylight to 

reduce electric lighting in commercial buildings while controlling glare. This can 

be achieved in two ways: (1) for example, using “smart” electrochromic coatings that can reversibly switch properties in response to sensor input and that are 

capable of optimizing between cooling and lighting and can provide glare control 

as well; and (2) employing dynamic optical control using automated, motorized 

shading systems in buildings, including automated shades, blinds, shutters, and so 

on. These systems are commonplace in many European buildings but are rarely 

found in the United States. Fully automated, motorized roller shades with dimmable, addressable fluorescent lighting to capture daylight benefits were recently 

installed in a new 52-story office building in New York City.

Apte and Arasteh (2006) show that taken together, these two classes of 

emerging window technologies could produce large energy savings in the U.S. 

building stock if widely deployed in new and existing buildings. Tables 2.15 and 

2.16 provide energy-savings estimates for the residential and commercial sectors, 

respectively, if the specified set of window technologies was fully deployed in the 

building stock. The tables show that the full penetration of ENERGY STAR®

windows in residential and similar windows in commercial buildings would provide nearly 1.8 quads of energy savings per year. However, if the advanced technologies described above are commercialized and fully penetrate the buildings 

stock, the full technical potential for energy savings would increase to nearly 3.9 

quads per year. Since the stock today accounts for approximately 4.2 quads of 

energy use per year, these improvements shift the role of windows in buildings to 

being approximately “energy neutral.” This is achieved by greatly reducing the 

unwanted seasonal losses and gains in all buildings in all climates and then by 

providing useful solar heat in winter in homes and useful daylight year round in 

commercial buildings. It will take many years, of course, to replace the existing 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

90 Real Prospects for Energy Efficiency in the United States

TABLE 2.15 Annual Energy Savings Potential of New Residential Window 

Technologies

Energy Savings over Installed Window Stock in 2005 

(quads)

Scenario Heat Cool Total

Sales (business as usual)a 0.49 0.37 0.86

ENERGY STAR® (Low-e) 0.69 0.43 1.12

Dynamic Low-e 0.74 0.75 1.49

Triple Pane Low-e 1.20 0.44 1.64

Mixed Triple, Dynamic 1.22 0.55 1.77

High-R Superwindow 1.41 0.44 1.85

High-R Dynamic 1.50 0.75 2.25

a The average properties of residential windows sold in 2004; used as a “business as usual” scenario.

Source: Apte and Arasteh, 2006.

TABLE 2.16 Annual Energy Savings Potentials of New Commercial Window 

Technologies

Energy Savings over Installed Stock in 2005 (quads)

Scenario Heat Cool Total

Sales (business as usual)a 0.03 0.17 0.20

ENERGY STAR® (Low-e) 0.33 0.32 0.65

Dynamic Low-e 0.45 0.53 0.98

Triple Pane Low-e 0.71 0.31 1.02

High-R Dynamic 1.10 0.52 1.62

a The average properties of residential windows sold in 2004; used as a “business as usual” scenario.

Source: Apte and Arasteh, 2006.

stock with these new technologies, but a transition to “zero-net-energy windows” 

could provide enormous benefits eventually (Arasteh et al., 2006).

2.6.6 Low-Energy and Zero-Net-Energy New Homes

It is possible to construct homes that combine high levels of energy efficiency 

in the building envelope, heating and cooling systems, and appliances, along 

with passive and active solar features, in order to approach zero-net-energy 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 91

consumption.13 This is the objective of the Department of Energy’s Zero Energy 

Homes program. Although the market share for zero-energy homes (ZEHs) is 

still very low, the level of awareness and commitment among builders is growing 

rapidly. 

A growing number of new homes being built use 50 percent as much energy 

as that used by typical new homes, or even less, as evidenced by the fact that more 

than 23,000 new homes met this performance criterion and qualified for a federal 

tax credit as of 2007. The following examples demonstrate the techniques used to 

achieve very low conventional energy use in new homes.

Two highly instrumented homes were built with the same floor plan in Lakeland, Florida, in 1998 (Parker et al., 2000). One of these was of conventional 

construction and served as the project control. The experimental building included 

an interior duct system, a high-efficiency heat pump, better wall insulation, a 

white reflective roof, solar water heating, efficient appliances, and efficient lighting. Over 1 year, the experimental home used 6,960 kWh of electricity and had 

photovoltaic (PV) system production of 5,180 kWh. For the same year, the control 

home used 22,600 kWh; that is, the experimental home consumed 70 percent less. 

Including the PV production, the experimental home’s net energy use was only 

1,780 kWh, a 92 percent reduction relative to the control home. 

A 3079-square-foot (286-square-meter) ZEH was built in Livermore, 

California, in 2002 (Parker and Chandra, 2008). The home featured fairly high 

levels of insulation; an innovative, computerized night cooling system (NightBreeze®) using outside air introduced by the duct system; high-performance windows with window shading; an attic radiant barrier; and highly efficient appliances and lighting. Heating was provided by a hydronic loop using a tankless gas 

water heater. Cooling was provided by the NightBreeze® with compressor cooling 

backup. In 2004, the 3.6 kW PV system produced more electricity (4890 kWh) 

than the house used (4380 kWh) so that net electricity consumption was negative: 

−510 kWh. Very little compressor cooling was ever needed. However, natural gas 

consumption totaled 700 million Btu per year—likely due to excess heat loss in a 

hot-water circulation loop. 

In Lenoir City, Tennessee, the Oak Ridge National Laboratory constructed 

five ZEHs within a Habitat for Humanity development (Christian et al., 2004). 

13A home with zero-net-energy consumption may at times produce more energy than it consumes (for example, through photovoltaic panels on the roof), and at other times it may consume 

more energy than it produces.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

92 Real Prospects for Energy Efficiency in the United States

The project focused on small, affordable homes while evaluating a variety of efficient building methods and technologies such as the following:

•	 A heat-pump water heater linked to the refrigerator for heat recovery,

•	 A crawl space with thermostat-controlled ventilation to assist with 

space cooling and dehumidification in the summer,

•	 Ground source heat pumps using foundation heat recovery,

•	 Structural insulated panels,

•	 An interior duct system,

•	 High-performance windows,

•	 Efficient appliances, and

•	 A gray water waste-heat recovery system.

Conventional energy use in these homes was reduced by 35–60 percent. 

Nonetheless, because a number of innovative technologies were tested in these 

experimental homes, the cost per unit of energy savings was relatively high (Parker 

and Chandra, 2008).

Another ZEH Habitat for Humanity home was built in Wheat Ridge, 

Colorado (Norton and Christiansen, 2006). The small home was superinsulated 

with R-60 ceiling, R-40 double-stud walls, and R-30 floor insulation. Ventilation 

was provided by a small heat-recovery ventilator. Very-high-performance, low-E 

solar glass with argon fill and a U-value of 0.2 was used for the east, west, and 

north faces, with a higher transmission U-value 0.3 glass used for the south exposure. For hot water, the home used a 9-square-meter solar collector with 757 liters 

of storage, backed up by a tankless gas water heater. The home was mated with a 

4 kW rooftop PV system.

During a recent year, the PV system in the Wheat Ridge home produced 

1,542 kWh more than the electricity used in the home. It is interesting to note that 

some 60 percent of the electricity use in the home was for nonappliance, nonlighting miscellaneous electric loads. Only 5.7 million Btu of natural gas were used 

during this period. Thus, the home was a net energy producer on both a site and 

a source basis. The total incremental cost of the project was $42,500, including 

$32,000 for the PV system and $7,100 for the solar water-heating system. The 

incremental cost of the efficiency measures was only about $3,400, due in part to 

the elimination of a full-size furnace.

Premier Gardens is a community-level project in Sacramento, California. 
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 93

This project saw 95 entry-level homes constructed with high levels of energy 

efficiency: R-38 ceiling insulation and R-13 to R-19 wall insulation, tankless gas 

water heaters, high-efficiency gas furnaces, tightly sealed ducts buried in the attic 

insulation, and fluorescent lighting in all permanent fixtures (Parker and Chandra, 

2008). The Premier Gardens homes also included 2.2 kW of PV on each house. 

Across the street from the development, a similar housing project was constructed 

without the energy efficiency measures or solar power. Performance monitoring in 

both developments showed that the Premier Gardens homes averaged 34 percent 

lower gas consumption and 16 percent lower electricity use. With the PV generation included, the homes averaged 54 percent lower net electrical demand and 

even greater savings during summer peak periods. The incremental cost of the Premier Gardens homes (not including the California PV buy-down) averaged about 

$19,000.

Figure 2.12 compares the performance of various ZEHs. The graph shows 

the energy performance as well as the incremental cost of different homes or housing projects. The costs for efficiency features are generally modest, but the solar 

power systems add $20,000 to $50,000 or more to project costs. Efficiency measures also reduce energy use more cost-effectively than solar systems do, as indicated by the steeper first set of data points relative to the second set of data points 

in Figure 2.12.

Figure 2.13, which shows the cost of saving or supplying energy for a set 

of homes similar to those discussed in Figure 2.12, indicates that efficiency measures are often cost-effective with a cost of saved energy at less than $0.10/kWh. 

However, the combination of solar PV and efficiency measures may not be costeffective owing to the still-high cost of the solar systems, suggesting that efficiency 

measures should be emphasized first in low-energy homes.

Recent analysis shows that the source-energy use of a typical 2,000-squarefoot, two-story house can be reduced by 50 percent at an incremental first cost 

of approximately $13,000. If this incremental cost is financed through a 30-year 

mortgage at 7 percent interest, the annualized cost for greater energy efficiency 

is just two-thirds of the annual utility bill savings, leading to net annual savings 

for the homeowner of about $450 on average (Anderson and Roberts, 2008). 

The efficiency measures that can be used to achieve this level of energy efficiency 

include additional insulation, tight sealing of the building envelope, highly efficient 

heating and cooling equipment, a tankless gas hot-water heater, ENERGY STAR®

appliances, and fluorescent lamps in most light fixtures.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

94 Real Prospects for Energy Efficiency in the United States

2.12 Efficiency

Incremental Cost of Efficiency Measures and Photovoltaics (Dollars)

Annual Energy Use, Kilowatt-hour Equivalent

(Electricity Plus Gas)

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

–5,000

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000

Lakeland

Smith Passivhaus

Armory Park del Sol

Premier Gardens

Wheat Ridge

FIGURE 2.12 Energy use versus incremental first cost of five zero-energy and near-zeroenergy homes. Baseline homes (actual or estimated) are the first point of each line (i.e., 

intersecting the Y-axis). The first drop in (conventional) energy use and first increase in 

incremental cost are a result of energy efficiency measures. The second drop in (conventional) energy use and second increase in incremental cost are due to the solar photovoltaic (PV) energy systems. The houses were constructed in Sacramento, California (Premier 

Gardens); Wheat Ridge, Colorado; Tucson, Arizona (Armory Park del Sol); Urbana, Illinois 

(Smith Passivhaus); and Lakeland, Florida.

Source: Courtesy of D. Parker, Florida Solar Energy Center, Cocoa, Fla.

2.6.7 Low-Energy New Commercial Buildings

Technical innovation in the building sector will continue to drive improvements 

in building performance, but there is a significant gap between the potential of 

existing building technologies and the effective adoption of these strategies by the 

building sector. This gap represents a huge opportunity for improvements in building performance that will generate substantial performance improvements in the 

near term. New buildings as complete structures last many decades, but major 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 95

energy-using subsystems within such buildings are often redesigned on 5-year or 

20-year cycles, so improved subsystems could be applied at least partially to existing buildings, particularly in the commercial sector. 

A review of the best-performing new buildings in the country suggests that 

buildings that achieve energy-use reductions of 50 percent or more below standard practice do not typically incorporate cutting-edge technologies, but instead 

successfully integrate multiple “state-of-the-shelf”14 technologies to achieve these 

performance levels (Turner and Frankel, 2008).15 This approach represents a huge 

14 “State-of-the-shelf” technologies represent the state-of-the-art selection of technologies that 

are widely available (on the shelf) today. 

15Also see http://www.gettingtofifty.org—a searchable database of information about projects 

whose energy performance targets 50 percent beyond ASHRAE 90.1-2001; NBI (2008).

Dollars per Kilowatt-hour Equivalent Saved

Premier Gardens

Wheat Ridge

Armory Park del Sol

Smith Passivhaus

Hathaway House

Livermore

Lakeland

0.6

0.5

0.4

0.3

0.2

0.1

0.0

2.13 Efficiency

Dollars per Kilowatt-hour Equivalent of Efficiency Investment

Dollars per Kilowatt-hour of PV

Dollars per Kilowatt-hour Equivalent Including Both Efficiency and PV

FIGURE 2.13 Cost of saved energy and solar photovoltaic (PV) energy supply in seven 

low-energy homes (those shown in Figure 2.12 plus two additional projects: one in 

Washington, D.C. [Hathaway House] and one in Livermore, California). Costs are shown 

on an annualized basis using a fixed-charge rate of 0.06 and with gas savings converted 

to kilowatt-hour equivalent.

Source: Courtesy of D. Parker, Florida Solar Energy Center, Cocoa, Fla.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

96 Real Prospects for Energy Efficiency in the United States

opportunity for improved energy performance using existing available technologies (Griffith et al., 2007).

The main difference between high-performing buildings and conventional 

buildings is essentially an attention to integration, interaction, and quality control 

throughout the design, construction, and operation of the building. This process, 

typically referred to as integrated design, represents a transformation not in technology but in conceptual thinking about how building systems can most effectively work together and the successful implementation of design intent (Torcellini 

et al., 2006). 

One aspect of building performance that will grow tremendously in the next 

decade is the incorporation of more robust monitoring tools for building performance. A critical limitation of the ability of building designers and operators to 

improve building performance is the lack of good information about the impacts 

of design and operating decisions on actual building performance. A review of 

energy modeling results for 80 recently constructed Leadership in Energy and 

Environmental Design (LEED) buildings suggests a wide variation in the accuracy 

of energy modeling in predicting actual energy use (Turner and Frankel, 2008). 

In current practice, there is almost no mechanism through which the design community can receive real feedback on the effectiveness of its design strategies; no 

way to separate operational issues from design-based performance characteristics; 

and very little actionable feedback to building operators on real-time building performance. To address this problem, a host of efforts are currently under way for 

developing more effective tools to monitor and manage building operational performance using real-time data and intuitive data visualization.16

2.7 BARRIERS TO IMPROVING ENERGY EFFICIENCY IN BUILDINGS

Proponents of energy efficiency point to a wide range of market failures or barriers that inhibit greater investment in energy efficiency measures, including the 

following:

16Building performance measurement protocols are currently under development by the Center for Neighborhood Technology, the New Buildings Institute, the Green Building Alliance, the 

U.S. Green Building Council, the American Society of Heating, Refrigerating, and Air-Conditioning Engineers, and a host of private companies. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 97

•	 Limited supply and availability of some energy efficiency measures;

•	 Consumers lacking information or having incomplete information

about energy efficiency opportunities, and the high transaction costs for 

obtaining such information;

•	 Users of energy lacking the capital to invest in energy efficiency 

measures;

•	 Fiscal or regulatory policies that discourage energy efficiency investments, often inadvertently; 

•	 Decision making that does not consider or value energy efficiency; 

•	 Perceived risk associated with the performance of relatively new energy 

efficiency measures; 

•	 Split incentives whereby the party designing, constructing, or purchasing a building or piece of equipment does not pay the operating costs; 

and

•	 Energy prices that do not reflect the full costs imposed on society by 

energy production and use (externalities).17

It is important to recognize there is no single market for energy efficiency. 

The energy efficiency “market” consists of many end-uses, a myriad of intermediaries, hundreds of millions of energy users, and millions of decision points. In 

addition, it is useful to distinguish between what are generally viewed as market 

failures and market barriers (Box 2.1). Market failures occur if there is a flaw in 

the way that markets operate. Market barriers are not flaws in the way that markets operate, but they limit the adoption of energy efficiency measures nonetheless. 

2.7.1 Market Failures

Environmental externalities are one of the most important and frequently cited 

examples of unpriced costs and benefits. Energy prices do include costs associated 

with meeting environmental standards, but other adverse environmental impacts, 

such as emissions of mercury or CO2, land disruption, or legal water contamination, are not factored in to energy prices. Likewise, the cost paid by society to protect and defend sources of oil and other energy imports is not included in energy 

17No attempt was made to rank the various market failures or barriers by importance in this 

list or in the subsequent discussion. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

98 Real Prospects for Energy Efficiency in the United States

prices. As a result of failing to include these costs in market prices, more fossil 

energy is consumed than is socially optimal (Brown et al., 2007). 

Many energy economists acknowledge that not including environmental 

and social costs in energy prices is a problem. For example, Jaffe and Stavins 

(1994) stated, “While much controversy surrounds the magnitude of the value 

of the environmental damages associated with energy use, the direction of the 

effect is unambiguous . . . consumers face incentives to use more energy than is 

socially desirable if they do not bear the full costs of the pollution their energy use 

fosters.” 

There are also barriers to recognizing and taking into account the full benefits of energy efficiency measures in consumer decision making. For example, 

at peak times, small reductions in demand can have a disproportionate effect in 

reducing price. The benefits of reducing demand accrue not only to the customers who reduce their load but to all customers, since all pay a lower price for 

their electricity. Because the majority of benefits accrue to customers who take no 

action, no customer realizes the full benefit of reducing his or her own load, and 

so there is less motivation to reduce demand than would be the case if a customer 

could realize the full benefit (Elliott and Shipley, 2005; Wiser et al., 2005; Spees 

and Lave, 2007).

Various types of fiscal policies discourage investments in energy efficiency. 

For example, capital investments in commercial buildings must be depreciated 

over more than 30 years, while energy purchases can be fully deducted from taxable income the year in which they occur (Brown, 2001). This puts energy effiBOX 2.1 Market Failures and Market Barriers 

Inhibiting Greater Energy Efficiency

Market Failures Market Barriers 

• Unpriced costs and benefits • Low priority of energy issues

• Distortional fiscal and • Incomplete markets for energy

regulatory policies efficiency 

• Misplaced or split incentives • Lack of access to capital

• Insufficient and inaccurate • Fear of not getting value from next

information buyer

Sources: Brown, 2001; IEA, 2007. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 99

ciency investments and upgrades at a disadvantage in terms of cost-effectiveness. 

Likewise, most states charge sales tax on energy efficiency measures and projects 

but do not tax electricity and fuel sales (Brown et al., 2007). In addition, conventional energy sources such as oil and natural gas production receive tax subsidies 

such as depletion allowances.

Some regulatory policies also inhibit investments in energy efficiency in 

buildings and industry. In particular, regulatory policies that allow public utilities 

to increase their profits by selling more electricity or natural gas are a disincentive 

to effective utility energy efficiency programs (Carter, 2001). Many utilities also 

have adopted tariffs and interconnection standards that discourage end users from 

adopting energy-efficient combined heat and power (CHP) systems (Brooks et al., 

2006). The variability in the stringency and enforcement of building energy codes 

across states and localities is cited as another barrier to energy efficiency in buildings (Brown et al., 2007). 

Misplaced incentives, also known as split incentives or principal-agent problems, exist in numerous situations. The most visible example of misplaced incentives is in rental markets, where building owners are responsible for investment 

decisions but tenants pay the energy bills. Nearly one-third of U.S. households 

rent their homes, and 40 percent of privately owned commercial buildings rent or 

lease their space (Brown et al., 2005). A number of studies have revealed lower 

levels of energy efficiency in dwellings occupied by renters compared to those 

occupied by owners in the United States. For example, a survey in California 

found that insulation, energy-efficient windows, programmable thermostats, and 

other energy efficiency measures are less common in rental housing compared to 

owner-occupied dwellings (see Figure 2.14).

Misplaced incentives also are found in new construction markets in which 

decisions about building designs and features are made by people who are not 

responsible for paying the energy bills. Architects, builders, and contractors have 

an incentive to minimize first cost in order to win bids and maximize their profits 

(Koomey, 1990; Brown et al., 2007). Also, commercial leases are often structured 

so that the landlord allocates energy costs to tenants on the basis of square footage leased. In that case, neither the landlord nor any of the tenants has the incentive to invest in cost-effective efficiency (Lovins, 1992). 

Split incentives also exist for certain appliances and end-uses (IEA, 2007). 

When a homeowner installs a cable or satellite television box in his or her home, 

the box is purchased by the service provider, but the electricity bill is paid by the 

homeowner. When a retail store owner installs a beverage vending machine on 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

100 Real Prospects for Energy Efficiency in the United States Market Penetration (Percent) Insulated Walls Insulated Attic Double-Pane Windows Programmable Thermostat Compact Fluorescent Lamps

Low-Flow Showerheads

90

80

70

60

50

40

30

20

10

0

2.14 Efficiency

Owner Occupied

Rental

FIGURE 2.14 Comparison of the market penetration of energy efficiency measures in 

owner-occupied and rental housing in California. “Penetration” is the percentage of U.S. 

households with an energy-saving feature such as insulation.

Source: CEC, 2004. Reprinted with permission.

his or her property, the machine is specified by the bottler but the utility bill is 

paid by the retailer. In these cases, the owner of the equipment has no incentive to 

spend extra money to improve energy efficiency. 

In some cases the split in incentives is not between different economic actors 

but between different centers of responsibility within a single organization. In 

larger companies, energy efficiency investment decisions are often made by financial officers in charge of capital budgets, but the energy savings accrue to the division responsible for operating a particular piece of energy-efficient equipment. The 

operating division does not have access to capital or authority to make investment 

decisions, and the financial officers may end up ignoring cost-savings opportunities in the utilities area. 

A large body of research documents that consumers are often poorly 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 101

informed about technology characteristics and energy efficiency opportunities. 

Some consumers do not know where to find credible information on energy efficiency options. Consumers may know how much more an energy-efficient air conditioner or water heater costs, but they would not know how much they will save 

per year by purchasing the more efficient technology, despite the fact that these 

technologies may carry mandatory energy efficiency labels. In addition, it can take 

many years to inform and educate a large majority of households and businesses 

about energy efficiency options. For example, after nearly 8 years of active promotion of—and incentives for—CFLs, nearly one-third of households surveyed in the 

Pacific Northwest in late 2004 were still unaware of this energy efficiency measure 

(Rasmussen et al., 2005). Indeed, many owners or managers of large commercial 

buildings have no knowledge of the size of the energy bills of their properties, 

despite the fact that energy is the largest cost component of net operating income, 

typically coming in at 15 percent. Some owners or managers even conceive of 

energy as a fixed cost beyond their control.

This lack of information is an even greater problem, and harder to fix, for 

individual end-uses. For example, when a tenant of a commercial building buys 

office equipment, the electricity usage of this equipment will not be metered, either 

at the user level or even on a level that would allow a rational decision to be made 

about the efficiency of the equipment. And not a single end-use in homes is ever 

metered separately. Thus homeowners have no direct information as to whether 

their computer, or videogame box, or hair dryer is a big energy user or a trivial 

one.

Likewise, consumers or businesses often lack the ability or time to process 

and evaluate the information that they do have, a situation sometimes referred to 

as “bounded rationality” (Koomey, 1990; Golove and Eto, 1996). And consumers 

often have difficulty using information on energy labels or calculating the payback 

period for a more efficient appliance (Sanstad and Howarth, 1994). Even when 

performance ratings are available (such as ENERGY STAR® labeling), consumers 

may not know how the energy-efficient device will function and how much energy 

and money will be saved in their own homes or businesses. 

Consumers or businesses may perceive (rightly or wrongly) that energy efficiency technologies do not perform as well as the standard, less-efficient products 

they are used to.18 For example, consumers may believe that energy-efficient fluo18Usually the assumption is not only wrong but reversed: the energy-efficient option performs 

better than what the consumer is used to. So while the popular press often reports negative con-
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

102 Real Prospects for Energy Efficiency in the United States

rescent lamps provide poorer-quality light compared to that from incandescent 

lamps; that energy-efficient homes have poorer air quality and are less healthful 

than leaky, inefficient homes; or that energy-efficient furnaces or air conditioners 

are less reliable than “low-tech” standard efficiency models (Jaffe and Stavins, 

1994). Likewise, businesses may be concerned that energy-efficient devices are 

less reliable and could lead to costly downtime. In some cases, such concerns were 

legitimate when a technology was first introduced (e.g., for CFLs), but are no longer valid today. 

Recent research has shown that human decision making departs from 

rationality in certain consistent ways, and several of those ways impact energy 

efficiency investments. Decisions reflect risk aversion and loss aversion, in that a 

$1 gain represents less positive utility than a $1 loss does negative utility. It takes 

a gain of $2.50 to balance a loss of $1 as a result of risk aversion, and a similarly 

biased ratio for loss aversion (Thaler et al., 1997). Decision makers confronted 

with a complicated choice will tend to leave things the way they are rather than 

risking failure or optimizing the situation as a decision maker with a fresh perspective would. This situation is also known as “status quo bias.”

These problems might represent a relatively minor failure of the market 

when the decision maker is acting on his or her own behalf, but they are serious problems when that person is an agent for others, for example, a business 

manager who is not the owner. Corporate shareholders do not want irrational 

behavior, and such behavior certainly is not consistent with the way to maximize 

profit (Goldstein, 2007). 

The lack of information is often a market barrier rather than a market failure. In some cases, however, it rises in significance because the problem is not 

merely the dissemination of existing information but rather the generation of 

information in the first place. For example, televisions are a growing source of 

energy use, but information on the energy use of a particular set is unavailable 

because (until 2008) there was no standard on how to test a television’s energy 

consumption. This type of problem often occurs because the product’s trade association wants to set test standards or, in some cases, prefers that there not be any 

test standards.

sumer reactions to CFL color, a national survey of consumers as part of the McGraw-Hill annual 

construction survey found that more consumers than not consider the light quality of CFLs better than that of incandescent lamps (LeBlanc, 2007). 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 103

2.7.2 Market Barriers

Turning to the market barriers, businesses tend to pay limited attention to 

energy-use and energy-savings opportunities if energy costs are a small fraction 

of the total cost of owning or operating the business or factory, or if energy 

efficiency is not viewed as a priority by the company management. Energy costs 

represent less than 2 percent of the total cost of operating a factory or commercial business in many (but not all) cases. Furthermore, businesses are most concerned with developing new products, maintaining production, and increasing 

sales; energy consumption is usually a secondary or tertiary concern. As a result 

of these and other factors, many businesses limit energy efficiency investments 

to projects with payback periods of no more than 2 or 3 years (DeCanio, 1993; 

Geller, 2003).

Many individual consumers also do not value the lifetime energy savings provided by more efficient appliances, vehicles, or other energy efficiency measures. 

For example, consumers on average expect vehicle fuel-efficiency improvements to 

pay back their first cost in 3 years or less even though vehicles remain in use for 

about 14 years on average (Greene and Schafer, 2003). Chapter 5 discusses the 

strategies for overcoming this barrier as well as other market barriers discussed in 

this section.

Regarding incomplete markets for energy efficiency, some measures are 

relatively new and are still not widely available in the marketplace or not well 

supported by product providers (Hall et al., 2005). These include measures 

such as highly efficient light fixtures, reflective roofing materials, heat-pump 

water heaters, and modern evaporative coolers. The limited availability of these 

products results in a lack of consumer awareness and demand, and the lack 

of demand makes it difficult to expand availability. Also, some very effective 

energy efficiency services such as duct testing and sealing and the recommissioning of existing buildings are not widely available or marketed in many parts of 

the country.19

Regarding a lack of capital to invest in energy efficiency measures, this is 

particularly a problem for low-income households that have limited resources and 

limited access to credit. In addition, some businesses (particularly small businesses) 

have insufficient capital or borrowing ability.

19It should be noted, however, that some energy efficiency measures such as insulation, compact fluorescent lamps, or ENERGY STAR® appliances are readily available.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

104 Real Prospects for Energy Efficiency in the United States

Detailed studies of particular markets have found multiple and substantial 

barriers inhibiting the adoption of cost-effective energy efficiency improvements 

(IEA, 2007). In the motors market, for example, motor suppliers may fail to stock 

high-efficiency motors; buyers may lack accurate information on motor efficiency 

or other opportunities for cost-effectively saving energy in motor systems; facility 

managers often shy away from newer technologies, fearing reliability problems; 

and motors may be replaced on an emergency basis, resulting in little or no time 

to consider energy efficiency (Nadel et al., 2002). Also, many motors are purchased by original equipment manufacturers (OEMs), companies that assemble 

pumps, blowers, air-conditioning systems, and other items. OEMs generally purchase motors based on lowest first cost since they are not responsible for paying 

operating costs, another example of split incentives. 

2.7.3 Implications of Market Barriers

Particular policy and program remedies are available for many of the market 

failures and barriers described above (Hall et al., 2005). These include educating 

consumers and businesses, increasing the supply and visibility of energy-efficient 

products and services in retail establishments, offering consumers and businesses 

financial incentives to get their attention and stimulate greater willingness to 

adopt efficiency measures, removing inefficient products or buildings from the 

marketplace through codes and standards, and reforming pricing and regulatory 

policies. 

But other market failures or barriers are deeper and harder, if not impossible, to correct. Diffuse decision making, risk aversion, loss aversion, and status 

quo bias, in particular, would seem difficult to solve, even conceptually. Moreover, 

there are transactions costs related to educating consumers, addressing the split 

incentives problem, or convincing households or businesses to invest in energy 

efficiency to a greater degree. The real question is whether policy and program 

interventions are cost-effective mechanisms for stimulating greater investment in 

energy efficiency measures—that is, whether the value of the energy savings, peakdemand reduction, and nonenergy benefits (see below) exceed the costs (both for 

the efficiency measures and policy or program implementation). As discussed in 

detail in Chapter 5, many types of energy efficiency policies and programs offer 

effective and economically attractive ways of removing or reducing the market 

failures and barriers described above. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 105

2.8 MARKET DRIVERS

A number of factors—economic, environmental, and business related—are serving to overcome the barriers and market failures discussed above. Likewise, many 

energy efficiency measures provide multiple benefits, including nonenergy benefits 

that help to drive the adoption of these measures. In addition, numerous public 

policies, including state and utility efficiency programs, building energy codes, and 

appliance efficiency standards are stimulating a greater adoption of efficiency measures. These policies and programs are discussed further in Chapter 5.

2.8.1 Economic, Environmental, and Business Considerations

The costs of electricity, natural gas, and petroleum products are volatile but 

are generally rising (see Figure 2.15). Corrected for inflation, the average retail 

price for electricity paid by households in the United States increased 34 percent 

between 1975 and 1985, but then fell 24 percent during 1985–2002 (EIA, 2008b). 

However, the national average price increased 10 percent in real dollars during 

2002–2007. Retail natural gas prices paid by residential consumers increased 

45 percent on average during 2002–2007. The downturn in the world economy 

apparent at the time of this writing will mitigate growth in energy prices for a 

while, but the underlying determinants of demand growth remain in place. Higher 

energy prices improve the cost-effectiveness of energy efficiency measures and 

stimulate greater interest in and willingness to adopt such measures on the part of 

consumers (AIA, 2007). This is clear from the high demand for fuel-efficient vehicles and the heavy drop-off in demand for large sport-utility vehicles and other gas 

guzzlers in response to rapidly rising gasoline prices in late 2007 and early 2008. 

Environmental awareness and concern about energy security and global climate change are also on the rise. A national survey administered by researchers 

from the Massachusetts Institute of Technology in 2003 and 2006 showed that 

citizens ranked global warming as the nation’s most pressing environment concern in 2006, whereas in 2003 global warming was ranked at number 6 out of 10 

(Curry et al., 2007). Furthermore, the same survey found that support for action 

to address global warming is rising, as is the willingness to pay more for electricity in order to address global warming. In particular, the amount that respondents 

indicated they were willing to pay to address global warming increased 50 percent 

between 2003 and 2006. Many states and cities are adopting greenhouse gas emissions reduction goals and action plans, thereby increasing the awareness of and 

support for the adoption of energy efficiency measures. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

106 Real Prospects for Energy Efficiency in the United States

2.15 Efficiency

Year

Average Price of Residential Natural Gas

(Dollars per Thousand Cubic Feet)

Average Retail Price of Residential Electricit

y

(Cents per Kilowatt-hour)

16

14

12

10

8

6

4

2

0

14

12

10

8

6

4

2

0

1973 1977 1981 1985 1989 1993 1997 2001 2005

Electricity

Natural Gas

FIGURE 2.15 Average price of residential natural gas and average retail price of residential electricity.

Source: EIA, 2008b.

Growing awareness of the ENERGY STAR® label and its increasing use in 

energy-related purchase decisions are other indicators that interest in energy efficiency is rising (EPA, 2008). ENERGY STAR® is promoted in part as a way for 

consumers to reduce polluting emissions and protect the environment. Likewise, the 

awareness and adoption of “green building” practices are rapidly rising. For example, 2.3 billion square feet of commercial buildings were registered or certified under 

the LEED rating program at the end of 2007, up more than 500 percent in 2 years 

(Makower, 2008). 

Many corporations with forward-looking agendas are making commitments to increase energy efficiency and/or to reduce their greenhouse gas emissions and are achieving impressive results (Hoffman, 2006). These commitments 

often pertain to energy use and greenhouse gas emissions within the company 

itself. However, some large corporations such as Wal-Mart, Hewlett-Packard, and 

General Electric are expanding their production and/or marketing of energy- and 

resource-efficient products. Wal-Mart, for example, exceeded its goal of selling 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 107

100 million compact fluorescent lamps in 2007 and announced that it would 

launch its own brand of CFLs (Makower, 2008). The retailer also announced 

plans to cut the energy use of its stores and help increase the energy efficiency 

of its entire supply chain. Hewlett-Packard has introduced a wide range of more 

efficient personal computers that meet the ENERGY STAR® specifications issued 

in 2007. And General Electric recently announced that it would start manufacturing and marketing energy-efficient tankless and heat-pump water heaters, in 

conjunction with the DOE’s announcing ENERGY STAR® criteria for residential 

water heaters. Such efforts increase consumer awareness and the adoption of 

energy-efficient products. 

2.8.2 Nonenergy Benefits

Energy efficiency is often defined in terms of using technology to reduce the 

amount of energy consumed in providing a given level of service. However, 

energy-efficient technologies in many cases provide a higher level of service as a 

result of “nonenergy” benefits. In some cases, the value of these nonenergy benefits exceeds the value of the energy saved over the lifetime of the product. It is 

also possible that energy-efficient technologies can reduce the level or quality of 

service—that is, they can result in nonenergy costs. But empirically, the number of 

cases in which this is true is small. 

The CFL offers one example of nonenergy benefits. The nonenergy benefits 

of CFLs are primarily the increased lifetime. Compact fluorescent lamps meeting the ENERGY STAR® specifications have a minimum lifetime of 6,000 hours, 

but increasing numbers of products have lifetimes of 10,000 hours or more. For 

comparison, the lifetime for incandescent bulbs ranges from 750 hours to 2,000 

hours, with 1,000 hours being most typical. For applications where lights are hard 

to change or where staff must be paid to change the bulbs, the value of reduced 

maintenance greatly exceeds the value of the energy savings.20

The color rendition of CFLs, which is different from that of incandescents, 

in some cases is a benefit. Incandescents are only available in a limited range of 

color temperatures from about 2500 K to 3000 K, with the low end of the range 

20For example, to change incandescent lamps providing illumination to a three-story atrium, 

maintenance crews must set up scaffolding to climb up three stories in order to change the bulbs. 

The cost of avoiding doing this every 1,000 hours—two or three times a year for typical usage 

patterns of office buildings—exceeds by an order of magnitude the value of lifetime energy savings of the lamp, which is on the order of $50–$100. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

108 Real Prospects for Energy Efficiency in the United States

obtainable only through dimming and the high end of the range obtainable only 

through halogen lamps. CFLs are available at a choice of color temperatures ranging from about 2700 K to about 6500 K; commonly available products are at 

2700 K, 3500 K, and 4100 K. 

LEDs used for traffic signals provide substantial cost savings to the municipalities that use them because of their longer lifetime; these savings go far beyond 

the value of energy savings. Longer lifetime means less expense for maintenance crews to replace burned-out lamps. LED traffic signals also have a safety 

advantage—if an incandescent signal fails, the entire red light or green light goes 

out, whereas if LEDs fail, they fail one lamp at a time, and the driver can still see 

a red light, green light, or amber light even if the pattern is not perfectly circular. 

And, because of their much lower energy use, it is technically feasible to operate 

LED signals with battery backups, so that traffic signals can function even in a 

blackout. 

Energy-efficient (and water-efficient) domestic clothes washers are marketed 

on the basis of their superior cleaning ability and the fact that they cause less 

wear to fabrics, in addition to the value of the savings of energy, water, or even 

detergent. Many of these products can also, through their energy-efficient design, 

handle larger garments or those that might previously have required dry cleaning. 

These factors are much more important than energy savings in the marketing of 

these clothes washers. 

Natural daylighting is another energy-saving strategy with significant nonenergy benefits. High-quality daylighting has been shown to have a positive association with better student performance in schools, higher retail sales in stores, 

and productivity improvements in offices and other workplaces (Romm, 1999; 

Heschong and Wright, 2002; Kats, 2006). 

Improved insulation and fenestration systems in buildings not only reduce 

energy use for air-conditioning and cooling but also provide greater comfort. In 

these cases, this benefit is a consequence of the physics of heat transfer: betterinsulated walls or windows have interior surface temperatures that are closer 

to room temperature than do poorly insulated ones; this creates a radiant heattransfer environment for the human body, which is more comfortable. In hotter 

climates, windows that reflect near-infrared solar heat result in less solar heat 

gain on clothes or skin than would be the case with conventional windows. 

Homes that are sealed to prevent air leakage from or to the outside and are better insulated also provide better acoustic isolation (i.e., less interior noise). And 

sealing air ducts in buildings not only saves energy but also can provide more 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Residential and Commecial Buildings 109

even heating and cooling within the building—for example, avoiding rooms at 

the end of the duct system that are not adequately heated in the winter or cooled 

in the summer. 

The panel is unaware of any comprehensive study looking at nonenergy 

impacts (costs and benefits) from energy efficiency measures. This informal review 

finds numerous examples of nonenergy benefits (some of which are larger than the 

energy benefits themselves) and a few examples of nonenergy costs. Such a study 

would be useful, particularly if it attempted to quantify these costs and benefits. 

2.9 FINDINGS

The following findings derive from the panel’s analysis of energy efficiency in 

buildings summarized in this chapter.

B.1 Studies assessing the potential for energy savings in buildings take several different approaches, looking at whole-building results as well as 

results by end-use and technology. Nevertheless, their results tend to be 

consistent.

B.2 The potential for large, cost-effective energy savings in buildings is 

well documented. Median predictions of achievable, cost-effective savings are 1.2 percent per year for electricity and 0.5 percent per year for 

natural gas, amounting to a 25–30 percent energy savings for the buildings sector as a whole over the next 20–25 years. If this level of savings 

were to be achieved, it would offset the EIA (2008a) projected increase 

in energy use in this sector over the same period.

B.3 Studies of energy efficiency potential are subject to a number of limitations and biases. On the one hand, factors such as not accounting for 

new and emerging energy efficiency technologies can lead such studies 

to underestimate energy-savings potential, particularly in the midterm 

and long term. On the other hand, some previous studies were overly 

optimistic about the cost and performance of certain efficiency measures, thereby overestimating energy-savings potential, particularly in 

the short term. Although these limitations must be acknowledged, they 

do not affect the panel’s overall finding that the potential for energy 

savings in buildings is large.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

110 Real Prospects for Energy Efficiency in the United States

B.4 Many advanced technologies under development and likely to become 

commercially available within the next decade—including LED lamps, 

innovative window systems, new types of cooling systems, and powersaving electronic devices—will further increase the energy-savings 

potential in buildings. In addition, new homes and commercial buildings with relatively low overall energy use have been demonstrated 

throughout the country. With appropriate policies and programs, they 

could become the norm in new construction.

B.5 Despite substantial barriers to widespread energy efficiency improvements in buildings, a number of countervailing factors could drive 

increased energy efficiency, including rising energy prices, growing 

concern about global climate change and the resulting willingness of 

consumers and businesses to take action to reduce emissions, a movement toward “green buildings,” and growing recognition of the significant nonenergy benefits offered by energy efficiency measures. 

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Real Prospects for Energy Efficiency in the United States 

121

Energy efficiency in the U.S. transportation sector merits special attention 

from the standpoint of energy security and the environment because this 

sector is almost solely dependent on a single fuel—petroleum—about 60 

percent of which is imported. Moreover, the transportation sector is responsible 

for about 30 percent of U.S. emissions of greenhouse gases.

3.1 SCOPE AND CONTENT OF THIS CHAPTER

This chapter describes the U.S. transportation system and its energy consumption. 

It identifies near-term (through 2020) opportunities for energy efficiency and the 

technologies that could capitalize on them. (See Box 3.1 for definitions of fuel efficiency, fuel economy, and fuel consumption.) It considers technologies that could 

improve energy efficiency in the medium term (through 2030–2035), as well as 

longer-term opportunities that could stem from technologies that are now at an 

early stage of research and development (R&D). Finally, it touches on the possibilities for broader changes in transportation systems.

Reflecting the charge to the Panel on Energy Efficiency Technologies, the 

transportation technologies covered here are described in terms of their performance (improvements in energy efficiency and fuel consumption), their costs, and 

their effects on the environment (mainly reductions in greenhouse gas emissions). 

This review is not an in-depth study of all the factors that could improve technology performance, cost, or deployment, or associated environmental effects. Hence, 

the potential improvements discussed here should be considered as first-step technology assessments rather than as forecasts.

3 Energy Efficiency in Transportation 
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Real Prospects for Energy Efficiency in the United States 

122 Real Prospects for Energy Efficiency in the United States

BOX 3.1 Fuel Efficiency, Fuel Economy, and Fuel Consumption

“Energy efficiency” in transportation is generally discussed using terminology 

specific to this sector of the economy, as defined below. The primary terms used 

to quantify the fuel consumed by a vehicle as it is driven are “fuel economy” (or 

“fuel efficiency”) and “fuel consumption.”

Fuel efficiency is a relative term used to describe how effectively fuel is used 

to move a vehicle. Thus, a heavy and a light vehicle, using the same technology in 

the same ways, would have the same fuel efficiency but very different fuel economy. Note that fuel-efficiency improvements do not necessarily result in increased 

fuel economy, as they are often offset by the negative effects of increases in 

vehicle power and weight. Thus, fuel efficiency is related to the amount of useful work that is derived from the combustion of fuel. Whether that useful work is 

applied to increase the number of miles that can be traveled per gallon of fuel or 

to provide other amenities (such as size and power) is a separate question.

Fuel economy is expressed as miles per gallon of fuel consumed; it is the term 

most commonly used in the United States in discussing vehicle fuel consumption. 

Fuel consumption is the inverse of fuel economy. It refers to the fuel consumed 

by the vehicle as it travels a given distance. Widely used in the Europe (expressed 

in liters per 100 km), this metric is a clearer measure of fuel use than is fuel economy. The amount of fuel consumed in driving from one place to another (say, New 

York City to Washington, D.C.) is what matters to consumers. In U.S. units, fuel 

consumption is usually expressed as gallons per 100 miles. 

To illustrate: A vehicle with fuel economy of 50 miles per gallon (mpg), which 

corresponds to fuel consumption of 2 gallons per 100 miles, is twice as fuelefficient as a vehicle of the same size, weight, and power that gets 25 mpg, corresponding to 4 gallons per 100 miles.

Passengers and freight are transported by land vehicles, aircraft, and waterborne vessels through vast networks of land, air, and marine infrastructure. For 

this report, the panel partitioned this sector into passenger transport and freight 

transport and separated each of these into highway transportation and nonhighway transportation. 

Highway transportation is responsible for 75 percent of the energy used in 

transportation and has the greatest potential for energy efficiency; it is therefore 

the focus of this chapter. Nonetheless, nonhighway modes of transportation (aviation, railroad, and marine) together account for about 17 percent of the energy 

used in the sector and are an important potential source of energy savings collec-
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 123

tively. Efficiency improvements in these transport modes are also discussed. Transport modes such as mass transit and intercity rail have important roles in bringing 

about more energy-efficient passenger and freight transportation, particularly if 

they shift traffic to modes that can be more energy-efficient. However, they are 

not treated in detail here.

Section 3.2 outlines energy use for U.S. transportation overall. Passenger 

and freight transport are covered in Sections 3.3 and 3.4, respectively. Section 3.5 

briefly discusses the effects of alternative fuels on the efficiency of highway 

vehicles.

Much of the discussion in this chapter is “vehicle-centric” in the sense that it 

focuses on opportunities for boosting energy efficiency through the engineering of 

highway vehicles (and aircraft) and their subsystems and equipment (e.g., engines, 

transmissions, body designs, and tires). Indeed, a great deal of R&D attention has 

been given to vehicle engineering for energy efficiency.

 The energy required for transportation, however, is greatly influenced by 

the performance of the systems in which these vehicles operate. “Systems” refer 

to the physical networks of infrastructure through which vehicles move, as well 

as the underlying logistic, institutional, commercial, and economic considerations 

that influence the mix of vehicles used, how they are used, and how the infrastructure itself performs. For example, congestion management that allows vehicles to 

operate at more constant speeds, with fewer starts and stops and less idling, could 

increase overall transportation efficiency. System energy efficiency can also be 

improved through the more direct routing of trucks and aircraft, the optimization 

of operating speeds, more intense use of infrastructure, and changes in land-use 

density and patterns. Similarly, energy use in air transportation is influenced by 

air-traffic-management requirements. The degree to which the underlying systems 

operate effectively, therefore, can fosteror in some cases, hinderenergy efficiency. Some of these system-level issues are discussed briefly in Section 3.6. 

Energy use in transportation is also influenced by factors that give rise to the 

demand for travel and that affect the amount or type of travel. Change in these 

areas, however, is a complex topic that can only be touched on in this chapter. 

The demand for transportation comes from individuals and businesses pursuing 

social and economic activities. Reducing these activities may save energy, but may 

or may not be otherwise desirable. The panel did not examine possibilities for saving energy by reducing the activities that spur demand for transport. It focused 

instead on the use of more energy-efficient modes of transportation as a means of 

achieving energy savings (for example, using mass transit or freight rail in place of 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

124 Real Prospects for Energy Efficiency in the United States

individual vehicles or trucks), although this chapter does at times point to some 

of the system-level requirements, such as changes in land-use patterns and density, 

that may be needed to support such improvements.

In examining opportunities for energy efficiency in transportation, the panel 

considered the three time periods set out in the America’s Energy Future (AEF) 

project:

1. Early deployment: through 2020;

2. Medium-range deployment: 2020 through 2030–2035;

3. Longer-range deployment: beyond 2030–2035.

Current technologies offer many improvements in fuel economy that become 

increasingly competitive and attractive as fuel prices rise. For the early period of 

its assessment (through 2020), the panel focused primarily on opportunities to 

improve the energy efficiency of mainstream power trains and vehicles. Reductions 

in fleet fuel consumption through 2020 are likely to come primarily from improving today’s spark-ignition engine, compression-ignition (diesel) engine, and hybridelectric vehicles fueled with petroleum, biofuels, and other nonpetroleum hydrocarbon fuels.1 Annual, incremental improvements in engines and transmissions are 

expected to continue. When coupled with changes in the deployment fractions of 

these propulsion systems, as well as substantial vehicle weight reductions, these 

improvements could reduce average vehicle fuel consumption steadily over this 

time period.

In the medium-term (2020 through 2030–2035), changes in power-train and 

vehicle technologies that go beyond incremental changes become feasible. Plugin hybrid-electric vehicles using electricity plus any of the above fuels may well 

become a significant fraction of new-vehicle sales. Their deployment may be followed by substantial numbers of (fully) battery-electric vehicles.

Over the longer term (beyond 2030–2035), major sales of hydrogen fuel-cell 

vehicles and the necessary hydrogen supply and distribution infrastructure may 

develop.

1Note that biofuels and other nonpetroleum hydrocarbon fuels are covered not in this report, 

but in Liquid Transportation Fuels: Technological Status, Costs, and Environmental Impacts—

the report of the AEF Panel on Alternative Liquid Transportation Fuels (NAS-NAE-NRC, 

2009b).
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 125

Only when a sizable fraction of in-use vehicles incorporates efficiency 

improvements and new power trains can the effect of these changes on the 

nation’s energy use and greenhouse gas emissions reach significant levels. The 

panel constructed some illustrative scenarios of vehicle and technology deployment as a means of estimating the potential overall effects of improved passenger 

vehicles and technologies on fuel consumption and the environment. The results 

are discussed in Section 3.3.

Finally, Section 3.7 outlines the challenges that will have to be met and the 

impediments that will have to be overcome to improve energy efficiency in transportation, and Section 3.8 presents the panel’s findings for the sector.

3.2 ENERGY USE IN TRANSPORTATION

Energy use for transportation in the United States has experienced tremendous 

growth over the past several decades, although the trend registered brief pauses 

during the economic recessions of 1974, 1979–1982, 1990–1991, and 2001. 

In 2007 the United States consumed 29 quads (quadrillion British thermal 

units, or Btu) of energy for transportation, or about 28 percent of total U.S. 

energy use. Moreover, the sector used more than 70 percent of the petroleum consumed in the United States. 

Energy use in each mode of transportation reflects its degree of use as well 

as its energy efficiency characteristics. Figure 3.1 breaks down total U.S. transportation energy use into components, by mode, for the year 2003. As shown, 

passenger travel is dominated by automobiles and by air transport for longer 

distances.2 Mass transit and scheduled intercity rail and bus services have important roles in some locations but account for only a small proportion of total 

passenger-miles.3 On the freight side, the major transport modes are by truck, 

rail, water, pipeline, and air. Trucking dominates in terms of tons and value of 

shipments.

In 2006, petroleum accounted for 96 percent of the energy used for transportation; gasoline accounted for 62 percent of the energy used (EIA, 2006). 

2Bureau of Transportation Statistics, National Transportation Statistics, Transportation Energy Data Book, available at http://www.bts.gov/publications/national_transportation_statistics/. 

3One passenger carried for 1 mile is referred to as a “passenger-mile.” For example, an automobile carrying four people 8 miles is responsible for 32 passenger-miles of travel.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

126 Real Prospects for Energy Efficiency in the United States

Transportation

28%

(28 Quads)

Residential Buildings

22%

(21.6 Quads)

Commercial

Buildings

19%

(18.5 Quads)

Industry

31%

(31.3 Quads)

Highway

(75%)

21.6

Cars (43%)

9.3

Personal &

Recreational

(20%) 0.45

Construction

(35%) 0.78

Rail

(13%)

0.63

Water

(21%) 1

Pipeline

(20%) 1

Air (46%) 2.2

Agriculture

(23%) 0.51

Industrial &

Commercial

(21%) 0.47

Light Trucks

(32%) 7

Buses

(1%)

0.19

Motorcycles

(0.1%)

0.02

Medium &

Heavy Trucks

(24%) 5.1

Off-Hwy

(8%) 2.2

3.1 Efficiency

Non-Hwy

(17%)

4.8

Figure 3.1 U.S. transportation energy consumption (quads) by mode and vehicle in 

2003.

Note: Total U.S. energy consumption = 98.2 quads.

Light-duty vehicles (LDVs), defined as passenger cars and light trucks, are the primary users of gasoline. Heavy-duty vehicles (HDVs), defined as heavy trucks and 

buses and medium-duty trucks, accounted for most of the diesel fuel consumed, 

about 17 percent of the energy used. LDVs and HDVs accounted for about 60 

percent and 20 percent of transportation sector carbon dioxide (CO2) emissions, 

respectively. 

3.2.1 Public Transit

Although public transit consumes a relatively small fraction of overall transportation energy, it serves several important roles in urban transportation systems. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 127

Today, the energy required for mass transit in the United States is less than 2 percent of the total energy used for transport (Davis et al., 2008). However, transit 

buses on average consume about the same amount of energy per passenger-mile as 

that consumed by LDVs, largely because of low average ridership, especially during non–rush hours (Davis et al., 2008). Rail transit is somewhat better in terms 

of energy use per passenger-mile, but apart from New York City and a few other 

densely populated cities that have heavy ridership during both peak and nonpeak 

hours, transit rail is also characterized by light usage for much of the day and thus 

high average energy use per rider. These averages mask the specific times (rush 

hours) and corridors during which public transit uses less energy per passengermile than passenger cars do and where targeted promotion of transit use could 

contribute to a reduction in total energy use. It merits noting that the run-up in 

gasoline prices in 2007–2008 coincided with increases in public transit ridership 

and that public transit ridership has grown by one-third in the United States over 

the past 12 years (APTA, 2008). 

Although the panel did not analyze the potential for energy efficiency gains 

in public transit per se, it does consider in Section 3.6 how energy efficiency can 

be improved through system-level improvements in the provision, use, and operation of transportation systems. In so doing, the panel mentions how changes in 

the provision of transit services and in the operation of the highway and aviation 

infrastructure can boost energy efficiency. 

3.2.2 Commercial Versus Private Transportation

The drivers for energy efficiency in commercial transportation differ from those 

for private transportation. Lifetime operating costs, and thus energy efficiency, are 

important to companies supplying passenger and freight transportation. The commercial transportation sector is so highly competitive that even small cost differentials among firms can have a major influence on their relative profitability and 

growth. 

In contrast, fuel is a small fraction of the lifetime cost of owning a motor 

vehicle for private transportation. For many consumers, vehicle comfort, style, 

and operating performance are more important than fuel consumption. The time 

period over which the costs of driving are considered (relative to initial vehicle 

costs) also tends to be shorter for passenger transport than for freight transport. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

128 Real Prospects for Energy Efficiency in the United States

3.3 the POTENTIAL FOR ENERGY EFFICIENCY 

IMPROVEMENT IN passenger TRANSPORTATION

Automobiles, light trucks, and aviation are the main modes of passenger transportation in the United States. Private automobiles account for the vast majority of 

local and medium-distance passenger-trips4 (those under 750 miles), and airlines 

account for longer trips (BTS, 2006). 

3.3.1 Light-Duty Vehicles—Efficiency Trends

The major factors driving vehicles to become more (or less) fuel-efficient are the 

price of fuel (including taxes), regulations, and consumer preferences for particular 

vehicle attributes. This section reviews experience with these factors. 

3.3.1.1  International Experience

Europe has historically had high fuel and vehicle taxes that raise owner and user 

costs. Moreover, diesel fuel has often been taxed at a rate lower than that for gasoline. High prices have pushed consumers to demand fuel-efficient vehicles, giving 

a larger market share to diesel engines. The average fuel economy of new lightduty vehicles in Europe today approaches 40 miles per gallon (mpg), 60 percent 

higher than in the United States.5

Vehicle fuel economy in Japan is similar to that in Europe. In 2006, Japan 

revised its fuel economy standard to 47 mpg, to be achieved by 2015 (ICCT, 

2007b).

3.3.1.2  U.S. Experience

In contrast to the trend in Europe, from 1980 until recently, real gasoline prices 

had been falling in the United States, encouraging consumers to buy larger, 

heavier, more powerful vehicles and to drive more, rather than to seek greater 

fuel economy. During periods of high fuel prices (such as those prevailing in mid2008), U.S. consumers have demonstrated more interest in fuel economy. The 

average fuel economy of recently sold new vehicles in the United States is about 

25 mpg. The U.S. Energy Independence and Security Act of 2007 (EISA; Public 

4One passenger taking one trip, regardless of trip length, is referred to as a passenger-trip.

5Note that “real-world” fuel economy values are lower—in Europe real-world fuel economy 

is about 28 mpg; in the United States it is about 21 mpg. See Schipper (2006).
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 129

Law 110-140) requires that corporate average fuel economy (CAFE) standards be 

set for LDVs for model years 2011 through 2020 which will ensure that, by 2020, 

the industry-wide CAFE for all new passenger cars and light trucks, combined, is 

at least 35 mpg.6 This is a 40 percent increase over today’s average fuel economy.

Although fuel economy has not improved, fuel efficiency has improved. 

Owing to relatively low fuel prices and static fuel-economy standards between the 

mid-1980s and the early 2000s, increases in vehicle size and performance have offset energy efficiency gains in vehicles (Lutsey and Sperling, 2005; An and DeCicco, 

2007). As a result, average new-vehicle fuel-economy levels have stagnated for 

nearly two decades, and total vehicle fleet use and greenhouse gas emissions have 

increased steadily owing to the increasing fleet size and vehicle-miles traveled 

(VMT).7

Before discussing specific energy-saving technologies for LDVs, the panel 

notes that energy prices will have a significant impact on the pace of the development and introduction of these technologies. The effects of fuel costs on driving 

and demand for motor fuel have been studied extensively. Recent work by Small 

and Van Dender (2007) suggests that, as U.S. incomes have risen, the dominant 

effect of increases in fuel prices has been more demand for vehicle fuel economy 

rather than reduced driving. In other words, people are more likely to drive 

vehicles with higher fuel economy than to sacrifice making trips in the face of rising gasoline prices. Small and Van Dender (2007) estimate that, in the short term, 

each 10 percent increase in fuel costs results in a 0.1 percent reduction in VMT 

but a 0.3 percent increase in realized miles per gallon, often achieved through 

more intensive use of the vehicles with the highest fuel economy in the household.8 In the longer term, when consumers have time to choose among alternative vehicle technologies and types, realized fuel economy increases by a full 2 

percent for each 10 percent increase in fuel prices, while travel falls by 0.5 percent. (Figure 3.2 illustrates how recent increases in fuel prices have increased the 

fraction of new vehicles sold that are automobiles rather than light trucks, since 

cars average 27.5 mpg compared with 22.3 mpg for light trucks, and how the 

subsequent fall in prices has reversed this trend.) The response in the direction of 

6The Obama administration has recently proposed that these requirements, specified by Subtitle A of EISA (Public Law 110-140), be accelerated.

7One vehicle-mile is one vehicle traveling 1 mile (regardless of the number of passengers).

8Hughes et al. (2008) drew the same conclusion.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

130 Real Prospects for Energy Efficiency in the United States

3.2 Efficiency

Annual New Vehicle Sales (Percent)

Average Price of Gasoline, All Grades (Dollars)

90

80

70

60

50

40

30

20

10

0

1980198119821983198419851986198719881989199019911992199319941995199619971998199920002001200220032004200520062007

Jan 08

Feb 08

Mar 08

Apr 08

May 08

Jun 08

Jul 08

Aug 08Sep 08

4.50

4.00

3.50

3.00

2.50

2.00

1.50

1.00

0.50

0.00

Car

Truck

U.S. Average

Gasoline Price

(All Grades)

Annual Data through 2007 Monthly 2008 Data

Figure 3.2 U.S. car and light truck percentage of new vehicle sales versus average price 

of gasoline (all grades).

Source: Gasoline prices (2007$) for 1980−2007 are from Table 5.24 in EIA (2008). For 2008, 

the monthly nominal gas prices are from EIA (2009). Light truck and car percentages 

from 1980 to 2006 are from Table 4.6 of the Transportation Energy Data Book, Edition 27 

(Davis et al., 2008). Light truck and car percentages for 2007 and 2008 are from Ward’s 

Automotive Group, a division of Prism Business Media, Inc., Ward’s U.S. Light Vehicle 

Sales Summary, Ward’s AutoInfoBank, available at http://wardsauto.com.

improved fuel economy suggests that as incomes and energy prices rise, they will 

spur demand for the kind of energy-saving technologies discussed next.

3.3.2 Light-Duty VehiclesTechnologies

Long-standing concern with oil imports and greenhouse gas emissions has led 

to several studies by the National Research Council (NRC), examining ways to 

reduce both of these. In particular, three studies have had as their main focus 

technologies that could improve fuel efficiency in light-duty vehicles (NRC, 1992, 

2002, 2008b). Two other studies on hydrogen technologies and the hydrogen 

economy (NRC, 2008c and 2004a, respectively) also considered conventional 

vehicle technologies that could have an effect by 2020. Moreover, energy centers 

at leading U.S. universities and federal laboratories, as well as private consultants, 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 131

have recently carried out in-depth studies of transportation energy efficiency technologies and their potential to reduce petroleum use and greenhouse gas emissions 

through about 2030 (e.g., Bandivadekar et al., 2008; Lutsey, 2008). The following 

review of vehicle efficiency technologies draws on these and other studies; their 

quantitative estimates are in general agreement.

The review is organized as follows: engine improvements, transmission 

improvements, and other (nonpropulsion system) improvements. A brief overview 

of the possibilities for each of these to increase fuel efficiency in LDVs is given 

first. This is followed by a summary of the overall decrease in petroleum consumption that could result from these changes.9 Many of these technologies are 

already being used in a limited number of vehicles, but their use is expected to 

expand to satisfy the higher fuel-economy standards specified in EISA.

3.3.2.1  Engine Improvements

Gasoline Spark-Ignition Engine

The gasoline spark-ignition (SI) engine efficiency improvements that could be 

deployed in large volume in the next decade include but are not limited to the 

following: variable valve timing, two- and three-step variable valve lift, cylinder 

deactivation, direct injection turbocharging with engine downsizing, enginefriction reduction, and smart cooling systems. Many of these are already in lowvolume production. In the medium-term (15–20 years), technologies such as camless valve actuation, continuously variable valve lift, and homogeneous-charge 

compression ignition (HCCI)10 could be deployed in increasing numbers. A 

survey of recent technology assessments shows that the above technologies have 

the potential to reduce vehicle fuel consumption, on average, by approximately 

10–15 percent in the new-vehicle sales mix11 in the nearer term (by 2020) and by 

9Note that this review does not cover the effects of biofuels on petroleum consumption.

10HCCI combines features of spark-ignition and compression-ignition (diesel) engines by 

making it possible to ignite gasoline and other hydrocarbon fuels using compression. 

11These reduction percentages indicate the fuel consumption of a new, state-of-the-art vehicle 

on the date stated, relative to its current-technology-equivalent vehicle. These percentages are 

panel estimates of what can realistically be expected from engine, drivetrain, and vehicle improvements in the near- and midterm future, based on estimates in the references given. Vehicle 

performance levels are assumed to be comparable to today’s values. The economic and regulatory context is assumed to place greater but not extreme market emphasis on lowering vehicle 

fuel consumption.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

132 Real Prospects for Energy Efficiency in the United States

an additional 15–20 percent in the medium term (by 2030) (EEA, 2007; Kasseris 

and Heywood, 2007; Ricardo, Inc., 2008; NRC, 2008b). Turbocharged, downsized gasoline engines, which are some 10–15 percent more efficient than equalperformance, naturally aspirated gasoline engines, are expected to steadily replace 

a significant fraction of naturally aspirated (nonturbocharged) gasoline engines, 

improving energy efficiency and contributing to meeting future fuel-economy 

standards.

Diesel Compression-Ignition Engine

Owing to their high compression ratios and reduced pumping losses, turbocharged 

diesel engines currently offer approximately a 20–25 percent efficiency benefit 

over gasoline SI engines when adjusted for the higher energy density of diesel fuel. 

Efficiency improvements in compression-ignition (CI) engines are likely to come 

primarily from increased power density, improved engine-system management, 

more sophisticated fuel-injection systems, and improved combustion processes. 

New technologies are emerging for after-treatment to reduce emissions of particulate matter and oxides of nitrogen to levels comparable to those of SI engines. The 

primary challenges for diesel engines in the United States are the added costs and 

fuel penalties (of about 3–6 percent) associated with the after-treatment systems 

required to reduce these emissions (Bandivadekar et al., 2008; Johnson, 2008, 

2009; Ricardo, Inc., 2008). By 2020, improvements in energy and after-treatment 

technologies have the potential to reduce the fuel consumption of new dieselengine vehicles relative to current diesel vehicles by about 10 percent, and by an 

additional 10–15 percent by 2030.

Gasoline Hybrid-Electric Vehicle

Hybrid vehicles combine an internal combustion engine (ICE) with electric drive 

from a battery-electric motor/generator system. Usually both systems can drive the 

vehicle, and the ICE recharges the batteries. (Hence, these vehicles are also called 

“charge-sustaining” hybrids.) The primary fuel-consumption benefits of a gasoline 

hybrid-electric vehicle (HEV) derive from regenerative braking, engine downsizing, 

the active management of energy use to maintain the most efficient engine operating conditions, and the elimination of idling.

Hybrid vehicles are increasingly being classified on the basis of the extent of 

the functions offered by the electric motor/generator. Relative to equivalent gaso-
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 133

line SI engines, belt-driven starter-generator systems can eliminate engine idling, 

reducing fuel consumption by 4–6 percent; integrated starter-generator systems 

that can recover energy from regenerative braking, along with eliminating engine 

idling (a mild hybrid), can reduce fuel consumption by 10–12 percent. A parallel 

full hybrid with power assist, such as Honda’s Integrated Motor Assist system, can 

increase this benefit to more than 20–25 percent, whereas more complex systems 

using two motors, such as Toyota’s Hybrid Synergy Drive, can reduce fuel consumption by more than 30 percent. 

Some prototype diesel HEVs are under development and could be in limited 

production volumes within a few years. These could have about 10 percent higher 

efficiency (which corresponds to 20 percent lower diesel fuel consumption due to 

higher fuel density) than that of an equivalent gasoline hybrid. The cost for a diesel HEV would be significantly higher than for a gasoline-fueled version.

Plug-In Hybrid Electric Vehicle

Plug-in hybrid-electric vehicles (PHEVs) are hybrid vehicles that can be recharged 

from an external source of electricity. The liquid-fuel savings that can be realized 

is directly related to the amount of electricity stored in the battery.

PHEVs require substantially larger battery packs than those used in conventional HEVs. Depending on the nature of the HEV being redesigned as a 

PHEV, the redesigned vehicle will likely require a larger electric motor and 

higher-capacity power electronics. The larger battery and, if needed, larger components increase propulsion system size, weight, and cost. As with the chargesustaining hybrids discussed above, they also use an onboard ICE to recharge 

the batteries.

Batteries for these vehicles are usually sized to obtain an all-electric driving 

range of 20 to 60 miles. Compared with a gasoline SI-engine-powered vehicle, 

PHEVs could reduce petroleum consumption by up to 75 percent, depending on 

the onboard battery size and (thus) range, and on how these vehicles are driven 

(Kromer and Heywood, 2008). The corresponding reduction in greenhouse gas 

emissions depends on the greenhouse gas intensity of the electricity used to charge 

the battery. Although PHEVs are likely to be introduced in modest numbers into 

the U.S. market over the next 5 years, the development of a mass market for 

PHEVs will require low-cost, lightweight batteries that can store the needed electricity and last for 10 years or more (Anderman, 2007). The current status of battery performance and development is summarized in Box 3.2.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

134 Real Prospects for Energy Efficiency in the United States

Box 3.2  Status of Advanced Battery Technology

Lead acid batteries were invented in the 19th century and are still the standard 

battery technology in vehicles today. The GM EV1, a production battery-electric vehicle (BEV), used this battery technology as recently as 1999, and then transitioned to 

the nickel-metal hydride (NiMH) battery. 

The next generation of batteries, based on lithium-ion chemistry, is widely 

deployed in consumer electronic devices. Of course, the power and energy storage 

requirements of these devices are much smaller than those of electric vehicles.

Hybrid-electric vehicles (HEVs) require batteries with high power (commonly stated 

in units of watts per kilogram). Plug-in HEVs (PHEVs) and BEVs require significant 

energy storage (along with sufficient power). Today’s batteries have an energy storage 

capacity of 150–200 Wh/kg. A typical vehicle consumes approximately 0.25 kWh per 

mile in all-electric mode. Typical electric motors that can propel a vehicle require power 

ranging between 50 and 150 kW.

Chemistries

Table 3.2.1 summarizes the promising advanced battery chemistries and their performance characteristics. Significant amounts of research and development are being 

devoted to promising new versions of the chemistries of cathode materials, anode 

materials, and electrolytes, as well as to manufacturing processes.

TABLE 3.2.1 Lithium-ion Battery Cathode Chemistries

Lithium

Lithium Lithium Nickel Lithium

Cobalt Manganese Manganese Iron

Oxide Spinel Cobalt Phosphate

Automotive Limited auto applications

status (due to safety concerns) Pilot Pilot Pilot

Energy density High Low High Moderate

Power Moderate High Moderate High

Safety Poor Good Poor Very good

Cost High Low High High

Low-temperature

performance Moderate High Moderate Low

Life Long Moderate Long Long

Source: Adapted from Alamgir and Sastry, 2008.
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 135

Performance and Cost Targets

The U.S. Advanced Battery Consortium (USABC) has established a set of long-term 

performance goals for electrochemical energy storage devices:

• The target for PHEV batteries is an energy storage capacity of 11.6 kWh with an 

energy density of 100 Wh/kg and a unit cost of stored energy of $35/kWh. 

• The target for BEV batteries is an energy storage capacity of 40 kWh with an 

energy density of 200 Wh/kg and a unit cost of stored energy of $100/kWh. 

In addition, goals were established for battery life in terms of the number of 80 

percent discharge cycles. Meeting these goals is likely to be required for widespread 

commercialization of electrically powered vehicles.

Lithium-ion batteries currently lead in energy density (Wh/kg) metric and have an 

average annual improvement rate of 3.7 percent. Lead-acid batteries lead in the cost 

of stored energy ($/kWh) at $50/kWh and have an average annual reduction rate of 

around 3 percent. However, lead-acid batteries are unable to satisfy the battery life 

requirements for PHEVs and BEVs. Today’s lithium-ion batteries that have the cycle 

life desired for automotive applications cost between $500/kWh and $1000/kWh.

The cost target (in $/kWh) is currently viewed as the greatest challenge for 

lithium-ion battery technology.

Industry Developments

The lithium-ion consumer electronics market is currently at around 2 billion units 

annually. The volume of lithium-ion batteries in automotive applications, however, 

is very small. Frost & Sullivan (2008) predict a 19.6 percent compound annual growth 

rate for shipments of HEV batteries, as well as a smaller but rapidly growing market 

for PHEV and BEV batteries. 

An auto battery alliance has been promoted by the U.S. Department of Energy’s 

Argonne National Laboratory and includes 3M, ActaCell, All Cell Technologies, Altair 

Nanotechnologies, EaglePicher, EnerSys, Envia Systems, FMC, Johnson Controls-Saft, 

MicroSun, Mobius Power, SiLyte, Superior Graphite, and Townsend Advanced Energy.

All major vehicle manufacturers have partnered with major battery manufacturers: Ford with Johnson Controls-Saft, General Motors with LG Chem, Chrysler with 

General Electric, Toyota with Panasonic/Sanyo, Nissan with NEC via the Automotive 

Energy Supply joint venture, and Honda with GS Yuasa.

Specialists anticipate that it may be 10 to 20 years before advanced battery technology can reach the USABC performance and cost targets. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

136 Real Prospects for Energy Efficiency in the United States

Battery-Electric Vehicle

The successful development and deployment of PHEVs enabled by developments 

in advanced battery technology might also lead to batteries suitable for batteryelectric vehicles (BEVs) (see Box 3.2).

Although several models of BEVs are being introduced into the market today 

in limited production volumes, in the near-term those BEVs that are commercially 

viable are likely to be small cars with modest performance capabilities, such as 

“city BEVs.”

Hydrogen Fuel-Cell Vehicle l Vehicle

Fuel-cell technology, in a hybrid system with hydrogen as the fuel, offers the 

promise of significantly higher propulsion system efficiency than that of ICE technology, as well as zero vehicle tailpipe greenhouse gas emissions. Several scientific, 

engineering, and business challenges must be overcome before hydrogen fuelcell vehicles (HFCVs) can be commercialized successfully (NRC, 2004a, 2008c, 

2008d; Crabtree et al., 2004). As discussed in the studies just cited and in other 

references, the principal challenges are increasing the durability and lowering the 

costs of fuel cells, achieving cost-effective storage of hydrogen in fueling stations 

and on board the vehicle, and reducing the environmental impacts from deploying 

a hydrogen supply and fueling infrastructure with low greenhouse gas emissions. 

The NRC’s recent study on the transition to a hydrogen-based transportation 

system (NRC, 2008c) discusses scenarios for the introduction of HFCVs. As these 

scenarios show, there is significant potential for reducing oil imports and CO2

emissions with HFCVs in the long term (2035–2050), but little opportunity for 

impact in the near term (by 2020) because of the time required to overcome existing technical challenges, to provide the fueling infrastructure, and to ramp up to 

high-volume vehicle production.

3.3.2.2  Transmission Improvements

Automatic transmissions are popular in the United States primarily because of 

their ease of use and smooth gearshift. Transmission efficiency is likely to improve 

in the near- to midterm through increasing the number of gears and reducing 

losses in bearings, gears, sealing elements, and the hydraulic system. While fourspeed transmissions have dominated the U.S. market, five-speed transmissions 

are becoming standard as well (EPA, 2007). Six-speed automatic transmissions, 

as well as automated manual transmissions, are already used in some cars and 
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 137

are likely to become more widely used over the next decade. Manufacturers have 

begun incorporating seven- and eight-speed transmissions into some luxury vehicles, and the penetration of these transmissions can be expected to increase in the 

midterm (2020–2035). Energy and Environmental Analysis, Inc., estimates that 

each additional gear results in a retail price increase of approximately $50 (EEA, 

2007).

Table 3.1 lists the efficiencies that can be expected from various transmission 

systems in the near- to midterm. As shown, improvements of 2–9 percent are realizable and provide equivalent percentage reductions in vehicle fuel consumption. 

Note that, although a continuously variable transmission (CVT) allows the engine 

to operate near its maximum efficiency, the estimated efficiency of CVTs is lower 

than the corresponding estimate for six- and seven-speed automatic transmissions.12 CVTs have been in low-volume production for well over a decade.

3.3.2.3  Nonpropulsion System Improvements

Vehicle Weight and Size Reduction

Reducing vehicle weight is one obvious way to reduce fuel consumption. A commonly used rule of thumb is that a 10 percent reduction in vehicle weight can 

reduce fuel consumption by 5–7 percent, when accompanied by appropriate 

engine downsizing at constant performance (Bandivadekar, 2008). Vehicle simulation results suggest that the relative benefits of weight reduction may be smaller 

than this in some types of hybrid vehicles because the hybrid propulsion system 

12The CVT has a slightly lower torque-transmitting efficiency owing to its higher frictional 

losses. However, when coupled with the engine in the vehicle, its extra flexibility improves the 

overall engine-plus-CVT efficiency. Not much difference is apparent among the several “best” 

transmission technologies.

TABLE 3.1 Expected Transmission System Efficiencies 

Transmission Efficiency (%)

Current automatic transmission (4- and 5-speed) 84–89

Automatic transmission (6- or 7-speed) 93–95

Dual clutch transmission (wet-clutch) 86–94

Dual clutch transmission (dry-clutch) 90–95

Continuously variable transmission (CVT) 87–90

Source: Ricardo, Inc., 2008, and EEA, 2007.
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Real Prospects for Energy Efficiency in the United States 

138 Real Prospects for Energy Efficiency in the United States

actively manages engine use to stay in areas of higher and more uniform efficiency and also to recoup vehicle energy during braking (An and Santini, 2004; 

Wohlecker et al., 2007).

Weight reduction can be achieved by substituting lighter-weight materials 

(such as aluminum) for heavier ones, by redesigning vehicles, and by downsizing vehicles and components. For example, downsizing a passenger car by one 

Environmental Protection Agency (EPA) size class (e.g., from large to midsize) can 

reduce vehicle weight by between 9 and 12 percent (Cheah et al., 2007). Unlike 

vehicle weight, however, vehicle size is an attribute that consumers value.

The cost of reducing vehicle weight through the use of lighter-weight materials is estimated to be about $3/kg ($1.40/lb) (Bandivadekar et al., 2008). Secondary weight reduction (e.g., using a smaller engine because the vehicle is lighter) 

and weight reduction due to vehicle redesign are usually assumed to occur when a 

vehicle is redesigned, so the cost is assumed to be small.

Rolling Resistance Reduction

A recent NRC report on tires and passenger-vehicle fuel economy (NRC, 2006) 

agrees with earlier estimates in the literature (Schuring and Futamura, 1990) 

that each reduction of 0.001 in the coefficient of the rolling resistance of passenger tiresequivalent to a 10 percent reduction in overall rolling resistancecan 

reduce vehicle fuel consumption by 1–2 percent. After examining the fuel-saving 

technologies and designs that are being developed for original-equipment tires 

(those supplied with new vehicles) to assist in meeting U.S. CAFE standards, the 

NRC report also concludes that such a 10 percent reduction in the average rolling 

resistance of passenger tires is possible over the next decade because many of these 

technologies can be introduced, not only into the new-vehicle market, but also 

into the much larger market of replacement tires. The incremental cost of such 

lower rolling resistance tires is expected to be small.

Aerodynamic Drag Reduction

In the EPA highway driving cycle13 with an average speed of 48 miles per hour, 

approximately half of the energy required to propel the vehicle is used to over13The Environmental Protection Agency has developed standard driving cycles that represent urban and highway driving. Fuel-economy ratings and CAFE standards are based on fuelconsumption measurements over these cycles.
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 139

come aerodynamic drag. Thus, body designs that reduce aerodynamic drag can 

achieve meaningful reductions in fuel consumption. The aerodynamic drag on a 

vehicle is the product of a drag coefficient (CD), the vehicle frontal area, the vehicle velocity squared, and the air density (divided by 2). Thus drag increases significantly as vehicle speeds increase, especially above 60 miles per hour. A 10 percent 

reduction in the drag coefficient can lower average vehicle fuel consumption by up 

to 2 percent. Demonstration vehicles built during the U.S. Department of Energy’s 

Partnership for a New Generation of Vehicles achieved a coefficient of drag as 

low as 0.22—a 35 percent reduction from the then-current vehicle (NRC, 2000). 

The cost of reducing the vehicle’s drag coefficient, since it would occur when the 

vehicle is redesigned or a new vehicle is developed, is assumed to be small. 

Lubricants

Engine friction has a substantial negative impact on engine efficiency. Friction can 

be and is being reduced through improvements in engine design and the use of 

new materials and surface coatings. It can also be influenced by engine lubricant 

properties, and lower viscosity oils are increasingly being used. The most commonly used engine oils or lubricants are mineral oils that contain additives to 

improve viscosity, inhibit engine oxidation and corrosion, act as dispersants and 

detergents, and reduce surface friction. There are strong pressures to reduce both 

the consumption of engine oil and the additive components that produce ash, 

in order to minimize the degradation of the exhaust system’s emission-control 

technologies, such as catalysts and particulate traps. Effective and low-cost diesel 

emission control technologies are critical to any major expansion of diesel engine 

vehicles in the U.S. LDV market. The use of synthetic engine oils rather than mineral oils is growing: although their cost is higher, they can reduce engine friction 

and thus improve fuel economy by a few percent. Improvements in mineral oil 

properties could increase vehicle fuel economy by about 1 percent (NRC, 2008b). 

3.3.2.4  Summary of Potential LDV Efficiency Improvements: Performance and

Environmental Impacts

Table 3.2 shows the panel’s estimates for the potential reductions in petroleum 

consumption and greenhouse gas emissions that could result over the next 25 

years from the adoption of both the evolutionary and the new-vehicle technologies discussed above. These estimates assume that vehicle size and performance are 

held constant. 
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Real Prospects for Energy Efficiency in the United States 

140 Real Prospects for Energy Efficiency in the United States

TABLE 3.2 Potential Relative Vehicle Petroleum Use and Greenhouse Gas Emissions from 

Vehicle Efficiency Improvements Through 2035

Petroleum Consumption 

(gasoline equivalent) Greenhouse Gas Emissionsa

Propulsion System

Relative to 

Current Gasoline 

ICE

Relative to 

2035 Gasoline 

ICE

Relative to 

Current Gasoline 

ICE

Relative to 

2035 Gasoline 

ICE

Current gasoline 1.00 1.00

Current turbocharged gasoline 0.90 0.90

Current diesel 0.80 0.80

Current hybrid 0.75 0.75

2035 gasoline 0.65 1.00 0.65 1.00

2035 turbocharged gasoline 0.60 0.90 0.60 0.90

2035 diesel 0.55 0.85 0.55 0.85

2035 HEV 0.40 0.60 0.40 0.60

2035 PHEV 0.20 0.30 0.35–0.45 0.55–0.70

2035 BEV None 0.35–0.50 0.55–0.80

2035 HFCV None 0.30–0.40 0.45–0.60

Note: These estimates assume that vehicle performance (maximum acceleration and power-to-weight ratio) and size remain the 

same as today’s average new-vehicle values. That is, the improvements in propulsion efficiency are used solely to decrease fuel 

consumption rather than to offset increases in vehicle performance and size. Estimates have been rounded to the nearest 0.05. 

BEVs and HFCVs are expected to have shorter driving ranges than PHEVs between rechargings or refuelings.

BEV, battery-electric vehicle; HEV, hybrid-electric vehicle; HFCV, hydrogen fuel-cell vehicle; ICE, internal combustion

engine; PHEV, plug-in hybrid vehicle. aGreenhouse gas emissions from the electricity used in 2035 PHEVs, 2035 BEVs, and 2035 HFCVs are estimated from the 

projected U.S. average electricity grid mix in 2035. Greenhouse gas emissions from hydrogen production are estimated for 

hydrogen produced from natural gas. 

Source: Bandivadekar et al., 2008. Estimates based on assessments by An and Santini, 2004; Wohlecker et al., 2007; Cheah et Estimates based on assessments by An and Santini, 2004; Wohlecker et al., 2007; Cheah et

al., 2007; NPC, 2007; and NRC, 2004.

These estimates are based on studies that have evaluated the fuelconsumption reduction potential of many plausible improvements in power train 

and vehicle technology. The studies have aggregated these improvements through 

vehicle simulations and drive-cycle analysis, or by appropriately compounding 

realizable combinations of these improvements. Each entry in Table 3.2 is the 

fuel consumption of each technology (gasoline equivalent) relative to that of the 

average vehicle in either the current or the 2035 new-vehicle sales mix, and thus 

reflects an attempt to incorporate the extent to which these improvements have 
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 141

been deployed across the sales mix. Relative fuel consumption for cars and light 

trucks is comparable. These numbers are for vehicles with performance levels 

and interior size essentially the same as those of today’s new vehicles, and with a 

20 percent vehicle weight reduction, a 25 percent reduction in vehicle drag coefficient, and a 33 percent reduction in the tire rolling-friction coefficient. These 

reductions in relative fuel consumption are indicative of what could be achieved 

on average in vehicles by these improvements and changes in power train and 

vehicle technologies. 

Taken together, these engine and transmission improvements, reductions in 

weight, and other nonpropulsion system improvements could reduce the fuel consumption of a gasoline ICE vehicle by up to 35 percent by about 2035.

Although current diesel-engine vehicles have a 20 percent gasoline-equivalent 

fuel-consumption advantage over current ICE gasoline-engine vehicles, this gap 

is likely to narrow (e.g., to 15 percent by 2035), as there is greater improvement 

potential in the gasoline engine. 

Because their technology is relatively new and thus can deliver deeper cuts in 

vehicle fuel consumption, HEVs and PHEVs have greater potential for improved 

fuel consumption (e.g., 47 percent and 73 percent, respectively) than do ICE 

power trains. Note, however, that they continue to depend on petroleum or other 

liquid fuels. 

Reductions in greenhouse gas emissions from gasoline and diesel ICEs, 

HEVs, and PHEVs are proportional to the reductions achieved in petroleum consumption. Further reductions in greenhouse gas emissions could be achieved by 

motor vehicles if the effective carbon content of fuels were lowered through the 

addition of biofuels having low net carbon emissions (NAS-NAE-NRC, 2009b).

BEVs and HFCVs are two longer-term technologies that need not depend on 

petroleum or alternative hydrocarbon fuels and could have zero tailpipe emissions 

of criteria pollutants and CO2.

For PHEVs, BEVs and HFCVs, the well-to-tank emissions produced during 

the generation of electricity and hydrogen determine the full potential for these 

vehicle technologies to reduce greenhouse gas emissions. Efficiency improvements 

in the vehicles themselves, together with low- or zero-emissions generation of the 

electricity and hydrogen that they require, offer the potential for dramatic reductions in total greenhouse gas emissions. If implemented, these improvements could 

give the PHEV the edge over the HEV in terms of reducing both petroleum consumption and greenhouse gas emissions.

The panel judges that the estimates shown in Table 3.2 can be realized if 
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Real Prospects for Energy Efficiency in the United States 

142 Real Prospects for Energy Efficiency in the United States

manufacturers devote all future improvements in vehicle efficiency to reducing 

actual fuel consumption such that vehicle performance and size (acceleration and 

power-to-weight ratio) are kept essentially constant at today’s levels. Also, the 

electricity used to recharge PHEVs and BEVs is assumed to come from the anticipated average U.S. electricity supply mix (Kromer and Heywood, 2008). There are 

significant regional variations in the greenhouse gas emissions from the electricity 

supply system, as well as uncertainty about how large a fraction of the future supply will come from nuclear or renewable-energy sources, or will employ effective 

carbon capture and storage technology. The greenhouse gas emissions for HFCVs 

are based on the assumption that, in this transition timeframe (through 2035), 

hydrogen is produced by steam reforming of natural gas, currently the most economic and developed hydrogen production process. 

Because vehicle manufacturers compete on—and consumers expect—everbetter performance, resolving the performance, size, and fuel-consumption 

trade-off is a critical policy challenge. As noted earlier, due to relatively low fuel 

prices and static fuel-economy standards between the mid-1980s and the early 

2000s, vehicle size and performance increases have offset energy efficiency gains 

in vehicles (Lutsey and Sperling, 2005; An and DeCicco, 2007). Sales of more 

fuel-efficient vehicles have fluctuated with recent increases in fuel prices (see 

Figure 3.2). It is unlikely that future energy efficiency improvements will be realized in decreased fuel consumption unless appropriate fiscal, regulatory, or other 

policies are implemented to promote or require reduced fuel consumption over 

increased power or performance. 

3.3.3 Light-Duty VehiclesCosts

The estimation of technology costs is more uncertain than is the estimation of the 

relative benefit of individual technologies. This is particularly the case under the 

volatile economic conditions of 2008–2009.

The results of the panel’s evaluation, carried out under the economic conditions prevailing in mid-2008, are given in Table 3.3. The price increments given 

are relative to a 2005 gasoline vehicle. The cost estimates shown represent the 

approximate incremental retail price of future vehicle types (including the cost 

of emission-control systems), compared with current gasoline-fueled ICE vehicles 

(EEA, 2007; Bandivadekar et al., 2008). 

These future (2035) vehicles incorporate improved engines of the type indicated, more efficient transmissions, a 20 percent reduction in vehicle weight (two-
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 143

thirds from materials substitution at a cost of $3/kg), and moderate reductions in 

tire rolling resistance and aerodynamic drag. They have the same size and performance as those of today’s vehicles.

These prices are based on the costs associated with producing a vehicle at the 

manufacturing plant gate. Note that if the demand for new materials in these vehicles raises material costs significantly, then manufacturing costs would increase 

accordingly. To account for distribution costs and manufacturer and dealer profit 

margins, production costs were multiplied by a representative factor of 1.4 to provide representative retail price estimates (Evans, 2008). 

More information on the assumptions behind the estimates in Table 3.3 is 

provided in Box 3.3.

Note that the timescales indicated for these future-technology vehicles are 

not precise. The rate of price reduction will depend on the rate at which these 

Table 3.3 Estimated Additional Cost to Purchaser of Advanced Vehicles 

Relative to Baseline 2005 Average Gasoline Vehicle

Propulsion System

Additional Retail Price

(2007 dollars)

Car Light Truck

Current gasoline 0 0

Current diesel 1,700 2,100

Current hybrid 4,900 6,300

2035 gasoline 2,000 2,400

2035 diesel 3,600 4,500

2035 hybrid 4,500 5,500

2035 PHEV 7,800 10,500

2035 BEV 16,000 24,000

2035 HFCV 7,300 10,000

Note: Cost and price estimates depend on many assumptions and are subject to great uncertainty. For 

example, different companies may subsidize new vehicles and technologies with different strategies in mind. 

Costs listed are additional costs only, relative to baseline average new car and light truck purchase prices (in 

2007 dollars) that were calculated as follows:

—Average new car: $14,000 production cost × 1.4 (a representative retail price equivalent factor) = an 

average purchase price of $19,600.

—Average new light truck: $15,000 × 1.4 = $21,000.

These are not meant to represent current average costs. Rather, they are the costs used in this analysis. See 

Box 3.3 for more information on the assumptions underlying the estimates.

For the purpose of these estimates, the PHEV all-electric driving range is 30 miles; the BEV driving range 

is 200 miles. Advanced battery and fuel-cell system prices are based on target battery and fuel-cell costs 

from current development programs.

Source: Bandivadekar et al., 2008.
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Real Prospects for Energy Efficiency in the United States 

144 Real Prospects for Energy Efficiency in the United States

BOX 3.3 Estimating the Cost of Advanced Vehicles

The cost estimates in Table 3.3 in this chapter are from Bandivadekar et al. 

(2008). The estimates are based on an extensive review of existing studies assessing the costs and fuel-consumption benefits of future vehicle technologies. The 

cost estimates assume high-volume production of 500,000 to 1 million vehicles per 

year. For conventional internal combustion engines, future technology costs were 

estimated on a component-by-component basis in proportion to the improvement 

in fuel consumption, based on a comparison of the costs and fuel-consumption 

benefits of 11 studies. Alternative power train costs—for hybrid, plug-in hybrid, 

battery-electric, and fuel-cell vehicles—were estimated by aggregating the results 

of several studies based on a component-by-component assessment. 

The costs for pre-commercial and emerging technologies (in particular, those 

for fuel-cell systems and batteries) assume additional cost reductions resulting 

from continued technology development. These cost reductions are over and 

above those realized as a result of high production volumes. Battery costs assume 

that the material costs decrease by 30 percent relative to a present-day, high-volume estimate; this assumption is consistent with technology-development assumptions in Anderman et al. (2000). Costs for fuel-cell systems were estimated using 

the cost models developed in Carlson et al. (2005) and the assumptions summarized in Kromer and Heywood (2008).1

In addition, since the more recent Massachusetts Institute of Technology report 

(Bandivadekar et al., 2008) was released, updated fuel-cell and battery data have 

been made publicly available and provide a more recent assessment. See the 

following:

• Batteries: Kalhammer, F.R., B.M. Kopf, D.H. Swan, V.P. Roan, and M.P. Walsh, 

2007, Status and Prospects for Zero Emissions Vehicle Technology: Report 

of the ARB Independent Expert Panel 2007. Prepared for the State of 

California Air Resources Board, Sacramento, California, April 13, 2007.

• Fuel cells: Sinha et al., 2008, Direct Hydrogen PEMFC Manufacturing Cost 

Estimation for Automotive Applications. Presentation by TIAX, LLC, to the 

U.S. DOE Fuel Cell Annual Merit Review.

• Hydrogen storage: Lasher et al., 2008, Analyses of Hydrogen Storage 

Materials and On-Board Systems. Presentation by TIAX, LLC, to the U.S. DOE 

Fuel Cell Annual Merit Review.

1 Kromer and Heywood (2008) assume that continued development enables reduced 

platinum loadings from those used in TIAX’s estimated system costs of $57/kW. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 145

technologies are taken up by the market (Bandivadekar et al., 2008; Evans, 2008). 

Wide and rapid deployment could bring costs down more quickly.

The results in Table 3.3 show that power trains entering the fleet today, 

such as improved diesel engines and hybrid vehicles, cost the purchaser from 10 

percent to 30 percent more than a current gasoline vehicle costs. This price difference (in constant dollars) is expected to drop to 5–15 percent in the midterm (by 

2035) because the increase comes from incorporating new technology whose cost 

is expected to drop more rapidly, owing to in-use experience, than will the costs 

of well-established technologies. Longer-term options such as plug-in hybrid and 

fuel-cell vehicles are estimated to cost between 25 percent and 30 percent more 

than this 2035 gasoline vehicle. Battery-electric vehicles with standard vehicle performance and size remain costly, approaching double the cost of a future gasoline 

vehicle. As noted earlier, a more plausible market opportunity for BEVs is small, 

city cars with reduced range. However, these also will need significantly improved 

battery performance and reduced battery costs to become competitive.

Retail price increases from technologies that reduce fuel consumption are 

largely offset by fuel savings over a vehicle’s lifetime, but not in all cases. The 

extent to which this is the case depends on how the more efficient technology is 

used. As noted earlier, efficiency improvements can be directed toward reducing 

actual fuel consumption or toward moderating the increase in fuel consumption 

that would otherwise accompany increased vehicle size and power. An estimate 

of the full cost of reducing fuel consumption would account for how changes in 

vehicle attributes such as fuel efficiency, power, and size affect the value that consumers derive from these products.

The net economic benefit of reduced fuel consumption derived by vehicle 

purchasers obviously depends on the fuel price, the discount rate, and the time 

period over which the benefit is assessed. It also depends, of course, on the vehicle 

price increment and the amount of fuel saved. With full emphasis on reducing 

actual fuel consumption rather than on increasing vehicle performance and size, 

at a fuel price of $2.50 per gallon and a 7 percent discount rate over 15 years 

(the average vehicle lifetime) and 150,000 miles, improved gasoline engines fully 

pay back the retail price increase (relative to a current vehicle) (Bandivadekar et 

al., 2008). Hybrid and diesel power trains pay back 60 percent and 90 percent of 

the up-front retail price increase, respectively, under similar discounting assumptions. Longer-term options such as PHEVs and HFCVs are estimated to pay back 

50 percent to 70 percent of the increase in retail price at a fuel price of $2.50 per 

gallon. At a higher fuel price of $5.00 per gallon, the discounted fuel savings of 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

146 Real Prospects for Energy Efficiency in the United States

all the technologies listed in Table 3.3, except diesel vehicles and standard-sized 

BEVs, fully pay back the initial retail price increase. (Battery packs in these future 

hybrid and electric vehicles are assumed to last for a vehicle’s lifetime, so battery 

replacements are not included in these costs.)

Note that it is widely accepted that consumers discount their fuel savings 

over a much shorter period—typically 3 to 4 years. This reduces the benefit of the 

fuel savings significantly. Reductions in the price of future hybrid systems could 

allow these vehicles to break even. Diesel engines could lose ground relative to 

future gasoline vehicles owing to the greater potential for increased efficiency of 

the gasoline ICE and also resulting from the anticipated higher diesel fuel cost 

over gasoline due to rising diesel fuel demand for freight transportation.

The estimates in Table 3.3, when combined with the estimated fuel-consumption reductions in Table 3.2, indicate that evolutionary improvements in gasoline 

ICE vehicles are likely to prove the most cost-effective choice for reducing petroleum consumption and greenhouse gas emissions. These vehicles will be sold in 

large quantities in the near term, so if the overall cost of reducing fuel consumption and greenhouse gas emissions from motor vehicles is to be kept as low as 

possible, it is critical that efficiency improvements in these vehicles be used primarily to reduce on-the-road fuel consumption. 

While current HEVs appear to be less competitive than improved gasolineand diesel-fueled ICE vehicles, over time they are likely to become a more costeffective choice in many applications as a consequence of their substantial and 

increasing fuel efficiency advantage and the anticipated reduction in their price 

premium.

PHEVs, BEVs, and HFCVs appear to be more costly alternatives for reducing petroleum consumption and greenhouse gas emissions. Among these three 

technologies, PHEVs are likely to become more widely available in the near term 

to midterm, whereas BEVs and HFCVs are midterm to long-term alternatives for 

high-volume production. 

3.3.4 Light-Duty VehiclesDeployment

To have a significant effect on the petroleum use and greenhouse gas emissions of 

the entire vehicle fleet, the market share of vehicles that are significantly more fuel 

efficient must become sizable. Common barriers to achieving such a market share 

include but are not limited to higher initial cost, safety concerns, fuel availability (or lack thereof), reliability and durability concerns, and a lack of consumer 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 147

awareness. Because the advanced-technology (non-ICE) vehicles are competing 

against steadily improving gasoline ICE vehicles, the market penetration of such 

vehicles may be slow unless aided by high fuel prices or by fiscal, regulatory, or 

other policies.

Even if sufficient market demand exists for certain technologies, time 

and capital constraints affect how quickly the demand can be satisfied. Typical 

development times for automotive products are 3–5 years. Then to deploy these 

new products, vehicle manufacturers and their suppliers must be able to make 

adequate capital investments to bring new production capacity online, and the 

supply of critical components (such as advanced batteries) must be assured. Generally, a decade or more is required between the development of a technology to 

a stage at which it can be deployed, its introduction on a commercial vehicle, and 

then the achievement of significant sales. For example, it has taken 10–15 years 

or more for major new technologies such as automatic transmissions to reach 

significant deployment levels; the same has been the case for the spread of small, 

high-speed diesel engines in cars in Europe (now some 50 percent of the market) 

(Bandivadekar et al., 2008).

Currently, there are no quantitative methods that can estimate possible vehicle market shares based on the constraints outlined above. Moreover, there are the 

technical constraints discussed earlier. For example, both PHEVs and HFCVs will 

need significant technical breakthroughs to become competitive in the market. 

If high energy-storage battery technology progresses sufficiently (see 

Box 3.2), PHEVs could be deployed more rapidly than could HFCVs and the 

hydrogen distribution infrastructure, with production volumes building over the 

2020–2035 timeframe. The infrastructure issues associated with supplying electricity to PHEVs can be dealt with incrementally as production volumes start to 

increase over the next decade. In the midterm, beyond about 2020—when PHEV 

sales volumes could increase to significant levels—the impact on the electrical 

supply and distribution system would then become more substantial. In contrast, 

a new infrastructure is needed to supply hydrogen to HFCVs. Thus, PHEVs are 

increasingly being viewed as a promising midterm to long-term option. 

A recent NRC report (NRC, 2008c) concludes that, although “the maximum 

practicable number of HFCVs that could be on the road by 2020 is around two 

million,” it would take decades—e.g., until 2050—for this technology to have a 

major impact on oil use and greenhouse gas emissions.

Table 3.4 shows the panel’s judgment, based on all these constraints, of 

the extent to which these advanced-technology vehicles could penetrate the new
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Real Prospects for Energy Efficiency in the United States 

148 Real Prospects for Energy Efficiency in the United States

Table 3.4 Plausible Share of Advanced Light-Duty Vehicles in the New-Vehicle 

Market by 2020 and 2035 (percent)

Propulsion System 2020 2035

Turbocharged gasoline SI vehicles 10–15 25–35

Diesel vehicles 6–12 10–20

Gasoline hybrid vehicles 10–15 15–40

PHEV 1–3 7–15

HFCV 0–1 3–6

BEV 0–2 3–10

Note: The percentage of hydrogen fuel-cell vehicles considered “plausible” is in contrast to the percentages 

reported in NRC (2008c), which represent “maximum practical” shares. 

light-duty vehicle (LDV) market in the United States. The estimates are intended 

as illustrations of achievable deployment levels, based on historical case studies 

of comparable technology changes which suggest that relative annual increases of 

8–10 percent in the deployment rate are plausible. With changes in the factors that 

affect vehicle attributes or purchases, such as stricter fuel-economy standards or 

high fuel prices, the timeline for reaching these market shares could be shortened. 

Note that the panel’s estimates are not meant to imply that all of these 

technologies would necessarily be deployed together. It may turn out that some 

technologies do not prove to be marketable. Others that are more appealing could 

then capture a higher fraction of new-vehicle sales.

Vehicles with major changes in technology, or with new technology, face 

many hurdles on their way to market acceptance. Of course, they must be more 

appealing to a significant fraction of the market than the vehicles that they are 

intended to replace. That attractiveness has many attributes: for example, performance, capacity, utility, style, fuel consumption, and especially price. The 

panel’s judgment is that none of the alternatives to steadily improving mainstream 

technology vehicles currently appears attractive enough to guarantee market 

acceptance. 

3.3.5 Total Light-Duty Vehicle Fleet Fuel ConsumptionEstimates

As stated above, the Energy Independence and Security Act of 2007 requires that 

the corporate average fuel economy standard be 35 mpg in 2020. 

The panel examined two scenarios to explore how the deployment of the 

advanced technologies listed in Table 3.2, together with vehicle efficiency improvements (such as reductions in vehicle weight, aerodynamic drag, and tire rolling 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 149

resistance), could reduce the petroleum consumption of the U.S. in-use vehicle 

fleet. The methodology used for the analysis follows that described in Cheah et al. 

(2007) and Bandivadekar et al. (2008). The two scenarios—termed “optimistic” 

and “conservative”—are described in Box 3.4.

Note that these scenarios are not predictions or forecasts of what the future 

vehicle fleet would be like, but instead are intended as illustrative examples of the 

degree of change to the vehicle fleet required to improve fleet average fuel economy. In these scenarios, the panel examined the effects on fleet fuel consumption 

of the fuel-economy improvements that may be achieved by 2020. It then extrapolated the associated improvement rates (over 2006–2020) out through 2035 (see 

Box 3.4). The scenarios reflect the relative petroleum consumption of vehicle 

technologies as shown in Figure 3.3. These values are closely comparable to the 

rounded numbers on consumption based on more than one source in Table 3.2. 

The values were estimated assuming that vehicle performance and size are held 

constant and that all power train and vehicle efficiency improvements are used to 

reduce fuel consumption rather than to offset increases in performance and size. 

Based on the estimated fuel-consumption characteristics of individual vehicle 

types shown in Figure 3.3 and the fleet efficiency improvements represented in 

the scenarios, Table 3.5 shows examples of the sales mixes and weight reduction that would be required to meet the CAFE targets and to extend that rate of 

improvement beyond 2020. Achieving the “optimistic” targets would require that 

the efficiency improvements provided by these technology changes be used largely 

to decrease actual fuel consumption. In this case, the emphasis on reducing fuel 

consumption, or ERFC, parameter would have to be 75 percent, which allows 

only a modest increase in average vehicle performance (a reduction in the 0-to-60 

mph acceleration time of about 1 second from its current average value of about 

9 seconds). For the conservative scenario, only half of the efficiency gains that 

could be made by 2035 are realized in decreased fuel consumptionthe rest of 

the efficiency improvement is used to offset the fuel-consumption impacts of additional increases in vehicle power, weight, and size.

The relative proportions of the various power trains are based on the panel’s 

judgments as to their relative attractiveness (including cost), the degree of change 

from the baseline technology, and the historically observed limit of about 10 

percent in the annual increase in production volumes when attractive changes in 

power train technology occur (such as the transition from manual to automatic 

transmissions in the United States, and the buildup of diesel engines in passenger 

cars in Europe). Note that the emphasis on reducing fuel consumption rather than 
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Real Prospects for Energy Efficiency in the United States 

150 Real Prospects for Energy Efficiency in the United States

BOX 3.4 Future Vehicle Scenarios

Optimistic Scenario

The optimistic scenario assumes that the new vehicle sales mix in 2020 meets 

the Energy Independence and Security Act (EISA; Public Law 110-140) corporate 

average fuel economy (CAFE) target of 35 mpg (a 40 percent increase from today’s 

value). It then assumes that fuel efficiency continues to improve at the same rate 

through 2035. A full 75 percent of this improvement potential is assumed to be 

devoted to decreasing actual fuel consumption; the rest is assumed to be offset by 

increased vehicle performance, size, and weight.1 This assumption is represented 

by introducing a factor called “emphasis on reducing fuel consumption,” or ERFC. 

In this case, the value of ERFC is 75 percent. The result is that, by 2035, average 

new-vehicle fuel economy would reach 50 mpgdouble today’s value.

Conservative Scenario

The conservative scenario assumes that the 2020 CAFE target is met 5 years 

later, in 2025. It then assumes that fuel efficiency continues to improve at this rate 

(a lower rate than in the optimistic scenario). However, it also assumes that only 

half of this improvement is used to decrease actual fuel consumption (an ERFC 

value of 50 percent), and the rest is assumed to be offset by gains in vehicle performance, size, and weight. The result is that, by 2035, average new-vehicle fuel 

economy has increased to only 40 mpg—about 60 percent above today’s values.

No-Change Baseline

The two scenarios above are compared with a no-change baseline. This baseline extrapolates the history of the past 20 years, during which power train efficiency improvements essentially offset the negative impacts on fuel consumption 

of increasing vehicle performance, size, and weight (i.e., the no-change baseline 

assumes an ERFC value of zero). 

1This assumption reflects the panel’s judgment that it is unlikely that there will be no

increases in vehicle performance, size, and weight.

on increasing performance and size assumes a significant shift in U.S. vehicle purchasers’ choices. ERFC is currently low (about 10 percent) in the United States, 

whereas it averages 50 percent in Europe. The weight-reduction estimates come 

from a shift from light trucks to cars (the mix in the United States is about 50 

percent light trucks); more extensive use of lighter-weight materials such as aluminum; the redesign of components and vehicles; and some reduction in vehicle size, 

in both light trucks and cars. These weight-reduction estimates (of 700–1050 lb) 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

151

are based on assessing the specific weight-reduction opportunities and aggregating plausible combinations of these other improvements that would also meet 

these fuel-economy objectives. These sales mix illustrations were selected so as to 

make comparable the degree of challenge in all the areas where improvements are 

needed. See Bandivadekar et al. (2008) and Cheah and Heywood (2008) for additional details.

This analysis indicates that achieving the CAFE target and continuing that 

rate of improvement beyond 2020 will require substantial changes in engine and 

vehicle technology, as well as significant weight reduction (part of which could 

result from size reduction) and changes in consumer preferences and purchasing 

behavior. 

Figure 3.4 shows, for the conservative and optimistic scenarios, the corresponding annual gasoline consumption of the U.S. in-use LDV fleet from the present out to 2035. A no-change baseline assumes that all of the efficiency improvements go to vehicle size, weight, and power, as has occurred since 1982. The 

cumulative fuel savings under each scenario compared with this no-change baseRelative Fuel Consumption

NA SI Gasoline (Reference)

Turbo SI Gasoline

Diesel

Hybrid-Electric Gasoline

Plug-In Hybrid

1.20

1.00

0.80

0.60

0.40

0.20

0.00

2006

1.00

0.90

0.84

0.70

0.28

0.85

0.76 0.72

0.56

0.24

0.62

0.55 0.53

0.35

0.17

2020 2035

Year

3.3 Efficiency

Figure 3.3 Relative fuel consumption (tank to wheels) of future cars by power train, 

assuming that all efficiency improvements go to raising fuel economy.

Source: Cheah and Heywood, 2008.
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Real Prospects for Energy Efficiency in the United States 

152

Table 3.5 Illustrative Vehicle Sales Mix Scenarios

Percent Emphasis on Reducing Fuel Consumptiona

Percent Light Trucks vs. Cars

Percent Vehicle Weight Reduction

 Market Share by Power Train (percent)

Percent Fuel Efficiency Increase from Today

Naturally AspiratedSI

TurboSI Diesel Hybrid

Plug-in Hybrid

Total Advanced Power Train

Optimisticb

20202035

7575

4030

1725

5236

2626

79

1520

09

4864

+38+100

Conservativec

20252035

5050

4040

1720

5549

2421

77

1416

07

4551

+38+62

Note: Assumed average new-vehicle weight (cars and light trucks) currently is 1900 kg (4180 lb). Thus, average weight reductions of 700–1050 lb per vehicle would be required. Neither of these scenarios includes BEVs or FCVs. aThe amount of the efficiency improvement that is dedicated to reducing fuel consumption (i.e., that is not offset by increases in vehicle power, size, and weight).  bThe optimistic scenario meets the new CAFE target of 35 mpg in 2020, and then extrapolates this rate of improvement through 2035. In this case, the average fuel economy in 2035 reaches 52 mpg, roughly double today’s value.  cThe conservative scenario achieves the new CAFE target of 35 mpg only in 2025 (5 years later) and extrapolates this rate of improvement through 2035, when the average fuel economy reaches only 60 percent above today’s value. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 153

line are indicated. Note that this no-change baseline includes some growth in overall fleet size and miles driven, but no resulting change in vehicle fuel consumption. 

Table 3.6 shows the corresponding cumulative fuel savings of the U.S. in-use 

LDV fleet through 2035. The cumulative, fleetwide fuel savings can be substantial, 

so long as the proposed fuel-economy standards are met and the rate of improvement is sustained.

Table 3.7 gives the corresponding annual fuel savings from the no-change 

baseline in 2020 and 2035.

These illustrative scenarios show that substantial changes in vehicle weight 

and size, significant improvements in the efficiency of ICE power trains, and the 

increasing production over time of hybrid systems will all be needed to reduce the 

in-use fuel consumption of the U.S. LDV fleet. The market will need to respond 

by purchasing these improved vehicles in steadily growing volumes despite their 

higher price, and it will need to forgo expectations of ever-increasing vehicle 

performance. If the trends indicated by these scenarios are to occur, the assumed 

production-vehicle changes (or their equivalents) will need to start soon. If all this 

does happen, then in-use U.S. LDV gasoline consumption would level off by about 

2020, offsetting the fuel-consumption growth path that the United States has been 

following over the past few decades. Fuel consumption could then decline back to 

2007–2008 levels by 2035.

3.4 Efficiency

250

200

150

100

50

0

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

Year

Vehicle Fleet Fuel Use

(Billion Gallons)

Baseline

Conservative

Optimistic

Figure 3.4 Fuel use for the U.S. in-use light-duty vehicle fleet out to 2035.

Source: Cheah and Heywood, 2008.
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Real Prospects for Energy Efficiency in the United States 

154 Real Prospects for Energy Efficiency in the United States

3.3.6 Environmental Impacts of Light-Duty VehiclesLife-Cycle Context

A full assessment of the effects on the environment of an LDV would cover energy 

consumption and all environmental effects, including greenhouse gas emissions, 

over the entire vehicle lifetime, which includes the vehicle manufacturing and disposal stages as well as vehicle use. Currently, the energy use and greenhouse gas 

emissions associated with manufacturing are each some 10 percent of the total 

fuel use and emissions over the vehicle life cycle. This fraction rises as vehicles 

become more fuel efficient: for hybrid and fuel-cell vehicles, the fraction is 15–20 

percent.14

For a full life-cycle assessment, the energy and greenhouse gas emissions 

involved in fuel supply would also be included. The energy required to produce 

gasoline or diesel fuel ranges from 20 to 25 percent of the fuel energy delivered to 

the vehicle fuel tank, depending on the petroleum source and the refining details 

14Values from the Argonne National Laboratory’s GREET 2.7 model.

Table 3.6 Cumulative Fuel Savings from the Baseline Shown in Figure 3.4

Today through 2020 

(billion gallons)

2020 through 2035 

(billion gallons)

Optimistic scenario 86 834

Conservative scenario 64 631

Note: The no-change baseline assumes constant sales mix by power train, constant ratio of light trucks 

versus cars, 0.8 percent compounded annual growth in new-vehicle sales, and 0.1–0.5 percent increase in 

vehicle travel.

Table 3.7 Annual Fuel Savings in 2020 and 2035 from the No-Change 

Baseline Shown in Figure 3.4

2020 (billion 

gallons/year)

2035 (billion 

gallons/year)

Optimistic scenario 21 86

Conservative scenario 16 66

Note: The no-change baseline assumes no change in average new-vehicle fuel consumption, a constant 

ratio of light trucks versus cars, and a 0.8 percent compounded annual growth in new-vehicle sales. It also 

assumes that growth in vehicle travel slows from 0.5 percent to 0.1 percent per year over 25 years, and that 

any efficiency improvements are fully offset by increases in vehicle performance, size, and weight.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 155

(Bandivadekar et al., 2008). For biofuels, electricity, and hydrogen, this component is more complex and depends strongly on how these other sources of energy 

are generated. 

When the energy consumption and emissions from all four life-cycle stages—

manufacturing, use, disposal, and fuel supply—are added together, the relative 

benefits (of one vehicle type over another) are diminished, because the energy and 

greenhouse gas emissions associated with supplying petroleum-based fuels are proportional to the amount of fuel used, whereas the manufacturing effects are not.

The need discussed above to assess the environmental impacts of transportation in a full life-cycle context goes beyond the scope of this chapter. The World 

Business Council for Sustainable Development reviewed these broader issues in its 

study Mobility 2030, which describes the major challenges that future transportation systems must address. These involve reducing emissions of greenhouse gases 

and other air pollutants, mitigating ecological damage, lowering traffic-related 

deaths and injuries, reducing noise, easing congestion, and enhancing mobility 

opportunities. This broader set of challenges is the context in which an assessment 

of transportation’s energy consumption and greenhouse gas emissions must be 

grounded (WBCSD, 2004).

3.3.7 Passenger Aircraft for Air Transportation

As shown in Figure 3.1, air transportation represents almost half of nonhighway 

transportation energy use, or about 10 percent of total transportation energy use 

in the United States. Several studies have examined opportunities for increasing 

energy efficiency in commercial passenger aircraft (see Kahn Ribeiro et al., 2007). 

Airline investment decisions are driven by fuel efficiency, since fuel expenditures 

are the largest operating cost for most airlines. For example, Boeing’s and Airbus’s 

newest generation of airliners, the Boeing 787 Dreamliner and 747-8 and the 

Airbus A350-XWB, employ weight-reducing carbon composite structural materials and less energy-intensive electrical systems. These aircraft represent a 15–20 

percent improvement in fuel efficiency over the aircraft that they replace.

As shown in Figure 3.5, there have been many energy-saving technological 

improvements in commercial aircraft since the introduction of jet airliners, spanning the 1960s-era Boeing 707 to the Boeing 777. The new 787 Dreamliner and 

Airbus’s forthcoming A350 are extending these improvements. Business jets are 

likewise becoming more energy-efficient. Fuel performance has become a major 

selling point for makers of these aircraft. For example, Honda Motor Company is 
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Real Prospects for Energy Efficiency in the United States 

156 Real Prospects for Energy Efficiency in the United States

developing a six-seat jet aircraft that the automaker plans to market for business 

aviation. This aircraft has a number of features aimed at reducing weight and drag 

(lightweight engines, all-composite fuselage, and over-the-wing engine mount) and 

thus fuel burn. 

Commercial aircraft must satisfy a number of demands and constraints, 

including performance with respect to safety, noise, passenger comfort, and emissions of air pollutants. As noted in Lee et al. (2001), as the fuel efficiency of commercial airliners has increased, some of these gains have been used to provide 

additional passenger amenities (e.g., more luxurious first-class seating, sophisticated entertainment systems) as well as to reduce noise. This fractional ERFC parallels the experience with automobiles discussed above. 

In addition to the design of the aircraft themselves, the systems in which 

they operate have a major influence on energy efficiency. The efficient use of 

aircraft, along with choosing the most suitable aircraft to fulfill market service 

requirements, is critical to improving system energy efficiency. Figure 3.6 shows 

3.5 Efficiency

Energy Intensity (MJ/RPK)

Year (or Year of Introduction for New Technology)

7

6

5

4

3

2

1

0

1955 1960 1965 1970 1975 1980 1985 1990 1995 2000

Short Range

Long Range

B720-000

B720-000B

B707-100B

B727-200/231A

B707-300

B707-300B

DC9-10

DC9-30

DC9-40

DC9-50

L1011-500

A310-300

Fleet Average

(31 Aircraft Types)

Fleet Average

(Entire U.S.)

MD80/

DC9-80All

B767-200/200ER

B757-200

A300-600/R/CF/RCF

B767-300/300ER

A320-100/200

B747-400

MD-11

B737-500/600

B777

B737- B737-300 400

B737-100/200

B747-100

L1011-1

/100/200

DC10-30 DC10-40

DC10-10

B747-200/300

Figure 3.5 Commercial aircraft efficiency trends. The dotted line is the fleet average 

for only the 31 aircraft types shown.

Note: RPK, revenue passenger-kilometer; 1 million joules is about 0.95 thousand Btu.

Source: Lee et al., 2004, adapted from Lee et al., 2001. Reprinted with permission from 

Elsevier.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 157

the historical trends in aircraft seating capacity and load factors (passengers per 

available seat). As noted in Lee et al. (2001), “Load factor gains have been attributed to deregulation in the U.S. and global air travel liberalization, both of which 

contributed to the advent of hub-and-spoke transportation systems” (p. 185). 

While hub-and-spoke services may lead to more circuitous trips than are required 

with point-to-point service (necessitating additional miles traveled and operations to and from the connecting hub airport), on balance they can boost energy 

efficiency because they enable more intense utilization of aircraft. Likewise, airtraffic-control and management procedures influence energy efficiency. Air-traffic 

management that leads to more precise and less circuitous flight paths, reduced 

taxiing and idling, and more efficient climbs and descents will reduce fuel burn. 

Next-generation, satellite-based air navigation systems and new air-traffic-control 

procedures, such as continuous descent approaches, promise to shorten flights and 

yield further gains in operational efficiency. These gains will complement those 

from advances in aircraft engines, materials, and wing designs (such as raked wing 

tips that reduce cruise drag). 

Thus, energy efficiency in air transportation must be viewed on a comprehensive, systems basis that considers the energy performance of aircraft designs 

as well as how they are used. According to Lee et al. (2001), the energy intensity 

3.6 Efficiency

Load Factor

Seats

Year

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0.0

200

180

160

140

120

100

80

60

40

20

0

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000

Historical Trends in Load Factor

Historical Trends in Number of Seats

Figure 3.6 Historical trends in aircraft seating capacity and load factors for flights operated by U.S. carriers.

Source: Lee et al., 2001. © 2001. Reprinted with permission from Elsevier.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

158 Real Prospects for Energy Efficiency in the United States

of new aircraft (measured by energy consumed per seat-mile flown) declined by 

60 percent during the first 40 years of jet travel. The authors estimate that 57 

percent of this decline stemmed from increases in engine efficiency, 22 percent 

from increases in aerodynamic performance, 17 percent from increased load factors, and 4 percent from operational changes such as flight time efficiency (that is, 

reduced time on the ground or in noncruise portions of the flight). They anticipate 

energy efficiency improvements of 1–2 percent per year for the next two decades, 

yielding a total improvement of more than 30 percent over this period.

The Federal Aviation Administration expects air travel demand (in passenger 

emplanements) to grow about 3 percent per year over the next several decades.15

This presents a major challenge to efforts to reduce fuel consumption in this sector, because energy efficiency per passenger emplanement is expected to improve 

by only 1–2 percent per year (Lee et al., 2004). This energy efficiency improvement will not be enough to counter the expected growth in demand. 

3.4 FREIGHT TRANSPORTATION

The United States spends about 6–7 percent of its gross domestic product (GDP) 

on the movement of freight. According to the Federal Highway Administration 

(FHWA, 2007), about 21 billion tons of freight were moved in 2006 (including 

4 billion tons in pipeline movements).16 The FHWA expects U.S. freight transport 

to continue to grow by 2 percent per year over the next two to three decades as 

the economy grows and domestic and international trade increases, resulting in 

an 85 percent increase in freight tonnage by 2035 (to 37 billion tons). Factoring 

in 0.5 percent annual growth in energy efficiency in the freight sector means that 

total energy use for freight movement will grow by 40 percent or more. 

Table 3.8 shows projections of freight tonnage by mode for 2035. These 

projections are based in large part on assumptions for GDP growth, as freight volumes have historically tracked economic growth. 

Trucking dominates freight shipment in the United States in terms of both 

tonnage and shipment value (on the latter measure, it accounts for 95 percent of 

shipments). The dominance of the truck mode is not expected to change during 

15See http://www.faa.gov/data_statistics/aviation/aerospace_forecasts/2008-2025/.

16See http://ops.fhwa.dot.gov/freight/freight_analysis/nat_freight_stats/docs/07factsfighres/

table2_1.htm.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 159

TABLE 3.8 Weight of Freight Shipments by Mode: 2007 and 2035 (millions of tons)

2007 2035

Total Domestic Exportsa Importsa Total Domestic Exportsa Importsa

Total 21,225 19,268 619 1,338 37,210 33,666 1,112 2,432

Truck 12,896 12,691 107 97 22,813 22,230 262 320

Rail 2,030 1,872 65 92 3,525 3,292 57 176

Water 682 575 57 57 1,041 874 114 54

Air 14 4 4 6 61 10 13 38

Intermodalb 1,505 191 379 935 2,598 334 660 1,604

Pipeline and 

unknownc

4,091 3,934 6 153 7,172 6,926 5 240

aData do not include imports and exports that pass through the United States from a foreign origin to a foreign destination 

by any mode. bMail and courier shipments and all intermodal combinations except air and truck.

c

Pipeline and unknown shipments are combined because data on region-to-region flows by pipeline are statistically uncertain.

Source: U.S. Department of Transportation, Federal Highway Administration, Office of Freight Management 

and Operations, Freight Analysis Framework, Version 2.2, 2007. Available at http://www.ops.fhwa.dot.

gov/freight/freight_analysis/nat_freight_stats/docs/08factsfigures/table2_1.htm.

See also http://ops.fhwa.dot.gov/freight/freight_analysis/nat_freight_stats/docs/07factsfigures/table 2_1.htm.

the next 25 years. It is important to note, however, that this forecast was made 

before the run-up in diesel prices to more than $5 per gallon in 2008. Sustained 

higher diesel prices may lead to some marginal shifts in traffic to other modes and 

perhaps to lower overall growth in freight traffic.

3.4.1 Heavy-Duty Vehicles

The trucking sector is the main user of heavy-duty vehicles, defined as trucks and 

buses having gross vehicle weights exceeding 10,000 lb. HDVs consume about 25 

percent of the fuel used in the highway sector, the vast majority diesel (Figure 3.7). 

The largest HDVs used in transportationthose having gross vehicle weights in 

excess of 33,000 lbaccount for half of the energy used by the HDV fleet. These 

vehicles include the tractor-trailer combinations that are dominant for long-haul 

freight transportation. It merits noting that HDVs are used for construction, mining, agriculture, and other nontransportation purposes. Although these off-road 

vehicles are not examined further in this section, they do use a large portion of 

total HDV energy.
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Real Prospects for Energy Efficiency in the United States 

160 Real Prospects for Energy Efficiency in the United States

Heavy Truck

and Bus

21%

Light Truck

and SUV

28%

Off-Road

Vehicle

13%

Passenger

Car

38%

Light Truck

d SUV

Vehicle

13%

Pa

Ca

38%

3.7 Efficiency

3.3 Million

Barrels

per Day

2.5 Million

Barrels

per Day

4.4 Million

Barrels

per Day

1.5 Million

Barrels

per

Day

Figure 3.7 Total U.S. highway and off-road vehicle fuel use in 2003 (diesel and gasoline only), in million barrels per day.

Source: Transportation Energy Data Book, Edition 25 (Davis and Diegel, 2006).

Fuel efficiency is an important factor in diesel-engine and truck design 

because fuel costs account for a major portion of HDV operating costs. It is not 

uncommon for a tractor used intensely for long-distance freight transportation to 

travel more than 800,000 miles in its service life. Some tractors get about 5 mpg 

with diesel fuel; maintaining the engine, improving tires and aerodynamics, and 

limiting speed could boost their performance by 1–2 mpg. Over an 800,000-mile 

life, a tractor getting 5 or 7 mpg would use 160,000 and 114,000 gallons of diesel 

fuel, respectively. The more efficient tractor would save 46,000 gallons of diesel 

fuel, or $230,000 at $5 per gallon. This example shows how high diesel fuel prices 

create an environment that compels carriers to focus on vehicle efficiency, both in 

their vehicle purchase decisions and in their fleet maintenance and operations.

HDV energy efficiency is a complex issue, however, because trucks perform 

a wide variety of duties and operate in many environments. Measuring energy 

efficiency across this sector is therefore complicated. For example, one truck moving a 30-ton payload 500 miles may average only 5 mpg, while another operating over the same distance carrying a 10-ton payload may average 7 mpg. The 

former truck will be more energy-efficient on a ton-mile basis, whereas the latter 

will appear to be more energy-efficient when considered on a vehicle-mile basis. 

The nature of the payload (e.g., whether it consists of weight-limited, high-density 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 161

freight or space-limited, low-density freight) is therefore an important factor in 

measuring energy efficiencyand the expected payload is a factor in the design 

of the vehicle. Likewise, HDVs used mainly for local deliveries and services, such 

as tanker trucks and refuse and dump trucks, will appear to have low energy 

efficiency because they operate in congested, stop-and-go environments that are 

inherently fuel intensive.

Many factors influence HDV energy use. Vehicle design factors include the 

energy consumed by driveline friction, air resistance, the use of auxiliaries, and 

tire rolling resistance. Operating variables such as speed, road type, idling, and 

weather conditions also influence energy use, in addition to payload characteristics and whether the truck is fully or partially loaded. Trailer characteristics are 

also important factors in HDV efficiency, affecting aerodynamic drag and rolling 

resistance. Truck operators often do not own the trailers—shippers frequently own 

them—and these fleets can have long service lives. Trailer efficiency improvements, 

therefore, tend to lag tractor improvements. 

The pressure to reduce fuel costs has led truck manufacturers to make continuous improvements in engine efficiency through various technological improvements, including more sophisticated fuel injection systems, improved combustion, 

and higher cylinder pressures due to increased turbocharging. Automated manual 

systems are an example of transmission improvements that yield energy savings. 

Technologies that are on the horizon include CVT and power-shift transmissions, 

as well as hybrid-electric systems that can be used to modulate auxiliaries (pumping, fans, compressors, air-conditioning, and power steering) and reduce idling. 

Reducing idling can be especially important in urban duty cycles and for sleeper 

cabs, where idling alone can account for 5–10 percent of vehicle fuel use (Davis 

et al., 2008). More efficient auxiliary power units could increase fuel economy, 

as could the use of utility-supplied electricity when an HDV is parked at a truck 

stop.

The aerodynamic designs of the tractors in operation today are far better 

than those of a decade or more ago. Many more tractors are equipped with side 

skirts, roof fairings, and aerodynamic fronts. At common highway speeds (60–70 

mph), overcoming aerodynamic drag represents about 65 percent of the total 

energy expenditure for a modern Class 8 combination truck. The drag coefficient 

is defined as the drag/(dynamic pressure × projected area). The EPA estimates that 

this coefficient has been reduced from 0.8 to 0.65 during the past two decades 

(EPA, 2004). The EPA believes that the implementation of known technologies 

and techniques to improve aerodynamics can lead to a further 20 percent reduc-
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

162 Real Prospects for Energy Efficiency in the United States

tion in the drag coefficient. As an example, a Kenworth T2000 tractor, designed 

with a built-in aerodynamic shield, small radiator, rounded corners, and recessed 

lamps and tanks, is approximately 15 percent more fuel efficient than the “classic” 

Kenworth W900L tractor, designed without an aero shield and having a large 

radiator, many corners, and protruding lamps, tanks, and pipes (Jensen, 2006).

The U.S. Department of Energy’s (DOE’s) Project on Heavy Vehicle Aerodynamic Drag (McCallen et al., 2003) anticipates that continued research on truck 

aerodynamics, aided by wind tunnels and computer simulations, can lead to even 

further reductions in today’s drag coefficients, perhaps by as much as 50 percent. 

Although the authors do not specify a timeframe for this outcome, such a reduction would reduce HDV fuel use by approximately 25 percent when traveling at 

highway speeds.

Rolling resistance has been reduced through rigorous tire-maintenance programs by carriers, automated tire-pressure monitoring and refilling systems, and 

the advent of “super single” tires. Further reductions in the weight of tractors represent an area of opportunity, and more gains can be made through improvements 

in trailer aerodynamics, mass, and rolling resistance characteristics.

With regard to truck and carrier operations, there are numerous areas where 

energy savings can be achieved. Many, however, involve factors outside the direct 

control of truck operators, such as government size and weight limits for trucks, 

highway congestion, and road speed limits. Operational areas that are under operator control include route optimization (congestion avoidance and distance minimization), the reduction of empty mileage, more aggressive fleet management and 

maintenance, travel speed and acceleration control, “smart” gearing, and cruise 

management through global positioning systems (anticipating grade and speedlimit changes). Speed governors are designed into most new tractors but often go 

unused or are disabled by drivers. Greater use of these existing controls could save 

fuel.

Table 3.9 summarizes the potential for fuel efficiency gains in long-haul 

trucking from various near-term options discussed above, as estimated by the vice 

president of advanced engineering for Volvo Powertrain.17

Looking farther out in time, the U.S. DOE’s 21st Century Truck Program 

examined the prospects for alternative fuels in HDV applications, including trucks 

that fall into lighter classes than the long-haul tractor-trailer combinations of 

17A. Greszler, presentation to the NRC Transportation Research Board, May 1, 2008. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 163

TABLE 3.9 Largest Near-Term Opportunities for Improving the Fuel Efficiency of Long-Haul 

Trucks

Opportunity

Estimated Fuel

Efficiency Gaina Technology Readiness Issues/Obstacles

Low-rolling-resistance 

tires (super singles) on 

tractors and trailers

3% Available for high-volume 

use. Increasingly deployed.

Cost and life factors

Skepticism by operators

Trailer ownership split

Road damage concernsb

Turbo compound 3%–5% Concept proven with some 

production, but outside the 

United States.

Cost and reliability

Package space

Trailer side skirts 4% Commercially available. Trailer/truck ratio >3

Trailer ownership split

Skirt damage

Knowledge/incentives

Mandatory limit of 

road speed to 65 mph 

(controlled via truck 

software)

5% average Available in all Class 8 trucks 

since the mid-1990s.

Drivers paid by mile

Car traffic meshing/safety

Congressional action needed

Elimination of idling in 

sleeper mode

5%–7% Available: APU, battery, 

storage systems, shore 

power in some stops, engine 

stop-start systems, IdleAire 

system.

Storage system performance

Shore power availability

IdleAire system availability and 

cost

Cost and weight for onboard 

systems

California APU DPF 

requirement

Stop/start cycle disturbs sleep

Increase in weight, 

length, and trailer 

combination limits

Fewer trucks 

needed on road

None required. Safety concerns

Road damage concerns

State variations

Optimization of power 

train and engine to duty 

cycle

2%–5% Available. Customer awareness

Adequate sales engineering 

support

Variation in duty cycle

Trailer gap reduction 3% Commercially available. 

Deployed in some fleets.

Mix of trailers hauled

Turning-radius reduction

DPF size

aThe percentage reductions are not intended to be additive because some of the changes, if made, would reduce the impact of 

those that follow. b“Super single” tires show promise but may have drawbacks, such as pavement wear, under some circumstances.

Source: Estimates from A. Grezler, vice president of advanced engineering for Volvo Powertrain. Presentation to the 

Transportation Research Board, May 1, 2008.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

164 Real Prospects for Energy Efficiency in the United States

TABLE 3.10 Summary of Commercial Truck Greenhouse Gas Reduction Measures

Measure Description Phase-in Scenario Primary Studies Referenceda

Class 2b efficiency 25% CO2 g/mi reduction Logistical S-curve for 

new truck deployment 

from 2010 to 2020

Austin et al., 1999; DeCicco 

et al., 2001; EEA, 2001; 

NRC, 2002; Plotkin et al., 

2002; Weiss et al., 2000

Class 3–6 efficiency 40% CO2 g/mi reduction Logistical S-curve for 

new truck deployment 

from 2010 to 2020

Vyas et al., 2002; An et al., 

2000; Lovins et al., 2004; 

Langer, 2004

Class 7–8 efficiency 34% CO2 g/mi reduction Logistical S-curve for 

new truck deployment 

from 2010 to 2020

Vyas et al., 2002 ; Muster, 

2001; Lovins et al., 2004; 

Schaefer and Jacoby, 2006; 

Langer, 2004

Ethanol fuel substitution Increase mix of ethanol 

to 15% by volume of 

gasoline by 2020

Phased in linearly from 

8% in 2010 to 15% in 

2020 (all new additions 

above baseline are from 

cellulosic feedstock)

Bowman and Leiby, 1998; 

Wang et al., 1999 

Biodiesel fuel substitution Increase mix of biodiesel 

to 5% by volume of 

diesel by 2020

Phased in linearly from 

~0% in 2010 to 5% in 

2020 

Sheehan et al., 1998; Hill 

et al., 2006; Farrell and 

Sperling, 2007; EPA, 2007 

a See Kasseris and Heywood, 2007, for references. 

Classes 7 and 8 (DOE, 2006). The measures examined for reducing greenhouse 

gas emissions by trucks are summarized in Table 3.10. Their projected influence 

on new truck fuel economy through 2030 is shown in Figure 3.8.

3.4.2 Air Freight

The NRC report Potential Impacts of Climate Change on U.S. Transportation

(NRC, 2008a) notes that commercial aircraft account for 12 percent of transport 

energy use worldwide and 8 percent of that in the United States. The vehiclecentric energy efficiency technology for air freight is essentially the same as that 

for passenger-based airliners; such technologies are discussed in Section 3.3.7. 

3.4.3 Railroads

Railroads account for about 2.5 percent of transport energy use in the United 

States (Davis et al., 2008). Freight railroads in this country are nearly all diesel 

powered, compared with Japanese and European systems, which are electrified 
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 165

through much of their systems. Improvements in railroad technology offer modest 

opportunities for gains in U.S. transportation energy efficiency. Areas of opportunity include advanced high-efficiency locomotive engines, reductions in aerodynamic drag, track lubricants, lower train weight, regenerative braking, hybrids for 

switching engines in yards, and higher-efficiency propulsion systems.18

Railroad operations represent another area in which energy efficiency gains 

can be achieved. Opportunities include increased railcar capacity (from 286,000 to 

315,000 lb) and train length (e.g., 8,500-foot-long intermodal trains), optimized 

line-haul speeds enabled by technologies such as positive train control, and further 

structural changes in railroad economics such as a continued shift to larger and 

more uniform shipments (e.g., ”retail” to ”wholesale” railroading such as unit 

trains) that permit more efficient operations generally. 

18James J. Winebrake, “Scenarios for Reducing the Greenhouse Gas Intensity of Fuels Used in 

Goods Movement,” presentation to the NRC Transportation Research Board, May 1, 2008.

3.8 Efficiency

New Truck Fuel Economy (Miles per Gallon)

Model Year

20

15

10

5

0

1990 1995 2000 2005 2010 2015 2020 2025 2030

Baseline

Efficiency Scenario

Class 2b Trucks

Class 3–6 Trucks

Class 7–8 Trucks

Figure 3.8 Trends in the fuel economy of new commercial trucks. Historical and projected trends in the fuel economy of Class 2b (light) trucks; Classes 3−6 (medium) trucks; 

and Classes 7 and 8 (heavy) trucks. Class 2b trucks are those with gross vehicle weights 

(GVWs) of 8,500−10,000 lb; trucks in Classes 3−6 have GVWs of 10,000−26,000 lb; and 

trucks in Classes 7 and 8 have GVWs of more than 26,000 lb.

Source: Lutsey, 2008.
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Real Prospects for Energy Efficiency in the United States 

166 Real Prospects for Energy Efficiency in the United States

Examining freight from an intermodal perspective suggests further opportunities to save fuel by shifting some freight from truck to rail. The candidates for 

diversion to rail include truckload trailers of commodities that are not time sensitive and that are traveling more than 500 miles, as well as less-than-truckload 

long-haul freight. By and large, however, railroads have difficulty competing with 

trucks for freight whose delivery is time sensitive, such as overnight mail. Because 

trucks consume 10 times more energy than rail (and waterborne) per ton of freight 

moved, a 10 percent diversion of freight from truck to rail could produce a 9 percent energy savings. This is a substantial amount of traffic diverted, however. Even 

a small percentage shift in freight from truck to rail would require a considerable 

increase in railroad capacity. Increasing miles of track would be expensive and 

would likely be opposed by nearby residents, especially if new routes are needed.

3.4.4 Waterborne Shipping

Waterborne shipping makes use of oceans, inland and coastal waterways, and the 

Great Lakes. These routes use different vessels, require different infrastructure, 

and transport different commodities. The main fuels used are diesel oil (about 

70 percent) and heavy fuel oil (about 30 percent).

Measured in tonnage, the oceangoing segment of this sector accounts for 

about half of the freight moved on water into or within the United States. Oil 

tanker traffic is, of course, one important reason for this share. Another is the 

increase in manufactured goods shipped in international trade by container ships. 

More than 75 percent of the U.S. international trade (in dollar value) is with five 

countries: Canada, Mexico, Japan, China, and Germany (NRC, 2004b). Most 

of the trade with Canada and Mexico is by truck and rail, whereas most of the 

goods traded with Japan, China, and Germany are transported by container ships 

and other oceangoing vessels. In March 2007, the International Council on Clean 

Transportation concluded that “carbon dioxide emissions from shipping are double those of aviation and increasing at an alarming rate, which will have a serious 

impact on global warming, according to research by the industry and European 

academics” (ICCT, 2007a). However, measured in terms of the CO2 emitted or 

energy consumed per ton-mile or per value of freight moved, ocean shipping is 

highly efficient, since the vessels carry very large payloads over long distances. 

On the domestic inland rivers, the Great Lakes, and coastal waterways, tugboats, barges, and self-propelled vessels are used to move (mostly) bulk commodities, such as petrochemicals, coal, grain, lumber, and minerals. They are important 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 167

modes of transportation for these commodities in the specific regions in which the 

water routes are available. The energy efficiency of domestic marine shipping is 

comparable to that of railroads on a ton-mile basis (Davis et al., 2008).

Various opportunities exist in the near term to improve the energy efficiency 

of waterborne transportation. On the technology side, they include better shore 

power management and electrification, high-efficiency propulsion technology, 

improved hull design, and the use of alternative fuels. The potential for technical 

measures to reduce CO2 emissions from diesel fuel has been estimated at 5–30 

percent in new vessels and 4–20 percent in older ones. On the operations side, 

near-term opportunities include improved terminal operations to reduce idling, 

queues, and delays; improved vessel-loading and -unloading operations; better 

hull maintenance; and speed reduction or optimization. Increasing vessel size will 

also reduce energy use per ton of freight shipped, especially for container ships. 

Marintek (2000) estimated that these operational measures could provide up to a 

40 percent increase in energy efficiency.

In analyzing measures that can be taken to improve energy efficiency, 

Kromer and Heywood (2008) estimated the potential gains in energy efficiency in 

marine shipping to be 20–30 percent by 2020. Speed reduction was found to offer 

the greatest potential, followed by implementation of new and improved technology. Speed reduction, however, would require strong incentives to achieve, in 

view of the incentives to move shipments rapidly. Moreover, because of continued 

growth in commerce and waterborne traffic, it is likely that total energy use will 

continue to rise (Marintek, 2000).

3.5 FUELS OLD AND NEW

Current U.S. transportation systems—land, water, and airoverwhelmingly use 

petroleum-based hydrocarbon fuels. These fuels dominate because they are liquid 

at ambient temperature, have very high energy density, and fit well with today’s 

engine technologies: spark-ignition engines, diesels, and gas turbines. As an illustration of their attractiveness, when refueling a car today, the fuel’s chemical 

energy flows through the nozzle in one’s hand at the rate of 570,000 Btu per minute, providing another 400 miles of driving with a 5-minute refueling time. 

Current U.S. fuels and engine technologies have evolved together over many 

decades. Thus, U.S. petroleum extraction, delivery, refining, and distribution 

systems are cost-effective, and these fuels are well matched to what end-users—
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Real Prospects for Energy Efficiency in the United States 

168 Real Prospects for Energy Efficiency in the United States

vehicle owners and operators—need. The current U.S. petroleum-based fuelsupply system is vast in scale and does its job well. A major problem, of course, 

is that these established fuels—gasoline, diesel fuel, aviation kerosene—are some 

86 percent carbon by weight and when burned in engines emit almost all this 

carbon as CO2. The discussion below summarizes the current status of and anticipated developments in mainstream petroleum-based and alternative fuels. It also 

discusses whether these fuels offer any useful opportunities for augmenting the 

energy efficiency of the fuel-supply system as well as the tank-to-wheels efficiency 

of the vehicle. A more complete discussion can be found in the parallel effort of 

the America’s Energy Future Panel on Alternative Liquid Transportation Fuels 

(NAS-NAE-NRC, 2009b).

Transportation fuels affect internal-combustion-engine performance and 

efficiency directly through their combustion characteristics (knock resistance, or 

octane rating, for gasolines; self-ignition, or cetane rating, for diesel). They have 

indirect effects through their energy density and therefore weight for a given vehicle’s driving range, and through constraints imposed on engine operation because 

fuel composition affects vehicle air pollutant emissions control. The issue of fuel 

energy density is especially critical in the longer term for jet aircraft. Also, in a 

broader, life-cycle context, the energy consumed and the greenhouse gas emissions 

released during fuel production affect the overall energy and emissions impacts 

of the total vehicle-plus-fuels system. Lubricants affect engine energy efficiency 

through their role in engine friction.

3.5.1 Petroleum-Based Fuels

The characteristics of petroleum-based fuels have developed to match the needs of 

today’s land-based spark-ignition and diesel engines, marine use in boats and large 

ships, and the requirements of aviation’s jet engines. For reliable and efficient end 

use, a broadly based set of fuel-property requirements must be met. Current challenges are the rising cost of these fuels as demand grows rapidly; concerns about 

their long-term availability in ever-growing (and very large) volume; the need for 

cleaner fuels with decreasing levels of contaminants owing largely to ever-more 

stringent air pollutant emissions requirements; and much tighter fuel specifications 

(also for emissions control reasons). An exacerbating factor is that a growing proportion of the crude oils used is heavier (more dense), and these oils have higher 

inherent levels of contaminants.

Changes in gasoline and diesel fuel specifications are currently being 

explored that could reduce refinery energy requirements and permit useful—
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 169

though modest—improvements in energy performance and efficiency. Fuel characteristics that would aid the development of new engine combustion concepts such 

as HCCI are also being explored.

Since petroleum-based fuels dominate the transportation sector, they have 

developed very large-scale refining and distribution systems. More than 300 billion gallons of refinery products are distributed across the nation each year. The 

ability of alternative fuel streams to be compatible with and integrated into these 

refining and distribution systems is an important aspect of their attractiveness.

3.5.2 Natural Gas

The use of natural gas (methane) in road transportation varies around the world, 

but it is typically about 1 percent of the amount of petroleum-based fuel use. In 

a few countries (for example, Argentina and Italy) where tax policies make it an 

economically attractive fuel, its use is about 10 percent of transportation fuel consumption (Yeh, 2007). In the 1990s, natural gas made inroads into U.S. municipal bus fleets in order to achieve lower air pollutant emissions. However, diesel 

engines with effective exhaust cleanup technology are now proving to be a cheaper 

option in that market (Cohen, 2005; Cohen et al., 2003). Natural gas has a higher 

octane rating than that of typical gasolines, and it has good combustion characteristics, and thus could improve spark-ignition engine efficiency. Despite these 

advantages, methane is a gaseous fuel that must be compressed and stored on the 

vehicle in high-pressure tanks that are bulky, heavy, and costly. There are additional concerns over safety issues associated with compressed natural gas (which 

also constrain vehicle use), and uncertainty as to whether a secondary market for 

reselling natural gas vehicles used by fleet operators would develop. 

Based on the available evidence, the panel’s overall assessment of natural 

gas as a transportation fuel is that the drawbacks of a gaseous fuel (e.g., lower 

specific engine power, reduced driving range, a significant energy penalty for compression in vehicle fueling, the loss of vehicle interior space owing to fuel-storage 

tanks, extra cost, and methane emissions) currently more than offset the attraction 

of the lower carbon-to-hydrogen ratio of this fuel and its potential for improving efficiency. Moreover, demand for natural gas in other applications is rising 

rapidly, threatening to increase its price and make it less attractive as a vehicle 

fuel. Recently, technologies for extracting natural gas from shales have raised 

the prospect of significant increases in domestic production at moderate prices. 

If domestic natural gas supplies expand significantly and the cost of natural gas 
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Real Prospects for Energy Efficiency in the United States 

170 Real Prospects for Energy Efficiency in the United States

remains significantly lower than the cost of liquid petroleum-based fuels, its overall attractiveness as a transportation fuel relative to other applications will need to 

be reconsidered. 

3.5.3 Nonpetroleum Hydrocarbon Fuels

Oil sands (e.g., in Canada) and heavy oils (from Venezuela) are already contributing a growing fraction (about 5 percent) to liquid transportation fuels. Over time, 

other nonpetroleum sources of hydrocarbon fuels, such as gas-to-liquids, oil shale, 

and coal, are likely developments. These pathways can either produce high-quality 

transportation fuels directly or provide an input stream to appropriately modified refineries. These high-quality fuels can be blended with petroleum products to 

improve overall fuel quality and thus petroleum refinery efficiency. Such sources 

of transportation fuels are expected to steadily increase in volume. However, with 

current technology, the energy used in the production of nonpetroleum-based fuels 

is higher, and the amount of greenhouse gases emitted during their production is 

also higher, than is the case for petroleum-based fuels (NAS-NAE-NRC, 2009a). 

3.5.4 Biomass-Based Fuels

Liquid transportation fuels derived from biomass have the potential to contribute 

significantly to supplying energy for vehicles. Sources of biomass include corn 

grain, corn stover, switchgrass, miscanthus, forest wastes, and other dedicated 

fuel crops. End-products include ethanol (and possibly other alcohols), biodiesel 

and, potentially, gasoline- and diesel-like fuels. Also important are the life-cycle 

greenhouse gas emissions that result from growing and harvesting the biomass and 

producing and distributing the specific biofuels. Critical questions that still need 

to be resolved are the availability of suitable land for these crops, fertilizer and 

water requirements, land degradation over time, water pollution issues, and the 

net energy requirements during production. These issues are discussed extensively 

in the NRC report on alternative liquid transportation fuels (NAS-NAE-NRC, 

2009b). Biofuels would, of course, displace petroleum-based fuels.

Biofuelscurrently about 3 percent of land transportation fuel 

supplycould potentially grow in volume to some 10 percent on an energyequivalent basis over the next 10 or so years (NAS-NAE-NRC, 2009b). The 

current biofuels are ethanol, about 80 percent, and the rest biodiesel. Integrating these new fuels into the petroleum fuel production and supply system creates 

logistical problems that need to be resolved (e.g., because of its water-absorbing 
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 171

and solvent characteristics, ethanol cannot be transported in existing pipelines 

used for oil). Currently, the basic issues with biofuels are their delivered costs 

relative to those of petroleum fuels and their compatibility with the existing 

petroleum-based fuel production and distribution system.

From a broader perspective, the critical question is the life-cycle greenhouse 

gas emissions that result from growing and harvesting the biomass and producing and distributing the specific biofuels produced, and whether the advantageous 

characteristics of the fuel (e.g., ethanol with its greater knock resistance, which 

could be used to increase the engine compression ratio) can be used to improve 

efficiency. The substantial potential of biofuel as an important contributor to 

greater efficiency in the U.S. transportation sector still needs extensive evaluation. 

3.5.5 Electricity

Plug-in hybrids and battery-electric vehicles draw electricity from the electric 

grid. Their impact on the electric grid obviously depends on the number of these 

vehicles, on how much they are driven each day, and on when and where they 

recharge their batteries and how rapidly they recharge. Limited numbers of these 

vehicles will be available over the next few years. It is plausible that, as has happened with today’s conventional hybrids, production volumes will slowly expand 

over the next decade as these technologies are tested and improved and the significant cost premium is reduced. This introduction and initial growth phase can 

likely be accommodated by the electric grid with modest adjustments, although 

consumers will likely be restricted in their recharging options.

It is useful to consider how the impacts on the electric grid would evolve 

if sales volumes became increasingly larger. (See, for example, Samaras and 

Meisterling, 2008.) The electrical energy that must be supplied per mile traveled 

in a future PHEV or BEV is about one-third of the gasoline energy that would 

be supplied in an equivalent ICE vehicle. In the extreme case in which all LDVs 

in the United States were electric and the annual VMT were the same as that of 

standard vehicles today, the annual electricity demand would be about 30 percent 

of the total amount of electricity currently generated each year. If all this recharging were done overnight (which is unlikely), then current U.S. generating capacity would be able to recharge about half of these vehicles, although the variation 

from state to state would be substantial (6 percent to 63 percent) (Samaras, 2008). 

Growth in travel and electricity demand would also have to be factored in. However, the power requirements for recharging are significant; for example, a 30-mile 
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Real Prospects for Energy Efficiency in the United States 

172 Real Prospects for Energy Efficiency in the United States

battery recharge requires about 15 kWh, which is 3 kW for 5 hours, and at 110 

volts would require close to 30 amps for this time period.

There are many longer-term system issues with PHEVs or electric vehicles. 

These include the plausible fraction of total vehicles that would satisfy the 

recharging location, time of day, and charging-power-level constraints; and how 

the consumer vehicle purchase and use patterns would be affected by the range 

and recharging limitations of vehicles having different operating characteristics. It 

is too early in the development of electric-vehicle technology to be able to project 

how large a fraction of the vehicle market might eventually be met by such vehicles. Note that the impact on greenhouse gas emissions of using electricity as an 

energy source in transportation will depend on how much electricity is produced, 

distributed, and used for that purpose and how that energy is generated (i.e., what 

the primary energy source is, and—if it is fossil fuels—whether carbon capture 

and storage technology is effectively deployed). 

3.5.6 Hydrogen

Hydrogen fuel presents an especially challenging set of issues, since there is currently no hydrogen distribution system. A recent NRC study, Transition to 

Alternative Transportation Technologies: A Focus on Hydrogen (NRC, 2008c), 

examines what would be needed to implement such a transition and the timescales involved. It concludes that reductions in petroleum use and greenhouse gas 

emissions could grow steadily over the 2020–2050 timeframe but that substantial 

government actions and assistance would be needed for this to happen. Establishing a hydrogen production, distribution, and refueling system that provides a sufficiently widespread availability of the fuel so as not to impede the growth in fuelcell vehicle deployment is a challenging (but doable) task.

3.6 SYSTEM-LEVEL ISSUES

The history of transportation is one of continuous innovation. Most innovations 

are small and incremental. Some innovations accumulate and lead to a restructuring and reorganization of activities. Energy costs and supply often play a 

role in motivating innovationfor instance, the transition from sailing ships to 

steamshipsbut usually system innovations and changes are motivated by other 

factors. Major changes in transportation systems are costly and are complicated to 
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 173

bring about for many reasons, including the difficulty of coordinating the interests 

of businesses (such as vehicle and energy companies); the difficulty of overcoming 

the inertia of business practices; the existence of government rules dealing with 

safety, interstate commerce, and so on that were promulgated for previous practices and products; the nonuniformity of government rules across jurisdictions; 

and the need to blend new and old infrastructures and technologies. However, 

when major system transitions do occur, they may provide opportunities to boost 

the overall energy efficiency of the transportation sector. 

The freight sector offers examples. The development of standard, 20- and 

40-ft (6.1- and 12.2-meter) shipping containers, for example, has stimulated intermodal transfers among trucks, rail, ships, and even cargo airplanes. These containers can be collected by truck at factories and transported to rail terminals where 

they are carried for the long-haul portion of a trip, often to a seaport for loading 

onto specially designed container ships. By facilitating the transfer of cargo among 

modes, the “container revolution” has led to dramatic changes in logistics and in 

patterns of trade. Because of the greater energy efficiency of rail and water transport compared with trucking, containerization has presumably led to significantly 

lower energy use per ton-mile of freight. The impact on total energy use, however, 

is unclear, as the utility of containers has enabled far more extensive, international 

logistics systems. 

In passenger transport, opportunities for increasing fuel efficiency through 

system-level changes may be greater, if only because of the current pattern of 

largely single-occupant vehicle usage. One catalyst is the use of information and 

communication technologies, referred to in the transportation community as intelligent transportation systems (ITSs). The preponderant ITS effort has been incremental in nature. Local governments have learned to use information to manage 

the use of roads better, and travelers have gained access to navigation devices and 

information services that ease driving tension, reduce destination search times, and 

can be used for emergency services. The net effect is a small reduction in driving 

and energy usefrom smoother vehicle flow and reduced vehicle-miles traveled. 

More ambitious initiatives include using wireless and advanced information technologies to offer new mobility services such as demand-responsive jitney (inexpensive small bus) services, dynamic ridesharing (“smart carpooling”), smart car 

sharing, smart parking, and so on. These services have the potential for significant 

reductions in vehicle use and therefore in energy use and greenhouse gas emissions. But there are many barriers to their successful adoption, including consumer 

resistance, the difficulty of competing against subsidized conventional transit ser-
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Real Prospects for Energy Efficiency in the United States 

174 Real Prospects for Energy Efficiency in the United States

vices, opposition from entrenched interests such as taxis and transit operators, and 

insurance costs. Companies are emerging to offer these services, but their market 

share is very small.

Still more innovative are automated highway lanes for cars and trucks, using 

advanced control technologies, sensors, and wireless communication technologies. 

But these efforts have faltered in the face of litigation and safety concerns. And 

even as these automation technologies enter the market, initially as “smart” cruise 

control, automated vehicle parking, and automated emergency braking, they will 

have minimal effects on energy use. Furthermore, as they are fully implemented, 

they might even increase vehicle travel and energy use, as the ease of “driving” 

induces people to live farther from work and to drive longer distances.

Bus rapid transit service, which makes use of dedicated lanes and fare collection before bus entry (Levinson et al., 2002), combines the speed of subways with 

the flexibility of buses. For more personal service, smart paratransit, real-time carpools, and car-sharing services could reduce VMT.19

ITS and other advanced technologies may be used to create broader system 

changes with potentially much larger energy and greenhouse gas emission benefits. 

When transportation and land use are considered together, it is possible to imagine 

how new transportation systems could be developed that bring about improvements in energy efficiency. While a shift toward dense urban corridors would be 

at odds with long-term trends, changes in individual preferences (e.g., interest 

in urban amenities) and values (e.g., environmental concerns) may foster such a 

movement.

For such a diversified system to evolve, numerous changes would need 

to occur, not only in people’s preferences but also in policies and institutions 

that govern land-use management and the provision of transportation services. 

The panel cannot delve into these broader topics in this report. When taking 

a longer-range view of options, however, if the goal is to reduce overall energy 

use and greenhouse gas emissions, the interconnections among land use, transportation, and life styles should not be neglected. For instance, while some new 

transit services might by themselves consume more energy per passenger-mile 

traveled than single-occupant vehicles, the net effect of greater mobility and 

locational choices could be an overall reduction in energy use and greenhouse 

gas emissions. 

19See Chapter 2 of Sperling and Gordon (2009). 
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 175

It is thus important to explore, at this still early stage of ITS development 

and implementation, how ITS can be used to address the multiple needs and problems associated with surface transportation in a synergistic manner. 

Note that for any of the above-described changes to have a significant impact 

on U.S. transportation’s fuel consumption and greenhouse gas emissions, they 

would have to be implemented on a substantial scale. 

This brief overview identifies many opportunities for reducing vehicle energy 

use and greenhouse gas emissions through changes in the ways that the U.S. 

transportation infrastructure is managed and used. However, major insights and 

improvements will come from a broader, deeper understanding of transportation 

system issues for all transportation modes. Developing better data and tools that 

can be used to further that understanding is an important task.

3.7 CHALLENGES AND BARRIERS

•	 In the United States, many factors, including a century of falling energy 

prices and rising incomes, together with personal preferences and various government policies, have contributed to decentralized land-use 

patterns and a transportation-intensive economy. 

•	 Low-priced energy led to consumer purchasing behavior, vehicle 

designs, and operating decisions that emphasized convenience, style, 

and speed over fuel economy in automobiles and light trucks, and 

with added emphasis on cost-effectiveness in medium- and heavy-duty 

trucks, ocean shipping, and the air transport of passengers and freight. 

•	 The primary barriers to realizing greater energy efficiency in the transportation sector are the expectations of individuals and companies 

about future energy prices, fuel availability, and government policies. 

Although an extensive menu of technologies exists for saving energy in 

transportation, before decision makers choose to invest in these technologies, they must be convinced that energy price increases (or other 

factors that stimulate market demand) will persist.

•	 A barrier to rapid changes in the mix of LDV annual sales is the capacity of the automotive industry to change both power trains and platforms rapidly, across all models, and its ability to set up a high-volume 

supplier base in high-risk items such as high-energy-storage batteries. 
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176 Real Prospects for Energy Efficiency in the United States

The vehicle design cycle can be 3–5 years if the change involves major 

new technologies or materials. 

•	 Even when new or improved vehicle technologies are available on the 

market, barriers to purchase include high initial cost, safety concerns, 

reliability and durability concerns, and lack of awareness. For new 

technologies to reach a substantial fraction of vehicle sales usually 

takes more than a decade unless mandated by law or consumers clearly 

demand the new or improved technology. 

3.8 FINDINGS

T.1 In the transportation sector, the potential for energy savings and petroleum displacement resides both in increasing the efficiency with which 

liquid fuels (especially petroleum) are used and in shifting some of the 

vehicle fleet’s energy demand to electricity (including hydrogen fuel-cell 

vehicles). The overall energy use and greenhouse gas emissions (and 

other environmental effects) associated with such a shift depend on how 

the electricity or hydrogen is generated. 

T.2 An extensive menu of technologies exists today for increasing energy 

efficiency in transportation. Achieving the average new-vehicle fuel 

economy targets for 2020 set by the Energy Independence and Security 

Act of 2007 (EISA; P.L. 110-140), which represent a 40 percent increase 

over today’s value (and a 30 percent reduction in average fuel consumption), is thus a feasible, although challenging, objective. Reaching the 

EISA targets, and continuing to decrease fuel consumption, will require 

a shift from the historic U.S. emphasis on ever-increasing vehicle power 

and size to an emphasis on using efficiency improvements to improve 

vehicle fuel consumption.

T.3 In the near term, fuel-consumption reductions will come predominantly 

from improved gasoline and diesel engines, improved transmissions, and 

reduced vehicle weight and drag. Through at least 2020, evolutionary 

improvements in vehicles with gasoline internal-combustion engines are 

likely to prove the most cost-effective approach to reducing petroleum 

consumption. Gasoline-electric hybrids will likely play an increasingly 

important role as their production volume increases and their cost, 

relative to that of conventional vehicles, decreases. Meeting the EISA 
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Transportation 177

standards is likely to require that, over the next decade or two, an everlarger fraction of the new vehicle fleet be hybrids or plug-in hybrids.

T.4 Beyond 2020, continuing reductions in fuel consumption are possible. 

Plausible efficiency improvements in light-duty vehicles, alongside 

weight reduction and more extensive use of hybrid and plug-in hybrid 

(and possibly battery-electric) vehicles, could reduce transportation 

fuel consumption to below the levels implied by the higher 2020 fueleconomy standards mandated by the EISA. An especially important 

R&D focus is developing marketable vehicles that use electricity, which 

will require improving the performance and reducing the cost of highenergy-storage batteries.

T.5 A parallel longer-term prospect is fuel cells with hydrogen as the energy 

carrier. To be attractive, major improvements, especially in reducing costs, are needed. Widespread implementation requires significant 

investment in efficient, low-greenhouse-gas-emissions hydrogen supply 

and distribution systems. Onboard hydrogen storage is a key R&D 

issue. Establishing a new propulsion system technology and new fuel 

infrastructure on a large scale is a formidable task, and significant 

deployment of fuel-cell vehicles is unlikely before 2035.

T.6 There are opportunities to reduce energy use in freight transportation 

by improving both vehicle efficiency and freight system logistics and 

infrastructure. Reductions of 10–20 percent in the fuel economy of 

heavy- and medium-duty vehicles appear feasible over a decade or so. 

A broad examination is needed of the potential for improving the effectiveness of the freight system to reduce energy consumption further. 

T.7 Air transport and waterborne shipping have become more energyefficient in response to higher fuel prices. Jet engine and aircraft technology has the potential to improve the efficiency of new aircraft by 

up to 35 percent over the next two decades. However, improvements 

in aviation efficiency for passenger transport are unlikely to fully offset projected growth in air travel. Major additional issues are the full 

greenhouse gas and other environmental impacts of aviation fuel use 

at high altitude and of growing airline travel; the potential for using 

biomass-based fuels in jets; and whether the use of low-grade residual 

fuel in oceangoing vessels will continue.

T.8 Most transportation efficiency studies and proposals have focused on 

the considerable energy efficiency gains that could be achieved with 
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Real Prospects for Energy Efficiency in the United States 

178 Real Prospects for Energy Efficiency in the United States

improved vehicles rather than in the transportation system as a whole. 

This emphasis is appropriate given the potential for and impact of such 

gains. However, major insights and improvements can result from a 

broader and deeper understanding of transportation system issues. The 

potential overall impact of such broader, system-based changes, such 

as densifying and reorganizing land use and collective modes of travel, 

needs further exploration and quantification. Developing better data 

and tools that can be used to analyze and forecast how different policies 

and investments might affect vehicle use and travel is thus an important 

task. 

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Special Report 286. Washington, D.C.: The National Academies Press.

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Research Board Special Report 290. Washington, D.C.: The National Academies Press.

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Letter Report. Washington, D.C.: The National Academies Press.

NRC. 2008c. Transitions to Alternative Transportation Technologies—A Focus on 

Hydrogen. Washington, D.C.: The National Academies Press.

NRC. 2008d. Review of the Research Program of the FreedomCar and Fuel Partnership: 

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Ricardo, Inc. 2008. A Study of Potential Effectiveness of Carbon Dioxide Reducing Vehicle 

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Samaras, C., and K. Meisterling. 2008. Life cycle assessment of greenhouse gas emissions from plug-in hybrid vehicles: Implications for policy. Environmental Science and 

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Vidal, J. 2007. CO2 output from shipping twice as much as airlines. The Guardian. March 

3. Available at http://www.guardian.co.uk/transport/Story/0,,2025723,00.html.
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Wang, M., C. Saricks, and D. Santini. 1999. Effects of fuel ethanol use on fuel-cycle energy 

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mobilityfull.Pdf.

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Real Prospects for Energy Efficiency in the United States 

185

Building on improvements in energy efficiency in U.S. industrial manufacturing that have occurred over the past several decades in response to volatile fossil-fuel prices, fuel shortages, and technological advances is essential to 

maintaining U.S. industry’s viability in an increasingly competitive world. The fact 

is that many opportunities remain to incorporate cost-effective, energy-efficient 

technologies, processes, and practices into U.S. manufacturing. This chapter 

describes the progress made to date and the magnitude of the untapped opportunities, which stem both from broader use of current best practices and from a range 

of possible advances enabled by future innovations. It focuses on the potential 

for improving energy efficiency cost-effectively in four major energy-consuming 

industries—chemical manufacturing and petroleum refining, pulp and paper, iron 

and steel, and cement—and discusses the role of several crosscutting technologies 

as examples. In addition, this chapter identifies major barriers to the deployment 

of energy-efficient technologies, outlines the business case for taking action to 

improve the energy efficiency of U.S. manufacturing, and presents the associated 

findings of the Panel on Energy Efficiency Technologies.

4.1 ENERGY USE IN U.S. INDUSTRY IN A GLOBAL CONTEXT

As shown in Chapter 1, Figure 1.1, industry is responsible for 31 percent of primary energy use in the United States. Figure 4.1 illustrates how this energy use 

was distributed among industries, particularly the most energy-intensive ones, in 

2004.

4 Energy Efficiency in industry
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Real Prospects for Energy Efficiency in the United States 

186 Real Prospects for Energy Efficiency in the United States

Transportation

28%

Industry

33%

Chemicals 7.8

Commercial

18%

Residential

21%

Aluminum 0.9 

Nonmanufacturing 4.1

Other Manufacturing 3.8

Iron and Steel 1.9

Petroleum Refining 7.3

Fabricated Metals 0.7

Food Processing 1.6

Nonmetallic Minerals 1.4

Forest Products 3.3

Plastic and Rubber 0.7 

4.1 Efficiency

FIGURE 4.1 Total energy use in the U.S. industrial sector in 2004, quadrillion Btu (quads). 

Values include electricity-related losses. Total U.S. energy use in 2004 was 100.4 quads; 

total U.S. industrial energy use in 2004 was 33.6 quads.

Source: Craig Blue, Oak Ridge National Laboratory, based on EIA (2004) (preliminary) and 

estimates extrapolated from EIA (2002).

Globally, industry is the largest consumer of energy—the energy that it consumes exceeds that devoted to transportation, the residential sector, and commercial buildings combined. According to the International Energy Outlook 2009,

the industrial sector worldwide used 51 percent of the total delivered energy (or 

50 percent of the primary energy) in the year 2006, and its demand was projected to grow by an annual rate of 1.4 percent between 2006 and 2030 (EIA, 

2009a).1 Before 1973, manufacturing was the largest energy consumer in most 

member countries of the Organisation for Economic Cooperation and Development (OECD), but in recent years its dominance has subsided as industrial output 

has slowed, energy efficiency has increased, and other sectors have surged ahead 

(Schipper, 2004). As a result, industrial energy demand in OECD countries was 

anticipated to grow only 0.6 percent annually. In contrast, industrial-sector energy 

1See http://www.eia.doe.gov/oiaf/ieo/excel/ieoendusetab_1.xls.
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 187

consumption in non-OECD countries was projected to increase by 2.1 percent per 

year over the same period, with the most rapid growth occurring in China and 

India. 

As of 2006, industry accounted for 33 percent of the primary energy consumed in the United States and 28 percent of carbon dioxide (CO2

) emissions 

(EIA, 2008). Overall, the quantity of energy used by U.S. industries is huge, estimated at 32.6 quadrillion British thermal units (quads) of primary energy in 2006 

at a cost of $205 billion. About 5 quads, or 21 percent of this total, was for nonfuel uses of coal, gas, and oil—for example, the use of oil refining by-products in 

asphalt, natural gas employed as a feedstock for petrochemicals, and petroleum 

coke used in the production of steel (EIA, 2009b). U.S. industries use more energy 

than the total energy used by any other Group of Eight (G8) nation and about 

half of the total energy used by China (DOE, 2007b). 

The average annual rate of growth of energy in the U.S. industrial sector is 

projected to be 0.3 percent out to 2030, while CO2 emissions from U.S. industry 

are projected to increase more slowly, at 0.2 percent annually (EIA, 2008). These 

low rates are due partly to the presumed introduction of energy-efficient technologies and practices in industry. They also reflect the projected restructuring of 

the economy away from energy-intensive manufacturing and toward service and 

information-based activities. Many of the commodities that were once produced in 

the United States are now manufactured offshore and imported into the country. 

The energy embodied in these imported products is not included in the standard 

energy metrics published by the Energy Information Administration (EIA) of the 

Department of Energy (DOE). According to an analysis by Weber (2008), products imported into the United States in 2002 had an embodied energy content of 

about 14 quads, far surpassing the embodied energy of exports from the United 

States (about 9 quads).

The most energy-intensive manufacturing industries are those producing 

metals (iron, steel, and aluminum); refined petroleum products; chemicals (basic 

chemicals and intermediate products); wood and glass products; mineral products 

such as cement, lime, limestone, and soda ash; and food products. As shown in 

Figure 4.1, these industries are responsible for more than 70 percent of industrial 

energy consumption. Industries that are less energy-intensive include the manufacture or assembly of automobiles, appliances, electronics, textiles, and other 

products. 
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Real Prospects for Energy Efficiency in the United States 

188 Real Prospects for Energy Efficiency in the United States

4.1.1 Recent Trends in Industrial Energy Use

Primary-energy use in the industrial sector declined in the 1970s following the 

run-up of energy prices. Energy consumption bottomed out in the mid-1980s and 

then increased steadily through the turn of the century, exceeding its previous 

peak. Table 4.1 shows energy use for selected years within this period (excluding 

nonfuel uses). In recent years, industrial energy use has declined partly as a result 

of the economic restructuring noted above. Energy use in the manufacturing sector 

continues to be significantly higher than in the nonmanufacturing sectors, which 

include agriculture, forestry and fisheries, mining, and construction. Energy-use 

trends in some sectors have been relatively stable, such as in chemical manufacturTABLE 4.1 Total U.S. Industrial Energy Use (Excluding Nonfuel Uses of Coal, Oil, and Natural 

Gas), in Selected Years from 1978 to 2004 (in quadrillion Btu)

Usea 1978 1985 1990 1995 2002

Food Manufacturing, Beverage, and Tobacco (311/312) 1.36 1.4 1.35 1.72 1.77

Textile Mills, Textile Mill Products (313/314) 0.53 0.43 0.46 0.54 0.44

Apparel, Leather and Allied Products (315/316) 0.19 0.10 0.11 0.16 0.66

Wood Product Manufacturing (321) 0.64 0.52 0.59 0.67 0.70

Paper Manufacturing (322) 2.38 2.66 3.16 3.17 3.14

Printing and Related Support Activities (323) 0.16 0.15 0.20 0.22 0.23

Petroleum and Coal Products Manufacturing (324) 3.09 2.01 3.37 3.37 3.92

Chemical Manufacturing (325) 4.20 3.05 4.22 4.22 4.06

Plastic and Rubber Products Manufacturing (326) 0.45 0.44 0.52 0.67 0.86

Nonmetallic Mineral Product Manufacturing (327) 1.62 1.16 1.29 1.23 1.32

Primary Metal Manufacturing (331) 5.01 2.43 2.73 2.74 2.70

Fabricated Metal Product Manufacturing (332) 0.66 0.58 0.65 0.75 0.72

Machinery Manufacturing (333) 0.50 0.38 0.43 0.44 0.39

Computer and Electronic Product Manufacturing (334) 0.29 0.39 0.47 0.47 0.38

Electrical Equipment, Appliance, and Component 

Manufacturing (335)

0.24 0.23 0.29 0.34 0.27

Transportation Equipment (336) 0.73 0.66 0.70 0.77 0.82

Furniture and Related Product Manufacturing (337) 0.12 0.09 0.12 0.13 0.14

Miscellaneous Manufacturing (339) 0.14 0.11 0.12 0.14 0.17

Total (Manufacturing) 22.3 16.8 20.8 21.7 22.1

Total (Non-Manufacturing) Not

available

6.0 4.8 5.5 3.3

aNorth American Industry Classification System codes are given in parentheses. Totals may not equal sum of components due 

to independent rounding.

Source: U.S. Department of Energy, U.S. Energy Intensity Indicators, Trend Data, Industrial Sector. Available at http://www1.

eere.energy.gov/ba/pba/intensityindicators/.
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 189

TABLE 4.2 Primary Energy Consumption by Type of Fuel in the U.S. Industrial Sector 

(quadrillion Btu, or quads)

1978 1985 1990 1995 2002

Petroleum 9.87 7.74 8.28 8.61 9.57

Natural gas 8.54 7.08 8.50 9.64 8.67

Coal 3.31 2.76 2.76 2.49 2.03

Renewable energy 1.43 1.91 1.67 1.91 1.68

Source: U.S. Department of Energy, U.S. Energy Intensity Indicators, Trend Data, Industrial Sector. Available at http://www1.

eere.energy.gov/ba/pba/intensityindicators/.

ing and wood product manufacturing. In other sectors, however, energy use has 

increased significantly. For example, energy use in the plastic and rubber products 

manufacturing sector almost doubled between 1978 and 2002. 

Petroleum and natural gas are the two most common fuels consumed by the 

industrial sector (Table 4.2). While the use of petroleum and natural gas increased 

by 24 and 22 percent, respectively, from 1985 to 2002, coal consumption dropped 

by approximately 27 percent. The use of renewable energy has fluctuated over the 

years, totaling 1.43 quads in 1978, rising to 1.91 quads in 1985, and then retreating to 1.68 quads in 2002.

4.1.2 Energy-Intensity Trends and Comparisons

Between 1985 and 2003, industrial-sector gross domestic product (GDP) 

increased by 64 percent, while industrial energy use increased by only 12 percent 

(Figure 4.2), resulting in a significant decline in the energy intensity of the industrial sector (DOE/EERE, 2008). As previously noted, over the past decade structural factors (the change in manufacturing output relative to industrial output and 

the shift among manufacturing sectors to less energy-intensive industries) have 

caused a decline in energy intensity and in total industrial energy use. 

By comparing the energy intensity of manufacturing across 13 countries that 

are members of the International Energy Agency (IEA), Schipper (2004, p. 18) 

provides a glimpse into the relative efficiency of U.S. manufacturing. A simple 

comparison of manufacturing energy use per dollar of output suggests that the 

United States has a slightly higher than average manufacturing energy intensity. 

This is corroborated by statistics from the IEA (2004, p. 69) on energy use per 

unit of manufacturing value added in countries that are members of the OECD. 
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Real Prospects for Energy Efficiency in the United States 

190 Real Prospects for Energy Efficiency in the United States

4.2 Efficiency

Year

Index (1985 = 1.0)

1.8

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

0.0

1985 1987 1989 1991 1993 1995 1997 1999 2001 2003

GDP in Industry

Energy Use

Structure

Intensity

GDP 

Inten

Struc

Ener

FIGURE 4.2 Trends in U.S. industrial sector gross domestic product (GDP), energy use, 

structure, and energy intensity, 1985–2003. Industrial GDP increased 64 percent between 

1985 and 2003; energy intensity (energy use per dollar of GDP) declined by 19 percent 

over the same period, with most of the decline occurring since 1993. “Structure” represents the change in manufacturing as a fraction of total industrial output, and the 

changes that have occurred within manufacturing. 

Manufacturing, which is more energy-intensive than nonmanufacturing, has seen a 

growth in GDP relative to total industrial GDP, with most of that change occurring since 

1995. This factor has added about 6 percent to energy use, most of this effect occurring 

after the recession in the early 1990s. Manufacturing industries that are less energyintensive have grown relative to those manufacturing industries that are highly energyintensive, thus reducing the energy intensity of manufacturing as a whole. 

Source: DOE/EERE, 2008. 

The United States is considered a country with medium energy intensity country 

along with Finland, Sweden, and the Netherlands. High-energy-intensity countries 

include Norway, Australia, and Canada. At the same time, the United States has a 

less energy-intensive manufacturing sectoral structure relative to the other 12 IEA 

member countries, many of which are big producers of raw materials (e.g., Australia, Canada, the Netherlands, Norway, and Finland).2 Correcting for this difference raises the U.S. energy-intensity index compared with that of other IEA coun2Taking into account the activity of multinational corporations headquartered in each 

country. 
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 191

tries. While the analysis by Schipper is based on somewhat dated statistics (focusing on 1994), the panel’s assessment is that its fundamental conclusion regarding 

the relative energy inefficiency of U.S. manufacturing remains valid.

The EIA’s Annual Energy Outlook 2007 forecasted that U.S. industrial 

energy consumption would increase from approximately 34.1 quads in 2006 to 

35.8 quads in 2020 and 38.7 in 2030 (EIA, 2007). This baseline forecast assumed 

the continuation of current policies and some autonomous, or naturally occurring, 

efficiency improvement (see Section 4.2.1.4).

The EIA’s Annual Energy Outlook 2008 reduced the 2007 forecast’s projected increase in U.S. industrial energy consumption substantially to reflect the 

nation’s economic slowdown, rising energy prices, and the passage of the Energy 

Independence and Security Act of 2007 (P.L. 110-140) (EIA, 2008). With rising 

prices and more policy levers encouraging energy efficiency, greater energy efficiency improvement is anticipated to occur naturally as part of the 2008 baseline 

forecast. Specifically, the 2008 EIA estimate of U.S. industrial energy consumption 

for 2006 is 32.6 quads, 34.3 quads for 2020, and 35.0 quads for 2030 (Table 

4.3). With a lower anticipated rate of growth in energy consumption, the potential 

for further cost-effective efficiency improvements must be recalibrated. This has 

been done by scaling the percentage savings for 2007 to the 2008 projections (see 

Section 4.2.1.1).

TABLE 4.3 “Business as Usual” Forecast of U.S. Industrial 

Energy Consumption (quadrillion Btu, or quads)

Industry 2006 2020 2030

Refining 3.94 6.07 7.27

Aluminum 0.39 0.36 0.33

Iron and steel 1.44 1.36 1.29

Cement 0.45 0.43 0.41

Bulk chemical 6.83 6.08 5.60

Paper 2.18 2.31 2.49

Total 32.6 34.3 35

Source: EIA, 2008a. 
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Real Prospects for Energy Efficiency in the United States 

192 Real Prospects for Energy Efficiency in the United States

4.2 POTENTIAL FOR ENERGY SAVINGS

4.2.1 Review of Studies of Energy Efficiency Potential 

Two major studies that have attempted to assess the potential for cost-effective 

energy efficiency improvements across the U.S. industrial sector—Scenarios for a 

Clean Energy Future (IWG, 2000) and The Untapped Energy Efficiency Opportunity in the U.S. Industrial Sector (McKinsey and Company, 2007)—are described 

below. In addition, many studies have examined the potential for energy efficiency 

in individual manufacturing industries such as aluminum, chemicals, and paper; 

others have focused on the potential impact of specific technologies (such as 

membranes or combined heat and power [CHP]) or families of technologies (e.g., 

sensors and controls, fabrication and materials). Such cross-sectional studies are 

the subject of Section 4.3 (focusing on major energy-consuming industries) and 

Section 4.4 (focusing on crosscutting technologies and processes). Because they 

do not treat the industrial sector comprehensively, these studies do not enable a 

sector-wide estimation of economic energy efficiency potential. However, they 

provide valuable benchmarking of the two comprehensive studies discussed below. 

In addition, there are state-level and international assessments of industrial energy 

efficiency potential, which are also drawn on below.

4.2.1.1  U.S. Industrial-Sector Assessments

In the DOE-sponsored study Scenarios for a Clean Energy Future (CEF), prepared by the Interlaboratory Working Group on Energy-Efficient and Clean 

Energy Technologies (IWG), a portfolio of advanced policies3 was estimated to 

reduce energy consumption in the industrial sector by 16.6 percent relative to a 

business-as-usual (BAU) forecast, at no net cost to the economy (IWG, 2000; see 

also Brown et al., 2001, and Worrell and Price, 2001). The assumptions made in 

the study regarding cost-effectiveness are detailed in Box 4.1. The policies were 

assumed to be implemented in the year 2000; the 16.6 percent reduction was 

the difference between the BAU forecast for 2020 and the scenario trajectory 

3The effects of many policies for reducing energy use and greenhouse gas emissions from industry are modeled in Scenarios for a Clean Energy Future (IWG, 2000). These include industrywide agreements to reduce greenhouse gas emissions, the expanded deployment and marketing of 

ENERGY STAR® buildings, the rapid expansion of industrial energy assessment programs, and a 

carbon cap-and-trade system.
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 193

in 2020 as defined by advanced policies. The annual energy cost savings from 

the advanced scenario was estimated to exceed the sum of the annualized policy 

implementation costs and the incremental technology investments. (See Box 4.2 

for further description of the CEF study.)

BOX 4.1 Cost-Effectiveness of Industrial 

Energy Efficiency Investments

Investment decisions can be characterized by the internal rate of return (IRR), 

also called the hurdle rate, used to trigger an expenditure. The IRR involves a discounted cash flow analysis that is based on a firm’s cost of capital plus or minus a 

risk premium to reflect the project’s particular risk profile. McKinsey and Company 

(2007, 2008) assumes that investments with an IRR greater than 10 percent are 

cost-effective. In their studies, each investment opportunity is treated individually; 

no integrated analysis is conducted to determine whether investments in one technology might impact the economics of other investment options.

The CEF study, Scenarios for a Clean Energy Future (IWG, 2000), does not 

use a single hurdle rate. Rather, it draws on a variety of best-in-class modeling 

approaches that employ economic metrics seen as appropriate to particular sectors 

and technologies. 

For example, in the buildings sector, the business-as-usual hurdle rate is 

assumed to be about 15 percent (in real terms). In the advanced scenario, the 

potential impact of individual policies on energy demand was assessed in detailed 

spreadsheets using lower discount rates (typically about 7 percent), reflecting the 

influence of supporting policies that remove barriers to the adoption of energyefficient technologies. The hurdle rates and other parameters inside the buildingssector modules of the National Energy Modeling System (NEMS; the energy 

modeling system used by the U.S. Department of Energy’s Energy Information 

Administration) were then changed so that the model replicates the energy savings calculated from the CEF spreadsheets (IWG, 2000). 

In the industrial sector, the business-as-usual hurdle rate was generally assumed 

to be approximately 30 percent. In the advanced scenario, industrial subsectors 

were assessed using a hurdle rate of 15 percent to reflect the impact of the policy 

instruments that reduce transaction costs and financial risks. Combined heat and 

power (CHP) was modeled separately using Resource Dynamics Corporation’s 

DISPERSE model because of limitations of the NEMS model (IWG, 2000). 

As a final step, the NEMS integration model was used to assess the full range 

of effects of the economy-wide technology and policy scenarios. The integration 

step allows technology trade-offs and allows the effects of changes in energy use 

in each sector to be taken into account in the energy-use patterns of other sectors 

(IWG, 2000).
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Real Prospects for Energy Efficiency in the United States 

194 Real Prospects for Energy Efficiency in the United States

BOX 4.2 The Scenarios for a Clean Energy Future Study

The study Scenarios for a Clean Energy Future (CEF; IWG, 2000) was conducted 

by scientists at five U.S. Department of Energy (DOE) national laboratories with 

more than $1 million in funding from the DOE and the U.S. Environmental 

Protection Agency. Published in November 2000, it involved a comprehensive analysis of U.S. technology and policy opportunities, using a combination 

of engineering-economic analysis and a modified version of the DOE Energy 

Information Administration’s National Energy Modeling System (CEF-NEMS). In the 

study the major sectors of the economy (buildings, industry, transportation, and 

electricity) were analyzed separately to identify the most cost-effective energy 

policy and technology alternatives for addressing multiple energy-related challenges facing the nation. Using CEF-NEMS, an integrated assessment of technology 

and policy options was produced. Seven supplemental studies are published in the 

CEF report’s 600-page appendix (e.g., an assessment of combined heat and power 

opportunities). The appendix also contains details of the engineering-economic 

analysis so as to enable full public disclosure and replication by others. The report 

had extensive peer review, including that of a blue-ribbon advisory committee, 

and the results were the subject of a special issue of Energy Policy published in 

2001 (see Brown et al., 2001). 

Taken from the Annual Energy Outlook 1999, the BAU forecast used in the 

CEF study (IWG, 2000) estimated that the U.S. industrial sector would require 

41.2 quads of energy in 2020. In contrast, the advanced portfolio of policies 

(defined earlier in the CEF study and assumed implemented by 2020) produced 

a scenario with industry requiring only 34.3 quads of energy (saving 6.9 quads 

of energy, a 16.6 percent reduction). The 2008 EIA projection (EIA, 2008) forecasts a BAU industrial-sector consumption of only 34.3 quads of energy in 2020. 

Scaling the 16.6 percent savings estimate to this lower level of future baseline 

industrial energy consumption suggests a savings of 5.7 quads, or a possible policy-induced reduction in industrial energy use to 28.4 quads.4 These sector-wide 

4When the panel applies older estimates of percentage improvement to newer (and lower) 

BAU estimates of energy to estimate the absolute energy savings, it is possible to create doublecounting even if there was no double-counting in the original estimate of percentage improvement. That is, some of the energy efficiency improvements in the original estimate may have 

become a part of the BAU forecast (partially explaining the reduction in the BAU). The panel 

expects this problem to be negligible or nonexistent, because new energy efficiency opportunities 
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 195

savings estimates do not account for the possible efficiencies available from CHP 

systems, because at the time of the Annual Energy Outlook 1999, the model used 

by the EIAthe National Energy Modeling Systemwas unable to model CHP 

technology in an integrated manner. 

The Scenarios for a Clean Energy Future study commissioned an off-line 

analysis of the economic energy-savings potential of new CHP under “advanced” 

policies. This assessment concluded that CHP could reduce the energy requirements of the industrial sector by 2.4 quads in 2020 (IWG, 2000; Lemar, 2001). 

Scaling this estimate to reflect the downward forecast of future industrial energy 

consumption suggests an economic savings potential of 2 quads.5 In combination 

with the sector’s other energy efficiency opportunities identified in the CEF study, 

this brings the total estimate of economic energy-savings potential to 7.7 quads, 

or 22.4 percent of the Annual Energy Outlook 2008 (EIA, 2008) forecasted consumption of 34.3 quads in 2020.

Building on the CEF study, on other assessments, and on original research, a 

more recent publication by McKinsey and Company (2007)6 concurred that U.S. 

industries have a significant opportunity for energy efficiency gains (Figure 4.3). 

Financially attractive investments (defined as those with internal rates of return 

[IRRs] of 10 percent or greater) are estimated to offer 3.9 quads in energy-usage 

reduction in 2020, compared with the business-as-usual forecast based on the reference case of the Annual Energy Outlook 2007 (EIA, 2007). These investments 

are estimated by McKinsey and Company (2007) to generate $30–$55 billion in 

increased earnings, before interest and taxes, by 2020; this earnings growth would, 

in turn, generate a $210–$385 billion increase in the market value of industrial 

companies. As shown in Figure 4.3, an additional 1.0 quad is identified by McKinsey and Company (2007) as “additional opportunities through driving R&D,” 

bringing the estimated energy efficiency potential in the industrial sector to 4.9 

arise each year as infrastructure and equipment age and as new and improved technologies are 

introduced into the marketplace.

5The EIA 1998 forecast of industrial energy consumption in 2020 was 41.2 quads, and the 

EIA 2008 forecast is 34.3. Multiplying 2.4 quads times the ratio of these two forecasts (0.83) 

results in the estimated 2.0 quad savings from the use of CHP.

6The McKinsey and Company study has been widely criticized for ignoring adoption and 

transaction costs and the potential impacts on product attributes. For example, it does not include the cost of policy or program implementation, as is done in great detail in the CEF study 

(IWG, 2000; see Appendix E-1 of that study). 
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Real Prospects for Energy Efficiency in the United States 

196 Real Prospects for Energy Efficiency in the United States

4.3 Efficiency

Year

Projected Energy Deman

d

(Quadrillion Btu)

45

4

35

32.5

30

25

2005 2010 2015 2020

GDP in 

Intensi

Structu

Energy 

Energy Demand Due

to GDP Growth

Natural Industry Evolution,

Mix Shift, and Expected

Efficiency Gains

43.8

35.8

31.9

30.5

29.5

Opportunities >10% IRR

Opportunities 0 to 10% IRR

Additional Opportunities

Through Driving R&D

EIA Baseline

FIGURE 4.3 Summary of industrial energy efficiency opportunities through 2020 identified by McKinsey and Company. 

Note: GDP = gross domestic product; IRR = internal rate of return; R&D = research and 

development. 

Source: McKinsey and Company, 2007.

quads. Lower-returning projects with positive IRRs below 10 percent are also acknowledged by McKinsey and Company.

Contained within the 3.9 quads of energy efficiency potential are several 

crosscutting energy-saving opportunities totaling 1.5 quads. CHP represents 46 

percent of this opportunity (or 0.7 quad) and is characterized by McKinsey and 

Company (2007, p. 3) as “the leading cross-segment opportunity.” This estimate 

for CHP is considerably less than the 2.0 quad estimate from Scenarios for a 

Clean Energy Future (IWG, 2000). Because McKinsey and Company (2007) does 

not publish its background data, it is not possible to reconcile these two results. 

A recent National Research Council (NRC) study concluded that CHP economics are likely to improve in the near term through technology advancements and 

new niche applications for which CHP offers an economic advantage (NRC, 

2007). Perhaps some of this future potential for CHP is included in the McKinsey 

and Company estimate of savings from new research and development (R&D) 

investments. There may also be differences in the more limited potential assigned 

to small (<5 MW) projects by McKinsey and Company (2007, p. 47) compared 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 197

with the CEF study and others (Pace Energy Project, 2002).7 An additional study 

by Bailey and Worrell (2005) provides estimates of the opportunity for “nontraditional” CHP technologies. It identifies 7.4 quads of potential savings relative 

to 2002 U.S. energy consumption. However, only 5 of the 19 technologies identified are related to CHP technologies (i.e., advanced cogeneration, steam-injected 

gas turbine, gas turbine process heater, gas turbine drying, and fuel cells), resulting in an estimated technical energy efficiency potential in industry of about 4.4 

quads. This is comparable to the proposition examined by Shipley et al. (2008) 

that the United States could create a 20 percent generating capacity from CHP by 

the year 2030, which would lead to a fuel savings of 5.3 quads, or approximately 

half of the total energy currently consumed by U.S. households. The report also 

estimates that such an investment in CHP would create 1 million new green-collar 

jobs and $234 billion in new investments across the United States.

Table 4.4 summarizes the two studies’ estimates of energy-savings potential 

in various industrial subsectors. It also shows estimates from other U.S. studies 

and global estimates from the IEA (see Section 4.2.1.2 below). The CEF study 

estimates a large potential for economic energy savings in pulp and paper manufacturing (6.3 percent), iron and steel (15.4 percent), and cement (19.1 percent) 

(IWG, 2000, Table 5.8; Worrell and Price, 2001). Applying savings at these percentages to the latest BAU forecast of energy consumption in 2020 (based on the 

EIA, 2008) results in savings estimates of 0.14, 0.21, and 0.08 quad, respectively. 

On a segment-by-segment basis, McKinsey and Company (2007) concluded 

that the largest untapped opportunities for U.S. industrial energy efficiency savings 

reside in pulp and paper and in iron and steel. Because of the limited documentation underpinning these estimates, the panel treats them as qualitatively instructive. Relative to the McKinsey and Company study, the CEF study estimates for 

the iron and steel and cement industries are similar, but the estimate for the pulp 

and paper industry is significantly lower.

Table 4.5 summarizes the savings estimates in a different way, showing the 

overall range of savings identified for each energy-intensive industry, and for 

industry as a whole, and the baseline for the analysis.

7McKinsey and Company (2007, p. 47) postulates that “the economics of smaller facilities 

(<5 MW) are less attractive and offer diminished potential for additional energy savings beyond 

business as usual gains. Other issues with smaller CHP projects include: a) higher operating costs 

and lower heat rates; and b) high fixed costs (e.g., engineering, design, legal).” 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

198 Real Prospects for Energy Efficiency in the United States

TABLE 4.4 Economic Potential for Energy Efficiency Improvements in Industry in the Year 

2020: Sector-wide and by Selected Subsectors and Technologies

Estimates for U.S. Industry

CEF Study (IWG, 2000)

Scaled to AEO 2008 

(quads)

McKinsey and 

Company (2008)

(quads)

Other U.S. 

Studies

(quads)

Global 

Estimates from 

IEA (2007)

(%)

Petroleum refining n.a. 0.3 0.61–1.21

to

1.40–3.28a

13–16

Pulp and paper 0.14b 0.6 0.37 to 0.85c 15–18

Iron and steel 0.21d 0.3 0.79e 9–18

Cement 0.08f 0.1 0.29g 28–33

Chemical manufacturing n.a. 0.3 0.19h to 1.1i 13–16

Combined heat and power 2.0 0.7 4.4–6.8j

Total, industrial sector 7.7

(22.4%)

4.9

(14.3%)

18–26

Note: This table appeared in Lave (2009) before this report was completed. The data in Table 4.4 have been updated since the 

Lave (2009) article was published. CEF study, Scenarios for a Clean Energy Future (IWG, 2000); AEO 2008, Annual Energy 

Outlook 2008, with Projections to 2030 (EIA, 2008); n.a., not available. aBased on a range of 10–20 percent savings (LBNL, 2005) to 23–54 percent savings (DOE, 2006b) from a baseline forecast 

of 6.08 quads. b6.1 percent of the 2.31 quads of energy consumption forecast for the paper industry in 2020 by the Annual Energy Outlook 

2008 (EIA, 2008).

c

Based on 16 percent savings (Martin et al., 2000a) and 37 percent savings (DOE, 2006c) from the baseline forecast of 2.31 

quads. d15.4 percent of the 1.36 quads of energy consumption forecast for the iron and steel industry in 2020 by the Annual Energy 

Outlook 2008 (EIA, 2008). e

Based on 58 percent savings (AISI, 2005) from the baseline forecast of 1.36 quads. 

f

19.1 percent of the 0.43 quads of energy consumption forecast for the cement industry in 2020 by the Annual Energy 

Outlook 2008 (EIA, 2008). gBased on 67 percent savings (Worrell and Galitsky, 2004) from the baseline forecast of 0.43 quads.

hNational Renewable Energy Laboratory, 2002. 

i

DOE, 2007.

j

Bailey and Worrell, 2005.

4.2.1.2  International Assessments

The Intergovernmental Panel on Climate Change (IPCC) came to conclusions similar to those of the CEF (IWG, 2000) and McKinsey and Company (2007) studies 

regarding the industries with the largest carbon-mitigation potentials worldwide. 

Specifically, the IPCC identified the steel, cement, and pulp and paper industries as 

having the largest potential for energy savings (IPCC, 2007). 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 199

Tracking Industrial Energy Efficiency and CO2 Emissions (IEA, 2007), 

which estimates energy and carbon savings from the adoption of best-practice 

commercial technologies in manufacturing industries, suggests an overall level of 

energy-savings potential of 18–26 percent globally, with large-percentage savings 

from petroleum refining, pulp and paper, iron and steel, cement, and chemical 

manufacturing (see Table 4.4). It concluded that, on the basis of physically produced industrial output, Japan and Korea have the highest levels of manufacturing industry energy efficiency, followed by Europe and North America—levels 

that reflect differences in “natural resource endowments, national circumstances, 

energy prices, average age of plant, and energy and environmental policy measures” (IEA, 2007, p. 20). 

Since the IEA’s estimated energy savings are global percentages, their applicability to the U.S. context is not exact. In particular, care is needed to avoid unrealistic assessments of the savings potential in older industrial plants as compared 

with new, state-of-the-art facilities. International comparisons, however, underscore the potential for efficiency upgrades by U.S. industry.

TABLE 4.5 Summary of Estimated Cost-Effective Energy Savings in Industry Resulting from 

Improved Energy Efficiency (quads)

Industry

Energy Use in Industry

Savings over 

BAU in 2020a,b 2007

Business as Usual (BAU) 

Projection (AEO 2008 reference 

case)

2020 2030

Petroleum refining 4.39 6.07 7.27 0.3–3.28

Iron and steel 1.38 1.36 1.29 0.21–0.76

Cement 0.44 0.43 0.41 0.29

Chemical manufacturing 6.85 6.08 5.60 0.19–1.1

Pulp and paper 2.15 2.31 2.49 0.14–0.85

 Total savings—all industries 

(including those not shown)

4.9–7.7c

14–22%

aBased on Table 4.4, which provides results from a review of studies for specific energy-using industries and for industry as a 

whole, and for industry-wide combined heat and power (CHP). bSavings shown are for cost-effective technologies, defined as those providing an internal rate of return of at least 10 percent 

or exceeding a firm’s cost of capital by a risk premium. c

Includes CHP systems, which contribute an estimated savings in 2020 of 0.7–6.8 quads.
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Real Prospects for Energy Efficiency in the United States 

200 Real Prospects for Energy Efficiency in the United States

4.2.1.3  State Assessments

At least two states—New York and California—have conducted assessments of 

the economic potential for energy efficiency improvements in the industrial sector. 

These studies help to set parameters for estimation of economic energy efficiency 

potential at the national scale.

KEMA, Inc. (2006) provides an assessment of the electric and gas energy efficiency potential in existing industrial facilities in four California utility territories, 

focusing on the year 2016. With a base use of 32,800 GWh forecast for 2016, 

the study estimates that 4970 GWh of electricity use (i.e., 15.1 percent) could be 

eliminated by economic efficiency investments—that is, investments that are costcompetitive with supply-side options. For natural gas, 468 million therms of natural gas are forecast to be the magnitude of economic efficiency opportunity in the 

industrial sector, representing 13 percent of the base use of 3590 million therms in 

2016. Figure 4.4 presents the two supply curves, which identify the least-expensive 

efficiency measures. The least-cost options are arrayed on the left side of the curve 

in ascending order based on levelized energy costs. The width of each line is proportional to the amount of energy that can be saved. KEMA (2006) concludes 

that pumping has the largest electric end-use savings potential, followed by compressed air and lighting. Similarly, boilers represent the largest source of natural 

gas savings potential, followed by process heating.

A similar potential for energy efficiency improvement is described in a 2003 

assessment for New York State. According to Optimal Energy, Inc. (2003), the 

New York Energy Research and Development Authority (NYSERDA) forecasts 

that the industrial sector will require 33,100 GWh of electricity in the year 2022. 

Optimal Energy estimates that 5,000 GWh (15 percent) of this base use could 

be displaced by economic electricity-efficiency measures. The assessment did not 

evaluate natural gas or other energy-savings opportunities.

A combined heat and power market-potential study conducted by the 

NYSERDA identified over 5000 MW of installed CHP capacity at more than 210 

sites in New York State. Close to 80 percent of this capacity is at industrial sites, 

represented by a few facilities that have large CHP systems (Pace Energy Project, 

2002). 

The New York study identified numerous commercial and emerging technologies that can be used for CHP—including the internal combustion engine, 

steam turbine, gas turbine, micro-turbine, and fuel cell—which constitute nearly 

8500 MW of technical potential for new CHP at 26,000 sites. Near-term market-
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 201

4.4 Efficiency

Savings Potential as a Percentage of Base Electricity Use

Levelized Dollars

per Kilowatt-hour Saved

0.50

0.45

0.40

0.35

0.30

0.25

0.20

0.15

0.10

0.05

0.00

0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

Savings Potential as a Percentage of Base Natural Gas Use

Levelized Dollars per Therm Saved

1.20

1.00

0.80

0.60

0.40

0.20

0.00

0% 2% 4% 6% 8% 10% 12% 14%

FIGURE 4.4 Energy efficiency supply curves for California through 2016. The width of 

each portion of the curves is proportional to the amount of energy that can be saved. 

The fact that these two curves reach a maximum as the cost of efficiency options rises 

may simply reflect the limited set of technologies considered that have a marginal return 

on investment. 

Source: KEMA, 2006.
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Real Prospects for Energy Efficiency in the United States 

202 Real Prospects for Energy Efficiency in the United States

penetration forecasts range from 764 MW to nearly 2200 MW over the coming 

decade. Close to 74 percent of remaining capacity is below 5 MW and is located 

primarily at commercial and institutional facilities. Achieving this remaining 

potential depends on the degree to which many of the obstacles outline in Section 

4.5 can be overcome. 

4.2.1.4  Naturally Occurring Efficiency Improvement

The McKinsey and Company (2007) analysis assumes a significant amount of 

energy efficiency improvement in the BAU forecast, based on EIA modeling (see 

in Figure 4.3 the difference between the EIA baseline and the energy demand 

attributable to GDP growth). The naturally occurring improvement results from 

capital stock turnover of outdated technologies, as well as from cost reductions 

and performance improvements achieved from economies of scale and advances 

in science and technology. Thus, the level of energy efficiency improvement 

anticipated in the year 2020 relative to today could be large. For example, DOE 

(2004) identified 5.2 quads of cost-effective energy-savings opportunities from a 

range of end-uses in industrial energy systems, including steam generation, fired 

heaters, on-site power generation, motor systems, and facility heating, ventilation, and air-conditioning (HVAC), and lighting systems. More than 35 percent 

of this total opportunity (1.8 quads) was identified in waste-heat recovery, such 

as from gases and liquids in chemicals, petroleum, and forest products, including 

hot gas cleanup and the dehydration of liquid-waste streams. The second largest 

opportunity (1.4 quads) was identified in best practices in energy management and 

integration. These are the kinds of potential cost savings that EIA assumes will be 

absorbed in the BAU case. Relative to today’s energy efficiency practices, industrial energy efficiency improvements in 2020 could save considerably more energy 

than the 3.9 quads estimated by McKinsey and Company (2007), if the “naturally 

occurring” efficiency improvements are taken into account.

Looking to the midterm (2020–2035), a wide array of advanced industrial 

technologies could make significant contributions to reducing industrial energy 

consumption and CO2 emissions. Possible revolutionary changes include novel 

heat and power sources and systems and innovative concepts for new products 

and processes that take advantage of developments in nanotechnology and micromanufacturing. Examples include the microwave processing of materials and 

nanoceramic coatings, which show great potential for boosting the efficiency of 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 203

industrial processes.8 In addition, advances in recycling (resource recovery and 

utilization)—for example, of aluminum—could reduce the energy intensities of 

U.S. industry. Many of these approaches provide other benefits as well, such as 

improved productivity and reduced waste streams.

4.2.2 The Role of Innovation

Most of the current dialogue focuses on new technology that lowers industry’s 

energy use. In some cases, more important energy savings come from adapting the 

new technology for use in other sectors. For example, developing a new generation of fuel cells may lead to greater savings in motor vehicles. Other possibilities 

include “on-demand” manufacturing that applies ink-jet printing systems to threedimensional fabrication, or new plastics that double as integrated photovoltaic 

systems (Laitner and Brown, 2005). This role of industry in the development of 

emerging technologies highlights even greater energy savings than might be apparent from looking at industry’s own energy-use patterns alone. With the growing focus on corporate sustainability, industry is adopting a much broader view 

of its energy and environmental responsibilities, extending its concern to issues 

surrounding the sustainability of the products and services that it offers, and 

including the sustainability of its chain of suppliers. Wal-Mart, for example, has 

included indicators of energy sustainability in metrics used to select product and 

service providers.9 Accordingly, contractors that create minimal environmental 

impact are preferred.

4.3 OPPORTUNITIES FOR ENERGY EFFICIENCY IMPROVEMENTS 

IN FOUR MAJOR ENERGY-CONSUMING INDUSTRIES

In the chemical and petroleum refining, pulp and paper, iron and steel, and cement 

industries, numerous opportunities exist for energy efficiency improvements. 

These opportunities are characterized below in three timeframes: 5–10 years, 

10–25 years, and beyond 25 years. For each industry, the size of the economic 

energy-savings opportunity is described, along with associated costs, performance 

8See http://cleantech.com/news/3476/ceramic-nanotechnology-delivers-efficiency.

9Jim Stanway, Wal-Mart, personal communication, 2007.
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Real Prospects for Energy Efficiency in the United States 

204 Real Prospects for Energy Efficiency in the United States

improvements, and environmental impacts for each.10 In addition, the discussion characterizes the opportunity for expanding best practices through reinvigorated deployment programs or by removing governmental interventions that 

might inhibit private-sector funding. Finally, for each of the four major energyconsuming industries, promising R&D is identified that is likely to be required 

for these technologies to be ready for launch into the marketplace. In each case, 

government partnerships that might help prepare the technologies for widespread 

commercialization are noted.

4.3.1 Chemical Manufacturing and Petroleum Refining

The chemical industry manufactures an extensive array of organic and inorganic 

chemicals and materials. Raw materials include hydrocarbons from petroleum 

refining, mined chemicals and minerals, and even such animal and plant products as fats, seed oils, sugars, and timber. For energy sources the industry uses 

petroleum-based feedstocks, natural gas, coal, and electricity—and, to a lesser but 

growing extent, biomass.11 Products include thousands of bulk and fine organic 

and inorganic chemicals, polymers, agricultural chemicals, and fertilizers. Production levels are often in million- and billion-pound quantities but do extend to such 

high-value, low-volume products as pharmaceutical intermediates, specialty adhesives, and even perfume ingredients. Most large chemical companies are research 

intensive because of the continual need to generate new and improved products, to 

improve quality and yields, and to conform to environmental regulations. 

Companies are often concentrated near petroleum refineries, around shipping ports, or in places where cheap hydroelectric power is available. Energy costs 

are almost always a major part of total costs, so the need for energy efficiency 

is great. For some energy-intensive products, energy for fuel and power needs 

and feedstocks account for up to 85 percent of total production costs. Reflecting 

higher fuel costs during 2007, the industry spent $73 billion on purchases of fuel 

and power and energy feedstocks. Overall, energy costs (including feedstock costs) 

represent 20 percent of production costs and 10 percent of the value of industry 

shipments (American Chemistry Council, 2008; U.S. Census Bureau, 2007). 

The petroleum industry is similar to the chemical industry in its use of 

10A major issue for each industry is the input-output of material flows, including the consumption of conventional fuels as feedstocks (i.e., “nonfuel” uses). It is beyond the scope of this 

analysis to replicate or characterize such inputs and outputs of alternative production processes.

11See http://www.chemicalvision2020.org/alt_feedstocks.html.
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 205

energy sources and process equipment, but it normally produces a limited range 

of refined hydrocarbon products in high volume for the transportation industry. 

Many refining companies have a bulk-chemical arm to manufacture a limited 

spectrum of high-volume organic chemicals and bulk-polymer intermediates that 

are natural extensions of their refining operations. Petroleum companies vary in 

research intensiveness, but they are generally less dependent on finding new products and processes than the chemical industry is.

For these industries, energy efficiency and product yield are generally key to 

profitability and emissions abatement. Table 4.6 shows U.S. energy consumption 

for these industries from 1985 through 2002 (EIA, 2002). As can be seen, energy 

use from year to year was somewhat erratic, but it generally increased. These 

changes reflect varying industrial production levels, changing product mixes, and 

TABLE 4.6 Petroleum and Chemical Industry Energy Use, Selected Years from 1985 to 2002 

(quads)

Year Fuels

Purchased 

Electricity

Net Energy for 

Heat and Power Feedstocksa

Total Net 

Energy Use

Electricity 

Lossesb

Total 

Primary 

Energy

Petroleum Refining Energy Use 

(SIC 2911, NAICS 324110)

1985 2.46 0.11 2.57 2.45 5.02 0.23 5.25

1988 2.95 0.10 2.90 3.26 6.31 0.21 6.52

1991 2.79 0.10 2.89 2.87 5.76 0.21 5.97

1994 3.87 0.11 3.98 2.39 6.26 0.24 6.50

1998 3.48 0.12 3.48 3.75 7.13 0.21 7.34

2002 3.09 0.12 3.09 3.31 6.39 0.12 6.51

Chemical Industry Energy Use 

(SIC 28, NAICS 325)

1985 1.78 0.43 1.35 3.57 0.90 4.46

1988 2.27 0.42 1.68 4.36 0.86 5.22

1991 2.25 0.44 2.36 5.05 0.91 5.97

1994 2.35 0.52 2.46 5.33 1.08 6.41

1998 3.70 0.58 2.77 6.06 0.99 7.05

2002 3.77 0.52 3.75 6.47 1.58 8.04

Note: SIC, Standard Industrial Classification; NIACS, North American Industry Classification System. aPetroleum feedstock used to produce nonenergy products only (e.g., petrochemicals, lubricating oils, asphalt).

bElectricity losses incurred during the generation, transmission, and distribution of electricity are based on a conversion factor 

of 10,500 Btu/kWh.

Source: Based on data in select DOE reports, 1988−2005.
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Real Prospects for Energy Efficiency in the United States 

206 Real Prospects for Energy Efficiency in the United States

efficiency gains. For example, ExxonMobil achieved a 35 percent reduction in the 

energy intensity of its global refining and chemical operations from 1974 to 1999 

and has identified a further 10–15 percent cost-effective energy-savings opportunity in all plants around the world (Expert Group on Energy Efficiency, 2007).

Benchmarking data indicate that most petroleum refineries can economically improve energy efficiency by 10–20 percent (LBNL, 2005), and analysis of 

individual refining processes indicate energy savings ranging from 23–54 percent (DOE, 2006b). Common technologies include high-temperature reactors, 

distillation columns for liquid-mixture separation, gas-separation technologies, 

corrosion-resistant metal- and ceramic-lined reactors, sophisticated processcontrol hardware and software, pumps of all types and sizes, steam generation, 

and many others. In the DOE (2006b) petroleum bandwidth study, the largest 

potential bandwidth savings are found in crude distillation, with savings of up to 

54 percent of current average energy for atmospheric distillation (39 percent for 

vacuum distillation). Alkylation follows closely, with a potential bandwidth savings of 38 percent, and the remaining processes also exhibit significant potential 

for improving energy efficiencies. According to experts working in the field of 

petroleum refining and energy management, identifying plantwide energy savings 

of approximately 30 percent would be typical. However, these savings estimates 

are calculated on a relative basis. The absolute energy consumption of petroleum 

refineries in the United States must be adjusted to account for increasingly heavy 

crude slates over the coming years. When one adjusts for the use of heavier crude 

slates, the energy consumption of a refinery increases per equivalent amount of 

refined product.

Numerous reports and studies are available that describe near-, intermediate-, 

and potentially longer-term technologies to increase energy efficiency (and 

decrease related carbon emissions) (Expert Group on Energy Efficiency, 2007; 

DOE, 2006b) for both the chemical and the petroleum-refining industries. Three 

recent studies provide a wide range of efficiency-potential estimates. On the low 

side is the estimate that 0.014 quad could be saved by five technologies included 

in the DOE (2006a) Chemical Bandwidth Study. These technologies are applicable 

to the production of ethylene, chlorine, ethylene oxide, ammonia, and terephthalic 

acid. On the high side is the estimate that 1.1 quads of potential energy could be 

saved (DOE, 2007a). This assessment is based on 16 DOE Industrial Technologies 

Program (ITP) portfolio technologies (0.58 quad of savings) and five additional 

R&D technologies from the Chemical Bandwidth Study (0.52 quad of savings). 

Clearly, the magnitude of energy efficiency improvement will tend to expand or 
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 207

contract depending on the number of technologies that are considered. Interestingly, between these two extremes is an assessment based on a single type of technology and an estimated energy efficiency potential of 0.19 quad in the chemical 

industry today (DOE, 2002). This assessment is based on 12.4 percent of fuelsavings potential from steam system improvements.

As discussed in Box 4.3, in the chemical industry (as well as in petroleum 

refining), gaining even the so-called low-hanging fruit for increased energy efficiency faces significant obstacles. However, as is also pointed out, good management practices supported by the top levels of management aim to accomplish the 

savings over a reasonable time period.

One useful perspective on these risks can be seen in the NRC (2007) report 

Prospective Evaluation of Applied Energy Research and Development at DOE.

12

Based on an examination of 22 high-payoff projects, the NRC panel found that 

great potential existed for energy and carbon-emissions reductions, but technical 

and market risks were generally quite high. From an individual company’s viewpoint, the decision to pursue any one of these technology developments could be 

too risky. This risk is often the reason that DOE partners with individual firms or 

groups of companies for technology development and demonstration. 

While both the chemical and petroleum-refining industries are capable of 

prolonged and expensive R&D efforts for their own process improvements, 

advances in crosscutting technologies (such as process-control hardware and software, separation processes and equipment, and heat-management equipment) are 

often best accomplished by, or in collaboration with, vendors. While chemical 

and petroleum-refining companies typically develop process designs and specify 

the desired performance of technologies, they then purchase these technologies, 

thereby saving their R&D organizations for new-product development and specific process innovations. 

In summary, the chemical and petroleum-refining industries have many similarities in raw materials, energy sources, process equipment and control, and the 

opportunity to achieve significant energy efficiency improvements. They differ 

in key ways centered around the breadth of product lines and the areas in which 

innovation will gain them a competitive advantage. Both purchase much of their 

process equipment and controls from specialty providers, which themselves carry 

out R&D to improve their offerings. Factors that can impede the use of technol12See, in NRC (2007), the subsection, “Report of the Panel on DOE’s Chemical Industrial 

Technologies Program.”
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Real Prospects for Energy Efficiency in the United States 

208 Real Prospects for Energy Efficiency in the United States

ogy for energy efficiency improvements include the availability of the necessary 

capital, which must compete with other corporate needs, and, for specific innovations, the costs and risks associated with the marketplace. Generally speaking, 

both industries are endowed with strong technology and engineering organizations 

and are aware of the status of the technologies that they need for future improvements. Both, however, are careful in allocating R&D funds. As discussed above, 

the criteria for such expenditures are strongly influenced by payback times, potential gains in competitive advantage, and the projected timescales and technical and 

marketing risks for a given innovation. 

As a result of these factors, typical industry practice regarding energyintensive facilities such as large-scale distillation columns is to maintain and use 

them for as long as possible, primarily because of the large capital investment that 

BOX 4.3 Barriers to Plucking Low-Hanging 

Energy Efficiency Opportunities

Many reports and studies have been written about the tremendous energy-savings 

opportunities that exist in U.S. energy-intensive industries (as outlined in Section 4.3 

in this chapter). A large portion of these savings are often described as ready for 

the taking with little or no technical risk. As discussed throughout Section 4.3, these 

claims are true for the most part. So why doesn’t a given company move quickly to 

make the necessary investments, which often pay themselves back in a year or less? 

Why are these “sure thing” projects often spread out over years or even sometimes 

ignored? The answer is simple: competition for capital within a corporation and, in 

some situations, a lack of time and/or personnel to install the improvements. 

The top management of a company is responsible for the health of the corporation. A critical component of this duty is the allocation of limited capital among marketing, sales, manufacturing, research and development, and other functions. Capital 

allocations are further split into new plant construction, plant improvements and 

maintenance, office building expansions, and so on. There is tremendous demand at 

all times for capital in a successful company. This allocation process, as with all the 

other allocations, is largely decided on the basis of business need. At any given time, 

more product may be more important than lower energy consumption. Safety and 

compliance are always the number one priority. So in a given year, there may not be 

money for energy efficiency.

But even if there is capital for energy efficiency improvements, other constraints 

exist. Most manufacturing plants have annual shutdowns for maintenance and other 

alterations. These are carefully planned, with all activities to be done in the shortest 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 209

time possible. The object is to get up and running so that no product shortages will 

be created. This shutdown period is especially constraining in times of high product demand. If an energy efficiency improvement cannot be fit into the shutdown 

period, either because of a long implementation period or possibly a lack of available 

personnel, it may be passed over for the time being.

The discussion above in no way implies that energy efficiency, with its positive 

environmental impacts, always gets short shrift—quite the contrary. In energy-intensive industries such as chemical manufacturing, energy efficiency is often where the 

“big money” is. Well-run companies are usually aware of this and have implemented 

numerous “best practices” to ensure that they gain these savings as rapidly as 

possible.

The Dow Chemical Company management, for example, strives to commit 

its entire organization to energy efficiency in manufacturing (Fred Moore, Dow 

Chemical Company, December 2007). Top management sets aggressive, 10-year 

energy efficiency goals for each process. This adds up to a publicly stated energy efficiency goal for the company. To ensure that these goals are met, the company has 

put into place an energy management organization that is distributed throughout 

the business units, with reporting lines to the top of the company. Each business unit 

must have specific 10-year plans that show how it intends to accomplish its part of 

the company goal and the schedule for doing so. These individual plans consist of 

three 10-year subplans covering what will be done, what the unit would like to do, 

and what the unit needs in terms of innovation. Frequent reporting on progress in 

all three plans is required. Salary, bonus, and career progression are all linked to the 

goal. From 1994 to 2005, Dow’s programs achieved a 22 percent reduction in energy 

intensity. The company’s goal for the next 10 years is an additional 25 percent.

they represent. The consequence is that the motivation to replace them with more 

efficient equipment is often very low.

Three studies estimate the potential for energy savings in the chemical 

manufacturing industry. The highest estimate is 1.1 quads (18 percent) in 2020 

(DOE, 2007a). The lowest, 0.19 quad (3 percent), comes from NREL (2002). The 

McKinsey and Company (2008) estimate falls within this range.

Three studies also provide estimates of energy-saving potential in the petroleum industry. The highest estimate is a range of 1.40 to 3.28 quads in 2020 (23 

to 54 percent of projected energy consumption in this industry) published in a 

DOE (2006b) report. The lowest estimate, 0.3 quad in 2020 (5 percent), comes 

from McKinsey and Company (2008). An LBNL (2005) study provides an intermediate range of 0.61 to 1.21 quads saved in 2020 (10 to 20 percent).
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

210 Real Prospects for Energy Efficiency in the United States

TABLE 4.7 First Use of Energy for All Purposes in the Pulp and Paper Industry (Fuel and 

Nonfuel), in Primary Energy, 2002 (trillion Btu)

Net 

Electricitya

Residual 

and Distillate 

Fuel Oil

Natural 

Gas

LPG and 

NGL

Coal, Coke 

and Breeze Otherb Total

Total: Pulp and 

Paper Industry

223 113 504 6 240 1276 2363

Paper mills, except 

newsprint

78 51 206 1 143 523 1002

Paperboard mills 56 38 188 * 84 542 908

Pulp mills 5 w 24 * w 175 224

Newsprint mills 38 w 16 * w 27 94

Note: LPG = liquefied petroleum gas; NGL = natural gas liquid; “w” = data withheld to avoid disclosing data for individual 

establishments; * = estimates lower than 0.5 trillion Btu. 

a“Net electricity” is defined as the sum of purchases, transfers in, and generation from noncombustible renewable resources, 

minus quantities sold and transferred out. It excludes electricity inputs from on-site cogeneration or generation from combustible 

fuels since that energy is counted under generating fuel such as coal. 

b“Other” is defined as net steam (the sum of purchases, generation from renewables, and net transfers), and other energy used 

to produce heat and power or as feedstock/raw material inputs. 

Source: EIA, 2002, Data Table 1.2.

4.3.2 Pulp and Paper Industry

Pulp and paper production, which constitutes a majority of the forest products 

industry, consumes about 2.4 quads of energy annually (Table 4.7). Drying and 

the recovery of chemicals are the most energy-intensive parts of the papermaking 

process. The pulp and paper sector of the forest products industry is both capitaland energy-intensive. Energy is the third-largest manufacturing cost for the forest 

and paper products industry (AFPA, 2007). According to the Energy Information 

Administration (EIA, 2004), the forest products industry consumed 3.3 quads of 

energy in 2004, placing it third after the chemical and petroleum-refining industries in terms of energy use. Paper and paperboard mills consume the most energy 

in the pulp and paper sector, and more than half of the energy source is derived 

from net steam (the sum of purchases, generation from renewables, net transfers, 

and other energy used to produce heat and power or as feedstock or raw material 

inputs) (EIA, 2002). Steam is needed mainly for paper drying, but it is also used 

for pulp digesting and other uses. In papermaking, drying is the largest energy 

consumer, requiring large amounts of steam and fuel for water evaporation (DOE, 

2005a). Electricity is required in increasing quantities to run equipment such as 

pumps and fans and to light and cool buildings, among other uses.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 211

Several energy-efficient methods of drying have been developed, many of 

which are cost-effective today. One of these, a systems approach, involves using 

waste heat from heat-generating processes, including from power generation and 

ethanol production, as the energy source for evaporation (Thorp and MurdochThorp, 2008). These opportunities to recycle waste heat are only practical if the 

power production does not use condensing turbines (that is, if it is relatively inefficient), or if the ethanol distillation is conducted at relatively high temperature 

and pressures. Advanced water-removal technologies can also reduce energy use in 

drying and concentration processes substantially (DOE, 2005b). The Oak Ridge 

National Laboratory (ORNL) and BCA, Inc. (2005) estimated that membrane and 

advanced filtration methods could significantly reduce the total energy consumption of the pulp and paper industry. High-efficiency pulping technology that redirects green liquor to pretreat pulp and reduce lime kiln load and digester energy 

intensity is another energy-saving method for this industry (DOE, 2005b). Modern 

lime kilns are available with external dryer systems and modern internals, product 

coolers, and electrostatic precipitators (DOE, 2006c).13

In most kraft mills today, the black liquor produced from delignifying wood 

chips is burned in a large recovery boiler. Because of the high water content of the 

black liquor, its combustion is inefficient, and the possibility of electricity production from secondary steam production is limited by the steam’s low pressures. The 

gasification of black liquor not only allows efficient combustion but also enables 

the use of a gas turbine or a combined-cycle process with high electrical efficiency, 

thereby offering the potential for increasing the production of electricity within 

pulp mills. The surplus of energy from the pulp process also allows for the possible production of useful heat, fuels, and chemicals (that is, the operation of “biorefineries”) (Worrell et al., 2004).

The Pulp and Paper Industry Energy Bandwidth Study concluded that applying current design practices for the most modern mills can reduce the energy 

consumption of the pulp and paper industry by 25.9 percent and that the implementation of advanced technologies could reduce mill energy consumption by 

even more (41 percent) (DOE, 2006c). Of course, it is unrealistic to assume that 

long-existing facilities can be easily upgraded to new, state-of-the-art facilities. The 

13Electrostatic precipitators (ESPs) are more energy-efficient than wet scrubbers are, because 

energy in ESPs is applied only to the particulate matter that is being collected, but in wet scrubbers, energy is applied directly to the fluid medium, thus consuming more energy (ANL, 1990). 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

212 Real Prospects for Energy Efficiency in the United States

BOX 4.4 Reducing Energy Consumption in the 

U.S. Pulp and Paper Industry

McKinsey and Company (2007) identified the following opportunities to reduce 

by 2020 the energy consumed in the U.S. pulp and paper industry:

 100 percent = 0.60 quadrillion Btu (quads)

Papermaking 30 percent (0.18)

Multiprocess improvements 17 percent (0.10)

Steam efficiencies 17 percent (0.10)

Fiber substitution 14 percent (0.08)

Pulping 12 percent (0.07)

Other process steps 11 percent (0.07)

largest potential energy savings in the industry are estimated to be in paper drying, 

liquor evaporation, and lime kilns.

Similarly, the McKinsey and Company (2007) study for the DOE Industrial 

Technology Program indicates that the pulp and paper industry can reduce energy 

consumption by 25 percent (0.6 quad) by 2020 by accelerating the adoption of 

proven technologies and process improvements. As shown in Box 4.4, a majority 

of the savings is expected to come from papermaking, multiprocess improvements, 

steam efficiencies, and fiber substitution.

Martin et al. (2000a) studied the opportunities to improve energy efficiency 

in the U.S. pulp and paper industry. Their case study results indicate that the 

technical potential for primary energy savings amounts to 31 percent, without 

accounting for an increase in recycling. The cost-effective savings potential is 16 

percent. When recycling is included, the technical potential increases to 37 percent 

and the cost-effective savings potential remains the same. 

In sum, the estimates of cost-effective energy efficiency potential in 2020 

range from a low of 6.1 percent from the CEF study (IWG, 2000) to a high of 

37 percent (DOE, 2006c). This range includes the 16 percent estimate produced 

by Martin et al. (2000a) and the 26 percent estimate produced by McKinsey and 

Company (2007). Applying these savings estimates to the pulp and paper industry’s current consumption of approximately 2.31 quads annually results in a range 

of energy savings of 0.14 to 0.85 quad by the year 2020. Additional savings are 

possible from the use of combined heat and power technologies.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 213

4.3.3 Iron and Steel Industry

Iron and steel manufacturing, the fourth-largest user of energy in the industrial 

sector, consumes 1.4–1.9 quads per year (RECS, 2004; EIA, 2007). The energy-use 

breakdown by fuel is as follows: natural gas, 28.7 percent; petroleum, 7.6 percent; 

coal, 49.3 percent; renewables, 0.5 percent; and purchased electricity, 13.9 percent. Direct-energy costs represent 5–15 percent of the total cost of making steel, 

with additional energy costs embedded in expenditures for raw materials. The role 

of the U.S. steel industry in world markets has been eroding over the past three 

decades with manufacturing moving offshore, particularly to Asia. Table 4.8 indicates that between 1997 and 2006, imports of iron and steel products increased 

from 41 million tons per year to 65 million tons per year. During the same time 

period, exports of iron and steel products increased from 7.8 million tons per year 

to 12.7 million tons per year.

Between 2002 and 2006, U.S. production of raw steel increased from 101 

million to 109 million tons per year, while China’s annual production increased 

from 201 million to 462 million tons (WSA, 2008). Over the 10-year period from 

1996 to 2005, steel production declined in the United States at an average annual 

rate of 0.1 percent, while growing at an annual rate of 1.2 percent in Japan and 

12.1 percent in China.

U.S. industry consumes approximately 120 million tons of metallics to produce 100 million tons of steel. There are two basic methods for producing crude 

steel: the blast furnace and the basic oxygen furnace (BOF), which use mainly iron 

ore; and the electric arc furnace (EAF), which uses mainly reduced iron and pig 

iron. In 2006, integrated steelmakers produced roughly 43 percent of raw steel, 

while EAF operations produced the remaining 57 percent. For a detailed discussion of these processes, see recent reports by the IEA (2007) and Worrell and Neelis (2006).

Energy intensities for the two steel production methods vary substantially, 

reflecting the fact that the BOF produces new steel, whereas the EAF uses recycled 

steel. In 2003, BOFs required 19.55 million Btu/ton while EAFs required 5.26 

million Btu/ton. In 2002, the same uses required 21.23 million and 5.23 million 

Btu/ton, respectively. The calculated minimum energy requirement for ore-based 

steelmaking is 8.5 million Btu/ton (Fruehan et al., 2000). In 2006, yield losses 

totaled 8 million tons. The losses occur in many different operations and appear 

as “home” scrap and waste oxides; integrated producers also lose a small percentage of coal and coke. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

214 Real Prospects for Energy Efficiency in the United States

TABLE 4.8 Change in Imports and Exports of Iron and Steel Products Between 1997 and 2006

Products

1997

(thousand tons)

2006

(thousand tons) Percent Change

Imports

Steel mill products

 Ingots, blooms, billets, slabs, etc. 6,358 9,317 46.5

 Wire rods 2,237 3,046 36.2

 Structural shapes and pilings 1,141 1,146 0.5

 Plates 2,939 3,416 16.2

 Rails and accessories 238 352 47.9

 Bars and tool steel 2,627 5,111 94.5

 Pipe and tubing 3,030 7,545 149.0

 Wire drawn 655 903 38.0

 Tin mill products 638 749 17.4

 Sheets and strips 11,294 13,686 21.2

 Total steel mill products 31,157 45,273 45.3

Other steel products 3,233 6,941 114.7

Total steel products 34,389 52,214 51.8

Iron products and ferroalloys 6,659 13,110 96.9

Grand Total, Imports 41,048 65,324 59.1

Exports

Steel mill products

 Ingots, blooms, billets, slabs, etc. 210 219 4.3

 Wire rods 85 1,501 77.3

 Structural shapes and pilings 481 892 85.7

 Plates 780 1,806 131.7

 Rails and accessories 92 164 77.6

 Bars and tool steel 835 1,104 32.2

 Pipe and tubing 1,352 1,489 10.1

 Wire drawn 137 182 33.4

 Tin mill products 410 240 −41.3

 Sheets and strips 1,654 3,480 110.4

 Total steel mill products 6,036 9,728 61.2

Other steel products 1,333 1,702 27.7

Total Steel Products 7,369 11,430 55.1

Iron products and ferroalloys 458 1,260 175.1

Grand Total, Exports 7,827 12,689 62.1

Source: Adapted from AISI, 2006.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 215

Yield losses reduce the overall energy efficiency of steelmaking. The industry 

consumes about 18.1 million Btu/ton of product, including electricity generation 

and transmission and distribution losses—22 percent more than the practical minimum energy consumption of about 14 million Btu/ton. These energy losses, about 

4 million Btu/ton, are a result of process efficiencies and the production energy 

embedded in the yield losses. The BOF process itself is not a major energy user. It 

is the inherent energy of the charge materials that impact the overall energy intensity of the steelmaking process. To produce hot rolled steel from iron ore takes 

almost five times as much energy per ton as making the same product from scrap 

steel, as the above energy intensities show. Scrap yields roughly half the steel made 

and consumed (but these two are not identical).

Prior to the 1990s, steelmaking in the United States was more energyintensive than that in Germany, Japan, and Korea. It appears that, although the 

energy intensity of the U.S. steel industry improved significantly between 1995 

and 2005, it was still higher in 2005 than that in those three countries (Table 

4.9): in 1995, the steel industry in the United States was 57 percent more energyintensive than that in Korea and about 22 percent more energy-intensive than that 

in Japan and in Germany. In 2005, the U.S. steel industry was still more energyintensive than Korea’s and about 6 percent more energy-intensive than Japan’s and 

Germany’s. The report Saving One Barrel of Oil per Ton states, for example, that 

“energy consumption in blast furnace ironmaking has decreased by more than 

50 percent since 1950” (AISI, 2005). Yet blast furnace operation uses nearly 40 

percent of all the energy consumed by the iron and steel industry. One means of 

improving the efficiency of blast furnace ironmaking has been by recovering blast 

TABLE 4.9 International ComparisonEnergy Intensity of the Iron and Steel Industry of 

Selected Countries

Energy Intensity, 

1995 

(Btu/tonne) 

Energy Intensity, 

2005

(Btu/tonne)

Percent Difference 

Compared with the 

U.S., 1995 

Percent Difference 

Compared with the 

U.S., 2005 

Germany 8,114 7,660 –22 –7

Japan 8,059 7,743 –23 –6

Korea 4,463 7,438 –57 –10

United States 10,418 8,246 0 0

Source: Data from International Energy Agency, online statistical database; World Steel Association, online database.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

216 Real Prospects for Energy Efficiency in the United States

furnace gas and using it elsewhere in the overall production process. If this recovery is taken into the evaluation, the energy intensity of the blast furnace operation 

is said, by a representative of the steel industry, to be 12−14 million Btu/ton, and 

a total of 18−21 million Btu/ton total for finished goods. Over the past 20 years, 

the efficiency of iron and steel manufacturing in all countries has improved substantially, but the worldwide average has not improved much. This is due to the 

growth of iron and steel manufacturing in China, where the overall efficiency has 

not changed much. In China, there is a difference of about 20 percent between the 

average and the best plant due to the blast furnace size and the amount of heat 

recovery. 

It is important to use caution in comparing countries because differences can 

be caused by the actual efficiency of production, the amount of recycled material used, the process (BOF versus EAF) employed, and the type of final product 

(Schipper, 2004). Efficiency depends on the size and age of the plant—larger and 

newer facilities are often more energy-efficient than older ones. Savings can occur 

over time as a result of changes within plants or in processes and from shifts to 

plants and processes that are more energy-efficient; differences in resources, prices, 

and other factors also matter. Schipper (2004) points out as an important caveat 

that processes that are efficient in one country could be significantly less so in 

another country. 

To remain competitive, the U.S. iron and steel industry must become more 

resource efficient and less capital intensive. Figure 4.5 shows the energy conMillion Btu per Ton

60

50

40

30

20

10

0

Year

19501955196019651970197519801985199019952000200120022003200420052006

4.6 Efficiency

FIGURE 4.5 Energy consumption in the U.S. steel industry per ton of steel shipped, 

1950−2006. 

Source: DOE, 2008.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 217

sumption per ton of steel shipped by U.S. industry from 1950 to 2006. Energy 

consumption per ton of steel has decreased 27 percent since 1990, while CO2

emissions decreased by 16 percent. For 2002–2005, energy intensity per ton of 

steel decreased by 12 percent. In 2005, the American Iron and Steel Institute 

(AISI) announced a goal of using 40 percent less energy per ton of steel in 2025 

compared to what was being used in 2003 (AISI, 2005). According to AISI, only 

a small portion of this reduction could be obtained by the implementation of best 

practices; instead, major advances would require the development and implementation of “transformational technologies.” Some of the best opportunities (in 

terms of cost/benefit) include EAF melting advances, BOF slag heat recovery, the 

integration of refining functions, heat capture from EAF waste gas, and increased 

direct carbon injection. The majority of these technologies would be available 

before 2020 assuming continued technological R&D. With standard rates of stock 

turnover, one could expect these technological changes to be implemented in the 

midterm timeframe (2020–2035).

Fruehan (2008), in a study for DOE in partnership with the industry, analyzed various combinations of technologies—including the rotary hearth furnace 

(RHF); the CIRCOFER process, in which coal is charred and ore is partly metallized in a single first step, and then completed in a bubbling second step; and the 

RHF with a submerged arc furnace (SAF)—to determine whether combinations of 

proven technologies could enhance the overall process. Several revolutionary new 

steelmaking technologies—such as the use of hydrogen as an iron ore reductant 

or furnace fuel (under development), or electrolytic and/or biometallurgical-based 

iron and steel production (in the concept definition and development stage)—

could be ready in the midterm (that is, between 2020 and 2035). 

McKinsey and Company (2008) identified the iron and steel industry as one 

of the two (pulp and paper being the other) largest opportunities to reduce energy 

use in the industrial sector. Box 4.5 indicates that the iron and steel industry can 

reduce energy consumption by 0.3 quad (22 percent) by 2020 by accelerating the 

adoption of proven technologies and process improvements. These technologies 

are consistent with those mentioned above. Many of them have IRRs greater than 

20 percent. The AISI (2005) study provides a higher estimate of energy efficiency 

potential—0.79 quad or 58 percent of the projected energy consumption in the 

iron and steel industry in 2020. The CEF study (IWG, 2000) estimates a potential 

of only 0.21 quad (15 percent) in 2020.

The barriers to implementing energy efficiency in the iron and steel industry 

are similar to those of the other energy-intensive industries: lack of sustained cor-
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

218 Real Prospects for Energy Efficiency in the United States

porate interest, reduced levels of engineering research, low energy prices, and competition for capital, which are discussed in Section 4.5. 

The steel industry has been in a challenging financial position for several 

decades. In the past 30 years, new alloys using thinner steel have led to 25 percent 

less steel use in cars. Steel has also lost market share to aluminum, composites, 

and plastics. Steel has become a commodity product, and profit margins continue 

to shrink. Over the next 20 to 30 years, steel may be replaced by carbon-fiberreinforced materials, especially as carbon nanotube materials develop. These may 

be at least as strong as steel and much lighter. Some have recommended that the 

steel industry focus on specialty steels for tools, stainless steel, or high-silicon 

steels, which might provide value-added exports and more economic benefits. 

This would require a focus on new technologies instead of incremental process 

improvements.14

4.3.4 Cement Industry

The cement industry is among the largest industrial energy consumers in the 

United States and the world, accounting for 5 percent of the energy used in the 

U.S. manufacturing sector, or 1.3 quads (EIA, 2002, Table 2a), and about 9 percent of global industrial energy use (IEA, 2007, p. 9). The industry also accounts 

14F. Harnack, United States Steel Corporation, personal communication, June 2008.

BOX 4.5 Reducing Energy Consumption in the 

U.S. Iron and Steel Industry

McKinsey and Company (2007) identified the following opportunities to reduce 

by 2020 the energy consumed in the U.S. iron and steel industry:

 100 percent = 0.30 quadrillion Btu (quads)

Secondary casting 39 percent (0.12)

Arc furnace processes 19 percent (0.06)

Blast furnace processes 11 percent (0.03)

Integrated casting 8 percent (0.02)

Multiprocess improvements 10 percent (0.03)

Other process steps 13 percent (0.04)
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 219

for about 5 percent of global anthropogenic CO2 emissions and 2 percent of 

anthropogenic CO2 emissions in the United States (Worrell et al., 2001, 2004). 

The cement process involves three components: first, the mining and preparation of inputs, most importantly limestone (kiln feed preparation); second, the 

chemical reactions that produce clinker (clinker production); and third, the grinding of clinker with other additives to produce cement (finish grinding). The feed 

for older kilns is a slurry of inputs (the wet kiln process), while large new plants 

mix dry materials for introduction to the kiln. Energy use varies with the process 

and characteristics of the plant, but in general about 90 percent of the energy use 

and all of the fuel use occur in the manufacture of clinker in the kiln. The chemical process that converts limestone to lime, the key ingredient in clinker, produces 

roughly the same amount of CO2 gas as that generated by the energy use in its 

production for coal-fired kilns. Technologies that allow production of cement with 

a lower per ton share of clinker thus yield multiple benefits: savings in fuel consumption and reductions in greenhouse gas emissions of a factor of two or more 

above that associated with the energy efficiency alone.

In a wet kiln, the burners introduce heat at one end while at the other, 

“cool” end, the slurry is introduced and then dried (zone 1) and heated (zone 

2). Calcining, or the conversion of calcium carbonate to lime, occurs in the third 

zone, at temperature of 750°C to 1000°C, followed by the sintering zone where a 

mix of chemicals is reacted to create clinker. The clinker is then cooled. In modern 

dry kilns the first zone is omitted, and the heating is done in a preheater tower, 

followed by a second calciner tower, so that a shorter kiln is employed only for 

the sintering stage (Figure 4.6). 

Larger plants are more energy-efficient per ton, and the advanced processes 

are substantially more efficient. In the United States, energy efficiency varied from 

6.2 million Btu/ton of clinker for smaller wet-kiln plants to 3.8 million Btu/ton of 

clinker for dry preheater-precalciner kilns (Table 4.10). Coal dominates fuel consumption in U.S. plants, although they utilize an increasing proportion of waste 

materials, used tires, and petroleum coke (Table 4.11).

Energy efficiency in the U.S. cement industry improved steadily during the 1970s and 1980s as wet kilns were replaced by more modern facilities 

(Figure 4.7). Energy efficiency deteriorated during the 1990s, rising by approximately 10 percent per ton, as both the fall in energy prices and the increased 

demand for cement caused some of the less efficient manufacturing units to be 

redeployed. As of 2000, the U.S. cement industry was among the least energyefficient of the cement industries in the world, using nearly 80 percent more 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

220 Real Prospects for Energy Efficiency in the United States

Transportation

28%

Industry

33%

Chemicals 7.8

Aluminum 0.9 

Petroleum Refining 7.3

Fabricated Metals 0.7

Forest Products 3.3

4.7 Efficiency

Rotary Kiln Dry, PreheaterPrecalciner Kiln

~50 m 

Dry, Preheater Kiln

~90 m

Long Dry Kiln

~130 m

Wet Kiln

~200 m

Cooling

Zone

Sintering or

Burning Zone

Calcining

Zone

Preheat

Zone

Drying

Zone

Preheater

Tower

Drive Off

Water

Heating

Preheater/Precalciner

Tower

1450°C–1300°C

CaCO3 CaO + CO2 CaO + SiO2 + Al2O3 + Fe2O3 C3S + C2S + C3A + C4AF

"C" "S" "A" "F" Clinker

Upper, "Cool" End Clinker

Cooler

Burner

Fuel Raw

Materials

Lower, "Hot" End

20°C–200°C 200°C–750°C 750°C–1000°C 1200°C–1450°C

FIGURE 4.6 Diagram of functional zones for different cement kiln technologies. The 

feed for older (wet) kiln processes must first be dried. Modern dry-kiln feeds require 

little or no drying. 

Source: van Oss, 2005.

TABLE 4.10 Energy Intensity, Major Cement Processes in the 

United States

Process Primary Energy Use 

(million Btu/ton clinker)

Wet kilns <0.5 million tons/yr capacity 6.2

Wet kilns ≥0.5 million tons/yr capacity 5.6

Dry kilns <0.5 million tons/yr capacity 4.9

Dry kilns ≥0.5 million tons/yr capacity 4.1

Long dry kilns 5.1

Dry preheater kilns 4.1

Dry preheater-precalciner kilns 3.8

Source: van Oss, 2005.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 221

energy in the production of clinker—the most energy-intensive ingredient in the 

final product—than was used in Japan, the world leader in energy efficiency, while 

also using 10 percent more clinker in the production of cement than was used in 

Japan (Table 4.12). Partly because Japan has severely limited domestic energy supplies, it has made huge investments in R&D to improve energy efficiency in order 

to reduce its dependency on foreign energy resources. The United States has not 

faced a comparable sense of urgency in the industrial sector.

As the apparent energy performance of other countries suggests, considerable technological opportunities exist to improve the energy efficiency of the U.S. 

cement industry. The Clean Energy Future study (IWG, 2000) estimated that a 

19 percent improvement in energy efficiency was economically attractive, and the 

McKinsey and Company (2007) study concluded that a 21 percent improvement 

in energy use was feasible based on commercially available and commercially 

attractive technologieswith an estimated IRR of at least 10 percent. The details 

of the McKinsey and Company calculations are not available, but other sources 

suggest that while the McKinsey estimate may be optimistic, improvements are 

clearly feasible (Worrell et al., 2004). The panel first reviews the categories of 

potential improvements and then considers some issues that may arise in their 

adoption. This discussion is based on the estimates provided in Worrell et al. 

(2004).

Upgrading a kiln from wet to dry and from a long dry kiln to a preheater, 

precalciner kiln results in major energy efficiency gains but for a price that 

requires a payback period of at least 10 years. Worrell et al. (2004) conclude that 

these upgrades are attractive only when an old kiln needs to be replaced. However, they discuss a wide range of less drastic upgrades that yield commercially 

attractive benefits at each stage of the process.

At the first stage, Worrell et al. (2004) identify technologies with shortterm payback periods (less than 3 years) that yield only modest energy efficiency 

improvements for the dry kiln process, controls (savings up to 3 percent in the 

electricity used), and possibly blending and roller mills (payback periods not 

provided; total savings of up to 10 percent). Over half of the energy used at this 

stage, however, can be eliminated through available technologies with payback 

periods of more than 10 years. Key technologies are efficient conveyer systems of 

the dry kilns and high-efficiency classifiers for the wet kilns. 

Short-payback options in clinker production include advanced control 

systems, combustion improvements, indirect firing, and the optimization of 

components such as the heat shell. Although opportunities vary with specific 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

222 Real Prospects for Energy Efficiency in the United States

TABLE 4.11 Source of Fuel and Electricity Consumption by the U.S. Cement Industry in 2000

Fraction of Contributed 

Heat and Total Energy

Fuel Quantity Heat (%) Total Energy (%)

Coal 10.1 (million metric tons) 67 60

Coke, petcoke 1.8 (million metric tons) 14 13

Natural gas 338.3 (million cubic meters) 3 3

Fuel oils 123.7 (million liters) 1 1

Used tires 0.4 (million metric tons) 3 3

Solid wastes 1.0 (million metric tons) 6 5

Liquid wastes 929.1 (million liters) 6 5

Electricity 12.6 (billion kilowatt-hours) nil 10

Note: Average unit consumption of energy (fuel and energy consumed reflect the U.S. mix of wet and dry kilns; values likely 

would differ in countries operating a different mix of technologies):

• Electricity—143.9 kilowatt-hours per metric ton of cement,

• Heat—4.7 million Btu (1 million Btu = 1.055056 gigajoules) per metric ton of clinker,

• Total energy (includes electricity)—4.9 million Btu per metric ton of cement.

Source: van Oss, 2005, p. 29; data from U.S. Geological Survey’s annual survey of U.S. plants.

4.8 Efficiency

Year

Specific Energy Consumption (Million Btu per Ton)

9

8

7

6

5

4

3

2

1

0

Wet

Dry

Either

Clinker (Average)

Cement

197019721974197619781980198219841986198819901992199419961998

FIGURE 4.7 Primary energy intensity of U.S. cement and clinker production, 1970−1999. 

Energy intensity is expressed in million Btu per ton, higher heating value. 

Source: Worrell and Galitsky, 2004. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 223

TABLE 4.12 Cement Industry Intensities, 1990 and 2000, and Mid-1990s Clinkers Factors, by 

World Region and Subregion (Primary Energy)

A. Cement Industry Energy Intensities by Region and Subregion

Region Energy Intensities Subregion Energy Intensities

MJ per kg Clinker MJ per kg Clinker

Region Name 1990 2000 Subregion Name 1990 2000

 I. North America 5.47 5.45 1. United States 5.50 5.50

2. Canada 5.20 4.95

 II. Western Europe 4.14 4.04 3. Western Europe 4.14 4.04

III. Asia 4.75 4.50 4. Japan 3.10 3.10

5. Australia and New Zealand 4.28 4.08

6. China 5.20 4.71

7. Southeast Asia 5.14 4.65

8. Republic of Korea 4.47 4.05

9. India 5.20 4.71

IV. Eastern Europe 5.58 5.42 10. Former Soviet Union 5.52 5.52

11. Other Eastern Europe 5.74 5.20

 V. South and Latin America 4.95 4.48 12. South and Latin America 4.95 4.48

VI. Middle East and Africa 5.08 4.83 13. Africa 5.00 4.75

14. Middle East 5.17 4.92

B. Cement Industry Mid-1990s Clinker Factors by Region and Subregion

Region Unit-based Emissions Subregion Unit-based Emissions

Region Name

Factor, kg CO2/

kg Cement Subregion Name

Factor, kg CO2/

kg Cement

 I. North America 0.88 1. United States 0.88

2. Canada 0.88

 II. Western Europe 0.82 3. Western Europe 0.81

III. Asia 0.85 4. Japan 0.80

5. Australia and New Zealand 0.84

6. China 0.83

7. Southeast Asia 0.91

8. Republic of Korea 0.96

9. India 0.89

IV. Eastern Europe 0.83 10. Former Soviet Union 0.83

11. Other Eastern Europe 0.83

V. South and Latin America 0.84 12. South and Latin America 0.84

VI. Middle East and Africa 0.89 13. Africa 0.87

14. Middle East 0.89

Source: Battelle, 2002, substudy 8, p. 5. 
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Real Prospects for Energy Efficiency in the United States 

224 Real Prospects for Energy Efficiency in the United States

plants, the combination of these activities appears to yield an improvement in 

energy use on the order of 10 percent. Recovering heat from the cooling stage 

yields substantial savings. If the heat is used for power generation, it can save 

up to half of the electricity used in the clinker process. Heat-recovery opportunities, however, are closely tied to the basic structure of the kiln: an advantage of 

the preheater, precalciner kilns is that waste heat is used in the first two stages. 

Thus, taking full advantage of the heat-recovery savings may require other 

major upgrades.

For the last (grinding) stage, technologies with short-payback periods yield 

modest improvements. Significant electricity savings are available from highpressure roller presses, but these have payback periods of more than 10 years.

The most attractive and available technologies derive from changing the 

chemistry of the cement to reduce the need for calcination, thereby decreasing the 

high share of clinker characteristic of U.S. production. Blended cements include 

higher proportions of other cementitious materials, such as fly ash. Steel slag, 

which is already calcined, is an alternative to limestone for the production of 

clinker. The availability of these inputs and their probable price if they are used 

more widely in cement production raise concerns about how broadly they can 

penetrate the U.S. market. Worrell et al. (2004) identify potential energy savings 

of up to 20 percent from the deployment of blended cement technologies. Avoiding the production of clinker yields a double benefit in reduced CO2 emissions 

because both chemical production and energy use are avoided.

Advanced technologies with a potential to further improve energy efficiency 

and reduce carbon emissions include a fluidized bed kiln, advanced comminution 

technologies, and the substitution of mineral polymers for clinker (Worrell et al., 

2004). The Battelle (2002) study concludes that non-limestone-based binders may 

yield a reduction of 30 percent in CO2 emissions. Additional advanced technologies aimed at reduction of CO2 emissions include hybrid cement-energy plants, 

which are currently being investigated in the United States, and carbon capture 

and storage technology.15

15Cement plants present a much better carbon capture and storage opportunity than do advanced coal plants. Mitsubishi is currently designing carbon capture and storage technology suitable for advanced coal electric generating plants with an emission stream that is 12–15 percent 

CO2. Cement plants, alternatively, have emission streams with 30 percent CO2 content (Battelle, 

2002). Current production of cement in the United States results in about 0.85 kg CO2 per kilogram of cement. Thus, a carbon tax of $50 per tonne of CO2

 would increase the cost of a tonne 

of cement by $12.00, making the carbon tax one of the largest components in the cost of cement 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 225

Why have U.S. firms not adopted these technologies, and why do they significantly lag foreign firms? One component is simply the age of the installed plant. 

As discussed above, the major savings come with new plants and are routine in 

the facilities in countries whose capacities have grown rapidly in the past decade. 

U.S. consumption of cement increased during the 1990s, but by 2006 imports 

accounted for 20 percent of sales, so investment in new facilities has not mirrored 

the increase in demand. 

Replacing an older, wet-kiln facility with a new, more energy-efficient drykiln facility raises challenges in the United States that may not be present in developing countries and may in part explain the vintage of domestic plants. Cement 

facilities are colocated by limestone quarries. A major upgrade, or new plant, has 

a very long depreciation period. Before undertaking such an investment, a company would typically want adequate limestone supplies for 50 years of operation. 

In many cases, this would mean that the desired location for a new dry-kiln plant 

would be at a different location from the older, wet-kiln plant. Permitting and 

meeting other requirements (e.g., environmental requirements and public hearings) at a new site can be extraordinarily difficult, time-consuming, and expensive, 

and such requirements indeed change the relative economics of maintaining the 

old, inefficient facility versus investing in a modern, efficient plant. McKinsey and 

Company (2008) identified regulatory restrictions as the major reason for the U.S. 

industry’s apparent lack of new investment.

A second regulatory issue concerns the use of blended cements. The federal 

government has recently issued standards for blended cement, but widespread 

application requires actions by state standards boards. The existence of complex state and federal building codes and the expense of updating the codes are 

credited with slowing the introduction of blended cements that include a lower 

fraction of clinker. Regulatory restrictions and protracted government permitting 

and approval processes may be at the root of slow approval for the use of these 

cements. Alternatively, U.S. firms may not be eager to open the market to foreign 

manufacturers with greater experience and stronger track records than domestic 

sources possess.

In addition to regulatory restrictions, another component is plausibly the 

competitive environment in the industry. Until recently, import prices have only 

(Battelle, 2002). It should be noted that carbon capture and storage technology requires substantial energy itself, so that its deployment would confer a significant energy efficiency penalty in the 

production of cement. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

226 Real Prospects for Energy Efficiency in the United States

weakly pressured U.S. firms. Notwithstanding the North American Free Trade 

Agreement (NAFTA), antidumping tariffs protected domestic producers from lowpriced Mexican imports until 2006, while transportation costs moderated competition from Asia. Over the past 20 years, foreign firms—most notably the Mexican 

firm CEMEX—have become major shareholders in more than 80 percent of U.S. 

domestic cement plants. With the change in ownership and the need for major 

reconstruction following the devastating hurricane season of 2005, political support in the United States for antidumping tariffs has waned.

If the tariffs are relaxed, foreign firms will face a choice: upgrade the 

plants in the United States or increase imports. Which option they choose, and 

the health of the domestic industry, may depend on opportunities to expand 

operations in the United States, including the ability to site new facilities in new 

locations.

Three studies have estimated the potential for energy savings in the cement 

industry. The highest estimated savings, by Worrell et al. (2004), is 0.29 quad, 

or 67 percent of projected energy consumption in 2020.16 The CEF study (IWG, 

2000) estimated the potential savings at 0.08 quad (19 percent), and McKinsey 

and Company (2008) estimated it at 0.1 quad (23 percent) in 2020. 

4.4 CROSSCUTTING TECHNOLOGIES FOR IMPROVED ENERGY EFFICIENCY

One way to consider the potential impact of technological improvement in the 

industrial sector is to examine key crosscutting technologies that play a dominant role. These include combined heat and power systems, catalysis, pumps, 

motor and drive systems, design tools, and computational and other approaches 

to optimizing operations and maintenance (O&M). The obvious targets are the 

most energy-consuming processes. Separation processes, especially heat-driven 

separations, are a class of such energy-intensive processes, and these are discussed in some detail. Other high-temperature processes are also potentially 

capable of improvement. In addition, there are numerous examples of technology 

16Based on an energy intensity of 4.61 million Btu/ton for wet-kiln processes and 2.89 million 

Btu/ton for dry-kiln processes, and a total production of 23.2 million tons of wet-process cement 

and 62.8 million tons of dry-process cement.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 227

developments in which the impact on energy use is an indirect or a secondary 

consequence—for example, in sensor development and process controls. 

To illustrate how industries are and could be improving the efficiency of their 

operations, the panel describes several specific examples of crosscutting technologies, including some that are already being introduced but that may have much 

greater application, some that are still in the development stage, and a brief mention of the fundamental manner in which energy efficiency may be approached to 

achieve changes not yet associated with specific devices. 

The following seven subsections summarize these crosscutting technologies. 

4.4.1 Combined Heat and Power

Combined heat and power units transform a fuel (generally natural gas) into electricity and then use the hot waste gas stream for processes such as space and hotwater heating or industrial and commercial processes. Large, central-station generators use only about one-third of the energy in the fuel to produce electricity, and 

the rest must be dispersed with cooling towers or transferred to rivers, lakes, or 

the ocean. By capturing and converting waste heat, CHP systems achieve effective 

electrical efficiencies of 50−80 percent (Casten and Ayres, 2007; Lovins, 2007). 

For applications in which there is a large demand for low-temperature steam, such 

as spray drying, CHP units can be nearly 100 percent efficient. 

CHP facilities have been commonly established in energy-intensive industries 

such as food processing, pulp and paper, chemicals, metals, and oil refining. The 

levels of penetration of this technology depend on the availability and prices of 

natural gas as well as government policies. European countries, such as Finland 

and Denmark, are among the leaders in terms of installed CHP capacity, with 

30–50 percent of their total electricity generated through CHP technologies. The 

Danish CHP success story is based on a package of strategies that evolved after 

the First Heat Supply Law was introduced in 1979. This law included planning 

regulations and financial incentives that worked together to create desirable market conditions for CHP (IEA, 2009).

For commercial and industrial installations that buy electricity and also 

use large quantities of natural gas for process heating, CHP could double energy 

efficiency and cut costs by half. Installations such as steel-rolling mills and paper 

mills could reap large benefits from CHP. Commercial installations such as hospitals and hotels could also benefit from CHP.
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Real Prospects for Energy Efficiency in the United States 

228 Real Prospects for Energy Efficiency in the United States

CHP offers two additional benefits. Since the electricity is generated onsite, there may be no need for transmission and distribution lines, thus saving the 

expense of building and operating the lines and also eliminating the 6–10 percent 

loss of electricity during transmission and distribution (King, 2006; Casten and 

Ayres, 2007). A much larger benefit for some customers is that generating electricity on-site eliminates the possibility of power disruptions from transmission or 

distribution line problems. Having a CHP unit backed up by central-station power 

gives much more reliable power. In this case, however, lines must be sized to 

accommodate peak power, and hence little capital would be saved on the network 

connection.

Despite the efficiency gains that it offers, CHP has been limited in its development owing to a variety of regulatory, structural, and economic factors, including local restrictions on air emissions; backup energy fees (i.e., for standby power) 

charged by utilities; costs associated with site-specific engineering and design; difficulty in obtaining a suitable natural gas supply contract; restrictions on selling 

electrical power to the grid; and the challenges of obtaining permits and meeting 

safety regulations. For small CHP installations, these barriers can be prohibitive 

(Sovacool and Hirsch, 2007).

A CHP system is normally sized to provide the heat needed at a facility. In 

general, the CHP unit generates less power than the facility needs, at least at peak 

times. When the facility seeks to buy power from the utility, it is charged a significant backup fee, since it is assumed that the CHP customer will be adding to peak 

load. The utility might also charge a standby fee, arguing that it must have reserve 

generation available in case the CHP unit stops operating. Insofar as the utility 

does incur extra costs due to the CHP unit, the CHP unit should pay. However, 

the costs should be assessed on the basis of how the CHP unit is operated and 

when it wants backup power. Similarly, the CHP unit ought to be paid the savings 

to the utility when it sells electricity to the system. 

Within the commercial, institutional and industrial markets, engineering and 

plant staff may be resistant to CHP projects owing to limited familiarity, lack of 

internal coordination, concern over greater regulatory oversight, and competition 

for capital funding. Despite CHP’s overall air emission benefits, modifications to a 

plant’s industrial exhaust system may trigger federal or state review of the plant’s 

air permits, which can inhibit some plant managers from pursuing CHP. 

The three most critical technical challenges facing the market for CHP are 

that (1) original equipment manufacturers need to develop better prime movers 
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 229

(more efficient, cleaner, more reliable, more durable, and lower-cost systems); 

(2) original equipment manufacturers or aftermarket assemblers need to develop 

packaged CHP systems that facilitate plug-and-play installation; and (3) project 

developers need to demonstrate practical applications that can be replicated into 

“cookie-cutter” installations that yield attractive pricing for customers while 

maintaining acceptable profit margins for the technology vendors. 

The potential for CHP is greatest in areas that have high electricity prices 

(tied to natural gas prices), availability natural gas, and large industrial and commercial thermal loadsmost characteristic of the northeastern and southwestern 

United States. In the northeastern United States, natural gas is often used to fuel 

the marginal central power plant (i.e., the last unit turned on to supply demand) 

and sites’ process and space-heating needs. Since the deployment of CHP often 

displaces natural gas used for process heat, water and space heating, and electricity generation, CHP can actually lower natural gas demand while lowering cost.

The best candidate sites for CHP have coincident need for electric and thermal energy. Large-scale CHP, such as at district energy campuses, can be efficient 

and cost-effective in the right setting and has already been implemented at many 

attractive sites. 

Estimates of the cost-effective energy-savings potential with use of CHP 

nationwide range from 0.7 quad (based on McKinsey and Company, 2007) to 

7.4 quads (based on Bailey and Worrell, 2005). The latter estimate includes 

nontraditional CHP technology opportunities such as the use of energy that is 

typically discarded from pressure-release vents or from the burning and flaring 

of waste streams, the use of gas turbines that are more complex than traditional 

ones, and the use of flue gases from CHP plants to power a furnace. The estimated potential savings of 7.4 quads includes an estimated 0.6 quad of opportunities outside the industrial sector, reducing the industrial-sector estimate by Bailey and Worrell (2005) to about 6.8 quads. An additional 2.4 quads of savings 

opportunities in the 6.8 quad total is associated with nontraditional equipment 

for recycling energy, including black liquor gasification and landfill gas recovery. Removing these 2.4 quads results in the range of 4.4–6.8 quads shown in 

Table 4.4. A third, intermediate estimate based on the CEF study (IWG, 2000) is 

that CHP could cost-effectively expand the energy savings by 2.0 quads (Lemar, 

2001). 
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Real Prospects for Energy Efficiency in the United States 

230 Real Prospects for Energy Efficiency in the United States

4.4.2 High-Temperature and Separation Processes

Many industrial processes involve high temperatures, and some separation processes have thermal efficiencies as low as 6 percent, making separation processes 

an attractive target for improving U.S. industry’s energy efficiency. The energy 

used for separations totals about 4.5 quads per year, or 47 percent of all the 

energy used in manufacturing. Both distillation and membrane separation are 

described below to illustrate current and potential innovations that might reduce 

the energy intensity and total energy use of U.S. industry.

The petroleum industry consumes about 60 percent of the 2.4 quads of 

energy used each year in all industrial distillation processes. The distillation of 

chemicals and petroleum uses about 53 percent of the total energy used for industrial separations and is the largest energy-consuming process in industry. (Drying 

uses 20 percent less energy, and evaporation uses 60 percent less.) But distillation can be improved. Technologies that can significantly reduce the energy used 

in distillation processes include, for example, latent heat integration, multipleeffect distillation, and solution-thermodynamics-altering azeotropic or extractive 

distillation.

Other improvements include introducing heat exchangers along the distillation column, which can improve energy efficiency by about 25 percent. Analyzed 

and developed over about two decades, this process could be put into practice 

now (Jimenez et al., 2004; Mullins and Berry, 1984; Orlov and Berry, 1991; 

Schaller et al., 2001). Although in its fully optimized form this approach would 

probably be practical only with the construction of altogether new columns, side 

reboilers are one currently used approximation of this process.

Considerable attention has recently been paid to the development of separation processes based on membranes of many different kinds and on other porous 

materials. Membranes that separate different gases are particularly promising as 

means to improve energy efficiency. All membranes do need to be replaced from 

time to time, an aspect that must be included in assessments of their net utility 

(Martin et al., 2000b).

The ORNL and BCA, Inc. (2005) report Materials for Separation 

Technologies: Energy and Emission Reduction Opportunities identifies ways 

to reduce by about 240 trillion Btu/year (5 percent) the 4500 trillion Btu/year 

used for separations by U.S. industry, and it does not include improvements in 

distillation. 

Material methods, notably membrane and micro- and nanoparticle separa-
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 231

tion methods, offer tantalizing possibilities. The challenges are in developing materials and methods with high throughput, high selectivity, low energy requirements, 

resistance to fouling, durability, and affordable costs. The ORNL and BCA, Inc. 

(2005) report emphasizes the importance of developing metrics for evaluation 

of the potential methods. According to that report, membrane separation is the 

most widely applicable of all technologies for reducing the energy of separation 

processes in the petroleum, chemical, and forest products industries (Nenoff et al., 

2006; Banerjee et al., 2008). Zeolites are one of the kinds of materials that can 

achieve separations without requiring direct heat. However, the zeolite approach 

leaves the capturing material with the target material attached, so some removal 

process must be available if that material is valuable, or, if the material is considered a contaminant, either it must be removed or the used zeolite must be replaced 

and hence must have low cost.

Membranes can function to remove unwanted substances or to recover valuable material. For example, Amalgamated Research, Inc., and the Idaho National 

Laboratory are trying to develop a three-stage separation system for extracting valuable biomass products, and a project at the University of New South 

Wales, Australia, is working to develop a membrane for desalination (Chapman 

et al., 2004). Reported earlier at the 1995 Abu Dhabi Conference on Desalination (IDA, 1995) was a membrane desalination process in which water, heated to 

about 80°C, is reduced under pressure and passes as vapor through a membrane 

of polytetrafluoroethylene (PTFE: Teflon). Those proposing this membrane distillation process emphasize that the heat driving it may be waste heat or solar 

heat. Besides desalination, one of the most active areas of membrane development addresses the separation of hydrogen by capturing other substances in the 

membrane. 

Still another membrane-based process for desalination is reverse osmosis, a 

process in which pressure is applied to the saline water, driving water molecules 

through the membrane, moving them opposite to the direction in which they 

would diffuse in the absence of the pressure. A variety of organic materials such as 

cellulose acetate, nylon, and polyamide have been used for reverse osmosis membranes. The reverse osmosis process developed for seawater by Energy Recovery, 

Inc. (ERI), is said to use 1.7 kWh per cubic meter of purified water produced. By 

including a pressure exchanging device with the reverse osmosis apparatus, ERI 

uses up to 60 percent less energy than is used in conventional reverse osmosis systems. Approximately 30 percent of the total cost of desalination is the cost of the 

required energy; the total cost of newly desalinated seawater falls between $3 and 
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Real Prospects for Energy Efficiency in the United States 

232 Real Prospects for Energy Efficiency in the United States

$8 per 1000 gallons, so the cost of the energy would be between about $1 and less 

than $3 for that amount of product.17 Electric fields are also used to drive membrane separation processes to remove ionic substances from water. 

Membranes may be made of organic materials for relatively low temperature 

processes or of inorganic materials such as ceramics for high-temperature use. 

Some membranes are composed of both organic and inorganic materials. Some are 

made of metals—for example, palladium or palladium alloy—especially for hydrogen separation; RTI Corporation is active in this area. Polymeric membranes, 

the largest class, may also become important energy-efficient means for purifying 

hydrogen (Lin et al., 2006). Membranes are currently used successfully to separate 

light hydrocarbons as well as hydrogen from gas streams being used as fuel; the 

separated light hydrocarbons in many cases have industrial uses with a value considerably higher than that of the original fuel. 

The market for membranes is growing rapidly. In 1999, it was more than 

$1 billion and was predicted to reach $3 billion by 2008. The energy savings in 

the chemical industries alone has been estimated at about 95 trillion Btu/year by 

2025, a reduction of about 2.5 percent in the total energy consumption by those 

industries (Worrell et al., 2004). 

The principal inhibitors to the adoption of membrane separation methods 

are a lack of selectivity, the limited range of conditions under which they can 

function (organic materials typically must be used between 45°C and 60°C and 

at a pH of 4−10), fragility and lack of durability, and cost. The use of ceramic or 

mixed-composition membranes is one of the most active approaches to address 

these limitations. 

Combining membrane separation with distillation in a hybrid system is 

another approach under development. Typically, the distillation step provides a 

first-stage, partial separation, and the refinement is done with membranes. 

4.4.3 Fabrication and Materials

Advanced materials are an important enabling technology for all sectors of the 

economy: industry, buildings, and transportation. The industrial sector needs 

advanced materials that resist corrosion, degradation, and deformation at high 

temperatures and pressures; inferential sensors, controls, and automation, with 

17See http://www.hwsdesalination.com/index.htm, http://www.energyrecovery.com/ and http://

www.membranes-amta.org/amta_media/pdfs/6_MembraneDesalinationCosts.pdf.
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 233

real-time nondestructive sensing and monitoring; and new computational techniques for modeling and simulating chemical pathways and advanced processes. 

The development and implementation of new materials can lead to the increased 

energy efficiency and decreased environmental impact of U.S. industrial systems. 

New materials may be developed to make processes more efficient: for example, 

membranes for separation, or to substitute less energy-intensive materials to provide specific properties and services such as composites and nanomaterials for 

structural applications in place of steel.

The U.S. Department of Energy (DOE) has conducted an industrial materials 

development program for more than 20 years in the Office of Industrial Technology Program. This has been in collaboration with industrial firms, universities, 

and national laboratories. Materials-related opportunities are also discussed in 

Section 4.4.2 and in Section 4.4.4. The materials portfolio has three focus areas: 

materials for degradation resistance, with an emphasis on materials that are 

ultrahard and low-friction; materials for energy systems, with an emphasis on 

advanced refractories and thermal insulators for waste-energy recovery and reuse; 

and materials for separations, with an emphasis on membrane materials development. In its fiscal year (FY) 2009 budget submission, the DOE estimates potential 

energy savings from these programs in the year 2020 of 103 trillion Btu and carbon savings of 1.5 million metric tons of carbon equivalent. One needs to be cautious in applying these savings numbers so as not to double count when they are 

implemented in a specific industrial sector.

Examples of current efforts include the following:

•	 Nanocoatings for high-efficiency industrial hydraulic and tooling systems: Widespread use of new superhard coatings will increase energy 

efficiency through diminished friction loss and increased seal reliability 

in hydraulic pumps. Additional savings are possible through extending the lifetime of optimum cutting performance in machine tooling. 

Increased system reliability with decreased downtime and replacement 

costs might provide economic benefits. Environmental benefits include 

reduced pollutant leakage through pump seals and reduced emissions 

due to energy efficiency. Degradation-resistant nanocoatings of several 

borides are being developed.

•	 New material systems, including super stainless steels, low-cost titanium, and magnesium are being developed. New super stainless steels 

have comparable cost and creep resistance to state-of-the-art advanced 
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Real Prospects for Energy Efficiency in the United States 

234 Real Prospects for Energy Efficiency in the United States

austenitic stainless steels, but they have the potential for higher operating temperatures (up to 800–900°C) and durability under aggressive 

oxidizing conditions at a fraction of the cost. This represents a new 

class of heat-resistant alloys, because no alumina-forming, iron-based 

alloys with properties suitable for structural use above 600°C exist.

•	 Novel refractory materials for high-temperature, high-alkaline environments would be applied to boilers, furnaces, and gasifiers for use in the 

aluminum, chemical, forest products, and glass industries.

•	 Fiber-reinforced aerogel-based pipe insulation systems for industrial 

steam pipes would improve the high-temperature performance, durability, and life of aerogel materials. This insulation would be manufactured 

in blanket forms and have long-term water resistance. In addition to 

industrial steam pipes, this material could be applied to other components such as process heating lines, removable lids and covers, prejacketed insulation, and coker panels.

•	 Hierarchical nanoceramics for industrial process sensors are being 

developed in order to recover energy and water from industrial waste 

and process streams. An array of nanoceramic gas sensors for real-time 

burner balancing could increase combustion efficiency by at least 0.5 

percent and be applicable to many processes.

Examples of the successfully demonstrated use of advanced materials include 

the following:

•	 An advanced heating system for high-performance aluminum forgings 

(Figure 4.8) that

Uses an optimized combination of radiant and convection heating for 

processing materials,

	 Decreases energy consumption by a factor of three,

	 Reduces heating times by an order of magnitude, and

Produces high-performance forgings with improved tensile and 

fatigue properties.

Field testing of the system in a full-scale production setup demonstrated a 

cost savings of 40−50 percent owing to reduced energy consumption, increased 

throughput, and improved consistency in the process and product: 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 235

FIGURE 4.8 Continuous-belt infrared furnace for high-performance aluminum forgings. 

Testing of this system at Queen City Forging Company confirmed that it is more than 

three times more energy-efficient than current convection furnaces in preheating aluminum billets. It also provides grain refinement that enhances fatigue properties. Infrared 

preheated and forged components have been shown to last two times longer than conventionally preheated forgings. 

Source: DOE/EERE, 2005.

4.9 Efficiency

•	 Nickel aluminides for rolls in reheat furnaces made possible

The development of manufacturing procedures that enabled production of 115 nickel aluminide rolls for installation and testing,

The processing of more than 215,000 tons of steel during a 26-month 

period, and the elimination of more than 70 furnace shutdowns,
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Real Prospects for Energy Efficiency in the United States 

236 Real Prospects for Energy Efficiency in the United States

An increase in both yield and product quality owing to the elimination of rolling-related downgrading of steel, and

	 An increase of 35 percent in furnace energy efficiency.

Most of the materials that are currently in the R&D stage, such as those 

five listed above as examples of current efforts, will not be introduced in significant quantities until after 2020. Those that have been technically demonstrated successfully may be implemented within the next 10 years. To introduce 

a new material, particularly when substituting it for an existing material, the 

new material needs to be better than what it is replacing with regard to performance and cost. It often takes 10–20 years from “discovery” to have widespread 

impact in the marketplace. Part of the timeframe is the requirement to develop 

a database including the mechanical properties, performance results, life, and 

other characteristics so that designers will be comfortable using the new material. The nickel aluminides mentioned above, which increased furnace efficiency 

by an estimated 35 percent, have been under development since the mid-1980s 

and are just beginning to enter the marketplace in any significant amount. The 

development of new materials takes sustained funding, often from both the public and the private sector.

New fabrication processes are those crosscutting processes that support several energy-intensive industrial processes. The approach is to develop technologies that will improve yields per unit of energy cost for multiple elements of the 

manufacturing supply chain and will reduce waste and/or improve energy efficiency while demonstrating air- and water-neutral production methods. This is a 

relatively new focus for DOE, with areas of emphasis including the following: net 

and near-net design and manufacturing; advanced casting, forming, joining, and 

assembly; integrated predictive manufacturing and energy-efficient materials handling and plant operations; the engineering of functional materials and coatings; 

and nanomanufacturing, which would enable the mass production and application 

of nanoscale materials, structures, devices, and systems.

The U.S. materials and fabrication industries face the same competitive pressures as those facing the specific energy-intensive industries. There is strong cost 

and technology competition from foreign producers. The U.S. companies need 

to be at the cutting edge of developing and deploying new material to remain 

competitive.
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Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 237

4.4.4 Sensors and Process Controls

Much of the sensor development applicable to improved energy efficiency in 

the United States is conducted by DOE’s Industrial Technologies Program (ITP), 

often in collaboration with industrial firms. In 2004 the sensors program had as 

a goal a reduction of energy use by 12 trillion Btu/year. Five components make 

up the program: Advanced Sensor Technologies, Next Generation Control and 

Automation, Improved Information Processing, Robotics, and Affordable Wireless 

Technologies. The adoption of these technologies would lead to highly automated 

processes with efficient, intelligent feedback control through continuous monitoring and diagnosis. DOE’s approach involves automated monitoring to gather data, 

automated data analysis, automated feedback and control, and effective communication among the components. Sensors are used for inferential controls, real-time 

and nondestructive sensing and monitoring, wireless technology, and distributed 

intelligence. A goal is to have controls for plant production available by 2017. 

There are many novel sensors for a wide range of applications. Of these, 

many are specialized for very specific tasks. In the papermaking industry, a fiberoptic sensor measures paper basis weight to improve wet-end control in papermaking and to make paper of a uniform basis weight and higher quality. It minimizes energy requirements. Another noncontacting laser sensor measures shear 

strength and bending stiffness by tracking the rate of propagation of ultrasonic 

shock waves in the paper. It is claimed that this device could save the U.S. paper 

industry approximately $200 million annually in energy costs.18

New kinds of sensors employ a variety of technologies that in the past were 

usually associated with individual measurements rather than with monitoring. For 

example, an X-ray diffraction sensor developed under the ITP allows online monitoring of the composition, specifically the phase, of steel as it is being manufactured. The sensor detects grain structure, orientation, and size, and it can measure 

stress as well. As the approach is developed, this monitoring technology may well 

be useful in the manufacture of aluminum, paper products, cement, semiconductors, pharmaceuticals, and ceramics as well. The power requirements are low, 

there are no moving parts, and the devices are insensitive to changes in position or 

temperature and to vibration.

Laser sensors are finding many applications. A laser sensor system developed by an energy research company to measure the constituents in a melt has 

18See http://www.physorg.com/news4221.html.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

238 Real Prospects for Energy Efficiency in the United States

been tested successfully by an aluminum manufacturer and could be used in other 

industries such as glass and steel manufacturing. Developed with support from 

DOE’s Office of Energy Efficiency and Renewable Energy, the system has already 

been licensed and marketed, and sales have been made. Another laser sensor, using 

a tunable diode, detects temperature, nitrogen oxides, and carbon monoxide in 

furnace environments. Meant to optimize combustion processes, this system has 

been applied to a steel reheat furnace and an aluminum reverberatory furnace and 

might be applied in electric arc steelmaking furnaces as well. Another fiber-optic 

sensor measures the temperature profile of molten glass, up to depths of about 6 

inches. Such profiles are critical for the precise temperature control necessary to 

shape manufactured objects such as bowls and jars, flat window glass, blown glass 

for lightbulbs, and fiberglass for insulation.

An important area in which efficient sensors are also being developed and 

used is in lighting. Reductions of 20−25 percent in lighting costs are claimed for 

systems that reduce voltage and current for fluorescent lighting (Globalight). 

Wal-Mart is using sensors to control lighting levels as one of its energy efficiency 

efforts.

Monitoring of gases in flow processes is another area in which new sensors are finding application. Pennsylvania State University, with technology from 

the Sandia National Laboratories, developed a solid-state sensor for monitoring hydrogen in gas streams that can operate over a range from 0.5 to 99 percent hydrogen. Hundreds of such units are now in use. In 2006, three Argonne 

National Laboratory scientists developed the fastest commercially producible 

hydrogen sensor, with its most probable near-term use in hydrogen-powered vehicles. The detector is made of nanoparticles of siloxane and palladium. The signal 

is the change, with hydrogen, of the resistivity of the nanobeads of the sensing 

material.

The monitoring of liquids offers many opportunities. Emerson Process 

Management has developed an energy-efficient pH meter to monitor boiler 

water, steam condensate, boiler feedwater, and other such fluids. This is based on 

replacing a diffusion junction with a very precise, very small capillary, to allow 

small amounts of fluid to flow without serious restriction. A detector has been 

developed to predict the flooding of distillation columns. This feature will allow 

increases of 2–5 percent in throughput.

Wireless networking for sensor systems is under very active development. 

The Wireless Industrial Networking Alliance is one vehicle stimulating such 

work. The DOE sponsored the publication in 2002 of Industrial Wireless Tech-
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 239

nology for the 21st Century (DOE, 2002) to review the state of the art and project its future.

The ITP sponsored its sixth annual conference in Rosemont, Illinois, on June 

9–11, 2008, to review its research portfolio on sensors and automation. Topics 

covered included a microgas analyzer, imaging of surfaces for hot rolled steel bars, 

infrared temperature sensors, ultrasonic distance sensors, noncontacting speed 

measurement, digital sensor signals, the use of vibration power to supply the 

energy needed for sensor networks, and a variety of examinations of wireless sensor networks. The past project portfolio reviews in this program give an overview, 

through numerous samples, of advances in sensor methods whose development is 

supported by the DOE.

4.4.5 Steam and Process Heating

Process heating improvements and process and design enhancements can improve 

quality, reduce waste, reduce the intensity of material use, and increase in-process 

material recycling. Industrial facilities can eliminate some energy-intensive steps by 

implementing direct manufacturing processes, thereby reducing energy use, avoiding emissions, and enhancing productivity. This potential is vividly illustrated by 

the Save Energy Now assessments run by the ITP. 

Save Energy Now was created to help reduce energy consumption at industrial process sites in the wake of Hurricane Katrina. It initially focused on steam 

and process heat in a select group of 200 of the nation’s largest manufacturing 

facilities (there are about 6800 manufacturing facilities that use more than 1 trillion Btu annually) because these two areas make up about 74 percent of natural 

gas consumption in manufacturing. Facilities (companies) applied through an 

online process from November 2005 to January 2006; several requirements were 

set for applicant companies. Those facilities that did not make it into the 200 to 

receive assessments were still offered software or technical support from an industrial savings expert.

The Save Energy Now assessments at the participating industrial plants 

included the identification of ways to reduce natural gas use in steam and process 

heat as well as the on-site training of appropriate personnel to use the Save Energy 

Now software. Focused, rapid (lasting 3 days), and designed to closely involve 

plant personnel to achieve buy-in and capacity building for future in-house assessments, these assessments yielded an average of 8.8 percent energy savings annually 

with a payback in less than 2 years for most changes. In summary:
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

240 Real Prospects for Energy Efficiency in the United States

By the end of 2006, DOE had completed all 200 of the promised assessments, identifying potential natural gas savings of more than 50 trillion Btu and energy cost savings of about $500 million. These savings, if fully implemented, could reduce CO2

emissions by 4.04 million metric tons annually. These results, along with the fact that 

a large percentage of U.S. energy is used by a relatively small number of very large 

plants, clearly suggest that assessments are an expedient and cost-effective way to 

affect large amounts of energy use. (Wright et al., 2007, pp. i-ii)

The program was extended and expanded by ITP to include 250 facilities in 

2007 and to focus on pumping, compressed air, and fan systems in addition to the 

main thrust of steam and process heat.

Save Energy Now built on what ITP was already doing: 

•	 Plant-wide assessments. From 1999 through 2005, ITP conducted 49 

of these (at a 50 percent cost-share basis). Each of these systematic 

assessments of plant-wide operations addressed a variety of generic and 

industry-specific technology areas and identified methods for optimizing 

plant processes.

•	 Industrial assessment centers (IACs). Currently, IACs are located at 27 

universities, which conduct free assessments for small- to midsize facilities. Assessors include trained engineers and students. Over the past 20 

years, the program has resulted in a database of information on nearly 

100,000 cost-saving opportunities identified for industry as the result of 

13,500 assessments. These assessments have saved IAC clients an average of more than $55,000 per year for each assessment, with paybacks 

typically averaging a year or less.

•	 Best-practices decision software tools. ITP has developed a suite of 

software-based decision tools to help industrial plant personnel identify 

energy efficiency improvements for plant process and utility systems. 

These are available free of charge and can be downloaded from the 

DOE’s Web site.

•	 Best-practices end-user training. ITP provides daylong, year-round 

training on key areas to focus efforts for reducing energy waste in 

industrial processes. More than 10,000 people have attended these 

training sessions.

•	 Best-practices specialist qualification training. ITP has also instituted 

a training program that certifies individuals as experts on a particular 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 241

Potential Savings (Million Dollars per Year) 

0–9 Months

9 Months–2 Years

2–4 Years

4+ Years

Payback Period

50

45

40

35

30

25

20

15

10

5

0

Reduce

Steam

Demand

Use

Alternate

Fuel

Improve

Boiler

Efficiency

Add/

Modify

Backpressure

Steam

Turbine

Improve

Condensate

Recovery

Add/

Modify

Condensing

Steam

Turbine

Implement

Steam

Trap

Maintenance

Program

Improve

Insulation

Improve

Boiler

Blowdown

Rate

Improve

Blowdown

Feedwater

Heat

Recovery

Action

4.10 Efficiency

FIGURE 4.9 Top-10 energy-saving actions for industrial steam systems. Shown are the 

estimated savings in industrial energy costs identified by the DOE’s Save Energy Now 

assessments in 2006. Most of the savings had estimated payback periods of less than 

2 years. 

Source: Wright et al., 2007.

area of decision software (i.e. steam, process heat, pump); 460 people 

have been certified in this way.

•	 Collaborative targeted assessments. From 2001 through 2005, ITP 

conducted on-site training and assessments at 85 facilities. These assessments followed end-user training for plant personnel.

Figures 4.9 and 4.10, for steam and for process heat, respectively, show the 

average cost and payback for a select set of energy-saving actions.

On the supply side, industry can self-generate clean, high-efficiency power 

and steam and can create products and by-products that can serve as cleanburning fuels. The sector can also make greater use of coordinated systems that 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

242 Real Prospects for Energy Efficiency in the United States

more efficiently use distributed-energy generation, combined heat and power, and 

heat integration. 

Of these energy efficiency concepts, a number have been identified as suitable for near-term commercialization and deployment. Improvements are possible 

in steam boilers, direct-fired process heaters, and motor-driven systems, such as 

pumping and compressed air systems. For example, high-efficiency, low-NOx-

emission burners such as radiation stabilized burners, forced internal recirculation 

burners, ultralow-NOx burners, and UltraBlue burners have improved efficiency 

over conventional burners. Real-time, continuous emissions monitors are available 

to measure common compounds as well as ones that are not typically measured, 

such as formaldehyde or ammonia, to better control overall operations. Many of 

Potential Savings (Million Dollars per Year)

0–9 Months

9 Months–2 Years

2–4 Years

4+ Years

Payback Period

10

9

8

7

6

5

4

3

2

1

0

Furnace

Heat

Recovery

Heat

Cascading

Use of

Proper

Heating

Methods

Proper

Furnace

Insulation/

Maintenance

Reduce

Flue Gas

Oxygen

Content

Use

Oxygen for

Combustion

Use

Process or

Exhaust

Air for

Combustion

Improve

Load

Charge

Preheating

Reduce/

Eliminate

Furnace

Openings

and Leakage

Improve

Furnace

Scheduling,

Loading,

Shutdown

Action

4.11 Efficiency

FIGURE 4.10 Top-10 energy-saving actions for industrial process heating systems. Shown 

are the estimated savings in industrial energy costs identified by the DOE’s Save Energy 

Now assessments in 2006. Most of the savings had estimated payback periods of less than 

2 years. 

Source: Wright et al., 2007.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 243

4.12 Efficiency

Molten Aluminum Pool Metal to

Process

Pumping

Bay

Immersion

Conduction

Heating

Element Bay

Solid

Aluminum

Input Bay

Treatment

Bay

FIGURE 4.11 Process improvement example: isothermal melting of aluminum. Most aluminum is melted in furnaces, which use radiant heating as the dominant heat transfer 

mechanism and have poor thermal efficiency. Isothermal melting of aluminum involves 

the use of immersion heaters in multiple heating bays, allowing electricity to be converted to heat that is conducted directly to the molten metal. 

Source: DOE/EERE, 2007.

these newer technologies have shown success in a limited number of commercial 

applications. Other near-term opportunities for increasing energy efficiency exist 

through the adoption of best energy-management practices; the adoption of more 

modern and efficient power- and steam-generating systems; integrated approaches 

that combine cooling, heating, and power needs; and the capture and use of waste 

heat. One example of a near-term opportunity is isothermal meltinga revolutionary aluminum melting technology with a continuous-flow system using an 

immersion heater that converts electricity to melting energy with 98 percent efficiency (Figure 4.11).

R&D opportunities suggest the possibility of further energy efficiency 

improvements to industrial steam and process heating. The development of ultrahigh-efficiency boilers, in particular, could offer considerable efficiency gains over 

today’s state-of-the-art boilers. These boilers employ a combination of advanced 

technologies such as high-efficiency burners (for example, forced internal recirculation burners, or ultralow-NOx

 burners), heat-recovery components, and 

advanced sensors and controls, to achieve high efficiency and low levels of NOx

and CO2 emissions. The first demonstration of a prototype industrial “super 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

244 Real Prospects for Energy Efficiency in the United States

boiler” has a projected payback of less than 2 years and is saving thousands of 

dollars in energy costs annually (Wright et al., 2007).

4.4.6 Basic Approaches from Thermodynamics

One approach that has already been very useful for some processes—such as the 

optimized distillation column described previously—is a general optimization 

procedure that can be carried out for virtually any process for which a thermodynamic description is available. Specifically, the use of optimal control analyses 

can sometimes reveal ways to introduce as control variables some of the quantities 

that may have been treated only as passive, secondary variables in the evolution of 

a process. The temperature profile of a distillation column is one example.

The modern application of basic thermodynamics to the optimization of real 

processes is described by Sieniutycz and Salamon (1990) and Berry et al. (1999). 

Such approaches describe, for example, means to optimize drying processes and 

solar-driven heat engines, active heat insulation, and adsorption-desorption processes. However, these are descriptions at a rather abstract level. In terms of real 

devices, there needs to be a bridge between this level of analysis and the design of 

testable operating systems. 

4.4.7 Electric Motors and Drive Systems 

Electric motors make up the largest single category of electricity end-use in the 

U.S. economy. They also offer considerable opportunity for electricity savings, 

especially in the industrial sector. 

Based on an inventory of motor systems conducted in 1998 (Xenergy, Inc., 

1998), it is estimated that industrial motor energy use could be reduced by 11–18 

percent if facility managers undertook all cost-effective applications of mature, 

proven efficiency technologies and practices. Specifically, the implementation of all 

well-established motor system energy efficiency measures and practices that meet 

reasonable investment criteria could yield annual energy savings of 75–122 billion kWh. Many motor system efficiency improvements yield benefits in addition 

to energy cost reductions. The benefits include improved control over production 

processes, reduction in waste materials, and improved environmental compliance. 

This full energy efficiency potential cannot be captured all at once, since it would 

require roughly 10 percent of total new capital expenditures by all manufacturers 

(Xenergy, Inc., 1998).

Motor efficiency upgrades, improved methods of rewinding failed motors, 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 245

and system efficiency improvements are all important sources of possible energy 

savings, but they vary in terms of the effort required. Most motor efficiency 

upgrades can be achieved fairly easily by selecting the most efficient available 

motor for the application at hand. System efficiency measures, however, often 

require a significant amount of expertise and effort on the part of industrial end 

users and their vendors to identify, design, implement, and maintain the upgraded 

systems. It is estimated that replacement of 80 percent of the current population 

of 1- to 200-horsepower motors will take 15−20 years (Xenergy, Inc., 1998). The 

challenge for government and utility efficiency programs is to assist in accelerating 

the pace of replacement. 

A next generation of motor and drive improvements is also on the horizon, including motors with high-temperature superconducting materials. These 

advances are expected to be cost competitive in the midterm (i.e., in 2020 or 

later). Superconductors can be used to increase the magnetic field in a motor, 

thereby dramatically reducing motor size, weight, and energy losses. Cost and performance improvements are still needed, including reductions in the cost of cool 

superconducting materials.

4.5 BARRIERS TO DEPLOYMENT AND USE

The broader application of industrial technologies that are available for deployment is impeded by barriers such as the relative high risk and costs associated 

with new industrial technology, a lack of specialized knowledge relating to energyefficient improvements, and an inadequate flow of information. These barriers and 

several others are discussed below. (See also Box 4.3.)

Companies must consider the technical risks of adopting a new industrial 

technology. Uncertainties about the benefits and impacts of new technology on 

existing product lines can be significant. Small technology changes, particularly in 

large, integrated process plants, can lead to major changes in process and product 

performance. In today’s manufacturing environment with “24/7” operations, reliability and operational risks represent major concerns for industry when adopting 

new technologies. These perceived technical risks result in the more lengthy and 

larger-scale field testing of new technologies, more stringent investment criteria, and 

a slower pace of technology diffusion. 

The conservatism about adopting new technologies is not unique to energysaving technologies. For example, American steel companies continued to build 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

246 Real Prospects for Energy Efficiency in the United States

open-hearth furnaces after World War II, despite the demonstration of superior 

basic oxygen furnaces. The old technology was familiar and the new technology 

was a risk. Most energy savings come in through new processes and improved 

products rather than as a result of investments focused on saving energy. The 

energy savings is one benefit from the new technology, and usually the most 

important benefit. Since energy costs are typically small relative to the costs of 

materials, labor, and plant and equipment, they usually are not the factor driving 

new investments.

Relatively high initial costs for industrial energy efficiency improvements 

can be an impediment to investments. New energy-efficient technologies often 

have longer payback periods than traditional equipment has, and they represent 

a more serious financial risk, since there is greater uncertainty in future energy 

prices. This aspect of risk slows technological change and can result in suboptimal choices. Moreover, the interest rates available for efficiency purchases are 

often much higher than the utility’s cost of capital for new electricity-generating 

plants. Faced with uncertainty about future fuel prices, decision makers may 

simply avoid investments in new energy systems that require higher initial costs. 

Because changes in processes affect future cash flowsand often for long periods 

of timeit would be appropriate for plant managers to look at the net present 

value of discounted future cash flows rather than to focus on payback periods. 

A payback period does not properly account for the time value of money or risk, 

whereas net present value (if properly used) can account for both, as well as provide an accurate rate of return.

External benefits and costs are difficult to value quantitatively, and this 

inhibits industrial plant managers from investing in greenhouse gas mitigation 

and other pollution-abatement measures. Companies generally do so only when 

the investments are offset by lower energy or raw material costs or other cost 

benefits. External environmental benefits (e.g., benefits to society) are not usually considered in evaluating energy efficiency investments. Although they typically introduce innovations to the industrial sector, suppliers may be reluctant to 

expend resources in developing technologies for reducing greenhouse gas emissions, unless they have an assured market. On top of the typical risks posed by 

competing companies and products, uncertain demand can tip the scale toward 

unacceptable risk for potential financiers.

Distorted price signals also skew the demand for electricity in today’s retail 

markets. While time-of-use pricing is available for many major industrial customers, electricity rates generally do not reflect the real-time costs of electricity 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 247

production, which can vary by a factor of ten over a single day. Most customers 

in traditionally regulated markets buy electricity under time-invariant prices that 

are set months or years ahead of actual use. As a result, current market structures 

actually block price signals from reaching customers (Cowart, 2001, p. vii), such 

that consumers are unable to respond to the price volatility of wholesale electricity. Time-of-use pricing would encourage industrial customers to use energy more 

efficiently during periods when prices are high. According to Goldman (2006), 

2700 commercial and industrial customers were enrolled in time-of-use pricing 

programs in 2003, representing 11,000 MW. Three programs in the Southeast 

(TVA, Duke Power, and Georgia Power) accounted for 80 percent of these participants, most of which used large amounts of energy. Thus, there would appear to 

be considerable room for expanding time-of-use pricing programs to other regions 

and to smaller enterprises.

Lack of specialized knowledge related to energy-efficient technologies and 

their relative benefits is an impediment to adoption. Industrial managers can be 

overwhelmed by the numerous products and programs that tout energy efficiency, 

especially in the absence of in-house energy experts, and may find it risky to rely 

on third-party information to guide investments. Energy consulting firms often 

lack the industry-specific knowledge to provide accurate energy and operational 

cost assessments, and many industrial operations do not have in-house engineering 

resources to sort through or analyze the information.

 According to Neal Elliott, associate director for research at the American 

Council for an Energy Efficient Economy, “The number one issue with increasing end-use efficiency is the shortage of qualified energy managers and analysts” 

(Brown et al., 2008, p. 22). Business managers in commercial and industrial sectors are facing knowledge barriers, but commercial managers are more likely to 

adopt new technologies because the main efficiency improvements are related 

to common technologies, such as lighting and air-conditioning. Industrial plants 

often use very specific energy-consuming technologies that do not include off-theshelf improvements. In addition, industrial sectors may distrust such companies as 

energy services companies (ESCOs), which specialize in energy efficiency technologies, because these companies do not have industry-specific knowledge as a basis 

for providing accurate estimates to the manager (Brown et al., 2008).

Incomplete and imperfect information is an impediment to the diffusion of 

energy-efficient industrial technologies and practices, such as CHP systems, materials substitution, recycling, and changes in manufacture and design. This barrier 

is exacerbated by the high transaction costs for obtaining reliable information
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

248 Real Prospects for Energy Efficiency in the United States

(Worrell and Biermans, 2005). Researching new technology and collecting other 

relevant information consume precious time and resources, especially for small 

firms, and many industries prefer to expend human and financial capital on other 

investment priorities. In some cases, industrial managers and decision makers are 

simply not aware of energy efficiency opportunities and low-cost ways to implement them. 

This barrier is made more onerous by the limited government collection and 

analysis of energy use in the industrial sector. Consider, for example, the Manufacturing Energy Consumption Survey (MECS), a widely used publication that is 

published every 4 years by the DOE’s Energy Information Administration (EIA). 

In it, one can find the fuel breakdown of the petroleum industry, but there is no 

estimation of how much energy is used in distillation columns or other separations. By contrast, for buildings, the EIA’s Residential Energy Consumption Survey, Buildings Energy Data Book, and other such publications—many of which 

appear annually—contain substantially more detailed statistics than those available for manufacturing. More frequent and comprehensive collection and publication of such data and analyses are needed.

Investments in industrial energy efficiency technologies are hindered by market risks caused by uncertainty about future electricity and natural gas prices and 

unpredictable long-term product demand. 

The high cost of capital and constrained credit markets are also significant 

barriers to energy efficiency improvements in industry. New technologies have to 

compete for financial and technical resources against projects that achieve other 

company goals and against familiar technologies. Financial constraints can hinder the diffusion of technologies within industries; a technology may not spread 

across its potential market owing to the constraints of expected adopters, which 

do not all have the same ability to raise capital (Canepa and Stoneman, 2004). 

In addition, if the technology involved is new to the market in question, even if 

it is well demonstrated elsewhere, the problem of raising capital may be further 

exacerbated. 

Capital market barriers can inhibit efficiency purchases. Although, in theory, 

firms might be expected to borrow capital any time that a profitable investment 

opportunity presents itself, in practice firms often ration capitalthat is, they 

impose internal limits on capital investment. The result is that mandatory investments (e.g., required by environmental or health regulations) and those that are 

most central to the firms’ product line often are made first. Projects to increase 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 249

capacity or bring new products to the market typically have priority over energy 

cost-cutting investments.19

In the United States, firms can face fiscal policies unfavorable to investments 

in end-use efficiency. The current federal tax code discourages capital investments 

in general, as opposed to the direct expensing of energy costs. More specifically, 

tax credits designed to encourage technology adoption are limited by alternative 

minimum tax rules, tax credit ceilings, and limited tax credit carryover to following years; these limitations prevent the credits from being used to their full potential by qualified companies. Furthermore, outdated tax depreciation rules require 

firms to depreciate energy efficiency investments over a longer period of time than 

many other investments (e.g., only 5 years for a new data center), making these 

investments less cost-effective than other investment options (Brown and Chandler, 

2008). This is partly because energy-efficient products have long depreciable lives, 

such as 15 years for a new motor or a new industrial boiler. An illustration of the 

consequence of these depreciation rules is that a new backup generator would be 

depreciated over 3 years, whereas a CHP system would be depreciated over 20 

years. The CHP system would provide both reliability and energy efficiency; the 

backup generator, however, provides reliability at the expense of energy efficiency 

and clean air. This is another case of legislation lagging behind (and inhibiting) 

technological progress. Federal depreciation schedules were put into place more 

than two decades ago as part of the IRS Reform Act of 1986 (P.L. 99-514), and 

they have not kept up with technological innovations. A modification of depreciation schedules would remove a significant barrier to industrial efficiency investments, but it would require legislative action (Brooks et al., 2006). 

Regulatory barriers can also inhibit energy-saving improvements at industrial facilities. For example, as part of the 1977 Clean Air Act Amendments (P.L. 

95-95; 91 Stat. 685), Congress established the New Source Review (NSR) program and modified it in the 1990 amendments, but it exempted old coal plants 

and industrial facilities from the New Source Performance Standards (NSPS) 

intended to promote the use of the best air pollution control technologies, taking 

into account the cost of such technology and any other non–air quality, health, 

and environmental impact and energy requirements. However, investment in an 

upgrade could trigger an NSR, and the threat of such a review has prevented 

many upgrades. NSR thus imposes pollution controls where they are least needed 

19Sergio Dias, Northwest Energy Efficiency Alliance, personal communication, November 8, 

2006.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

250 Real Prospects for Energy Efficiency in the United States

and artificially inflates the value of the dirtiest plants. Altogether, these effects 

have led some critics to question whether the NSR program and the NSPS have 

resulted in higher levels of pollution than would have occurred in the absence of 

regulation (Brown and Chandler, 2008).

4.6 THE BUSINESS CASE FOR ENERGY EFFICIENCY

Other than subsidies, regulation, and supporting public policies, what might motivate industry to improve its energy efficiency? What are the most important leverage points for motivating efficiency improvements? Some of the most important of 

these drivers are described below.

•	 Rising energy prices. The sustained pain of rising oil, coal, natural gas, 

and electricity prices is motivating a renewed interest in energy efficiency. To remain competitive, industry must find ways to reduce its 

energy consumption, and higher energy costs can make efficiency investments more cost-competitive. Of course, the cost of efficiency investments can also rise with energy costs (perhaps lagged by a few years). 

Thus, the excitement over finally being able to justify an alternative-fuel 

or energy-reduction project because of recent energy cost increases is 

often dampened by the discovery of an accompanying rise in the cost of 

equipment and materials. 

•	 Environmental concerns and regulations. Many states are allowing 

industry to use energy efficiency to qualify for NOx and SO2 offsets in 

non-attainment zones. With a lowering of acceptable ozone concentrations, many additional counties in the United States are going to be in 

non-attainment. Title IV SO2 allowances are now trading at less than 

$100/ton, and NOx is trading at less than $1000/ton. At higher prices, 

these allowances could provide a lucrative stream of payments for many 

industrial efficiency investments.20 Most energy policy analysts forecast 

20The average weighted price for a ton of SO2

 in 2009 was $69.74 (http://www.epa.gov/

airmarkt/trading/2009/ 09summary.html). The average price for a ton of NOx in March 2009 

was roughly $625/ton (seasonal) (http://www.ferc.gov/ market-oversight/othr-mkts/emiss-allow/ 

othr-emns-no-so-pr.pdf).
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 251

that there will be tradable allowances for CO2 sometime in the next 

several years.

•	 Demand charges and demand-response incentives. The ability of industry to cut peak electric loads is a motivator for utilities to incentivize 

demand response (shifting loads to off-peak periods) in industry. Industrial energy efficiency measures that reduce energy demand (or slow its 

growth) can also help utilities meet energy needs, so promoting such 

savings can be in the utilities’ interest. In combination with peak-load 

pricing for electricity, energy efficiency and demand response can be a 

lucrative enterprise for industrial customers.

•	 Collateral benefits. Secondary or collateral benefits such as increased 

productivity, improved product quality, reduced labor costs, and 

enhanced reliability are often strong drivers for energy efficiency 

improvements (Worrell et al., 2003). This was illustrated effectively in 

Cool Companies: How the Best Companies Boost Profit and Productivity by Cutting Greenhouse Gas Emissions (Romm, 1999), which 

describes the many ways that corporations have benefited from increasing the energy efficiency of their operations.

•	 International competition. If a company cannot sell its products because 

of the cost of the energy needed to produce them relative to the costs 

of domestic or international competitors, attention may turn to energy 

efficiency improvements in the manufacturing process. 

•	 Corporate sustainability. Voluntarily reducing greenhouse gas emissions 

and implementing climate change mitigation strategies offer ways to 

boost shareholder and investor confidence, profit from future legislation, access new markets, lower insurance costs, avoid liability, offer 

competitive benefits, and prevent and prepare for physical and market 

damage caused by further climate impact. Almost all of the Fortune 500 

companies are publishing corporate responsibility reports. Many companies are setting energy efficiency goals (e.g., Johnson and Johnson, 

BP, Exxon, Dupont). Similarly, ISO 14000 certification informs the public about the nature of the production processes and is being required 

by DOE, Dow, and others.

•	 Shareholder activism, good corporate governance, and reputation 

management are other potential drivers of energy efficiency in industry. ENERGY STAR® designations and other government programs 

that recognize outstanding environmental performance by corporate 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

252 Real Prospects for Energy Efficiency in the United States

America have proven to be strong motivators of resource and energy 

conservation.

•	 Insurance access and costs, legal compliance, and concerns regarding 

fiduciary duty are additional business case drivers for managing greenhouse gas emission reductions through energy efficiency (Natural Edge 

Project, 2005).

4.7 FINDINGS

The following findings derive from the panel’s analysis of industrial efficiency 

summarized in this chapter.

I.1 Independent studies using different approaches agree that the economic 

potential for improved energy efficiency in industry is large. Of the 34.3 

quads of energy forecasted to be consumed by U.S. industry in 2020 

(EIA, 2008), 14–22 percent could be saved through cost-effective energy 

efficiency improvements (those with an internal rate of return of at least 

10 percent or that exceed a company’s cost of capital by a risk premium). These innovations would save 4.9–7.7 quads annually by 2020. 

I.2 Additional efficiency investments could become cost-competitive 

through energy RD&D. Enabling and crosscutting technologies, such 

as advanced sensors and controls, microwave processing of materials, 

nanoceramic coatings, and high-temperature membrane separation, can 

provide efficiency gains in many industries as well as throughout the 

energy system—for example, in vehicles, feedstock conversion, and electricity transmission and distribution.

I.3 Industry has experienced a significant shift to offshore manufacturing 

of components and products. If the net energy embodied in imports and 

exports is taken into account, the energy consumption attributable to 

industry would be increased by 5 quads.

I.4 Energy-intensive industries such as aluminum, steel, and chemicals have 

devoted considerable resources to increasing their energy efficiency. 

For many other industries, energy represents 10 percent or less of costs 

and is not a priority. Energy efficiency investments compete for human 

and financial resources with other goals such as increased production, 

improved productivity, introduction of new products, and compliance 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Energy Efficiency in Industry 253

with environment, safety, and health requirements. Outdated capital 

depreciation schedules, backup fees for combined heat and power systems, and other policies also hamper energy efficiency investment.

I.5 More detailed data, collected more frequently, are needed to better 

assess the status of and prospects for energy efficiency in industry. Proprietary concerns will have to be addressed to achieve this.

I.6 Drivers for energy efficiency in industry include rising and volatile 

energy prices, intense competitive pressure to lower costs, and an 

increased focus on corporate sustainability.

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Real Prospects for Energy Efficiency in the United States 

261

The opportunities described in Chapters 2 through 4 to improve energy efficiency in, respectively, U.S. residential and commercial buildings, the U.S. transportation sector, and U.S. industrial manufacturing are summarized 

here in Table 5.1, which presents the panel’s conservative and optimistic estimates 

for cost-effective annual energy savings available in these three sectors in 2020 

and 2030.1 The panel’s estimates are not projections; they reflect its assessments of 

technology potential assuming a rapid rate of deployment, but a rate nonetheless 

consistent with past deployment rates. If society were to give a higher priority to 

efficiency, perhaps because of higher energy prices, energy shortages, or concern 

about greenhouse gas emissions, deployment rates would be faster and the savings 

would be greater.

To achieve the energy-savings potential outlined in Table 5.1, the manner in 

which Americans use energy will have to be transformed, and policy actions will 

doubtless be an integral part of this transformation. Although policy recommendations are outside the scope of this study, in order to inform the policy debate 

and contribute to a better understanding of how impediments can be overcome, 

the panel reviewed some of the experience with—and importantly, lessons learned 

from—policies and programs aimed at influencing energy use in the United States. 

1As discussed in Chapter 3, “Energy Efficiency in Transportation,” the focus of that assessment relates to technologies that could power the nation’s cars and light trucks. If other categories, such as heavy-duty vehicles and aviation, had been included in the analysis, the panel’s estimate of the total savings would be greater. Forthcoming National Research Council reports will 

provide estimates for these two categories.

Overarching Findings and Lessons Learned 

from Federal and State Energy Efficiency 

Policies and Programs

5
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Real Prospects for Energy Efficiency in the United States 

262 Real Prospects for Energy Efficiency in the United States

5.1 OVERARCHING FINDINGS

On the basis of its estimates of the energy savings potential outlined in Table 5.1, 

the panel presents the following overarching finding:

Overarching Finding 1 

Energy-efficient technologies for residences and commercial buildings, transportation, and industry exist today, or are expected to be developed in the 

normal course of business, that could potentially save 30 percent of the 

energy used in the U.S. economy while also saving money. If energy prices 

are high enough to motivate investment in energy efficiency, or if public policies are put in place that have the same effect, U.S. energy use could be lower 

than business-as-usual projections by 19–22 quadrillion Btu (17–20 percent) 

in 2020 and by 30–36 quadrillion Btu (25–31 percent) in 2030.2,3

2The basis for comparison for the buildings and industry sectors is the reference scenario of 

the U.S. Department of Energy’s Annual Energy Outlook 2008, produced by the Energy Information Administration (EIA, 2008), and the panel’s similar but slightly modified baseline for the 

transportation sector. 

3The Committee on America’s Energy Future report (NAS-NAE-NRC, 2009) estimated the 

amount of possible savings as 15–17 quads (about 15 percent) by 2020 and 32–35 quads (about 

TABLE 5.1 Panel Estimate of the Potential for Cost-Effective Annual U.S. Energy Savings (in 

quads) Achievable with Energy Efficiency Technologies in 2020 and 2030

Conservative Estimate Optimistic Estimate

2020 2030 2020 2030

Buildings, primary (source) electricity 9.4 14.4 9.4 14.4

Residential 4.4 6.4 4.4 6.4

Commercial 5.0 8.0 5.0 8.0

Buildings, natural gas 2.4 3.0 2.4 3.0

Residential 1.5 1.5 1.5 1.5

Commercial 0.9 1.5 0.9 1.5

Transportation, light-duty vehicles 2.0 8.2 2.6 10.7

Industry, manufacturing 4.9 4.9 7.7 7.7

 Total 18.6 30.5 22.1 35.8

Note: Savings are relative to the reference scenario of the EIA’s Annual Energy Outlook 2008 (EIA, 2008) or, for transportation, 

a similar scenario developed by the panel. See Table 1.2 for more information on the baselines used in the panel’s analysis of the 

buildings, transportation, and industry sectors.
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Real Prospects for Energy Efficiency in the United States 

Overarching Findings and Lessons Learned 263

A savings of the amount of energy estimated in Overarching Finding 1 would 

reverse the growth in energy use forecasted by the Department of Energy’s Energy 

Information Administration (EIA, 2008). Instead of increasing from 99 quadrillion 

Btu (99 quads) in 2008 to 111 quads in 2020 and 118 quads in 2030, as forecast 

by the EIA (2008), full deployment of cost-effective, energy-efficient technologies 

would cause U.S. energy use to fall to 89–92 quads in 2020 and 82–88 quads in 

2030.

Table 5.1 shows that reducing electricity use in buildings provides the greatest opportunity for energy savings. In fact, these potential savings are so large 

that, as indicated in Overarching Finding 2, the effects on electricity generation 

could be dramatic.

Overarching Finding 2 

The full deployment of cost-effective, energy-efficient technologies in buildings alone could eliminate the need to add to U.S. electricity generation 

capacity. Since the estimated electricity savings in buildings from Table 5.1 

exceeds the EIA forecast for new net electricity generation in 2030, implementing these efficiency measures would mean that no new generation would 

be required except to address regional supply imbalances, replace obsolete 

generation assets, or substitute more environmentally benign generation 

sources.

The potential savings summarized above are very attractive. As discussed 

in Chapters 2 through 4, however, many barriers to the deployment of energyefficient technologies exist, even though the adoption of such technologies is projected to save money over time. These barriers include potentially high up-front 

costs, alternative uses for investment capital deemed more attractive, the volatility 

of energy prices leading to uncertainty with respect to the payback time, and the 

lack of information available to consumers about the relative performance and 

costs of technology alternatives. 

30 percent) by 2030. Since the release of that report, further analysis by the panel refined the 

amount of possible savings in 2020 to 17–20 percent.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

264 Real Prospects for Energy Efficiency in the United States

Overarching Finding 3

The barriers to improving energy efficiency are formidable. Overcoming 

these barriers will require significant public and private support, as well 

as sustained initiative. The experience of leading states provides valuable 

lessons for national, state, and local policy makers in the leadership skills 

required and the policies that are most effective.

One valuable lesson learned is that the long lifetimes of buildings and 

some capital equipment present a particularly important barrier to implementing energy-efficient technologies. These investments—particularly buildings—can 

last for decades or even centuries, blocking the implementation of more efficient 

substitutes. 

Overarching Finding 4

Long-lived capital stock and infrastructure can lock in patterns of energy use 

for decades. Thus, it is important to take advantage of opportunities (during 

the design and construction of new buildings or major subsystems, for example) to insert energy-efficient technologies into these long-lived capital goods.

In the rest of this chapter the panel discusses this and other examples of valuable experience gained from the implementation of federal and state policies aimed 

at overcoming barriers to energy savings. The review below concentrates on federal actions, but it also covers some actions taken in two large states, California 

and New York, as well as some policies adopted by electric utilities. 

5.2 Energy Efficiency POLICIES AND PROGRAMS

Between 1975 and 1980 the federal government adopted a number of laws that 

established educational efforts and financial incentives for energy efficiency, and 

it authorized the setting of efficiency standards. More recent legislation has established minimum efficiency standards for a wide range of household appliances and 

equipment used in the commercial and industrial sectors, as well as tax incentives 

to stimulate the commercialization and adoption of highly efficient products and 

buildings. Over the past 30 years the federal government has also devoted billions 

of dollars to energy efficiency research and development. In addition, many states 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Overarching Findings and Lessons Learned 265

have implemented building energy codes, utility-based energy efficiency programs, 

and other policies to complement these federal initiatives.4

5.2.1 Vehicle Efficiency Standards

In 1975 the United States adopted energy efficiency standards—known as corporate average fuel economy (CAFE) standards—for cars and light trucks. These 

standards played the leading role in the near doubling of the average fuel economy 

of new cars and the 55 percent increase in light-truck fuel economy from 1975 

to 1988 (Greene, 1998). In addition, a tax on inefficient “gas guzzlers” contributed to the rise in vehicle fuel economy during the late 1970s and 1980s (Geller 

and Nadel, 1994). Had these efficiency improvements not been implemented, the 

U.S. car and light truck fleet would have consumed an additional 2.8 million barrels per day (bbl/d) of gasoline in 2000 (NRC, 2002). The gasoline savings meant 

lower levels of oil imports and consequently lower trade deficits in the United 

States compared with what they would have been otherwise. The CAFE standards 

were met mainly through technological improvements in engines and drivetrains, 

as well as through vehicle weight reduction (NRC, 2002).

The original CAFE standards for cars reached their maximum level in 1985; 

small increases in the standards for light trucks have been adopted since then.5

With no further increase in standards, the average fuel economy of each type of 

vehicle (cars and light trucks) remained nearly constant during the 1987–2007 

period. In fact, the combined average fuel economy of new cars and light trucks 

actually declined from a high of 22.0 miles per gallon (mpg) in 1987 to 20.2 miles 

per gallon in 2006–2007 (estimated on-road performance, not rated fuel economy), due mainly to the shift from cars toward less-efficient sport utility vehicles 

(SUVs), pickup trucks, and minivans (EPA, 2007a). As a result of declining newvehicle fuel economy and increasing vehicle-miles traveled, U.S. gasoline consumption increased 31 percent from 1986 through 2006 (EIA, 2007).

4This review does not consider energy tax increases that have been enacted over the past 30 

years, because such increases have been very modest. The federal tax on gasoline, for example, 

was increased incrementally from 4¢/gal in 1973 to a total of 18.4¢/gal by 1993, but it has not 

been increased since then. Corrected for inflation, the gasoline tax in 2006 was only 26 percent 

greater than it was in 1973.

5Small increases in the light-truck standards were adopted through 2004. More significant but 

still modest increases were administered starting in 2005. The Energy Independence and Security 

Act of 2007 mandated more substantial increases, slated to amount to at least a 40 percent increase over the 2005 level by 2020.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

266 Real Prospects for Energy Efficiency in the United States

One of the flaws in the original CAFE standards was the lower standards 

for SUVs and other trucks relative to standards for cars, thereby encouraging 

manufacturers to redesign trucks to serve as passenger vehicles (Gerard and Lave, 

2003). However, other factors also contributed to the shift from cars to light 

trucks, making it difficult to determine the role of CAFE in this regard (Greene, 

1998; NRC, 2002). 

Auto manufacturers blocked efforts to increase the standards for many 

years despite numerous studies showing that raising the standards was technically and economically feasible (NRC, 2002; Difiglio et al.,1990; Greene and 

DeCicco, 2000). Pressure to raise the standards grew, however, as energy security concerns increased. The U.S. Congress enacted the first significant increase 

in the CAFE standards in more than 30 years as part of the Energy Independence and Security Act (EISA; Public Law 110-140), which was signed into 

law by President George W. Bush in December 2007. EISA requires the Department of Transportation to set tougher fuel-economy standards starting in 2011 

until the standards reach at least 35 mpg for cars and light trucks combined in 

2020—a 40 percent increase over the current standards.6 EISA also gradually 

phases out the fuel-economy credits for dual-fuel vehicles, a policy that reduced 

the effectiveness of the CAFE standards without significantly increasing the use 

of alternative fuels.

It is estimated that the new CAFE standards will save 1.0 million bbl/d of 

gasoline by 2020 and 2.4 million bbl/d by 2030, while providing more than $50 

billion in net economic benefits for consumers (ACEEE, 2007). These estimates 

include a “rebound effect”—that is, the increase in travel demand due to the 

reduction in the cost per mile driven as vehicle fuel economy improves. This effect 

is generally thought to be real but small (Greene, 1998; NRC, 2002; Small and 

Van Dender, 2007). 

5.2.2 Appliance Efficiency Standards

Appliance efficiency standards were first enacted by states—including California, 

New York, Massachusetts, and Florida—during the late 1970s and early 1980s 

(Nadel, 2002). Appliance manufacturers, disturbed by the patchwork of state 

standards, then supported the adoption of uniform national standards. National 

6The Obama administration recently proposed that these requirements, specified by Subtitle A 

of EISA 2007, be accelerated.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Overarching Findings and Lessons Learned 267

standards, developed through negotiations between manufacturers and energy 

efficiency advocates, first became law in 1987. These standards led to dramatic 

improvements in the energy efficiency of new refrigerators, air conditioners, 

clothes washers, and other appliances sold in the United States.

In 1992, minimum efficiency standards were extended to motors, heating 

and cooling equipment used in commercial buildings, and some types of lighting 

products. In 2005, standards were adopted for a variety of “second-tier” products, including torchiere light fixtures, commercial clothes washers, exit signs, distribution transformers, ice makers, and traffic signals. With the addition of these 

new products, national minimum efficiency standards were in place for more than 

40 types of products.

Appliance efficiency standards eliminate the least efficient products from the 

marketplace. At times, such standards have been technology forcing—meaning 

that few if any products could meet the standard at the time that it was established. This was the case for the standards for refrigerators and clothes washers 

set by the U.S. Department of Energy (DOE) (Nadel, 2002; Goldstein, 2007). The 

DOE is authorized to strengthen the minimum efficiency standards on a particular 

product if it determines that doing so is technologically feasible and economically 

justified.

It is estimated that national appliance efficiency standards saved 88 terawatthours (TWh) of electricity in 2000, or 2.5 percent of national electricity use that 

year (Nadel, 2002). The retirement of less efficient, older appliances, combined 

with the adoption since 2000 of new and updated standards, is expected to result 

in energy savings of 268 TWh in 2010, or 6.9 percent of projected national 

electricity use in that year, and 394 TWh by 2020, or 9.1 percent of projected 

national electricity use in that year (Nadel et al., 2006). 

The appliance standards laws include initial energy performance requirements, but they also direct the DOE to review them periodically and to adopt 

more stringent standards if technically feasible and economically justified. For 

example, the standards on refrigerators and freezers first adopted in 1987 have 

been significantly strengthened twice since then. As shown in Figure 5.1, the combination of federal and state standards resulted in a 70 percent reduction in the 

average electricity use of new refrigerators sold in the United States from 1972 

through 2001; during this period the price (in constant dollars) also fell by 62 percent, while the refrigerated volume actually increased. New standards on fluorescent lighting ballasts were adopted in 2000, followed by new standards on water 

heaters, clothes washers, and central air conditioners and heat pumps. Despite 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

268 Real Prospects for Energy Efficiency in the United States

completing these revisions, the DOE has missed legal deadlines for updating standards for about 20 other products. These delays have reduced the energy savings 

and economic benefits of appliance efficiency standards.

Additional appliance efficiency standards were included in EISA. Most noteworthy are those on general-service lamps, standards that will make it illegal to 

sell ordinary incandescent lamps after the standards take effect. In Phase One, 

which takes effect in three stages from 2012 to 2014, manufacturers will be able 

to produce and sell improved incandescent lamps as well as compact fluorescent lamps (CFLs) and light-emitting diode (LED) lamps that meet the efficiency 

requirements—that is, the minimum lumens of light output per watt of power 

consumption. In Phase Two, which takes effect in 2020, only CFLs and LED 

lamps will qualify unless manufacturers are able to roughly triple the efficiency 

of incandescent lamps. It is estimated that these new standards will save 59 TWh 

per year by 2020, in addition to the savings from standards on other products 

(ACEEE, 2007). 

5.1 Efficiency

Year

Electricity Use (Kilowatt-hours per Year) 1800

1600

1400

1200

1000

800

600

400

1980 1985 1990 1995 2000

GDP in In

Intensity

Structure

Energy U

Effective Date of New

State Standards

Effective Date of New

Federal Standards

1972

1978

FIGURE 5.1 Average annual electricity consumption of new refrigerators sold in the 

United States, 1972−2001. 

Source: Geller, 2003.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Overarching Findings and Lessons Learned 269

5.2.3 Building Energy Codes

Federal legislation passed in 1976 called for the adoption of national standards for building energy efficiency (also known as building energy codes). The 

building industry strongly opposed this policy, however, and it was eventually converted to voluntary guidelines and design tools (Clinton et al., 1986). 

Meanwhile, many states and localities adopted mandatory energy codes for new 

homes and commercial buildings. Model codes, such as the International Energy 

Conservation Code (IECC) and American Society of Heating, Refrigerating, and 

Air-Conditioning Engineers (ASHRAE) Standard 90.1, are widely followed by 

states and localities, thereby bringing some uniformity to building energy codes. 

The model codes are updated periodically through a consensus-seeking process. 

As of 2008, 19 states had adopted the 2006 version of the IECC or a more stringent code for new homes, and 27 states had adopted the ASHRAE 90.1-2004 or 

90.1-2006 code or a more stringent code for new commercial buildings (DOE, 

2008).

Building energy codes are enforced at the local level throughout the country. 

There is some evidence that code enforcement and compliance have been weak 

in various regions (Halverson et al., 2002; Kinney et al., 2003; Khawaja et al., 

2007), and a number of jurisdictions have taken steps to simplify their energy 

codes in order to facilitate compliance. Training architects, builders, contractors, 

and local code officials can significantly improve code compliance and can also 

be very cost-effective in terms of energy savings per program dollar (Stone et al., 

2002). The DOE provides software tools, technical assistance, and grants to support code adoption and implementation. 

It is estimated that the influence of building energy codes on new homes 

and commercial buildings constructed during the 1990s reduced U.S. energy 

use by 0.54 quad in 2000 (Nadel, 2004). This is a conservative estimate of the 

impact of energy codes in that it does not consider buildings constructed before 

1990 or after 1999. The DOE estimates that if all states adopted the update 

to the model commercial building energy code approved by ASHRAE in 1999, 

building owners and occupants would save about 0.8 quad over 10 years (DOE, 

2007a). Even more energy savings would result if all states adopted a more 

recent version of the ASHRAE model standard, such as the 2007 version. Energy 

codes in general are very cost-effective, with any extra first cost for complying with the code usually paid back through energy savings in 7 or fewer years 

(WGA, 2006). 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

270 Real Prospects for Energy Efficiency in the United States

5.2.4 Government-Funded Research, Development, and Demonstration

From 1978 to 2000, the DOE spent more than $7 billion (1999 dollars) on energy 

efficiency research, development, and demonstration (RD&D) programs, and 

as estimated by a report from the National Research Council, some of the most 

successful RD&D programs are yielding net economic benefits to the nation of 

around $30 billion (NRC, 2001). 

DOE-funded research has contributed to the development and commercialization of a number of energy-efficient building technologies, including highefficiency appliances, electronic lighting ballasts, and low-emissivity windows. 

RD&D programs tend to be most effective (Geller and McGaraghan, 1998; 

Alic et al., 2003) when they:

•	 Involve collaboration between public research institutions (such as universities and DOE national laboratories) and the private sector,

•	 Focus on multiple technologies and designs,

•	 Contribute to all stages of the innovation and product development 

process, and 

•	 Are complemented by other policies, such as financial incentives or 

regulations that stimulate market demand.

In contrast to the building technology program, DOE’s transportation technology RD&D program has had very little effect on the vehicle marketplace. This 

result is attributed to the fact that the DOE initially chose to focus on a limited 

number of advanced engines and power systems, such as Stirling engines, gas 

turbines, and battery-powered electric vehicles—none of which proved viable 

because of technological problems, lack of industry interest, and/or lack of market 

acceptance. The more recent focus on hybrid-electric power trains and fuel cells 

also has not influenced commercial vehicles so far, although considerable technical 

progress has been made and these technologies show great promise (NRC, 2008). 

This experience demonstrates that RD&D projects should be carefully selected 

and designed, taking into account technological, institutional, and market barriers. 

The Department of Energy operates a number of programs to promote 

greater energy efficiency in industry. Until 2007, the DOE funded RD&D mainly 

in partnership with nine energy-intensive sectors—agriculture, aluminum, chemicals, forest products, glass, metal casting, mining, petroleum, and steel. More 

recently the DOE has shifted RD&D toward crosscutting “technology platforms” 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Overarching Findings and Lessons Learned 271

such as industrial reactions and separations, waste-heat minimization and recovery, and high-temperature processing. The DOE recently identified nearly 100 

technologies that it supported in the past decade that are now commercially available and saving energy to some degree. These technologies are estimated to have 

saved about 1.1 quads of energy cumulatively and about 0.1 quad in 2005 alone 

(DOE, 2007b). 

5.2.5 Federal Incentives and Grants

Federal tax credits were provided for energy efficiency measures purchased by 

households and businesses in the late 1970s and early 1980s. The credit amounted 

to 15 percent of the measure cost7 for households and 10 percent of the measure 

cost for businesses. However, studies were not able to document that the tax 

credits expanded the adoption of energy efficiency measures (Clinton et al., 1986; 

OTA, 1992). This result was attributed to the small size of the credits and the fact 

that the credits applied to commonplace efficiency measures such as home insulation and weather stripping, which had already been widely adopted before the 

credits took effect. These tax incentives cost the U.S. Treasury around $10 billion 

and were discontinued in 1985.

Based in part on this experience, new tax credits were enacted in 2005 for 

innovative energy efficiency measures that included hybrid, fuel cell, and advanced 

diesel vehicles; highly efficient new homes and commercial buildings; and efficient 

appliances. These tax credits were intended to support the commercialization 

and market development of these innovative technologies but not necessarily to 

save a significant amount of energy. In addition, a 10 percent tax credit of up to 

$500 was adopted for energy retrofits to the building envelope of existing homes. 

Except for the tax credits for advanced vehicles, these new tax credits were slated 

to expire at the end of 2007, but most were extended as part of the American 

Recovery and Reinvestment Act of 2009 (ARRA; Public Law 111-5). It is still too 

early to evaluate the impact of the 2005 tax credits. 

 Low-income households typically spend 16 percent of their total annual 

income on home energy costs, compared to 5 percent or less for middle- and 

upper-income households (DOE, 2006). The DOE provides grants to improve the 

energy efficiency of low-income housing through the Weatherization Assistance 

7Measure cost is the full cost for an add-on measure such as insulation or a variable-speed 

motor drive, but the incremental cost for a higher-efficiency pump or motor. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

272 Real Prospects for Energy Efficiency in the United States

Program (WAP). The WAP has helped more than 6.2 million families reduce their 

energy consumption and energy cost burden since 1976. The DOE estimates that 

these households experienced a $1.6 billion reduction in energy costs during the 

winter of 2005 as a result of the weatherization efforts (DOE, 2006).

Energy efficiency researchers developed improved home audit and retrofit 

techniques during the course of the WAP. These techniques include instrumented 

audits using blower doors, advanced air-sealing techniques, and greater emphasis on heating system improvements. As a result, the WAP lowered space-heating 

energy consumption in participating households by an average of 31 percent for 

homes weatherized from 1993 through 2002 (Berry and Schweitzer, 2003). This is 

significantly greater than the energy savings realized in homes weatherized during 

the 1970s and 1980s.

In recent years, federal funding for the WAP has enabled the weatherization 

of about 100,000 homes per year. The ARRA provides $5 billion in additional 

funds for home weatherization, as well as more flexible qualification and spending 

criteria. This one-time funding will enable the retrofitting of approximately 1 million homes.

5.2.6 State and Utility Programs

States and electric utilities have played a significant role in advancing energy efficiency in the United States. Many state utility regulatory commissions or state legislatures require electric utilities to operate energy efficiency programs, also known 

as demand-side management (DSM) programs. Most of these programs are funded 

through a small surcharge on electricity sales. In some states, utilities are allowed 

to earn more profit from the kilowatt-hours of electricity use saved through their 

energy efficiency programs than from the kilowatt-hours of new electricity delivered as a result of building new power plants or other energy supply facilities (not 

accounting for the relative size of the different resource options) (Kushler et al., 

2006). This approach removes the financial disincentive that discourages utilities 

from promoting energy efficiency measures to their customers. In a few states, 

these programs are implemented by independent entities or state agencies rather 

than by utilities. 

Utility and state efficiency programs provide information, technical assistance, and financial incentives to end users in order to encourage their greater 

adoption of cost-effective energy efficiency measures. Rebates are provided for a 

wide range of measures ranging from energy-efficient lightbulbs to heat pumps 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Overarching Findings and Lessons Learned 273

to commercial and industrial energy efficiency projects. Many programs promote 

ENERGY STAR® products and buildings and support the implementation of 

building energy codes as well as encourage new construction that exceeds minimum code requirements. Program managers have made considerable progress in 

developing and refining strategies for maximizing energy savings and program 

cost-effectiveness over the past 25 years (Nadel and Geller, 1996; NAPEE, 2006).

Although the funding for utility DSM programs was cut during the mid1990s as utility deregulation and restructuring began, it has rebounded in recent 

years. The funding for these programs nationwide increased from about $0.9 billion in 1997 to $2.0 billion in 2006 (CEE, 2007). There is considerable variation 

in the commitment to—and funding for—utility energy efficiency programs among 

states. As of 2004, the leading states were spending more than $15 per capita on 

these programs, whereas the median state was spending only $1.64 per capita. 

The top 20 states (in terms of spending per capita) accounted for 88 percent of 

nationwide spending on utility energy efficiency programs in 2004 (Eldridge et al., 

2007). 

Some states have adopted energy-savings requirements, sometimes known 

as energy efficiency resource standards, for utility and state energy efficiency programs. Connecticut, for example, is requiring electricity providers to achieve 1 

percent electricity savings per year from end-use efficiency efforts, combined heat 

and power (CHP) plants, and waste-heat recovery. Minnesota has enacted overall 

energy-savings goals of 1.5 percent per year, with at least 1 percent coming from 

utility efficiency programs. Texas now requires electricity providers to offset 20 

percent of projected load growth through end-use efficiency programs. Other 

states including Hawaii, Nevada, and North Carolina allow utilities to count the 

energy savings from efficiency programs as well as renewable energy generation 

toward meeting overall clean-energy standards (Nadel, 2007).

Utilities have collaborated to stimulate the development and commercialization of advanced technologies and superior efficiency levels. One such example is 

the “golden carrot” incentive program that led to the introduction of new, highly 

efficient refrigerators during the 1990s and also paved the way for next-generation 

efficiency standards (Geller and Nadel, 1994). In this case, participating utilities 

paid the winning manufacturer incentives—up to $30 million—as it sold qualifying highly efficient models in their service areas. Utilities have also collaborated to 

stimulate the development and commercialization of highly efficient air conditioners and heat pumps, heat-pump water heaters, air duct testing and sealing techniques, and other new energy efficiency technologies (Nadel et al., 2003). 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

274 Real Prospects for Energy Efficiency in the United States

In addition to the funding of energy efficiency programs by utilities, the DOE 

provides funding to states through the State Energy Program (SEP). This funding, a total of $49.5 million in fiscal year 2007, is used by state energy offices for 

loans and grants, energy audits, codes and standards efforts, training, and other 

educational activities related to advancing energy efficiency and renewable energy 

use. Researchers have determined that the state-level programs are very costeffective, with more than $7 in energy-bill savings on average for each dollar provided by the DOE (Tonn and Peretz, 2007). The programs also yield substantial 

nonenergy benefits, including local economic development, reduction in pollutant 

emissions, and improved public health and safety. The ARRA of 2009 provides 

$3.1 billion in one-time funding for the SEP. 

Utility and state energy efficiency programs as a whole reduced electricity 

use by about 74 TWh in 2004, or 2.0 percent of electricity sales nationwide (York 

and Kushler, 2006). In leading states such as California, Connecticut, Minnesota, 

Vermont, and Washington, however, efficiency programs reduced electricity use 

in 2004 by 7 to 9 percent, considering the cumulative impact of the programs in 

these states. Furthermore, energy savings have risen since 2004 because overall 

DSM funding has increased. National energy savings reached approximately 90 

TWh as of 2006.

5.2.7 Promotion of Combined Heat and Power Systems

In addition to their other accomplishments, policy initiatives have also improved 

the efficiency of energy conversion and supply, specifically by expanding the use of 

combined heat and power systems, also known as cogeneration. The Public Utility Regulatory Policies Act of 1978 (PURPA; Public Law 95-617) includes a section mandating that utilities buy power from cogenerators (and other qualifying, 

smaller power producers) at avoided costs. PURPA also exempts qualifying facilities from regulatory oversight under the Public Utilities Holding Company Act 

(PUHCA; Public Law 74-333) and from constraints on natural gas use imposed 

by the Power Plant and Industrial Fuel Use Act (Public Law 95-620). Some states, 

such as California and New York, set attractive avoided costs and contract terms, 

and CHP capacity nationwide expanded from less than 10 gigawatts (GW) in 

1980 to almost 44 GW by 1993 (Elliott and Spurr, 1999).

The expansion of CHP capacity slowed during the 1990s because of declining avoided costs and the onset of utility deregulation and restructuring, but the 

Clinton administration launched a new CHP initiative in late 1998, setting a goal 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Overarching Findings and Lessons Learned 275

of 92 GW of installed CHP capacity by 2010. The DOE and the Environmental 

Protection Agency (EPA) support efforts to remove barriers and promote greater 

awareness and adoption of CHP systems. Partly in response to this national effort, 

some states, including California, New York, New Jersey, Connecticut, and Texas, 

have removed regulatory barriers, adopted favorable emissions regulations, and 

provided financial incentives for CHP systems (Eldridge et al., 2007).

Survey data indicate that installed CHP capacity in the United States reached 

85 GW at more than 3,300 sites as of 2006 (Shipley et al., 2008). CHP plants 

generated 506 TWh of electricity in 2006, almost 12 percent of all electricity produced nationwide. It is estimated that the use of CHP systems resulted in about 

1.9 quads of primary-energy savings that year (Shipley et al., 2008). Given that 

over 85 percent of the CHP capacity in the country was installed after 1980, the 

panel attributes 1.62 quads of energy savings in 2006 to PURPA and other policy 

initiatives aimed at stimulating the adoption of CHP systems. (The effects of 

PURPA and other energy initiatives are summarized in Table 5.2.)

5.2.8 Consumer Education, Training, and Technical Assistance

Complementing the minimum efficiency standards discussed above, the ENERGY 

STAR® product-labeling program informs U.S. consumers of the most efficient 

products in the marketplace at any particular time. The ENERGY STAR® label 

exists for a wide range of products, including personal computers and other 

types of office equipment, kitchen and laundry appliances, air conditioners and 

furnaces, windows, commercial appliances, and lighting devices. Energy-efficient 

commercial buildings and new homes also can qualify for the ENERGY STAR®

label. The ENERGY STAR® label helps consumers by reducing uncertainties 

about energy performance and lowering transaction costs for obtaining such 

information. 

Figure 5.2 shows the growth in the market share (percentage of new sales) 

for various ENERGY STAR® appliances over the past decade. Market shares for 

clothes washers, dishwashers, and room air conditioners greatly increased during 

this time period. Revisions in the ENERGY STAR® qualification level temporarily 

reduced the ENERGY STAR® market share for refrigerators and room air conditioners from 2000 to 2001. 

It is estimated that the ENERGY STAR® program in aggregate has resulted 

in about 175 TWh of electricity savings as of 2006 (EPA, 2007b). However, some 

of this savings is also counted by utility and state-based energy efficiency pro-
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

276 Real Prospects for Energy Efficiency in the United States

grams. The ENERGY STAR® program has achieved the most energy savings in the 

areas of commercial building improvements and personal computers, monitors, 

and other types of office equipment. The ENERGY STAR® program continues to 

develop criteria and adopt labeling for additional products—for example, for television sets and water heaters. In some cases, the ENERGY STAR® program paves 

the way for minimum efficiency standards by bringing new energy efficiency measures into wide production and use.

TABLE 5.2 Estimates of Annual Energy Savings from Major Energy Efficiency Policies and 

Programs 

Policy or Program

Electricity 

Savings 

(TWh/yr)

Primary

Energy 

Savings 

(Quads/yr) Year Source

CAFE vehicle efficiency standards — 4.80 2006 NRC, 2002a

Appliance efficiency standards 196 2.58 2006 Nadel et al., 2006b

PURPA and other CHP initiatives — 1.62 2006 Shipley et al., 2008c

ENERGY STAR® labeling and promotion 132 1.52 2006 EPA, 2007bd

Building energy codes — 1.08 2006 Nadel, 2004e

Utility and state end-use efficiency programs 90 1.06 2006 York and Kushler, 2006f

DOE industrial efficiency programs — 0.40 2005 DOE, 2007b

Weatherization assistance program — 0.14 2006 DOE, 2006g

Federal energy management program — 0.11 2005 FEMP, 2006h

Total — 13.32 — —

aExtrapolation of fuel savings estimated by the NRC to 2006, and assuming 75 percent of the energy savings from vehicle 

efficiency improvements are due to the CAFE standards. bInterpolates between savings estimates by ACEEE for 2000 and 2010. 

c

Assumes that 85 percent of the energy savings from all CHP systems installed in 2006 was due to PURPA and other policy 

initiatives. dAssumes only 75 percent of the energy savings estimated by U.S. EPA in order to avoid double counting savings with utility 

and state programs. e

Increases the energy savings estimate for new buildings constructed during 1990–1999 from Nadel (2004) by 100 percent to 

account for the impact of codes prior to 1990 and post-1999. 

f

Extrapolates the 2004 national electricity savings estimate to 2006 based on national DSM budget estimates for 2005 and 

2006. gAssumes 5.6 million weatherized households and average energy savings of 25 million Btu/yr per household, from Berry and 

Schweitzer (2003). hBased on the reported reduction in energy use per square foot of floor area during 1985–2005 and actual primary energy 

use in federal buildings as of 2005 (i.e., excluding energy use by transport vehicles and equipment).
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Overarching Findings and Lessons Learned 277

5.2 Efficiency

Year

Percent of New Sales 100

90

80

70

60

50

40

30

20

10

0

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Clothes Washers

Dishwashers

Refrigerators

Room Air Conditioners

FIGURE 5.2 ENERGY STAR 

® appliance market shares (percent of new sales), 1997−2006. 

Note: AC = air conditioner.

Source: Karney, 2006.

The DOE operates a number of education, training, and technical assistance 

programs for industries. These programs promote energy efficiency improvements 

in motors and in pumping and compressor systems. They also provide energy 

assessments for larger industrial plants and conduct energy audits for small- and 

medium-size manufacturers through university-based Industrial Assessment Centers. In combination, it is estimated that these programs have reduced industrial energy use by 1.75 quads cumulatively and 0.3 quad in 2005 alone (DOE, 

2007b).

The DOE operates a program known as the Federal Energy Management 

Program (FEMP) to improve energy efficiency in federal facilities. Starting in 

1991, executive orders instructed federal agencies to reduce their energy use per 

square foot of floor space. The FEMP provides technical assistance, training, and 

help with innovative approaches to project financing and implementation. Many 

federal agencies are using energy service companies and performance contracts to 

implement efficiency projects with support from the FEMP. In response to the rel-
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

278 Real Prospects for Energy Efficiency in the United States

evant executive orders and the FEMP, site energy use per square foot of floor area 

in federal buildings declined nearly 30 percent from 1985 to 2005. During this 

period, however, there was growing electrification in federal buildings, with the 

result that primary energy use per square foot of floor area declined by only 16 

percent (FEMP, 2006).

The federal government also implements some significant information and 

education programs aimed at increasing energy efficiency in the transportation 

sector. These include the light-vehicle fuel economy information program (www.

fueleconomy.gov) and the EPA’s SmartWay program for both passenger and freight 

vehicles (www.epa.gov/smartway/). In 2006, the EPA updated the test methods for 

measuring vehicle fuel economy as well as the label that appears on new vehicles. 

This was done to bring the estimates of miles per gallon on the label closer to 

actual fuel economy. The new label includes more prominently displayed fuel-cost 

information and a graphic comparing the fuel economy of various models in a 

particular vehicle category.

5.2.9 Overall Energy Savings 

Table 5.2 provides estimates of the annual energy savings resulting from most of 

the policies and programs discussed above. In some cases (i.e., for CAFE standards and PURPA), the savings reflect a judgment of the relative importance of 

the policies and market forces. The total energy savings, 13.3 quads per year, was 

equivalent to more than 13 percent of national energy use in 2006—more than the 

energy supplied by nuclear power and hydroelectric power combined. It was also 

more than five times the increase in renewable energy supply in the United States 

between 1973 and 2006.

It should be noted, however, that these policies and programs provided only 

a moderate amount of the total energy savings associated with the 50 percent 

decline in national energy intensity during the 1973–2007 period (see Chapter 1). 

Increasing energy prices, ongoing technological change, and structural change also 

contributed to the steep decline in energy intensity in the past 35 years.

A comparison of the energy savings across the various policies and programs 

in Table 5.2 shows that regulatory initiatives such as the CAFE standards, appliance efficiency standards, and PURPA provided the largest amount of energy savings. It should be recognized that some energy efficiency policy initiatives, such 

as RD&D efforts in the buildings sector, are not included in Table 5.2 in order to 

avoid double counting of savings. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Overarching Findings and Lessons Learned 279

5.3 THE CALIFORNIA EXPERIENCE

Figure 5.3 illustrates electricity use per capita from 1960 to 2006 in California, 

New York, and the United States as a whole. California maintained nearly flat per 

capita electricity consumption from 1975 to 2006, and in 2006 its per capita use 

was about 40 percent less than that in the United States as a whole, although the 

two were nearly the same in the 1960s. The shaded wedge in Figure 5.3 depicts 

the growth in U.S. per capita electricity consumption (since 1973). The U.S. and 

California trend lines started to diverge in 1974 when the United States experienced its first energy crisis.

Many factors contributed to the difference between the California and U.S. 

trend lines. California began setting its building and appliance efficiency standards 

earlier, and its electricity prices increased more rapidly, than was the case in most 

of the United States. And, of course, compared with the entire United States, other 

factors such as a different mix of industries and differences in climate also contributed (Sudarshan and Sweeney, 2008). 

5.3 Efficiency

Year

Kilowatt-hours per Person

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

 Per Capita Income in Constant 2000 Dollars

1975 2005 % Change

U.S. GDP per Capita 16,241 31,442 94

California GSP per Capita 18,760 33,536 79

United States

California

New York

196019621964196619681970197219741976197819801982198419861988199019921994199619982000200220042006

FIGURE 5.3 Per capita electricity consumption (not including on-site generation) in 

California, New York, and the United States, 1960−2006. 

Source: U.S. Department of Energy, Energy Information Administration. State Energy 

Data System, State Energy Consumption, Price, and Expenditure Estimates, available at 

http://www.eia.doe.gov/emeu/states/_seds.html. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

280 Real Prospects for Energy Efficiency in the United States

Table 5.3 compares 2005 per capita electricity consumption in California 

and the United States as a whole, broken out by major sectors (residential, commercial, and industrial) of the economy. The residential sector and the industrial 

sector each accounted for about 40 percent of the difference in consumption, and 

the commercial sector accounted for the remaining 20 percent. Sudarshan and 

Sweeney (2008) show that the types of industries in California are less electricity-intensive than those in the country as a whole, a factor that explains most of 

the difference in the industrial sector. Likewise, California has less commercial 

floor space per capita than does the United States as a whole, causing most of 

the difference in the commercial sector. These and other structural, price, and climatic effects can explain about 75 percent of the difference in electricity intensity 

between California and the country as a whole (Sudarshan and Sweeney, 2008). 

In addition to the various policies (discussed below) that California has pursued to increase the efficiency of electricity consumption, the impact of price on 

consumption is certainly worth noting. Figure 5.4 illustrates on a state-by-state 

basis the connection between the average price of electricity and per capita consumption in 2006. 

Although certainly not the whole story, consumption is clearly price elastic, 

and so the straight-line fit (with an R2 of 41 percent) has a negative slope of −811 

kWh per capita per 1¢/kWh. Both New York and California have high-priced 

electricity and below-average per capita consumption, as indicated in Figure 5.4, 

and both have a relatively low percentage of total consumption associated with 

the industrial sector—New York just 11 percent and California only 19 percent, 

compared to the national average of 29 percent.

Regarding policies that influenced the trend shown in Figure 5.3, California first enacted efficiency standards for major types of appliances and for new 

residential and commercial buildings in the mid-1970s. The state has updated its 

TABLE 5.3 Comparison of Per Capita Electricity Consumption in the United States and in 

California in 2005

United States

(kWh/person)

California

(kWh/person)

Difference

(kWh/person)

Difference

(%)

Residential 4,586 2,369 2,216 42

Commercial 4,302 3,253 1,048 20

Industrial 3,438 1,391 2,048 39

Total 12,326 7,013 5,312 100
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Overarching Findings and Lessons Learned 281

energy efficiency requirements for new buildings many times since then and has 

adopted minimum efficiency standards for additional appliances as well. After 

action by California and other states, the federal government also began to enact 

standards, at times even adopting those of California. Over the years, most of 

the appliance standards have migrated to national standards and therefore have 

resulted in efficiency gains in all states. The national energy savings are substantial, as noted previously. 

In addition to appliance standards and energy codes for new buildings, California has implemented substantial state and utility energy efficiency programs. 

Figure 5.5 provides annual funding levels for investment in energy efficiency by 

California’s investor-owned utilities for the years 1976–2004, with forecasts for 

2005–2012.8 Funding has varied considerably over time due to factors such as the 

8These utilities provide service to about 75 percent of the state’s population. The remainder is 

served by municipal utilities and other public agencies.

5.4 Efficiency

Average Price of Electricity (Cents per Kilowatt-hour)

Per Capita Consumption (Kilowatt-hours)

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

0 5 10 15 20 25

y = -811.3 + 20720

R2 + 0.41

CA NY

FIGURE 5.4 Average price of electricity and per capita consumption, 2006; 50-state data. 

Source: U.S. Department of Energy, Energy Information Administration, Electric Power 

Annual. Data Tables, 2006 State Data Tables (EIA-816). Population estimates from the 

U.S. Census Bureau, Annual Estimates of the Population for the U.S., Regions, States and 

Puerto Rico: April 1, 2000, to July 1, 2007 (NST-EST2007-01).
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

282 Real Prospects for Energy Efficiency in the United States

movement toward deregulation and restructuring during the 1990s, but energy 

efficiency funding has rebounded in recent years and is expected to continue to 

rise in the near future.

California enacted a number of policies to stimulate vigorous utility efficiency programs. The state has now placed energy efficiency as its most preferred 

resource and has committed to the aggressive funding of these efforts for the next 

few years, as Figure 5.5 illustrates. Figure 5.5 also highlights some of the following important policies that the state has adopted since the early 1980s:

•	 1982: Decoupling of utility profits from sales in order to eliminate the 

negative incentives associated with reduced sales;

•	 1991: Providing of performance incentives to utilities that met or 

exceeded efficiency savings, a policy that was then abandoned during 

California’s initial efforts at restructuring its electricity sector;

Millions of 2002 Dollars per 

Year

1000

900

800

700

600

500

400

300

200

100

0

Year

1976197819801982198419861988199019921994199619982000200220042006200820102012

Opportunities >10%

EIA Baseline

Profits

Decoupled

from Sales

Performance

Incentives

Market

Restructuring

Public Goods Charges

Integrated

Resource

Planning

Crisis Forecast

2% of 2004

IOU Electric

Revenues

5.5 Efficiency FIGURE 5.5 Funding (in constant 2002 dollars) for investor-owned utility energy efficiency programs in California, 1976−2004, and forecasted for 2005−2012. Also shown are 

key policies enacted by the state since the early 1980s. Public-good charges of 0.3¢/kWh 

sold were imposed beginning in 1998 to fund energy efficiency and other public-benefits 

activities. 

Note: IRP = integrated resource planning; “crisis” refers to the temporary power shortages and severe electricity price spikes experienced in 2001. 

Source: Rosenfeld and McAuliffe, 2008. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Overarching Findings and Lessons Learned 283

•	 1998: Implementation of a mandatory charge of 0.3¢/kW sold in order 

to fund energy efficiency and other “public benefits” activities;

•	 2001: Inclusion of efficiency as a part of integrated resource planning, 

and the direct comparison of energy savings to other options for meeting future load and load growth requirements, including other policy 

considerations;

•	 2004: Establishment of energy efficiency goals of about 1 percent per 

year (about 2.3 TWh per year) through 2013; and

•	 2007: Reinstatement of performance incentives. California established 

specific efficiency targets with a risk/reward incentive mechanism, as 

illustrated in Figure 5.6. Utilities are allowed a bonus, in addition to 

cost recovery, if they achieve at least 85 percent of their savings goals.

California updated its building efficiency standards and approved more 

than $500 million for additional energy efficiency programs in 2001. These 

actions were taken in order to help the state respond to temporary power 

shortages and severe electricity price spikes caused by flaws in the state’s utility restructuring policy. These emergency efforts were very successful. In total, 

compared to levels of the previous year, California reduced its electricity use by 

about 7 percent and peak demand by 10 percent in the summer of 2001 (CEC, 

2002). These savings enabled the state to avoid further power shortages during 

the summer of 2001.

The combination of standards and programs has resulted in considerable 

electricity savings since the inception of these efforts. Figure 5.7 illustrates the 

cumulative effects of appliance standards, building energy codes, utility efficiency 

programs, and what is termed market transformation—that is, longer-term market 

impacts due to previous state and utility efficiency programs—in California from 

1975 though 2003. In total, it is estimated that these initiatives saved about 40 

TWh per year (1.13 MWh per capita) as of 2003, equivalent to about 15 percent 

of actual electricity use in the state that year. 

California continues to promote and advance energy efficiency throughout all sectors of the economy. Energy efficiency, the top priority of the state’s 

Energy Action Plan, will be heavily relied on if the state is to meet its goal of 

reducing greenhouse gas emissions in 2020 to levels experienced in 1990 (CEC, 

2008). 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

284 Real Prospects for Energy Efficiency in the United States

5.6 Efficiency

d Energy Deman

d

adrillion Btu)

45.0

4.00

35.0

325

GDP in 

Intensit

Structu

Energy 

Energy Demand Due

to GDP Growth

Natural Industry Evolution,

Mix Shift, and Expected

Efficiency Gains

Earnings = ER x PEB

5¢/kWh, $25/kW, 45¢/therm

below goals, or payback of

negative net benefits (costeffectiveness guarantee)

0% 65%

85% 100%

ER = 9%

ER = 12%

% of CPUC

Goals

Earnings Capped

at $450 Million

Penalty Capped

at $450 Million

(Per Unit

Below

CPUC

Goal)

Penalty

Reward

(% of

PEB)

43.8

35.8

Opportunities >10%

EIA Baseline

FIGURE 5.6 Utility energy efficiency incentive mechanism adopted by the California 

Public Utilities Commission (CPUC) in 2007. The CPUC established efficiency targets along 

with a risk/reward mechanism under which utilities are allowed both cost recovery and a 

bonus (or penalty) for exceeding (or falling short of ) the targets. 

Note: PEB = performance earnings basis; ER = earnings rate(s), the percentage of PEB 

that will accrue to shareholders.

Source: CPUC, 2007.

5.4 THE NEW YORK EXPERIENCE

New York State has a long history of implementing policy actions to encourage 

more efficient use of energy across all sectors. Policy makers have recognized that 

cost-effective strategies to reduce energy use are critical for stimulating and maintaining economic growth. New York’s energy efficiency efforts include the system 

benefits charge (SBC) described below; the adoption and continual updating of 

energy building codes and appliance standards; executive orders directing state 

agencies and authorities to improve energy efficiency; and well-funded research 

and development programs. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Overarching Findings and Lessons Learned 285

5.7 Efficiency

Year

Gigawatt-hours per Year

45,000

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

–15% of Annual Electricity Use in California in 2003

Utility Efficiency

Programs and Market

Transformation

Building Standards

Appliance Standards

19751976197719781979198019811982198319841985198619871988198919901991199219931994199519961997199819992000200120022003

FIGURE 5.7 Annual electricity savings from key energy efficiency policies and programs 

implemented in California, 1975−2003. 

Source: CEC, 2007.

Although the past three decades have been characterized by increases in 

population, greater demands for energy-using technologies, and increasing lifestyle expectations, New York State has maintained a relatively flat level of total 

energy use per capita (about 36 percent lower than the national average in 2005). 

New York is currently the second-least energy-intensive state in the continental 

United States on a per capita basis (after Rhode Island). Its relatively low energy 

use per capita is due in part to its highly energy-efficient urban transportation, 

which includes subways, commuter rail, buses, and ferries, as well as to structural 

changes such as the shift away from a heavy industrial base and toward a service 

and information economy.

New York’s electricity use per capita relative to that of the United States (see 

Figure 5.3) is an indicator of the overall success of the state’s continuing efforts 

to promote the efficient use of electricity. Between 1960 and 2006, the difference between New York and the United States in annual electricity use per capita 

widened from about 1100 kWh to about 4900 kWh. In 2006 the residential sector accounted for 41 percent of the difference, the industrial sector for 53 per-
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

286 Real Prospects for Energy Efficiency in the United States

cent, and the commercial and transportation sectors for the remaining 6 percent 

(Table 5.4).

New York’s energy efficiency efforts began in the late 1970s with federal 

funding for a State Energy Conservation Program (SECP). The funding was small 

relative to the need, but the efforts initiated through the New York State Energy 

Office (NYSEO) represented an important beginning in achieving greater energy 

efficiency and conservation savings and provided experience for government programs working in concert with the private sector. Over the years, the NYSEO was 

able to develop a diverse portfolio of programs serving the residential, business, 

and government sectors. These programs took another step forward in the 1980s 

as a result of receiving significant funding from a legal settlement against Exxon 

and other oil companies for charging excessive prices for their crude oil in the late 

1970s. By 1989, New York State had received more than $335 million, including 

interest, from this funding source.

New York’s energy efficiency efforts directed at the electric utility sector 

began in earnest in 1984, driven largely by concerns about the construction delays 

and escalating costs that were plaguing the Shoreham and Nine Mile Point 2 

nuclear power plants and the Somerset coal plant. At the time, DSM programs 

were viewed by New York’s Public Service Commission (PSC) as potential alternatives to continued investment in new, central-station power-generation projects. As 

a result, investor-owned utilities were required by the PSC to develop pilot-scale 

DSM programs that included energy efficiency and load management. The programs were initially funded at approximately $25 million annually, representing 

approximately one-quarter of 1 percent of gross annual utility revenue. 

Following an assessment of the pilot programs in 1987, the PSC concluded 

TABLE 5.4 Comparison of Per Capita Electricity Use in the United States and in New York in 

2006

United States

(kWh/person)

New York

(kWh/person)

Difference

(kWh/person)

Difference

(%)

Residential 4,514 2,508 2,006 41

Commercial 4,341 3,938 403 8

Industrial 3,378 776 2,602 53

Transportation 25 145 –121 −2

Total 12,258 7,367 4,890 100
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Overarching Findings and Lessons Learned 287

that DSM programs were a viable and economic alternative to new energy supply 

resources and that DSM should be considered on an equal footing with supply 

resources in integrated resource planning. At a minimum, it was recognized that 

DSM could delay the need for peaking capacity, even if the need for new baseload 

power supplies could not be completely eliminated. The job creation and environmental benefits associated with reducing electricity use were also identified and 

quantified as further justification for investment in DSM. Utilities were directed by 

the PSC to assess DSM potential, identify cost-effective programs, establish DSM 

goals, and develop long-range DSM plans, including incentive, information, and 

education programs.

In the early 1990s, the PSC implemented a revenue decoupling mechanism to allow utilities to recover revenues lost from energy efficiency reductions 

(determined by the amount by which actual sales revenue fell below the forecast 

adopted in the most recent rate case). Along with the revenue decoupling mechanism, the PSC approved financial incentives for achieving energy efficiency goals, 

as well as financial penalties for falling short of goals. The incentive scheme 

proved to be effective and was successfully adapted to each investor-owned utility 

(DeCotis, 1989).

By 1993, DSM spending by investor-owned utilities in New York State 

reached $280 million (equivalent to about $400 million in 2007 dollars; Figure 

5.8), a dramatic increase from the initial $25 million spent in 1984. Additional 

DSM spending by the state’s energy authorities raised the state’s annual investment 

in energy efficiency resources in 1993 to about $330 million (about $470 million 

in 2007 dollars).

New York began the process of restructuring its electricity industry in 1996. 

A key element of this effort was that investor-owned utilities were required to 

sell generation assets to independent power producers. As a result, New York’s 

investor-owned utilities were transformed into transmission and distribution companies. With the transition to wholesale market competition, the responsibilities 

for administering DSM programs were transferred to the New York State Energy 

Research and Development Authority (NYSERDA). The utilities’ current role, 

following the divestiture of their generation assets, is to collect program funds 

from ratepayers through a system benefits charge. The funds are provided to 

NYSERDA, under the oversight of the PSC, to administer energy efficiency, load 

management, environmental protection, and research and development programs. 

NYSERDA has been administering statewide SBC programs in cooperation with 

the New York Power Authority and the Long Island Power Authority since 1998.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

288 Real Prospects for Energy Efficiency in the United States Millions of 2007 Dollars per 

Year

Incremental Energy Efficiency Achievements

(Gigawatt-hours)

LIPA

NYPA

NYSERDA

Utilities

Energy Efficiency

(GWh)

500

450

400

350

300

250

200

150

100

50

0

2000

1800

1600

1400

1200

1000

800

600

400

200

0

Year

199019911992199319941995199619971998199920002001200220032004200520062007

Prof

Decouple

from Sale

Restructuring

Process Initiated

Competitive Wholesale

Market Start-Up

Start of

System

Benefits

Charge

FIGURE 5.8 New York State’s annual energy efficiency expenditures (in constant 2007 5.8 Efficiency

dollars) and achievements, 1990−2007. 

Note: EE = energy efficiency; GWh = gigawatt-hours; LIPA = Long Island Power Authority; 

NYPA = New York Power Authority; NYSERDA = New York State Energy Research and 

Development Authority. 

Source: Courtesy of NYSERDA. 

By 2007, annual investment in energy efficiency by New York’s energyrelated authorities increased to nearly $300 million (see Figure 5.8). Accounting 

for the cumulative annual impact of programs implemented since 1990, New 

York has lowered its annual electricity use by nearly 12 TWh, or about 8 percent of end-use sales (Figure 5.9). This 12 TWh of demand-side resources has 

reduced New York’s CO2 emissions by about 6.5 million tons per year, equivalent to removing about 1.3 million cars from the roads annually. All SBC energy 

efficiency programs (administered by NYSERDA) are required by the PSC to be 

cost-effective, which means that the present value of estimated lifetime monetary 

benefits exceeds the costs of implementing the programs. Through year’s end in 

2007, the benefit-cost ratio, counting only direct utility system benefits for New 

York’s portfolio of SBC-funded energy efficiency programs, is 6.2 (on a presentvalue basis). Including nonenergy benefits, such as improved comfort, safety, and 

productivity, the benefit-cost ratio increases to 9.9, and adding macroeconomic 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Overarching Findings and Lessons Learned 289

benefits (e.g., valuing added employment) increases the ratio to 13.2 (NYSERDA, 

2008).

In April 2007, then-New York Governor Eliot Spitzer initiated an energy efficiency program of unparalleled proportions, known as the “15 by 15” program, 

by calling for a 15 percent reduction in electricity use in 2015 compared to the 

business-as-usual projected level of electricity use for that year (Spitzer, 2007). 

5.5 LESSONS LEARNED

What lessons can be drawn from the wide-ranging experience encapsulated in this 

chapter regarding policies and programs aimed at increasing energy efficiency at 

5.9 Efficiency

Year

Gigawatt-hours per 

Year

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

Building Code

LIPA Energy Efficiency

NYPA Energy Efficiency

NYSERDA Energy Efficiency

Utilities Energy Efficiency

8% of End-Use Sales in 2007

199019911992199319941995199619971998199920002001200220032004200520062007

FIGURE 5.9 New York State’s energy efficiency achievements, 1990 through 2007: annual electricity use. 

Note: EE = energy efficiency; LIPA = Long Island Power Authority; NYPA = New York 

Power Authority; NYSERDA = New York State Energy Research and Development 

Authority.

Source: Courtesy of NYSERDA. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

290 Real Prospects for Energy Efficiency in the United States

both the national and the state level? Most importantly, the experience demonstrates that well-designed policies can result in substantial energy savings. This is 

clear from the fact that the policies taken together reduced national energy use 

in 2006 by more than 13 percent according to the estimates in Table 5.2. Also, 

leading states such as California and New York have been able to increase energy 

efficiency more than other states have, resulting in greater benefits for citizens, 

businesses, and the environment.

The experience shows that minimum efficiency standards can be a very effective strategy for stimulating energy efficiency improvements on a large scale, especially if standards are updated periodically. Minimum efficiency standards have 

been a key part of both federal and state energy efficiency efforts. Such standards 

should be technically and economically feasible and should provide manufacturers 

with enough lead time to phase out the production of nonqualifying products in 

an orderly manner. 

Government-funded RD&D contributed to the development and commercialization of a number of important energy efficiency technologies. Experience 

has demonstrated that RD&D can take many years to pay off, and that attention 

should be devoted to commercialization and market development as well as to 

technological advancement. Also, a prudent RD&D portfolio includes high-risk, 

potentially high-payoff projects as well as those involving lower-risk, incremental 

improvements (NRC, 2001). 

Although there is evidence that energy prices influence energy efficiency and 

levels of energy consumption, as illustrated in Figure 5.4, neither the federal government nor states have used energy taxes to any significant degree as a strategy 

for stimulating greater energy efficiency. 

Financial incentives, including those provided by utilities, can increase the 

adoption of energy efficiency measures. Financial incentives should be carefully 

designed, however, avoiding costly efforts that have little or no incremental impact 

on the marketplace. One way to avoid this outcome is to provide incentives for 

newly commercialized technologies—in particular those with a high first cost but 

with good prospects for cost reduction as demand grows, production expands, 

and learning occurs.

Information dissemination, education, and training can increase the awareness of energy efficiency measures and improve know-how with respect to energy 

management. The ENERGY STAR® labeling program exemplifies the impact that 

a well-conceived, widely promoted labeling and education effort can have. Educa-
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Overarching Findings and Lessons Learned 291

tion and training are also important for the successful implementation of building 

energy codes. 

In general, energy efficiency policies and programs work best if they are integrated into market transformation strategies, addressing the range of barriers that 

are present in a particular situation (Geller and Nadel, 1994). In the appliance 

market, for example, all of the following are being carried out simultaneously: 

government-funded RD&D helps to develop and commercialize new technologies; 

product labeling educates consumers; efficiency standards eliminate inefficient 

products from the marketplace; and incentives offered by some utilities and states 

encourage consumers to purchase products that are significantly more efficient 

than the minimum standards. This combination of actions has led to dramatic 

improvements in the efficiency of refrigerators and other types of appliances, and 

the efficiency gains and energy savings are continuing today. 

The experience described above suggests that energy efficiency policies 

should be kept in place for a decade or more in order to ensure an orderly 

development of energy efficiency markets. At the same time, policies such as efficiency standards and targets, product labeling, and financial incentives should 

be revised periodically. This will increase their effectiveness and reduce program 

costs, for example, by phasing out incentives as particular technologies become 

well established in the marketplace. Dynamic policies steadily improved residential appliance efficiency, whereas stagnant policies failed to maintain car and 

light-truck efficiency improvements during the 1990s and the early part of this 

decade.

5.6 CHANGING CONSUMER BEHAVIOR

The energy efficiency policies and programs discussed in this chapter focus primarily on increasing the energy efficiency of buildings, appliances, vehicles, and 

industrial operations. Less attention has been devoted to changing consumer 

behavior—for example, encouraging people to drive less or buy fewer and/or 

smaller vehicles, appliances, or homes. Consumer behavior can be influenced in a 

number of ways (PIEE, 2007), including the following:

•	 Offering convenient alternatives such as practical and high-quality mass 

transit services;
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

292 Real Prospects for Energy Efficiency in the United States

•	 Using financial incentives such as taxing energy, taxing carbon dioxide and other pollutant emissions, or taxing inefficient devices more 

heavily;

•	 Increasing awareness, for example by educating people about the environmental consequences of their lifestyle choices; and

•	 Providing feedback on energy consumption—for example, by including 

easy-to-understand comparative information on energy use on monthly 

utility bills. 

It remains to be seen if changing behavior can play a larger role in energy 

efficiency efforts in the coming decades.

5.7 REFERENCES

ACEEE (American Council for an Energy-Efficient Economy). 2007. Energy Bill Savings 

Estimates as Passed by the Senate. Washington, D.C.: ACEEE. Available at http://www.

aceee.org/energy/national/EnergyBillSavings12-14.pdf.

Alic, J.A., D.C. Mowery, and E.S. Rubin. 2003. U.S. Technology and Innovation Policies: 

Lessons for Climate Change. Arlington, Va.: Pew Center on Global Climate Change.

Berry and Schweitzer, 2003. Metaevaluation of National Weatherization Assistance 

Program Based on State Studies, 1993-2002. ORNL/CON-488. Oak Ridge, Tenn.: 

Oak Ridge National Laboratory. 

CEC (California Energy Commission). 2002. The Summer 2001 Conservation Report. 

Sacramento, Calif.: CEC. 

CEC. 2007. Table 42, California Energy Demand 2008-2018: Staff Revised Forecast, Final 

Staff Forecast, 2nd ed., CEC-200-2007-015-SF2. Sacramento, Calif.: CEC. November 

27.

CEC. 2008. 2008 Energy Action Plan Update. CEC-100-2008-001. Sacramento, Calif.: 

CEC; San Francisco, Calif.: California Public Utilities Commission. Available at http://

www.fypower.org/pdf/cpuc_eap_update.pdf.

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Billion Industry. Boston, Mass.: CEE.

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Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Appendixes
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 
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Real Prospects for Energy Efficiency in the United States 

299

I

n 2007, the National Academies initiated the America’s Energy Future (AEF) 

project (Figure A.1) to facilitate a productive national policy debate about the 

nation’s energy future. The Phase I study, headed by the Committee on America’s Energy Future and supported by the three separately constituted panels whose 

members are listed in this appendix, will serve as the foundation for a Phase II 

portfolio of subsequent studies at the Academies and elsewhere, to be focused on 

strategic, tactical, and policy issues, such as energy research and development priorities, strategic energy technology development, policy analysis, and many related 

subjects. 

A key objective of the AEF project is to facilitate a productive national policy 

debate about the nation’s energy future.

Committee on America’s Energy Future

HAROLD T. SHAPIRO, Princeton University, Chair

MARK S. WRIGHTON, Washington University in St. Louis, Vice Chair

JOHN F. AHEARNE, Sigma Xi and Duke University

ALLEN J. BARD, University of Texas at Austin

JAN BEYEA, Consulting in the Public Interest

WILLIAM F. BRINKMAN, Princeton University

DOUGLAS M. CHAPIN, MPR Associates

STEVEN CHU,1 Lawrence Berkeley National Laboratory

A America’s Energy Future Project

1Resigned from the committee on January 21, 2009.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

300 Real Prospects for Energy Efficiency in the United States

Committee Subgroups

Phase I

Phase II

March 2008

National Academies Summit

Committee on America’s Energy Future

Harold T. Shapiro, Chair

Mark S. Wrighton, Vice Chair

Energy from Fossil Fuels

Nuclear Energy

Electricity Transmission

and Distribution

Crosscutting and Integration Issues

Alternative Liquid

Transportation Fuels

Energy from Renewable Resources

Energy Efficiency

Panel on Energy Efficiency

Technologies

Lester B. Lave, Chair

Maxine L. Savitz, Vice Chair

Panel on Electricity from

Renewable Resources

Lawrence T. Papay, Chair

Allen J. Bard, Vice Chair

Panel on Alternative Liquid

Transportation Fuels

Michael P. Ramage, Chair

G. David Tilman, Vice Chair

ALTF AEF A-1

FIGURE A.1 America’s Energy Future Project.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Appendix A 301

CHRISTINE A. EHLIG-ECONOMIDES, Texas A&M University

ROBERT W. FRI, Resources for the Future

CHARLES H. GOODMAN, Southern Company (retired)

JOHN B. HEYWOOD, Massachusetts Institute of Technology

LESTER B. LAVE, Carnegie Mellon University

JAMES J. MARKOWSKY, American Electric Power Service Corp. (retired)

RICHARD A. MESERVE, Carnegie Institution for Science

WARREN F. MILLER, JR., Texas A&M University

FRANKLIN M. (“Lynn”) ORR, JR., Stanford University

LAWRENCE T. PAPAY, PQR LLC

ARISTIDES A.N. PATRINOS, Synthetic Genomics, Inc.

MICHAEL P. RAMAGE, ExxonMobil (retired)

MAXINE L. SAVITZ, Honeywell, Inc. (retired)

ROBERT H. SOCOLOW, Princeton University

JAMES L. SWEENEY, Stanford University

G. DAVID TILMAN, University of Minnesota, St. Paul

C. MICHAEL WALTON, University of Texas at Austin

PANEL ON ENERGY EFFICIENCY

LESTER B. LAVE, Carnegie Mellon University, Chair

MAXINE L. SAVITZ, Honeywell, Inc. (retired), Vice Chair

R. STEPHEN BERRY, University of Chicago 

MARILYN A. BROWN, Georgia Institute of Technology 

LINDA R. COHEN, University of California, Irvine 

MAGNUS G. CRAFORD, Philips LumiLeds Lighting 

PAUL A. DeCOTIS, Long Island Power Authority

JAMES DeGRAFFENREIDT, JR., WGL Holdings, Inc. 

HOWARD GELLER, Southwest Energy Efficiency Project 

DAVID B. GOLDSTEIN, Natural Resources Defense Council 

ALEXANDER MacLACHLAN, E.I. du Pont de Nemours and Company (retired)

WILLIAM F. POWERS, Ford Motor Company (retired)

ARTHUR H. ROSENFELD, E.O. Lawrence Berkeley National Laboratory 

DANIEL SPERLING, University of California, Davis 
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302 Real Prospects for Energy Efficiency in the United States

PANEL ON ALTERNATIVE LIQUID TRANSPORTATION FUELS

MICHAEL P. RAMAGE, ExxonMobil Research and Engineering Company 

(retired), Chair

G. DAVID TILMAN, University of Minnesota, St. Paul, Vice Chair

DAVID GRAY, Noblis, Inc. 

ROBERT D. HALL, Amoco Corporation (retired) 

EDWARD A. HILER, Texas A&M University (retired)

W.S. WINSTON HO, Ohio State University 

DOUGLAS R. KARLEN, U.S. Department of Agriculture, Agricultural Research 

Service 

JAMES R. KATZER, ExxonMobil Research and Engineering Company (retired) 

MICHAEL R. LADISCH, Purdue University and Mascoma Corporation

JOHN A. MIRANOWSKI, Iowa State University 

MICHAEL OPPENHEIMER, Princeton University 

RONALD F. PROBSTEIN, Massachusetts Institute of Technology 

HAROLD H. SCHOBERT, Pennsylvania State University 

CHRISTOPHER R. SOMERVILLE, Energy Biosciences Institute 

GREGORY STEPHANOPOULOS, Massachusetts Institute of Technology 

JAMES L. SWEENEY, Stanford University 

PANEL ON ELECTRICITY FROM RENEWABLE RESOURCES

LAWRENCE T. PAPAY, Science Applications International Corporation (retired), 

Chair

ALLEN J. BARD, University of Texas, Austin, Vice Chair

RAKESH AGRAWAL, Purdue University 

WILLIAM L. CHAMEIDES, Duke University 

JANE H. DAVIDSON, University of Minnesota, Minneapolis 

J. MICHAEL DAVIS, Pacific Northwest National Laboratory 

KELLY R. FLETCHER, General Electric

CHARLES F. GAY, Applied Materials, Inc. 

CHARLES H. GOODMAN, Southern Company (retired)

SOSSINA M. HAILE, California Institute of Technology 

NATHAN S. LEWIS, California Institute of Technology 

KAREN L. PALMER, Resources for the Future 
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Real Prospects for Energy Efficiency in the United States 

Appendix A 303

JEFFREY M. PETERSON, New York State Energy Research and Development 

Authority

KARL R. RABAGO, Austin Energy

CARL J. WEINBERG, Pacific Gas and Electric Company (retired)

KURT E. YEAGER, Galvin Electricity Initiative

America’s Energy Future Project Director

PETER D. BLAIR, Executive Director, Division on Engineering and Physical 

Sciences

America’s Energy Future Project Manager

JAMES ZUCCHETTO, Director, Board on Energy and Environmental Systems 

(BEES)

America’s Energy Future Project Staff

KEVIN D. CROWLEY, Director, Nuclear and Radiation Studies Board (NRSB), 

Study Director

DANA G. CAINES, Financial Manager, BEES

SARAH C. CASE, Program Officer, NRSB

ALAN T. CRANE, Senior Program Officer, BEES

GREG EYRING, Senior Program Officer, Air Force Studies Board

K. JOHN HOLMES, Senior Program Officer, BEES

LaNITA JONES, Administrative Coordinator, BEES

STEVEN MARCUS, Editorial Consultant

THOMAS R. MENZIES, Senior Program Officer, Transportation Research Board

EVONNE P.Y. TANG, Senior Program Officer, Board on Agriculture and Natural 

Resources

MADELINE G. WOODRUFF, Senior Program Officer, BEES

E. JONATHAN YANGER, Senior Program Assistant, BEES
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

305

Lester B. Lave, Chair, is the Harry B. and James H. Higgins Professor of Economics and University Professor at Carnegie Mellon University. He is also director, Carnegie Mellon Green Design Initiative, and codirector, Carnegie Mellon 

Electricity Industry Center. His teaching and research interests include applied 

economics, political economy, quantitative risk assessment, safety standards, modeling the effects of global climate change, public policy concerning greenhouse gas 

emissions, and understanding the issues surrounding the electricity transmission 

and distribution system. He is a recipient of the Distinguished Achievement Award 

of the Society for Risk Analysis. Dr. Lave is a member of the Institute of Medicine.

Maxine L. Savitz, Vice Chair, is a director of the Washington Advisory Group. 

Dr. Savitz is a former deputy assistant secretary for Conservation, U.S. Department of Energy (DOE). She received the Outstanding Service Medal from DOE in 

1981. Prior to her DOE service, she was program manager for Research Applied 

to National Needs at the National Science Foundation. Following her government service, Dr. Savitz served in executive positions in the private sector, including: president of Lighting Research Institute, assistant to the vice president for 

engineering at The Garrett Corporation, and general manager of AlliedSignal 

Ceramic Components. She recently retired from the position of general manager 

for Technology Partnerships at Honeywell. Dr. Savitz is a member of the American 

Association for the Advancement of Science. She was appointed to the National 

Science Board in 1998. She is a member of the Secretary of Energy Advisory 

Board, the DOE’s Laboratory Operations Board, and advisory bodies for Oak 

Ridge National Laboratory (ORNL) and Pacific Northwest National Laboratory. 

B Panel Biographical Information
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

306 Real Prospects for Energy Efficiency in the United States

Dr. Savitz also serves on the board of directors of the Electric Power Research 

Institute and the American Council for an Energy Efficient Economy. Dr. Savitz 

is a member of the National Academy of Engineering (NAE). She received a B.A. 

in chemistry from Bryn Mawr College and a Ph.D. in organic chemistry from the 

Massachusetts Institute of Technology. 

R. Stephen Berry is the James Franck Distinguished Service Professor Emeritus of 

Chemistry at the University of Chicago and holds appointments in the College, 

the James Franck Institute, and the Department of Chemistry. He has also held an 

appointment in the School of Public Policy Studies at the University of Chicago 

and has worked on a variety of subjects ranging from strictly scientific matters 

to a variety of topics in policy. He spent 1994 at the Freie Universität Berlin as 

an awardee of the Humboldt Prize. In 1983 he was awarded a MacArthur Fellowship. His experimental research includes studies of negative ions, chemical 

reactions, detection of transient molecular species, photoionization, and other 

laser-matter interactions. Other research has involved interweaving thermodynamics with economics and resource policy, including efficient use of energy. Since the 

mid-1970s, Dr. Berry has worked on issues of science and the law, and with management of scientific data, activities that have brought him into the arena of electronic media for scientific information and issues of intellectual property in that 

context. Dr. Berry is a member of the National Academy of Sciences (NAS). He 

attended Harvard University, where he received an A.B. and an A.M. in chemistry 

and a Ph.D. in physical chemistry.

Marilyn A. Brown is a professor of public policy at the Georgia Institute of 

Technology. Previously, she was the interim director of the Engineering Science 

and Technology Division at ORNL. During her 22 years at ORNL, Dr. Brown 

researched the impacts of policies and programs aimed at advancing the market 

entry of sustainable energy technologies and led several energy technology and 

policy scenario studies. Prior to serving at ORNL, she was a tenured associate 

professor in the Department of Geography at the University of Illinois, UrbanaChampaign, where she conducted research on the diffusion of energy innovations. 

She has authored more than 150 publications and has been an expert witness in 

hearings before committees of both the U.S. Senate and the House of Representatives. A recent study that she co-led, Scenarios for a Clean Energy Future, was 

the subject of two Senate hearings, has been cited in proposed federal legislation, 

and has had a significant role in international climate change debates. She serves 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Appendix B 307

on the board of directors of several energy, engineering, and environmental organizations, including the Alliance to Save Energy and the American Council for an 

Energy Efficient Economy, and she serves on the editorial board of the Journal 

of Technology Transfer. Dr. Brown is a member of the National Commission on 

Energy Policy. She has a Ph.D. in geography from Ohio State University and a 

master’s degree in resource planning from the University of Massachusetts.

Linda R. Cohen is a professor of economics and associate dean for research and 

graduate studies for the School of Social Sciences at the University of California, 

Irvine. She is a fellow and former council member of the California Council for 

Science and Technology, and was a member of the Advisory Panel for the Public 

Interest Energy Research Program for the California Energy Commission. She 

recently served on National Research Council (NRC) committees on the benefits 

of DOE programs in energy efficiency and fossil energy and on the American 

Physical Society Panel on Public Affairs’ Committee on Energy and Environment. 

In 2004 Dr. Cohen held the Gilbert White Fellowship at Resources for the Future 

of Washington, D.C. Her energy-related publications include The Technology 

Pork Barrel, “When Can Government Subsidize Research Joint Ventures? Politics, Economics and Limits to Technology Policy,” “Is U.S. Science Policy at Risk? 

Trends in Federal Support for R&D,” and Prospective Evaluation of Applied 

Energy Research and Development at DOE (Phase One): A First Look Forward,

with coauthors. She received a Ph.D. in social sciences from the California Institute of Technology.

Magnus G. Craford is the chief technology officer of Philips LumiLeds Lighting. 

Dr. Craford began his professional career as a research physicist at Monsanto 

Chemical Company. His initial research dealt with the development of optoelectronics materials and devices using a variety of compound semiconductor materials. In 1979, he joined Hewlett Packard Company as a manager in the Optoelectronics Division, responsible for the development of technology and processes 

for manufacturing visible light emitting diodes. In 1999, Dr. Craford assumed his 

current position as chief technical officer of LumiLeds Lighting, then a joint venture of Agilent Technologies and Philips Lighting, now owned by Philips. He is 

a fellow of the Institute of Electrical and Electronics Engineering (IEEE). He has 

received the MRS Medal, the IEEE Morris N. Liebmann Award, the Holonyak 

Award of the Optical of America, the Welker Award of the International Symposium on Compound Semiconductors, the Electronics Division Award of the 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

308 Real Prospects for Energy Efficiency in the United States

Electrochemical Society, and the Distinguished Alumni Award of the University of 

Illinois College of Engineering. He has published more than 50 papers and book 

chapters. Dr. Craford is a member of the NAE. He received a B.A. in physics from 

the University of Iowa and a Ph.D. in physics from the University of Illinois. 

Paul A. DeCotis is vice president of power markets at Long Island Power Authority, where he oversees strategic resource planning; fuel, energy, and capacity purchases and sales; power project development and management; and participation 

in the region’s wholesale power markets. Prior to this he was deputy secretary for 

energy in New York, serving as senior energy advisor to Governor Spitzer and 

Governor Paterson. He was also chair of the State Energy Planning Board. Mr. 

DeCotis previously served as director of energy analysis for the New York State 

Energy Research and Development Authority and before that was chief of policy 

at the State Energy Office in New York. Until his appointment as deputy secretary, 

he was president of a management consulting business, specializing in executive 

and board development, strategy, and mediation. Since 1985, he has served as an 

adjunct faculty member at several colleges and universities, including Cornell University, Rochester Institute of Technology, and Sage Graduate School. Mr. DeCotis 

is a member of the Board on Energy and Environmental Systems of the National 

Research Council; a member of the Energy Working Group of the Coalition of 

Northeastern Governors; a member of the Energy Resources Board of the American University at Kosovo; an editorial board member of the Energy Efficiency 

Journal; an executive committee member of the New York Reliability Council; 

and a member of the New York Smart Grid Consortium. He has served on and 

chaired many professional organizations and associations and has extensive community service experience. Mr. DeCotis received his B.A. in international business 

management from the State University College at Brockport, his M.A. in economics from the University at Albany, and his M.B.A. in finance from the Sage Graduate School at Russell Sage College.

James H. DeGraffenreidt, Jr., is chairman of the board and chief executive office 

of the WGL Holdings, Inc., the parent company of Washington Gas. He also 

serves as chairman and CEO of Washington Gas, the natural gas utility serving 

more than 980,000 customers in the Washington, D.C., metropolitan area and 

surrounding region. After practicing law as a partner or associate at different law 

firms and as assistant people’s counsel in Maryland, he joined WGL Holdings, 

Inc., as senior managing attorney. Mr. DeGraffenreidt also serves on numerous 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Appendix B 309

boards, including the American Gas Association Alliance to Save Energy, MedStar 

Health, Harbor Bankshares Corporation, Maryland Science Center, the Walters 

Art Museum, and the Massachusetts Mutual Life Insurance Company. He received 

a B.A. from Yale College and a J.D. and an M.B.A. from Columbia University.

Howard Geller is the executive director of the Southwest Energy Efficiency Project 

(SWEEP), a public interest venture he founded in 2001. Based in Boulder, Colorado, SWEEP promotes policies and programs to advance energy efficiency in a 

six-state region that includes Arizona, Colorado, Nevada, New Mexico, Utah, 

and Wyoming. He is the former executive director of the American Council for 

an Energy-Efficient Economy (ACEEE). He established ACEEE’s Washington, 

D.C., office in 1981, stepping down as executive director in February 2001. Dr. 

Geller has advised and conducted energy efficiency studies for utilities, governmental organizations, and international agencies. He has testified before the U.S. 

Congress on energy issues many times and has influenced key energy legislation, including the National Appliance Energy Conservation Act of 1987 and the 

Energy Policy Act of 1992. He is author or coauthor of four books. His most 

recent book, Energy Revolution: Policies for a Sustainable Future, was published 

in December 2002 by Island Press. Dr. Geller has spent significant time working on energy efficiency issues in Brazil, where he helped to start and frequently 

advises Brazil’s National Electricity Conservation Program. He was awarded the 

1998 Leo Szilard Award for Physics in the Public Interest by the American Physical Society in recognition of his contributions to national appliance efficiency 

standards and more efficient energy use in general. Dr. Geller is a member of the 

editorial advisory board for the journal Energy Policy and was the associate editor for energy efficiency for the Macmillan Encyclopedia of Energy. He received 

a Ph.D. in energy policy from the University of Sao Paulo in Brazil and a master’s 

degree in mechanical engineering from Princeton University.

David B. Goldstein codirects the energy program of the National Resources 

Defense Council. He has worked on energy efficiency and policy since the early 

1970s. In 2002, the MacArthur Foundation recognized his achievement in the 

field by awarding him one of its prestigious 5-year fellowships. Dr. Goldstein has 

worked toward the development of energy efficiency standards for new buildings 

and appliances at the regional and national levels, both in the United States and 

in Russia. He negotiated the agreement that led to the National Appliance Energy 

Conservation Act of 1987 and has helped design and direct energy efficiency pro-
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

310 Real Prospects for Energy Efficiency in the United States

grams with utilities and state regulatory agencies. Dr. Goldstein also created the 

Location Efficient Mortgage, a program designed to reduce urban sprawl and car 

use. He was a founding director of the Consortium for Energy Efficiency and the 

New Buildings Institute. Dr. Goldstein is a fellow of the American Physical Society and a recipient of its Leo Szilard Award for Physics in the Public Interest. He 

received a Ph.D. in physics from the University of California at Berkeley.

Alexander MacLachlan retired from E.I. du Pont de Nemours & Company in 1993 

after more than 36 years of service. He had been senior vice president for research 

and development (R&D) and chief technical officer since 1986. In 1994, he joined 

the DOE as deputy undersecretary for technology partnerships and in 1995 was 

made deputy undersecretary for R&D management. He left DOE in 1996 but 

remained on its Secretary of Energy Advisory Board, Laboratory Operations Board, 

Sandia President’s Advisory Council, and the National Renewable Energy Laboratory’s Advisory Council until 2003. He has participated in several studies for the 

NRC, including Containing the Threat from Illegal Bombings (1998), Technology 

Commercialization: Russian Challenges, American Lessons (1998), Building an 

Effective Environmental Management Science Program (1997), and most recently, 

Countering the Threat of Improvised Explosive Devices (2007). He was also chair 

for the Committee to Review the Department of Transportation’s Intelligent Vehicle 

Initiative. He served recently on the NRC’s Board on Radioactive Waste Management. Dr. MacLachlan is a member of Phi Beta Kappa and a member of the NAE. 

He received a B.S. in chemistry from Tufts University and a Ph.D. in physical 

organic chemistry from the Massachusetts Institute of Technology. 

William F. Powers retired as vice president of research, Ford Motor Company. He 

has extensive expertise in advanced R&D of automotive technology. His approximately 20 years at Ford included positions as director, Vehicle, Powertrain and 

Systems Research; director, Product and Manufacturing Systems; program manager, Specialty Car Programs; and executive director, Ford Research Laboratory 

and Information Technology. Prior positions also include professor, Department of 

Aerospace Engineering, University of Michigan, during which time he consulted 

with NASA, Northrop, Caterpillar, and Ford; research engineer, University of 

Texas; and mathematician and aerospace engineer, NASA Marshall Space Flight 

Center. He is a fellow, IEEE; fellow, Society of Automotive Engineers; fellow, 

American Society of Mechanical Engineers; member, NAE; and foreign member, 

Royal Swedish Academy of Engineering Sciences. He received a B.S. in aerospace 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Appendix B 311

engineering from the University of Florida and a Ph.D. in engineering mechanics 

from the University of Texas at Austin.

Arthur H. Rosenfeld is a professor of physics at Lawrence Berkeley National Laboratory (LBNL). He is also a member of the California Energy Commission. After 

completing his graduate studies, Dr. Rosenfeld went to the University of California 

at Berkeley, where he joined, and eventually led, the Nobel Prize–winning particle 

physics group of Luis Alvarez at LBNL until 1974. At that time, he changed to 

the new field of efficient use of energy, formed the Center for Building Science at 

LBNL, and led it until 1994. The center developed electronic ballasts for fluorescent lamps (which led to compact fluorescent lamps), low-emissivity windows, 

and the DOE-2 computer program for the energy analysis and design of buildings. 

He received the Szilard Award for Physics in the Public Interest in 1986 and the 

Carnot Award for Energy Efficiency from the DOE in 1993. In 2006, Dr. Rosenfeld received the Enrico Fermi Award, the oldest and one of the most prestigious 

science and technology awards given by the U.S. government. Dr. Rosenfeld is a 

cofounder of the ACEEE, the University of California’s Institute for Energy Efficiency, and the Washington-based Center for Energy and Climate Solutions. From 

1994 to 1999 Dr. Rosenfeld served as senior advisor to the DOE’s Assistant Secretary for Energy Efficiency and Renewable Energy. He received a Ph.D. in physics 

from the University of Chicago.

Daniel Sperling is a professor of civil engineering and environmental science and 

policy and director of the Institute of Transportation Studies at the University of 

California, Davis. Dr. Sperling has done extensive studies on alternative transportation fuels, fuel cell vehicles, and sustainable transportation, and has authored 

200-plus technical papers and eight books. He has been a member of several NRC 

committees related to transportation, including the Committee to Review the 

R&D Strategy for Biomass-Derived Ethanol and Biodiesel Transportation Fuels, 

the Committee on Alternative and Strategies for Future Hydrogen Production and 

Use, and the Committee for the Study of the Long-Term Viability of Fuel Taxes 

for Transportation Finance. He is the chair of the Transportation Research Board’s 

(TRB’s) Sustainability and Transportation Committee and a former chair of the 

TRB’s Alternative Transportation Fuels Committee. Dr. Sperling was elected a 

National Associate of the National Academies in 2004. He received a B.S. in civil 

engineering from Cornell University and a Ph.D. in transportation engineering 

from the University of California at Berkeley.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

313

The panel met five times in the course of its work. It heard from outside 

experts in open sessions at the first two meetings.

FIRST PANEL MEETING: October 22–23, 2007, Washington, D.C.

Presentations in Open Session

Lee Schipper, Director of Research, World Resources Institute, WRI Center for 

Sustainable Transport

Jaana Remes, Senior Fellow, McKinsey Global Institute

Mark Levine, Senior Staff Scientist, Lawrence Berkeley Laboratory

David Rodgers, Deputy Assistant Secretary for Energy Efficiency and Renewable 

Energy, U.S. Department of Energy

Steve Nadel, American Council for an Energy Efficient Economy

Alan Crane, Senior Program Officer, NRC, on the NRC’s 2001 CAFE report

Bob Simon, Staff Director, Senate Energy and Natural Resources Committee

SECOND PANEL MEETING: December 12–13, 2007, Washington, D.C.

Douglas Kaempf, Director, Office of Industrial Technologies, U.S. Department of 

Energy

C Presentations and Panel Meetings
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

314 Real Prospects for Energy Efficiency in the United States

Kathleen Hogan, Director, Climate Protection Partnership Division, U.S. 

Environmental Protection Agency

Steven Smith, Joint Global Change Research Institute, Pacific Northwest National 

Laboratory

Revis W. James, Director, Energy Technology Assessment Center, Electric Power 

Research Institute

Jonathan Creyts, Principal, McKinsey & Company

Fred Moore, Director, Manufacturing & Technology, Energy, Dow Chemical 

Company

K. John Holmes, Senior Program Officer, NRC, on the latest NRC vehicle fuel 

efficiency technology study

John Heywood, panel member, on transportation work at MIT

THIRD PANEL MEETING: March 11–12, 2008, Washington, D.C.

Closed meeting

FOURTH PANEL MEETING: May 3–4, 2008, Washington, D.C.

Closed meeting

FIFTH MEETING: June 26, 2008, Washington, D.C.

Closed meeting
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

315

D Definitions of Energy Efficiency

The term energy efficiency is used in several ways. The definition perhaps 

most often used is based simply on how much of a given task or product 

(be it the heating of a building for a specified time, the miles driven by a 

car, or the tons of iron smelted) is achieved per unit of energy expended for that 

task or product. For example, the number of tons of iron, t, that can be recovered 

from ore per Btu of energy, E, used in the smelting process, t/E, is one possible 

measure of energy efficiency. 

Another definition is based on the total energy, Etot, required to provide a 

product. According to this definition, the energy efficiency for making a ton of 

iron would be the tons of iron, t, per Btu of total energy required, including mining, transportation, smelting, and any other input, t/Etot. 

Both of the measures of energy efficiency defined above would be termed 

first-law efficiency (derived from the first law of thermodynamics), being based 

simply on actual energy use and not taking into account such things as the excess 

entropy due to the irreversibility of real processes. Hence, in many situations, one 

may use a second-law efficiency (derived from the second law of thermodynamics), which, instead of energy, uses the free energy, usually the Gibbs free energy, 

G, where G = H – TS. H is the enthalpy, and H = E + pV, where p is pressure 

and V is the volume of the system—in this case the volume of the iron produced. 

T is the temperature and S is the entropy. Because most processes are carried out 

at constant pressure, enthalpy H is the most appropriate measure, and one uses 

H rather than energy E. If one wishes to use the second-law efficiency, one simply 

replaces E, the energy used, with G, the free energy, in the expressions for the 

first-law efficiency. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

316 Real Prospects for Energy Efficiency in the United States

Additionally, one other kind of definition of energy efficiency is sometimes 

used, based on how much the actual process deviates from the thermodynamic 

limit. According to this definition, a perfect process would have a value of infinity for either its first-law or second-law efficiency; that is, the efficiency would 

be the tons of iron produced per amount of energy or free energy beyond the 

thermodynamic limit. Hence, for a perfect process, the denominators in these 

measures would be zero. No real process achieves the thermodynamic limit, of 

course, and so no real process has an infinite efficiency according to this last kind 

of definition. 

It is also possible to use a more realistic counterpart of the (preceding) definition based on the comparison with the thermodynamic limit—namely, a comparison based on the most efficient possible process subject to a chosen time or rate 

constraint. This approach enables the user to compare, for example, the relative 

advantages and disadvantages (in energy efficiency terms) of higher-capacity but 

slow processes and lower-capacity but faster processes. 

In practice, one very rarely encounters an explicitly stated definition of 

energy efficiency. Most commonly, people tend to use the very first definition, the 

amount of a task or product (the heating of a building for a specified time, the 

miles driven by a car, the tons of ore smelted, and so on) per direct unit of energy 

required for that task. When a different definition is being used, the user generally 

specifies which definition is being used. In this report, because the data have been 

taken from a very wide variety of sources, virtually none of which specified a definition, the panel assumed that the first and simplest definition was intended. This 

is not to imply that if the panel itself were to derive the efficiencies from primary 

data that it would use that same definition. The pragmatic course was taken here 

to allow the analysis to be carried out. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

317

Estimating the Net Costs and Benefits of 

Energy Savings

E

As described in this appendix, the question of whether an energy-efficient 

option will result in net cost or savings to the consumer depends on various considerations and can differ from consumer to consumer. For a 

product with a first cost higher than its less efficient equivalent, such as a compact 

fluorescent lamp (CFL) compared with an incandescent lamp, the savings would 

result from lower energy expenditures over the economic life of the product. 

However, those savings depend on the price of energy and the intensity of usage. 

For example, when replacing an incandescent lamp with a CFL in a fixture that is 

used for only a few hours per year, it would take many years for the higher initial 

cost of the CFL to be recouped, whereas a lamp used continuously would pay off 

the increased cost within a month. Similarly, high-priced energy increases the payoff of the energy-efficient product. 

The answer to the question of whether there is a net cost or benefit also 

depends on the interest rate that the consumer must pay to finance the higher-cost, 

more efficient product. In some cases the customer has no ability to borrow the 

additional purchase price at any interest rate. More generally, customers can use 

their credit cards, borrowing the money at an interest rate of about 20 percent 

per year. In still other cases, the additional purchase price is paid from money in 

a checking account that earns no interest. An energy-saving product might be out 

of the question for the customer who cannot afford the additional cost, might be 

of marginal benefit for the customer using a credit card, and might be of large net 

benefit to the customer paying a zero interest rate.

Analysts attempt to measure energy savings to consumers by means of various measures. They often use the net present value (NPV) of the energy savings, 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

318 Real Prospects for Energy Efficiency in the United States

computed using a particular interest rate, minus the initial purchase price. A variation on this method is to calculate the return on investment, or ROI. This method 

calculates the interest rate implicit in equating the higher initial cost to the stream 

of energy savings over time. For example, if an efficient air conditioner costs $300 

more than a less efficient model and saves $30 per year in electricity, the ROI 

is approximately 10 percent. For the more efficient air conditioner, there is no 

net savings for someone who would have to pay a credit card interest rate, but a 

large savings for someone taking the money from a checking account. The ROI 

and NPV depend both on the annual savings and on how long the air conditioner 

provides these savings—for example, if the building in which the air conditioner is 

installed will be torn down and the air conditioner destroyed in 3 years, that is the 

relevant period over which to calculate the return.
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

319

F Equivalences and Conversion Factors

Energy savings are normally measured in megawatt-hours of electricity 

(MWh) or in million British thermal units (Btu). These energy savings can 

be converted directly into avoided million tons of emitted carbon (C) or 

carbon dioxide (CO2). But most people have little feel for these strange units, 

and so news media, when reporting on energy topics, tend to convert energy and 

emissions savings to familiar equivalents: namely, avoided cars, homes, or power 

plants. 

The tables in the section below show how to perform these conversions, but 

first it is useful to define the typical car, typical home, and typical power plant—

things easily visualizedas used in the conversion tables. 

•	 A typical car is defined here as one that has an average fuel economy 

of 24 miles per gallon (mpg) and is driven 12,000 miles per year, for a 

gasoline use of 500 gallons per year. Such a vehicle would be a passenger car (rather than something larger or heavier such as a van or sportutility vehicle). 

•	 A typical home is defined here as one having an average annual electricity use of 12,000 kilowatt-hours (kWh), corresponding to primary 

energy use at the power plant of 125 million Btu, plus an average 

annual 75 million Btu of fuel for heat (typically natural gas), for a 

total of 200 million Btu. Note that, for the discussion below, electricity 

accounts for about 2/3 of this 200 million Btu. 
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Real Prospects for Energy Efficiency in the United States 

320 Real Prospects for Energy Efficiency in the United States

•	 A typical power plant is defined here as one with a generating capacity 

of 500 megawatts (MW) that operates for slightly less than 5000 hours 

per year1 and is thus selling 2.5 billion kWh per year (or 2.5 terawatthours [TWh]; tera = 1012 = trillion; see Table F.1). Although a typical 

20-year-old power plant has a generating capacity of about 1000 MW, 

or 1 gigawatt (GW; giga = 109 = billion), the typical power plant as 

defined here is smaller because newly constructed power plants tend to 

have a capacity of about 500 MW. 

The typical uses of energy and electricity given in the definitions above are 

shown in Column A of Tables F.2–F.4. Table F.1, “Metric Prefixes,” is the basis of 

all notations used in Tables F.2–F.4.

WHICH TABLE TO USE

The conversion by energy (Table F.2), electricity (Table F.3), and C or CO2 (Table 

F.4) differs by up to 50 percent. The choice of which table to use depends on 

one’s “model.” Those most interested in saving money, primary energy, and air 

pollution will prefer Table F.2, but those focusing on electricity trade-offs would 

use Table F.3 (which does not include cars), and those addressing CO2 trade-offs 

would choose Table F.4. 

1A more accurate number is 4850 hours per year (3300 billion kWh/680 GW from Table 7.1 

in Monthly Energy Review, February 2001, and Table 35 in 1999 Electric Power Annual, Volume 2, Energy Information Administration, Department of Energy, Washington, D.C., October 

2000, respectively). 

TABLE F.1 Metric Prefixes

Unit Multiple Metric Prefix Symbol Value 

103 kilo k Thousand 

106 mega M Million 

109 giga G Billion 

1012 tera T Trillion 

1015 peta P Quadrillion 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Appendix F 321

TABLE F.2 Energy Used Annually by a Typical Car and Home and Generated by a Typical 500 

Megawatt Power Plant 

A

Typical 

Annual Use 

(rounded)

B

Conversion 

to Btua

C

Annual Energy 

Use (Btu)b

D

Energy Use 

in Units of 

1 Million 

Cars

Passenger cars, vans, sport utility 

vehicles, light trucks—U.S. stock 

(private and commercial): 247 millionc

1 typical car 500 gald 1 gal = 125,000 Btu 62.5 million — 

1 million typical cars 500 million gal 1 gal = 125,000 Btu 62.5 trillion 1 

Homes—U.S. stock: 111 millione

1 typical home (electricity + gas/oil) 200 million Btu  200 million —

1 million typical homes 200 trillion Btu — 200 trillion 3.2 

Power plants—U.S. stock: 

3,300 TWhf ≡ 1,320 plants (1⁄2 GW)

Typical power plant 

(1⁄2 GW × 5,000 hours per year) 

2.5 TWh 1 kWh = 10,500 Btug 26.2 trillion 0.4 

aSee http://bioenergy.ornl.gov/papers/misc/energy_conv.html.

bFor metric units (e.g., kWh) the metric prefix is used; for Btu, the “value” multiplier is used, as shown in Table F.1, “Metric 

Prefixes.” c

Data from Table 1-11: Number of U.S. Aircraft, Vehicles, Vessels, and Other Conveyances, available at http://www.bts.

gov/publications/national_transportation_statistics/html/table_01_11.html. dData from Table MF21 (for motor fuel use) and Table MV1 and MV9 (for private and commercial auto stock) in Highway 

Statistics 1998, available at http://www.fhwa.dot.gov/ohim/ohimstat.html. Table 1.10 for average annual miles in Monthly 

Energy Review, DOE/EIA-0035(2000-04), April 2000. e

Data from Residential Energy Consumption Survey, available at http://www.eia.doe.gov/emeu/.

f

Data from Table 7.5 in Monthly Energy Review, DOE/EIA-0035(2000-04), April 2000. gSee Tables 2.6 and 7.5 in Monthly Energy Review, DOE/EIA-0035(2000-04), April 2000. In 1999, the U.S. electric grid 

consumed 34.5 quads of source energy to generate and sell 3,300 TWh of electricity. This yields a “heat rate” of 10,500 

Btu/kWh. 

Table F.2 converts the energy use of cars, homes, and power plants to “primary energy” (also referred to as source energy). Thus, the primary energy associated with electricity production includes the energy burned at the power plant, not 

just the 30 percent delivered to the home. 

Of the three conversion tables, Table F.2 would suffice for most purposes. 

As explained below, Tables F.3 and F.4 give slightly different conversions. Both 

cost to the customer and air pollution (nitrogen oxide [NOx] and CO2 emissions 

from combustion, as well as sulfur oxide [SOx] emissions from coal combustion) 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

322 Real Prospects for Energy Efficiency in the United States

are roughly proportional to primary energy, although the cost per Btu would vary 

among fuels.

Using Table F.2 (Primary Energy) 

With respect to the use of Table F.2, suppose one learns that low-energy 

(low-E) windows are saving 1 quad per year (1 quad = 1015 Btu, or 1 quadrillion 

Btu), which is about 1 percent of total U.S. energy use. One can use Column C of 

Table F.2 to divide by 1 million cars. 

Similarly one could calculate 5 million equivalent homes or 38 power plants 

avoided. 

Using Table F.3 (Electricity) 

Suppose one learns, however, that the 2001 refrigerator standard will save 30 

billion kWh, or 30 TWh, annually. In this case, Table F.3 indicates that a typical 

power plant sells 2.5 billion kWh per year (or 2.5 TWh), so it can be seen that as 

a result of the standard 12 power plants are avoided. Likewise, according to Table 

F.3, 1 million homes use 12 TWh, and so the standard has freed up electricity to 

supply 2.5 million homes. 

But as is noted above, for every 100 Btu of electric energy, homes use 

another 50 Btu of fuel, so there has not been enough energy and pollution saved 

to offset 2.5 million homes, but only about 1.7 million.2

2This 1.7 million home offset can be checked by converting 30 TWh to trillion Btu (using the 

grid’s heat rate of 10,500 Btu/kWh) and then using Table F.2. 

TABLE F.3 Electricity Used Annually by a Typical Home and Generated by a 

500 Megawatt Power Plant 

A

Typical 

Annual Use

D

Electricity Use in Units 

of 1 Million Homes

1 typical home 12,000 kWh — 

1 million typical homes 12 TWh 1 

Typical power plant 

(1⁄2 GW × 5,000 hours per year) 

2.5 TWh 0.2 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Appendix F 323

TABLE F.4 CO2 Released by Cars, Homes, and Power Plants

A

Typical 

Annual Use

(rounded)

B

Conversion 

to CO2

a

C

Annual CO2 

Release 

(metric tons)

D

CO2 Release 

in Units of 1 

Million Cars

Passenger cars, vans, sport utility 

vehicles, light trucksU.S. stock 

(private and commercial): 200 millionb

1 typical car 500 galc 1 gal = 8.8 kgd 4.4 

1 million typical cars 500 million gal 4.4 million 1 

HomesU.S. stock: 100 millione

1 typical home (electricity + gas/oil) 200 million Btu 1 million 

Btu = 55 kgf

11 

1 million typical homes 200 trillion Btu 11 million 2.5 

Power plantsU.S. stock: 

3,300 TWhg ≡ 1,320 plants (1⁄2 GW)

Typical power plant 

(1⁄2 GW × 5,000 hours per year) 

2.5 TWh 1 TWh = 0.6 

million tonsh

1.5 million 0.34 

a1 million tons/quadrillion Btu = 1 kg/million Btu; 1 ton of C corresponds to 3.67 tons of CO2

. bData from Tables MV1 and MV9 in Highway Statistics 1998, available at http://www.fhwa.dot.gov/ohim/ohimstat.html. 

c

Data from Table MF21 (for motor fuel use) and Tables MV1 and MV9 (for private and commercial auto stock) in Highway 

Statistics 1998, available at http://www.fhwa.dot.gov/ohim/ohimstat.html. Table 1.10 for average annual miles in Monthly 

Energy Review, DOE/EIA-0035(2000-04), April 2000. dSee Table B1, p. 104, EIA Emissions of Greenhouse Gases in the US, DOE/EIA-0573(98). e

Data from Figure 2.1, A Look at Residential Energy Consumption, DOE/EIA-0632(97). 

f

See Table A19 for million tons of carbon, p. 133, and Table A2 for primary quads, p. 118, Annual Energy Outlook,

DOE/EIA-0383(2000). gData from Table 7.5, Monthly Energy Review, DOE/EIA-0035(2000-04). hSee Table A19 for million tons of carbon, p. 133, Annual Energy Outlook, DOE/EIA-0383(2000).

Using Table F.4 (CO2) 

Finally, suppose that manufacturers want to get CO2 credit for the same 

refrigerator standards, so they use Table F.4 to convert the 12 power plants 

avoided into 18 million tons of CO2 per year. As before, one can divide 18 million 

tons of CO2 by the 1 million homes row (11 million tons of CO2) to find about 

1.6 million equivalent homes. CO2 savings is often stated in million tons of carbon 

rather than CO2, so it must be noted that 1 ton of carbon is equivalent to 44/12 = 

3.67 tons of CO2. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

324 Real Prospects for Energy Efficiency in the United States

A comparison of Column D in Tables F.2 and F.4 shows a slight difference in 

their equivalence of cars and homes. Table F.2 shows that 1 million homes use as 

much energy as do 3.2 million cars, but Table F.4 shows that the same 1 million 

homes produce only as much CO2 as 2.5 million cars. This is because, per Btu, 

gasoline produces 4/3 as much CO2 as electricity or natural gas. 

CONVERTING POWER PLANTS (OR PEAK SHAVING) TO “HOMES”

In the analysis above, energy (kWh), not power (kW or MW), is discussed. 

National newspapers often use “1 kW = 1 home” as the relevant conversion factor. This is nearly, but not quite, correct. A more realistic conversion is roughly 

1.6 kW for an average California home, and roughly 2.4 kW for an average U.S. 

home. This is based on the assumption that an average California home uses 

approximately 8,000 kWh per year, whereas an average U.S. home uses 12,000 

kWh. However, owing to fluctuations in power demand, a typical power plant 

runs for only about 5,000 hours per year rather than 8,760 hours per year. 
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

325

ACEEE American Council for an Energy-Efficient Economy

AEF America’s Energy Future

AEO Annual Energy Outlook

AISI American Iron and Steel Institute

APU auxiliary power unit

ARRA American Recovery and Reinvestment Act of 2009

ASHRAE American Society of Heating, Refrigerating, and Air-Conditioning 

Engineers

BAU business-as-usual

bbl/d barrel(s) per day

BEV battery-electric vehicle

BOF basic oxygen furnace

Btu British thermal unit

CAFE corporate average fuel economy (standard)

CCE cost of conserved energy

CEC California Energy Commission

CEF Scenarios for a Clean Energy Future study

CFL compact fluorescent lamp

CHP combined heat and power

CI compression-ignition

CO2 carbon dioxide

CPUC California Public Utilities Commission

CVT continuously variable transmission

G Acronyms and Abbreviations
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326 Real Prospects for Energy Efficiency in the United States

DOE Department of Energy, U.S.

DPF diesel particulate filter

DSM demand-side management

EAF electric arc furnace

EIA Energy Information Administration

EISA Energy Independence Security Act of 2007

EJ exajoule

EPA Environmental Protection Agency, U.S.

ERFC emphasis on reducing fuel consumption

ERI Energy Recover, Inc.

ESCO energy services company

ESP electrostatic precipitator

FCV fuel-cell vehicle

FEMP Federal Energy Management Program

FHWA Federal Highway Administration

FY fiscal year

GDP gross domestic product

GVW gross vehicle weight

GW gigawatt

HCCI homogeneous-charge compression ignition

HDV heavy-duty vehicle

HEV hybrid-electric vehicle

HFCV hydrogen fuel-cell vehicle

HVAC heating, ventilation, and air-conditioning

IAC industrial assessment center

ICE internal-combustion engine

IDEC indirect-direct evaporative cooling

IEA International Energy Agency

IECC International Energy Conservation Code

IEEE Institute of Electrical and Electronics Engineers

IPCC Intergovernmental Panel on Climate Change

IRP integrated resource planning
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Appendix G 327

IRR internal rate of return

ITP Industrial Technologies Program

ITS intelligent transportation system

IWG Interlaboratory Working Group on Energy-Efficient and Clean 

Energy Technologies

kw kilowatt

kWh kilowatt-hour

LBNL Lawrence Berkeley National Laboratory

LDV light-duty vehicle

LED light-emitting diode

LEED Leadership in Energy and Environmental Design

LIPA Long Island Power Authority

low-E low-emissivity

LPG liquefied petroleum gas

MECS Manufacturing Energy Consumption Survey

MEF modified energy factor

MHDV medium- and heavy-duty vehicle

mpg miles per gallon

MW megawatt

MWh megawatt-hour

NAE National Academy of Engineering

NAFTA North American Free Trade Agreement

NAS National Academy of Sciences

NEMS National Energy Modeling System

NGL natural gas liquid

NIACS North American Industry Classification System

NOx nitrogen oxide

NPV net present value

NRC National Research Council

NSPS New Source Performance Standards

NSR New Source Review

NYPA New York Power Authority

NYSEO New York State Energy Office
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

328 Real Prospects for Energy Efficiency in the United States

NYSERDA New York State Energy Research and Development Authority

O&M operations and maintenance

OECD Organisation for Economic Cooperation and Development

OEM original equipment manufacturer

OLED organic light-emitting diode

ORNL Oak Ridge National Laboratory

PHEV plug-in hybrid-electric vehicle

PSC Public Service Commission

PTFE polytetrafluoroethylene

PUHCA Public Utilities Holding Company Act

PURPA Public Utilities Regulatory Policies Act

PV photovoltaic

R&D research and development

RD&D research, development, and demonstration

RHF rotary hearth furnace

ROI return on investment

SAF submerged arc furnace

SBC system benefits charge

SECP State Energy Conservation Program

SEP State Energy Program

SHGC solar heat gain coefficient

SI spark-ignition

SIC Standard Industrial Classification

SO2 sulfur dioxide

SOx sulfur oxide

STC solar thermal cooling

SUV sport utility vehicle

SWEEP Southwest Energy Efficiency Project

TRB Transporation Research Board

TWh terawatt-hour
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States 

Appendix G 329

USABC United States Advanced Battery Consortium

VMT vehicle-miles traveled

WAP Weatherization Assistance Program

ZEH zero-energy home
Copyright © National Academy of Sciences. All rights reserved.

Real Prospects for Energy Efficiency in the United States