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February 20, 2008

McKinsey Globals Energy Efficiency plan


McKinsey Global has an energy productivity plan (36 pages) An additional $170 billion per year invested in energy efficiency can provide 17% average internal rate of return and cut projected energy demand growth by half by 2020. We could use existing technologies to pay for themselves. It would provide up to half of the global greenhouse gas (GHG) avoidance to get to a long term 550 ppm level of GHG in the atmosphere. This would reduce the energy demand in 2020 by 135 quadrillion BTU or the equivalent of 64 million barrels of oil per day. Instead of needing 613 quadrillion btu in 2020, there would be a need for 478 quadrillion btu. (In 2003, the world used 422 quadrillion btu).



They recommend four steps:
1. Set energy efficiency standards for appliances and equipment
This is to follow on the US success with energy efficient appliances like refridgerators.
2. Finance energy efficiency upgrades in new buildings and remodels
Best returns when new buildings are made, but the time to capture benefits is over 15 years.
3. Raise corporate standards of energy efficiency
Many companies are government owned or are shielded from high energy costs. Companies should be required to report on energy efficiency, GHG and pollution information. [I added the pollution part] Investment guarantees and incentives can be used to encourage corporate efficiency.
4. Invest in energy intermediaries
Many people (home owners, landlords and business owners) do not make the investment in energy savings even though those investments would pay for themselves. Problems are that they may not believe that they will keep the building or equipment long enough to see the returns. Policy and investment needs to be adjusted to allow businesses to step in that would pay for the energy efficiency and capture the returns (and pay something to the owner for access to the energy saving opportunity.)










FURTHER READING
Optimal cost efficiency for home energy

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