Energy Efficiency Explained

What You Need To Know

Energy efficiency is one of those buzzwords you hear everywhere, but are you sure you know what it means? And what if it doesn’t refer to a certain thing in particular? Or if it’s up for interpretation?

Let’s explore the concept of energy efficiency and what it really means.

Energy Efficiency at the Basic Level

The simplest way of defining energy efficiency is the act of improving energy use. Essentially you are using less energy but getting the same output. This shouldn’t be confused with energy conservation, which is focused on reducing energy use. With energy efficiency the idea is to make the products consume less electricity regardless of whether a person changes their behavior.

A good example is ENERGY STAR appliances. These are appliances the Environmental Protection Agency (EPA) has determined use a lower amount of energy to provide the same function as standard machines. They are energy efficient appliances.

Even though the ENERGY STAR program has been around since 1992, concern over energy efficiency didn’t become mainstream among the masses until around 2006. The going green movement has continued to gain steam since then due to the rising cost of energy and greenhouse gas emissions.

Much of the energy efficiency focus has been on homes and transportation. Over the last decades we’ve seen the rise of LEED construction, home energy audits, solar panel systems and electric vehicles. All this innovation is an effort to reduce energy use without forgoing modern day conveniences. And the effort seems to be paying off.

How Energy Efficiency is Leading to a Decline in Electricity Use

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Between 1950 and 2010 electricity use had been increasing in homes at a rate of 4% a year, but then the trend changed. Data collected by the Energy Information Administration (EIA) in 2012 showed a drop in electric use. Just as important was the fact the decrease wasn’t isolated. There was a decline in per capita residential electricity consumption in 48 states.

One of the biggest reasons for the decrease in electric use was shockingly simple – more energy efficient light bulbs. In the U.S. lighting accounts for 10% of electricity use. The introduction of LED and CFL light bulbs has helped keep consumption in check despite rising demand. Hundreds of millions of LED light bulbs have been installed since 2009 when only 400,000 were in use. CFLs are even more common in American households. Given that these bulbs are up to 85% more energy efficient than incandescent and can last 10-100 times longer it’s not surprising to find LEDs alone are expected to be 70% of all lighting sales by 2020.

Federal efficiency standards for appliances and electronics are another contributing factor for the electricity decline. For instance, all refrigerators and clothes washers made today must be more energy efficient than in the past regardless of whether or not they have an ENERGY STAR rating.

The EIA predicts that electricity use will continue to decline in residential and commercial buildings over the next 30 years. The Annual Energy Outlook 2019 estimates a 0.3% drop annually per household from now until 2050. Commercial electricity use is expected to decline even more at 0.4% less a year.

More Energy Efficiency Means Lower Cost for End Consumers

What does this mean for the average household?

It means energy efficiency improvements make a real difference in lowering utility costs. The Department of Energy has stated a household can reduce its energy use by 25-30% by implementing energy efficiency improvements. Approximately $200-400 a year can be saved by simply weatherizing to reduce the number of air leaks.

And energy efficiency products are getting cheaper. Take LED bulbs for example. From 2008 to 2013 the price of LED bulbs fell by 85%. They’re now not much more expensive than incandescent bulbs and 20 LEDs can save a family about $100 a year for 10 years.

Of course, some investments take more time to recoup the costs. A more energy efficient HVAC system or solar panels can dramatically reduce energy use, but it will take years to equal the cost of installation. However, if the equipment is maintained and maximized you should see a return on the investment that will continue to add up over time.

Rebates, tax credits and tax deductions offer extra incentive to opt for energy efficient improvements. When these are factored in homeowners can realize a positive return even sooner.

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