Efficiency Drive Could Cut Energy Use 23% by 2020, Study Finds

The biggest opportunity to improve the nation’s energy situation is a major investment program to make homes and businesses more efficient, according to a study released Wednesday by the consulting firm McKinsey. An investment of $520 billion in improvements like sealing ducts and replacing inefficient appliances could produce $1.2 trillion in savings on energy bills through 2020, the study found.

The report said such a program, if carried out over the next decade, could cut the country’s projected energy use in 2020 by about 23 percent, a savings that would be “greater than the total of energy consumption of Canada,” Ken Ostrowski, a senior partner in McKinsey’s Atlanta office, said at a forum in Washington on Wednesday. It would also more than offset the growth in energy use that would be expected otherwise.

“The scale is vast if we can put together the means to pursue it,” Mr. Ostrowski said.

Homes account for about 35 percent of the potential efficiency gains, according to McKinsey, while the industrial sector accounts for 40 percent and the commercial sector 25 percent. The report included only efficiency improvements whose long-term savings would outweigh the initial costs. It did not consider the potential environmental benefits of cutting energy use.

The report acknowledged substantial barriers to achieving the savings, foremost among them the initial costs. The $52 billion annual investment envisioned by McKinsey is four or five times more than the nation currently spends on energy efficiency, and would have to be maintained over a decade. The economic stimulus package passed in February barely makes a dent; by McKinsey’s estimate, it contains $10 billion to $15 billion in spending on energy efficiency.

Some home or business owners may not have the money to finance efficiency improvements, even if they would pay off in the long run. Other barriers include inertia (a homeowner may simply not feel like replacing an old air-conditioner); and poorly aligned incentives (a landlord who does not pay the electric bill has no economic reason to replace the old air-conditioner).

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