has helped to conserve energy in the state. “There are so many opportunities to capture energy efficiency in buildings,” Chu said. “We’re talking factors of three or more in new buildings that would pay for themselves in 5 years.”

An important policy innovation that has spurred conservation in the state has been to separate profits from energy sales. Traditionally, utility companies have made more money by selling more energy, creating an incentive to spur energy consumption. State policy in California consciously decoupled that connection. Instead, if utilities introduced more efficiency into the use of energy, they were able to charge higher rates. “There were inducements for the utility companies to actually make investments and save more energy,” Chu said. This has had a profound effect by making utilities outspoken advocates for energy efficiency in the state. For many years, California was the only state to have taken such an action, but it now is being implemented by states elsewhere.

Enlightened policies also can affect individual perceptions of discount periods. Most people are not impressed by an investment that will pay for itself in 20 years. They tend to like to see a repayment within a year and a half. But if they can be repaid in 5 to 6 years, inducements and policies that promote awareness of such payoffs can create “a big change,” said Chu. For example, a recent report by McKinsey & Company (2007) estimated that $1,000 worth of additional insulation and labor could pay for itself within 1½ to 2 years. Yet the American Home Builders Association is lobbying very strongly against efficiency targets, said Chu, contending that “American homeowners … don’t want to pay for [improvements].” The solution, according to Chu, is “to write your Congress people.”

Finally, Chu lauded the Top Runner program in Japan, which he called “an Energy Star labeling program on steroids.” The program identifies the most efficient product in a variety of categories and then uses the performance of this “top runner” model to set a target for all manufacturers to achieve within the next 4 to 8 years. “You don’t really need an elaborate appliance standard bureaucracy,” Chu said. You let “industry bootstrap itself. It’s a target, not a mandatory regulation, yet it seems to be very effective.”

Chu asked why programs like California’s utility company decoupling or Japan’s Top Runner have not been widely replicated around the world. Partly it is because people have not heard about the programs. In a 2007 report entitled Lighting the Way: Toward a Sustainable Energy Future (IAC, 2007), a committee cochaired by Chu and José Goldemberg recommended that a small international committee of experts be used to identify policies that have worked. Such policies are like the rudder of a ship that governments can use to produce enormous course changes over time.

SAVING MONEY BY SAVING ENERGY

The Rocky Mountain Institute also has examined a large number of ways to improve efficiency in homes and businesses. According to Lovins, institut-



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