Can Energy Efficiency Brighten a Dark Economy?

By Correspondent, Dan Murphy | The Christian Science Monitor, January 3, 2009 | Go to article overview
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Can Energy Efficiency Brighten a Dark Economy?


Correspondent, Dan Murphy, The Christian Science Monitor


After a decade working in the lighting industry in Singapore and the United States, Govi Rao decided to strike out on his own. His idea? To turn LEDs, those funny glowing lights in video games and digital watches, into a mainstream, environmentally friendly alternative to traditional lighting.

In 2007, he bought four LED (light-emitting diode) manufacturers in quick succession and set up his new outfit, Lighting Science, with the help of California investors. But with the economy tumbling since, his timing looked awful.

So why is Mr. Rao smiling? Because he expects the energy- efficiency parts of the $819 billion stimulus package the House passed Wednesday to jump-start sales, which would bring down his costs and, he hopes, make Lighting Science a world leader in an emerging, energy-saving technology.

It may be a pipe dream. Of all the long-term, "new economy" investments envisioned in the House legislation, such as Internet modernization and renewable energy, the roughly $30 billion set aside for energy efficiency is the least likely to generate the kinds of secure high-tech jobs that President Obama has talked about. Manufacturing of lights and other energy-saving devices is likely to move offshore, analysts say.

But that's not an argument for excluding energy-efficiency efforts from the stimulus plan. Efficiency, it turns out, could boost the American economy in a big way.

"Energy efficiency itself creates jobs, simply because of the household spending it takes out of the carbon-supply chain and puts into espresso drinks and haircuts," says David Roland-Holst, a resource economist at the University of California at Berkeley. "Service jobs are bedrock jobs."

How many jobs is hard to tell. California's energy-reduction programs generated 1.5 million jobs, worth $45 billion in payroll, between 1972 and 2006, according to a study by Mr. Roland-Holst. That's not a big yearly average, but Roland-Holst says the new federal investment, if followed through on, would create many more jobs over time.

Efficiency would also be a boon to taxpayers. The House legislation aims to retrofit 75 percent of all federal buildings with better insulation and energy-efficient lighting. It costs about $6 billion a year to heat, cool, and light federal buildings, says the US Government Accountability Office. The current plan is to cut that bill by 30 percent - a savings to taxpayers of almost $1.5 billion a year.

"Retrofitting a government building puts money into domestic construction," says Ed Young, an associate at Cambridge Energy Research Associates, a consulting firm in Cambridge, Mass. "It's not the [jobs] equivalent of building a rocket ship ... but it has lots of positive effects. The biggest thing to do for energy in the US is to save energy."

Savings for homeowners could be even bigger. The House plan calls for subsidized loans or grants to help retrofit2 million American homes. If those houses were brought in line with the most widely used efficiency standard in the US - the Leadership in Energy and Environmental Design (LEED) - they would use 30 percent less energy. With the average household spending about $3,500 a year on heating and electricity, the savings would translate into about $2.1 billion a year.

Because 2 million homes represent only about 2 percent of US households, many activists hope the effort will be expanded, perhaps as an antipoverty program.

"With all the foreclosure stuff that's going on, anything you can do to help reduce month-to-month operating costs for homeowners is a big plus," says Dan Karan, director of construction for Neighborhood Housing Services, a nonprofit group that builds and finances low- income housing in New York City.

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