Sunday, September 10, 2006

Conservation and Efficiency - A State Religion

We have been bludgeoned for at least 30 years with the idea that it is wrong to use energy. The California Energy Commission has insisted that conservation will solve all problems. They prevented electric utilities from building power plants until the energy crisis four years ago demonstrated how foolish was their mission. They told us that we were saving money because we weren't building expensive power plants- and we were. What they didn't tell us and won't now is that those power plants would have been far cheaper than the incredible bills the state ran up to supply energy we needed from those 'unnecessary' power plants.

A similar issue is the quest for energy efficiency - one of the tools of conservation. We are constantly urged to invest in more efficient equipment to save energy. And what is the result of our increased efficiency? Has it solved all our supply problems? Not hardly, and not just because of continued population growth. There is also the efficiency paradox.
The true cost of anything has nothing to do with money. Instead, the true cost of any action is the opportunity cost. Increasing the energy efficiency of any technology lowers the opportunity cost and raises the marginal utility of the technology. Increasing the marginal utility leads to a wider use of the technology, which eventually swamps the initial energy savings.

Not that there is anything wrong with efficiency - particularly if it is cost-effective. It is just contrary to economic principles to expect that it will reduce energy use.

No comments: