The Psychology of Energy Efficiency

Efficiency is unquestionably the largest, cheapest, and cleanest wedge among the many we need decarbonize our energy economy.  Energy efficiency tends to cost just 1 to 3 cents per kWh saved, far less than even coal-fired generation.   Every renewable technology, from wind to solar, to biomass, has trade-offs.  At the very least, we have to decide if the energy we are using for one purpose is not better used for something else.

Energy efficiency is the exception to this rule: you can not use a kilowatt-hour or a BTU over and over again.  Given these advantages over generation, it’s amazing that energy efficiency is nevertheless so extremely cheap.  Given an even moderately efficient [pun intended] market, you would expect that all the cheap energy efficiency measures would long ago have been taken until the marginal price of the next efficiency measure was above the marginal price of added electricity generation.

So why hasn’t it? 

Why is TXU trying to build a half dozen coal fired power plants in the face of broad opposition from the community when, for a fraction of the cost, they could instead pay to help people insulate their homes, change to more efficient air conditioners, and replace energy efficient lighting and save as much power as they plan to generate with the coal plants without any cost for fuel and harm to the environment from mining and emissions?

For that matter, why don’t TXU’s customers (and the rest of us) take these steps ourselves, when the internal return on investment is many time what we can rationally hope to achieve in the financial markets, and in many cases is even higher than the interest borrowers with the worst credit ratings pay on their credit cards.  (Like most financial advisors, I hate debt, especially credit card debt, but even if you’re drowning in $30,000 of credit card debt at 25% APR, it still makes sense for you to buy a pack of CFL’s at $3 each on that high-interest credit card, and replace every incandescent light bulb in your house that you use more than 2 hours a day.)

Here’s a blog which does a good job outlining the usual answers: lack of financing, perverse incentives, and disinterest on the part of people for whom energy is only a tiny part of the budget (all of which are true.)  He goes on to outline perscriptions that will undoubtably help to break down the barriers to the adoption of many Energy Efficiency measures.

I see other barriers that lie behind these.  Not just a failure of normal market forces, but conceptual problems.   While energy in general is a fuzzy concept to most people, using less energy is even less tangible.  You just can’t drop energy efficiency on your foot.  You’re not even at risk of electricution from it.

The pernicious consequence of systems of measurement is always that things we can’t measure go unnoticed.  If you have a hammer, everything looks like a nail, but even more insidiously, things that will never look like nails no matter how hard you squint dissappear from your vision altogether.  It is this psychological quirk that makes energy efficiency go unnoticed.

What image comes to your mind when I say “wind power”?  If you’re anything like me, you probably had a image of a forest of giant wind turbine blades turning gracefully on the horizon like ballet dancers.  Or, you might be like my wife, who would also have an image of a wind farm, but thinks they are ugly (although not so ugly as the haze from a distant coal plant) despite recognizing their necessity.  She wishes they were painted to camouflage them into the background.   Whatever your attitude towards wind power, you probably saw an image.

 Now try “energy efficiency.”  It’s a lot trickier, isn’t it?  I think about energy efficiency all the time, the way a teenage boy thinks about sex (okay, maybe not quite that much), and even I can’t settle on an image.  My mind flashes from the act of replacing an incandescent bulb with a compact fluorescent lightbulb (CFL) to an industrial scale combined heat and power facility, to closing the blinds at night to keep the heat in.

Not only is energy efficiency hard to picture, it’s also hard to measure.  To compute the energy savings from any activity, you have to establish a baseline: how much energy would you have used if you had not changed your methods.   Even in the simplest case of replacing a CFL, we don’t really know that the bulb we replace would really have stayed in the socket until the CFL breaks: A CFL can easily last 10 years, and by that time, we may be replacing all our bulbs with LEDs.  And that does not even begin to account for the effects on our HVAC systems.

Is your mind spinning?  That’s my point.  It can be so hard to get our minds around all the impacts of energy efficiency that, for most people, the most people, it may actually be rational to waste a little energy in order to avoid the headache that trying to get their mind around efficiency may entail.

The problem is, that decades of conserving brain power has left us as a society that wastes energy egregiously.

My prescriptions, designed to make thinking about efficiency easier:

  1. Measure energy use at every opportunity.  Many Prius drivers report that the real-time MPG gauge on the dash causes them to change their driving habits to grive more efficiently.  Getting a Kill-a-Watt energy meter makes us think more about our next electronics purchase.   Getting to know your electric meter can also motivate you to track down wasted energy.  A radical idea: on new homes, the electric meter should be inside, along with the circuit breakers.  New meters can be read (and even turned on and off) remotely, so there is no reason any longer to have them on the side of the house where we never see them. 
  2. Another thing we need to measure is when we use our electricity, not just how much.  Wholesale electricity prices can vary from a few cents per kWh to 30 cents or more during peak consumption.  As we move to a grid based on renewable energy supplies, most of which are intermittent and non-dispatchable, we need to get used to paying the real-time price of the energy we’re using.  Wide-spread adoption of time of use metering will drive the invention and adoption of appliances that can adapt themselves to changing prices.  There are direct, immediate benefits to the system by shaving peak loads, but the real benefits will come when people adopt new ways of doing things and new devices that will cause our appliances to run and our devices to charge when electricity is plentiful, and runonly the most essential uses of electricity when it is scarce.   Xcel is currently doing a pilot study on Time of Use Pricing in Colorado.  The preliminary result are that the right pricing scheme encourages customers to change their energy use much more than they had anticipated… but it still would not be “economic” to change out meters for more sophitocated models capable of handling this sort of billing.  Their definition of “economic” almost certainly does not include the benefits of the creativity which realistic pricing would unleash. 
  3. Allowing utilities to profit from selling less rather than more.  This concept, known as decoupling, is covered well here.  It’s important to remove (or even reverse) the incentive of utilites to sell us more electrons when we really want them to help us use less.

Finally, I do call this blog EE/RE Investing, so here are the sectors that I see benefiting from these recommendations as they are adopted:

  1. Companies selling advanced metering devices, and control systems that adapt to changing electric rates.
  2. Companies that sell building management systems.
  3. Energy storage technologies, such as as advanced batteries, flow batteries, and compressed air energy storage.
  4. Broadband over power lines technology, to handle the increased flow of information.


  1. Excellent posting, and I’ll suggest another reason why we have a hard time grasping the idea of energy efficiency. Compared to wind, solar or nuclear, it’s boring–and therefore gets less media attention than it should. It’s rarely controversial. And just try writing a headline that will grab people for a story about efficiency. I have. It’s not easy.

  2. Lou Grinzo said

    Great points. This is one of the issues I wrestle with all the time on my site, The Cost of Energy. It’s certainly a pressing issue, as the twin problems of peak oil and global warming loom over everything we do.

    One thing I tell my readers endlessly is that I don’t care why they use CFL’s or drive more efficiently, etc. They could be worried about use of natural resources or air pollution or the US trade deficit (largely influenced by oil imports) or their monthly bills. All those legitimate concerns lead us to the same bottom line: Find out how to use less energy and take the (often very small) steps needed to put that knowledge to work to achieve whatever goal motivates you.

  3. Donna Jones said

    Maybe we need to apply the wedge idea to energy efficiency also.
    For instance if you look at air infiltration, about 25 % comes around the house sill plate, 20% through the electric socket boxex (!!!), 15% around windows, etc.

    In looking at radiant heat loss, the biggie is definitely windows. Double pane windows have an R-Value of about 1.8 Install those fabric waffle shades, the R-value goes up to 4.5. Get the kind of shades with the side tracks, you increase r-value 18%, and so it goes.

    Every small or large piece contributes to energy efficiency and brings down the electric bill- and many of these efforts can be done by any normal person. Almost-old-lady that I am, I spent time several days crawling around the house with a screwdriver installing little foam insulating covers under all the electric sockets and switches last summer. Remaking thermal curtains (bought at a thrift store for $5) has made two rooms full of windows much much warmer. My son cut plexiglass sheets and put them in two skylights and now the snow doesn’t melt quickly on them, meaning we are saving heat.

    Maybe this idea could be illustrated with a multicolored fan shape, with each different kind of energy efficient action on a separate color and wedge of the fan.

    It might also pave the way for more widespread understanding of the Princeton “wedge” model for addressing climate change on the state, province and national scale.

    Great post, thanks!

  4. ROG said

    Thanks for the helpful post. I tried visualising a nuclear power plant and a wind farm. The nuclear plant looked as though it would produce large amounts of energy compared with the wind farm, but then I realised I was visualising Trawsfynydd Nuclear Power Station in North Wales (I used to live near there). It has been SHUT for a decade, and no one knows what to do with it. Strange how this psychology thing works…
    I have a question, though, relating to the benefits of energy efficiency. Isn’t there a paradox in which people save energy in one use, only to apply it to other uses, thus using more energy in total? I guess energy efficiency in itself does not necessarily reduce total consumption. Any thoughts?

  5. Tom said

    ROG- Indeed, if the only reason people are saving energy is to save money, they often do spend that money elsewhere, quite possibly on more energy. There is some real debate about this, especially when it comes to people driving more because they have more efficient cars.

    But the assumption that energy cost savings in one area will naturally lead to the same amount of energy spending elsewhere is not likely. Ask yourself, if you found $100 on the street, how much of it would you spend on energy? My guess is that it would be less than 20%… I think the same is true for dollars “found” in the course of energy efficiency.

    And some energy efficiency measures have positive spill-over effects, that is, saving energy in one place will actually lead to energy savings elsewhere as well. When you’re air conditioner is running, a CFL not only saves 75% of the energy that an incandescent bulb would put out, but it also means that you are generating less heat inside your home, and so the air conditioner will run less. Or, if you have a cold, drafty house, you may actually set the thermostat higher in the winter to make up for the chill you feel because of air leaks than you would if you lived in a comfortable efficient house, because the house will be much more uniform in temperature, and have few uncomfortable cold spots making you want to turn up the heat.

  6. There’s a really good example of this kind of thing in another domain: rechargable batteries. NIMH AA cells have comparable power capacity to duracell or other name brand AA cells, and the price per unit of service is less than 1% – **1%** – of the price of alkaline batteries.

    But the market penetration at least in America is neglibible.

    However, Lithium rechargables – embedded in devices like ipods and phones – are doing very, very well indeed.

    What’s interesting here is that the only real difference between the two technologies is the step of taking the AA cells out of the device, charging them, and putting them back vs. just dropping the device in it’s cradle. That one difference makes rechargable technology acceptable.

    So I think that we may need a similar “user interface” revolution in energy efficiency. I think, obviously, it starts with building codes – compare the State of California’s energy use per capita with that of other states.

    But it also needs an overhaul at a deeper level. I don’t know quite what that is, but we’re looking for it. is a book on energy economics which covers some territory you’re approaching – things like feedback loops between company AC systems and the grid, and dynamic pricing of power. I helped edit this and it’s well worth the read.

  7. Tom said

    Very good point Vinay. But you make me wonder… is there something about NiMH that makes you have to take the batteries out to recharge? Doesn’t the Prius use a NiMH battery pack which recharges in place?

    Sounds like an intersting book.

  8. No, it’s just typical of the AA / AAA battery devices that you have to take the batts out and recharge them, and the cradle-based devices are higher value so they have lithium batteries.

    Small is Profitable is amazing and a good bit of it is online. The subsequent book, is freely available in its entirety.

  9. Helen said

    The other issue about energy efficiency is that a huge amount of energy use is attributable to large facilities as opposed to individual homes. At a corporate and institutional level, building management systems are better than nothing, but don’t capture most of the available savings. For instance, if you tell the system that you want the temperature at 68 during the day and 60 at night, it will do that, but it won’t tell you that it’s doing so in an extremely inefficient way. The state of the art is Fault Detection, Diagnostics and Optimization systems which not only tell you exactly how every part of the system is operating, but diagnose problems and suggest corrections. In the case of Cimetrics’ Infometrics system (full disclosure: I work for Cimetrics,, there is also a disclosure of the dollar amount each problem is costing at current utility rates. This helps to both make energy savings more concrete and to enable ROI-based decision making when it comes to prioritizing maintenance. There are huge energy savings to be found for large facilities in this kind of system. We identified energy savings worth $1 million at just one customer facility last year alone.

  10. That’s extremely cool, Helen. Would you mind contacting me at the email address given on the contact page of the Wiki (click on my name and it will take you to the wiki page, then just click “Contact Us.”) I have a couple of questions that are rather off-topic for this thread.

    (I was part of the team that did http:/ that discusses the kinds of technology you’re talking about, and I have some questions about applications.)

  11. I really enjoyed this post, and will have to give some noodle time to this psychology concept as we ponder energy policy. (I am involved with the Energy Caucus for the Green Party of Canada, trying to develop policy that would address the imbedded disincentives you are discussing.)

    I was thinking about the comparison in economic incentives between houses and commecial buildings, as both have been brought up in the comments here.

    In the example of privately owned homes, the problem exists that the home is not built by the person paying the energy bills, so there is no incentive to build an efficient dwelling, and then the homeowner is faced with a large cost for a retrofit with (the belief of) a long payback period.

    In commercial buildings, or rental housing, the energy user very often does not even own the home, so doing an energy retrofit is not even an option, as they would be appealing to the building owner to complete the retrofit.

    I think there is sufficient room to increase energy costs (and lower other costs for energy users) so that energy is a larger proportion of monthly expenditures, giving shorter payback periods and more incenctive to cut back.

    For time of use metering, here in Ontario there is much talk about the cost of implementing these meters would be. Our current government talks about $1B province wide. But I have been telling everyone who would listen that it need not cost the taxpayers a dime if we made them mandatory for every new house and every house that changes hands, and then set pricing such that everyone else would voluntarily change their meters. The government could then provide free conversions to low income people who could not afford the hit. Really, if you are getting a $250,000 mortgage, what’s an extra $300 for a time-of-use meter?

  12. Tom said

       Great to know that policy makers are reading.
        I totally agree about making time of use enabled meters code… but the cost is actually a lot less than $300: if the TOU meter costs $300, and the meter they were going to install anyway costs $200, the cost of the policy to the builder or home buyer would only be the difference: $100 (these numbers are just examples… I have no idea what the metes actually cost.
        I just went to a presentation by Barbara Farhar, Ph.D. on a study she did for the US Department of Energy of a San Diego community of high performance homes (all energy efficient, all with solar hot water, some with PV) about the attitudes of home buyers compared with a nearby community of similar ordinary homes from a different builder.  She definitely saw the effect we are talking about: when people know how much energy they are using, they use it more wisely.   There were a lot of interesting policy implications for building codes as well.  Here is the study.  It’s very long, but I suggest you read the executive summary, and if you’re interested email me and I can get you in contact with her directly.

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