It all began in 1973. Energy efficiency is widely traced back to exactly this year, when Arab members of the Organization of Petroleum Exporting Countries imposed an oil embargo which raised prices around the globe. While a few types of legislation earlier in the twentieth century hinted at the need for efficiency before 1973, this was the event that made it clear to US law makers and industry players: energy efficiency measures are necessary to manage modern energy needs. 40 years later, energy efficiency remains a pivotal strategy for facility management to better use energy and lower operating expenses.
The following is an excerpt from a whitepaper that explores how the history of energy efficiency and utility incentive development led to why efficiency projects are funded by utilities today.
In the context of national energy use over time, using energy efficiently is a relatively new concept. Dozens of sources, from Energy.gov to the American Council for an Energy Efficient Economy, mark the beginning of energy efficiency as the year 1973. By 2014, the ACEEE conservatively estimated that “60% of the improvement in energy intensity is due to efficiency improvements,”2 having saved US businesses and consumers around $800 billion over 40 years. But those 40 years have marked a significant shift in how the US approaches energy use.
Prior to the 1970s, the US government refrained from implementing energy policy at the federal level. Throughout the industrial boom from the 1800s to the mid twentieth century, Americans relied on the private sector to manage their energy needs.3 With the birth of baby boomers and the rise of US industry in the years after World War II, the relative cheap and abundant energy previously available to businesses could not last. Interest in energy efficiency started developing during this period.
In the 1950s, the Housing and Home Finance Agency (HHFA) established early residential efficiency standards in response to homes that defaulted on federally insured loans with high utility bills. The New York blackout of 1970 led the American Society of Heating, Refrigerating and Air Conditioning (ASHRAE) to work on standards for commercial buildings.4 However, outside of these early standards, the concept of energy efficiency had not yet formalized.
In 1973, an oil embargo imposed by Arab members of the Organization of Petroleum Exporting Countries dramatically increased energy prices, driving an oil shock for countries around the globe, including the US.5 In response to these incidents, reminding the US of the importance of that inexpensive and readily available energy, the federal government stepped in to regulate energy use.
The oil shocks directly drove the development of local, regional, state and national policies and groups focused on this new issue for Americans: energy use. The first law established to address energy use was signed by President Gerald Ford in 1975, The Energy Policy and Conservation Act. The law was designed to do several things, including create:6
Congress established the Department of Energy (DOE) on October 1, 1977 in response to these needs. Energy efficiency began, at this time, as “energy conservation.” The DOE was created to diversify energy resources and promote this new field of energy conservation at the national level (among other initiatives7).
However, while the DOE wrote these new policies in response to a direct crisis surrounding energy use, the US still faced on going challenges of incentivizing adoption and encouraging businesses to understand how they should be reducing energy use to support the greater cause.
In 2013, the Alliance to Save Energy calculated that residential and commercial buildings were responsible for consuming about 40% of the primary energy generated in the US. As a result, national energy codes have been a “critical tool” for managing this immense consumption as it has grown over the last few decades.8 The DOE, alongside the Nixon, Ford and Carter administrations, started initiating and implementing the first phase of these codes, policies and programs from the mid-1970s through the 1990s. Utility deregulation, in the nineties, sparked the development of utility incentives that changed how energy efficiency was viewed.
2Steven Nadel, “35 years of energy efficiency progress, 35 more years of energy efficiency opportunity,” ACEEE Blog, June 30, 20 15 (12:56 p.m.), https://aceee.org/blog/2015/06/35-years-energy-efficiency-progress, para. 2.
3“A Brief History of the Department of Energy,” Department of Energy, accessed September 10, 2019, https://www.energy.gov/node/%20362173
4Alliance Commission on National Energy Efficiency Policy, “The History of Energy Productivity”, 9
5Steven Nadel, “35 years of energy efficiency progress, 35 more years of energy efficiency opportunity,” ACEEE Blog, June 30, 20 15 (12:56 p.m.), https://aceee.org/blog/2015/06/35-years-energy-efficiency-progress
6Alliance Commission on National Energy Efficiency Policy, “The History of Energy Productivity”, 6
7Sue Coakley, “Reflecting on the History of Energy Efficiency, While Looking to the Future,” Northeast Energy Efficiency Partner ships Blog, June 8, 2016 (10:31 a.m.), https://neep.org/blog/reflecting-history-energy-efficiency-while-looking-future
8Alliance Commission on National Energy Efficiency Policy, “The History of Energy Productivity”, 9
“A Brief History of the Department of Energy.” Department of Energy. Accessed September 10, 2019. https://www.energy.gov/node/%20362173
Alliance Commission on National Energy Efficiency Policy. “The History of Energy Productivity.” https://www.ase.org/sites/ase.org/files/resources/Media%20browser/ee_commission_history_report_2113.pdf
Coakley, Sue. “Reflecting on the History of Energy Efficiency, While Looking to the Future.” Northeast Energy Efficiency Partnerships Blog . June 8, 2016 (10:31 a.m.). https://neep.org/blog/reflecting-history-energy-efficiency-while-looking-future
Nadel, Steve. “35 years of energy efficiency progress, 35 more years of energy efficiency opportunity.” ACEEE Blog . June 30, 2015 (12:56 p.m.). https://aceee.org/blog/2015/06/35 years energy efficiency progress https://aceee.org/blog/2015/06/35-years-energy-efficiency-progress