US Energy Savings: Opportunities and Challenges

By Jon Creyts, Hannah Choi Granade, and Kenneth J. Ostrowski in the McKinsey Quarterly, January 2010

This article focuses on the broad range of opportunities and challenges that the authors' research has uncovered in three key sectors: residential, commercial, and industrial.

The specter of more expensive energy, along with concerns about its availability and environmental impact, has renewed interest in finding more efficient ways to use it. For executives, this shift could bring not only new challenges, including stringent regulations, but also new business opportunities. And for society as a whole, the potential savings are huge: more than $1 trillion in the United States alone.

Many people focus on opportunities that require high-tech new systems or on conservation efforts that reduce the benefits from energy. Yet there is great potential to reduce its consumption and minimize its total cost by using existing technologies—and without changing everyday habits. So why haven’t these prospects been realized already? Four fundamental barriers stand out. Energy efficiency typically requires large upfront investments to achieve savings that accrue later. In addition, it has low mindshare, and opportunities are fragmented across billions of devices in more than 100 million locations. Finally, the organizations that would be primarily responsible for implementing energy efficiency find it hard to measure, which makes them less motivated to act.

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