'Resource' for Developing Countries: Increase Energy Efficiency
It costs about half as much as building new power plants
Energy efficiency traditionally has been regarded as something only rich economies could afford. But given today's tremendous energy needs in the developing world, especially in Pacific Asia, it has taken on a new importance. Energy efficiency has emerged as a valuable resource that addresses the Pacific Basin's multiple goals of efficient capital investment, improved productivity, economic growth, and environmentally sustainable development.
Between the years 2000 and 2010, China's gross domestic product (GDP) is projected to grow by 7 percent per year. The GDP of Asia's other developing nations probably will grow 5.2 percent during the same period. This strong economic development will create huge increases in both commercial and industrial energy demand. Demand also will come from consumers, who increasingly are using cars, refrigerators, and other energy-consuming tools of modern living.
Bangkok, Southeast Asia's largest city, had 600,000 registered vehicles in 1979. By 1993, it had almost 3 million. The number is rising almost 11 percent per year, according to the International Institute for Energy Conservation. Only 40 percent of Bangkok households had refrigerators in 1980; a decade later, 90 percent did.
Commercial demand for oil
The World Bank estimates that developing countries now consume about 80 million barrels of oil equivalent per day just for commercial purposes. By the year 2010, the figure will grow to 100 million barrels. By 2030, as much as 200 million barrels of oil equivalent per day will be required to meet developing countries' commercial demand. While the Pacific Basin needs new energy and power supplies, satisfying the burgeoning demand creates four key challenges:
*Investing capital wisely.
*Fostering economic growth.
*Sustaining the environment.
Only energy efficiency can meet these challenges and help the Pacific Basin meet its energy needs.
Productivity. Energy efficiency is far different from the energy conservation of old. Conservation practices began in an energy crisis. They called for sacrifice: turning down thermostats, running factories at partial capacity, and other measures that hampered productivity. The efficiency ethic means getting the most out of every unit of energy. Rather than turning down the heat, it focuses on producing efficient heating and air conditioning systems. Rather than idling factories, it focuses on installing the best and most efficient process controls, motors, and other equipment. Today's energy efficiency is a combination of good technology and best practices to improve residential comfort and enhance industrial productivity.
Capital requirements. The United States Agency for International Development projects the annual cost of developing countries' energy projects at $100 billion. According to the US Energy Department, developing and transitional countries could save almost $2 trillion by 2025 if they pursue an energy-efficiency development strategy, which typically costs half of what it takes to build new capacity. Energy efficiency does more than save money - it offers a handsome return on investment.
Moscow, for example, retrofitted its centralized heating system, reducing gas consumption 20 percent, or $2.6 million a year. Energy savings alone will pay for this upgrade in just 2-1/2 years. Thailand's five-year Demand Side Management Plan is projected to save 311 megawatts of peak electricity at a cost of $189 million. Another 10-year plan to save 2,000 megawatts of peak power could save Thailand $2.3 billion.
Environment. Most people, companies, and governments want to practice sound environmental stewardship, but good intentions don't change the fact that most energy production pollutes. The World Bank estimates that coal use, which causes more emissions in electric generation than any other fuel, will double worldwide by 2030. If we don't take prompt action, environmental and human-health problems will increase proportionately.
Many countries are taking action. Those that signed the Rio climate treaty are creating action plans to reduce greenhouse-gas emissions. Industry, too, is making environmentally friendly improvements. The little measures add up. For example, over its life, just one of the new 100-watt compact fluorescent bulbs eliminates the equivalent of 1,000 pounds of carbon dioxide, eight pounds of sulfur dioxide, and four pounds of nitrous oxide emissions.
Today, almost half of all government subsidies in developing countries are earmarked for electricity generation. Yet, according to the World Bank, these countries use 20 percent more electricity than they should.
State-of-the-art technology can reduce industry's energy consumption by up to 15 percent. At Honeywell, for example, we retrofitted our 80-year-old headquarters with energy-saving lighting, heating, and cooling systems. As a result, we are saving $250,000 annually in energy costs. Financial institutions can provide incentives for energy-efficiency projects and facilitate their development. The European Bank for Reconstruction and Development has designated funds to address energy efficiency. The Asia Development Bank could do the same. Nongovernmental organizations can step up their efforts. Models include the Beijing Energy Conservation Institute and Thailand's International Institute for Energy Conservation.
The question is not whether we should be pursuing energy efficiency, but when we are going to buy into a proven concept. Energy efficiency is a winning strategy for everyone. In our rush to meet the world's growing energy needs, seeking energy efficiencies is a sensible multipurpose strategy. It does not require more barrels of oil, more tons of coal, or more megawatts of hydropower. It does not poison our land, our air, or our water. It does not deprive future generations of a healthy environment or a high standard of living. In fact, it helps ensure them.
There is no excuse not to pursue energy efficiency. Energy savings are available to any country, regardless of its natural resources or production infrastructure.
Michael R. Bonsignore is chairman and chief executive officer of Honeywell Inc.