Studies from the McKinsey group and National Research Council released this week claim that we can substantially reduce the country’s energy usage (15-32% by 2020) by replacing inefficient appliances and building materials. The good news: it will only take an investment of $520 billion to produce $1.2 trillion in energy savings. The bad news: the study ignores past experiences and basic economics.
Ironically, conservation is actually encouraging more energy usage. The Manhattan Institute explains, â€œefficiency increases consumption. It makes what we ultimately consume cheaper, and lower prices almost always increases consumption. To curb energy consumption, you have to lower efficiency, not raise it.â€?
Unfortunately, the same flawed logic is behind Act 129 of 2008, which requires utilities to lower electricity consumption by 1% come May 2011, and 3% come 2013. So how will PA utilities will lower usage? Most likely by raising the price of electricity as rate caps expire.