was rocked hard by the 1973 oil crisis not only because of its dependence on the car but also because its utilities burned a lot of oil. The next year, Governor Ronald Reagan, convinced by arguments about frugality and reducing energy waste, overruled his own staff and approved the establishment of the California Energy Commission. Thus did Ronald Reagan become the progenitor of the commission that set about writing increasingly strict rules for energy efficiency that became a model across the United States. Other states followed.8
Utilities began to promote conservation through information programs and by sending energy auditors out to poke around in attics, measuring insulation, and in basements, to check out furnaces. These efforts expanded into utilities’ demand side management (DSM) programs, which were aimed at helping homeowners and building operators to manage and reduce consumption. At the same time, manufacturers, prodded by mandatory standards and labeling requirements, brought more efficient appliances to market. A chaotic welter of competing state regulations was finally consolidated into uniform national standards. The federal government also started to award energy stars to appliances that were rated above average. Architects and builders focused on more efficient design. “Energy conservation did go mainstream,” observed Lee Schipper of Stanford University. “Builders thirty years ago did not understand the application of double and triple glazing in windows,” he said. “They do today.”9
THE GADGIWATTS
There is a puzzle: Despite the mainstreaming of conservation, U.S. residential energy consumption is 40 percent higher than in the 1970s, and commercial building consumption has almost doubled. The reasons are growth and innovation. The number of single-family homes increased substantially; so did the number of houses with air-conditioning. The expansion in size of houses is even more striking: square footage is up about 70 percent since the 1970s. Energy use per refrigerator has been cut in half since 1993, but energy used for refrigerators per home is roughly constant because many homes now have two refrigerators.10
The other major reason for the growth in home energy use are the “gadgiwatts”—more and more electricity is consumed by gadgets that largely did not exist in the 1970s. In those years, 91 percent of household electricity was consumed in just seven categories—stoves, indoor lights, refrigerators, freezers, water heaters, air conditioners, and space heating. Only 9 percent was “other.”
The “other” category has since grown to be 45 percent of electricity. That includes some things that were around in the 1970s, such as dishwashers and televisions. But it also includes all those devices and gadgets that have become integral to daily life and depend on “the gadgiwatts”—computers, printers, VCRs, fax machines, microwave ovens, telephones, cable services, flat-screen televisions, DVD players, smart phones, tablets, and any number of hand-held devices that need to be recharged.
The same thirst for energy and electricity exists in increasingly high-tech, highly wired office towers. Moreover, information technology has spawned whole new complexes and new demand: the thousands of data centers that house an estimated 15 million-plus servers worldwide—a number that could grow to more than 120 million by 2020. These centers draw heavily on electricity to power processors, memory, and other computer operations, and also to deliver the cooling required to remove the heat that is generated by the servers.11
This potential savings in energy efficiency in buildings has been described by energy economist Lawrence Makovich as the “conservation gap.” But realizing conservation potential is not so easy. The auto fleet may turn over every 12 years or so, but buildings last 50, or 75, or 100 years, or more. They can be retrofitted but only up to a point. Pricing will affect the time and amount of money that building owners and operators will put into improving the energy operations of existing structures. These investments involve rate of return and trade-offs with other investments. “The question of choice and trade-offs in efficiency investments compared with other allocations of capital is often overlooked,” observes a report from the World Economic Forum. “The investment grade test is important for sustainable investment in energy efficiency.” Like any other investment, efficiency has to compete with other choices.12
Nonfinancial barriers also stand in the way of efficiency. One is the disconnect between the interests of the builder and the eventual buyer. Builders, who put in insulation and appliances and decide on the thickness of the walls and the quality of the windows, are building on “spec.” Their focus is on keeping costs down to promote sales. New homebuyers, on the other hand, actually have to pay the monthly energy bills, and they