U.S. Consumers Are Rapidly Adopting This “Hidden” Energy Source
Today, I want to tell you about the fastest-growing power source in America. It’s a bit unusual and certainly unexpected. But there’s no question that it’s making a monumental impact on the way we consume energy.
But first, let me tell you a story about a change that I made not too long ago…
About two years ago, I bought my first light-emitting diode (LED) lightbulb. It replaced a 60-watt incandescent bulb that was in a hard-to-reach spot in our house.
Since then, I’ve replaced 95% of the lighting on our farm in Pennsylvania with LED bulbs. I’ve even tossed 4- and 8-foot fluorescent light fixtures and replaced them with high-output LED versions.
My annual electricity savings? About $840. And even though the LED bulbs cost me about $2,000, they will pay for themselves in less than three years.
What’s more, LED bulbs last far longer than incandescent and fluorescent ones do. In unheated garages, LEDs work far better than even cold start fluorescents.
Apparently, I’m not the only one making the switch. According to the U.S. Department of Energy, Americans have installed more than 450 million LED bulbs.
That’s up from fewer than 500,000 in 2009. In fact, almost 70% of Americans have purchased at least one LED bulb.
I’m not surprised. Prices for LED bulbs have dropped 94% since 2008. You can now buy a 60-watt equivalent LED bulb for about $2.
This is a classic example of Fessler’s Three Laws of Technology…
- Technology marches on.
- When it comes to technology, change happens much faster than anyone expects.
- New technology is almost always disruptive and transformative.
No one predicted the widespread adoption of LED bulbs. Ten years ago, who would’ve thought they would have such a disruptive and transformative effect on U.S. energy?
They were just too expensive. But here we are, just 10 years later, and consumers are rapidly replacing old energy-hogging, short-lived incandescent bulbs.
And they are doing it faster than anyone would have predicted! It’s what’s responsible for the fast growth of a “hidden” energy source.
America’s Fastest-Growing Energy Source
So… what is the “hidden” source? It’s energy efficiency.
Stay with me here…
Experts often refer to energy efficiency as the “first fuel” of our global energy system. Increasing energy efficiency is the most important step we can take toward sustainable energy.
Few people think of energy efficiency as a source of energy. But it is in fact a source, and it’s the fastest-growing one we have.
Thanks to improvements in energy efficiency, the demand for energy in IEA member countries has fallen from its peak in 2007. Demand is even lower than it was back in 2000.
In the U.S., energy efficiency is alive and well. U.S. homeowners have installed about 1 billion energy-efficient lightbulbs, including LEDs and CFLs (compact fluorescent lights).
If we assume each bulb operates three hours per day, we have an implied savings of 50 million megawatt-hours (MWh) per year. That’s equal to about 0.16 MWh per capita.
It shouldn’t be surprising that utilities are retiring them. Many just aren’t needed anymore – all because of increasing energy efficiency.
As you can see from the chart below, U.S. residential energy consumption is lower than it was five years ago. And that is in the face of an economy that’s seen significant improvements over the last five years.
Energy-efficient appliances deserve some credit for the reduction in energy use. But it’s the replacement of the lowly incandescent lightbulbs with LEDs that has made the difference.
It’s not just a few states seeing decreases in electricity use. Forty-eight states saw residential consumption decline.
Could there be another reason for the decrease in electricity use?
It can’t be any of the traditional economic factors like income and electricity prices…
Household incomes have increased about 5.5% since 2010. If anything, one would expect higher incomes to result in higher electricity use.
It’s not the price of electricity either. Residential electricity prices have been virtually the same since 2010.
All signs point to a greater level of efficiency. And there’s no question that LED and CFL bulbs have made a sizable impact.
But despite the impact LED and CFL bulbs have made, the possibility offered by electric vehicles is even more compelling. They continue to make inroads, though I believe their widespread adoption will happen much quicker than most experts predict (see Fessler’s Second Law of Technology above).
Further, strong energy efficiency initiatives need to be the core of every government’s energy policy. Energy security, lower energy bills, less air pollution and decarbonization of our energy supply are all made much easier with strong energy efficiency policies.
Are there other energy efficiency gains we can make in the future? “Plenty” is the simple answer… but I’ll leave that as the subject for a future article.
P.S. As you can see from this article, advancing technology is changing the way we consume energy. It’s happening at a much faster clip than most people realize…
What does this mean for investors?
It means now is the time to capitalize on this trend. And I can show you how.
I’ve already seen some major gains in my Advanced Energy Strategist portfolio… One of my picks is up 187% in less than a year. Click here to learn more.