Energy efficiency can support energy sector development goals and other economic, climate, and social objectives that partner countries are working to achieve.
USAID missions work with partner countries on a diverse set of development goals. Some countries are improving the supply and stability of their power sector or expanding affordable and reliable access to power. Energy efficiency has a clear role in contributing to these types of energy-related goals (see Basics section and below). In addition, because energy efficiency is a substitute for other types of fuel and affects all types of buildings and motorized processes, the impacts of efficiency can be directed toward achieving many non-energy objectives.
Learn below how energy efficiency can play a strategic role in programs aimed at growth and improvement in key development areas, such as Power Sector Planning, Economic Growth, Resource Conservation, Climate Change Mitigation and Adaptation, Gender Equality, and Improved Health Outcomes.
Power Sector Planning
The power sector comprises different components, including (1) power generation from resources, such as natural gas, coal, oil, hydropower, solar, and wind; (2) transmission of power through a grid to reach villages and towns; (3) distribution that provides individual homes and businesses with power that they purchase through a utility; and (4) demand, or energy consumption, by technology that includes lighting, motors, heating and cooling equipment, and plug-in devices, such as computers. This model is evolving with the development of new types of power, often solar, produced on-site at homes and other buildings. When connected to the grid, this is called distributed generation. Governments and utilities need to manage this complicated set of components and interactions to achieve affordable and reliable systems. Any one component can be improved in isolation; however, a system-based approach offers a highly cost-effective and sustainable strategy. Energy efficiency plays an essential role in comprehensive system planning due to its ability to reduce demand. Once demand is lowered, benefits cascade through the system by reducing the needed infrastructure for transmission and distribution and lowering the amount of resources necessary for generation. Lower demand can lead to improved service reliability and can help struggling utilities improve their management and increase customer payments.
Integrated Resource Planning (IRP) offers a broad strategic approach to systems-based power sector planning. IRP models cost-effective scenarios based on power generation options, projected transmission needs, and anticipated energy demand. USAID has supported IRP efforts that expand the standard scope to include climate and system resiliency, enabling governments and utilities to develop long-range plans that scale up energy resources, including clean energy sources, and address challenges related to short- and long-term power sector investment. An effective IRP process supports informed decision-making on the:
- Development of central and distributed power generation resources
- Expansion and improvement of transmission and distribution
- Use of demand-side management (DSM) and energy efficiency as a source of energy
Under USAID’s Energy Efficiency for Clean Development Program (EECDP), resources and field projects were developed to support USAID and partner countries to conduct comprehensive power sector planning. A 2017 workshop provided USAID staff with training on the IRP’s basic concepts and how to use different approaches to introduce or strengthen planning activities into local energy sectors. For example, a modified IRP approach can be used when a sector-wide assessment is not appropriate. In the Democratic Republic of Congo (DRC), an IRP-type assessment was used to develop transmission options for hydropower generation projects under development.
Economic Growth
Energy efficiency stimulates economic growth in a number of different ways. First, it helps ensure a reliable energy supply. This means factories and shops do not need to use expensive diesel backup generators for electricity during power outages or completely shut down. Efficiency also provides increased protection from fuel price variability. Energy efficiency can be part of a strategy to increase energy security by letting countries import less fuel and reduce their exposure to price fluctuations. Similarly, when companies and families increase their efficiency and reduce the amount of energy they purchase, they can also buffer their finances from price increases.
In areas where energy prices are high, energy efficiency can produce returns on investment that broadly benefit the economy. In high-price markets, energy efficiency activities can be incorporated into manufacturing facilities. This includes industrial and agriculture sectors; buildings and homes for companies and families; and schools, hospitals, and other government buildings. All of these applications produce cost savings by lowering the amount of energy that needs to be purchased to maintain operations, lighting, heating, and cooling. In turn, this gives governments, businesses, and families increased funds, revenue, and disposable income, which they use to stimulate the economy by increasing their consumption of goods and services.
In places where subsidies are in place to set artificially low consumer energy prices, fossil fuel subsidy reform (FFSR) provides a powerful opportunity to lower carbon emissions, reduce barriers to energy efficiency and renewable energy technologies, and unlock government funding. A 2017 report funded by the Nordic Council of Ministers, “Making the Switch,” looks at the potential impacts of removing subsidies. As explained in the report, a study modeling 20 countries showed an average drop of 11% in carbon emissions by eliminating subsidies. The reduction increased to 18% if the countries invested 30% of their savings to support energy efficiency and renewable energy.
Although research and modeling show clear opportunities to channel savings from FFSR into clean energy through efficiency and renewables, actual action taken by countries is difficult to find. As FFSR becomes more widespread, it’s reasonable to expect countries to make a greater effort to remove the barriers created by subsidies and actively promote their efficiency and renewable energy markets. A case study of the Philippines, published in the 2015 report, “Tackling Fossil Fuel Subsidies and Climate Change: Leveling the Playing Field,” describes the country’s history in reducing its fossil fuel subsidies as well as government policies to promote renewables. The report found that energy efficiency increased during the reform period, between 2000 and 2009, as demonstrated by the simultaneous reduction of energy demand and increase in GDP.
Over time, increased energy efficiency supports economic growth through new businesses and consumer savings, instead of draining government funds. Supporting public-private partnerships (PPPs) with government ministries can be a cost effective strategy to increase efficiency, especially when government program funding is limited. See the Promoting an Energy Efficient Public Sector (PePS) guide for more information on PPPs.
Resource Conservation
Energy efficiency decreases the demand for the fuel resources used to generate electricity, such as coal, natural gas, and petroleum. The end result is improved resource-use effectiveness and increased resource conservation. The U.S. Energy Information Administration (EIA) provides a simple methodology to calculate the amount of coal, natural gas, or petroleum used to generate a kilowatt hour (kWh) of electricity. This can be used to calculate the fuel savings from each kWh of electricity saved as a result of energy efficiency. The amount of fossil fuel used to generate a kWh is dependent on the efficiency or heat rate of the power plant that produces the electricity and the heat content of the fuel used to generate that electricity (both expressed in British Thermal Units or BTUs). Although there is currently no international database of power plant heat rates, the International Energy Agency (IEA) has published a methodology for calculating coal power plant efficiency. Heat content values for coal, natural gas, and petroleum are available on the EIA website.
In addition to saving energy resources, reductions in energy consumption can also save water (and vice versa). Building strategies that improve water efficiency and onsite storm and wastewater management reduce the need for water pumping and treatment and the required energy for those functions. Water use is also tied to power generation. Water is used to cool power generators, produce steam to generate electricity, and refine various fuels, among other uses. Reducing the demand for electricity will ultimately reduce water usage.
USAID supported improvements in energy and water efficiency through the Alliance to Save Energy’s Watergy program. The Alliance started its program in 1997 to address the “water and energy nexus” at water treatment facilities and supply infrastructure. Efficiency improvements offer an opportunity to reduce energy use by around 25% through improved management practices and reduced water leaks. The program, which went through 2005, helped more than 100 cities across the developing world implement projects and save energy and operating costs. For example, the city of Veracruz in Mexico achieved annual cost savings of $394,000 and reduced energy use by 24% (24 million kWh per year). The municipality also reduced monthly complaints regarding water and sanitation reliability to almost zero.
Climate Change Mitigation and Adaptation
Energy efficiency lowers greenhouse gas (GHG) emissions by reducing the amount of fuel required for electricity generation and heating. The higher the GHG emissions associated with major sources of fuel, the more effective efficiency programs will be in supporting climate goals. Many emerging economies have relatively low levels of GHG emissions; however, some of these economies are expanding rapidly increasing the energy consumption levels. As the infrastructure is constructed to support new businesses and industries, the opportunity to cost-effectively design efficiency into buildings, factories, and the power grid is significant. USAID has developed a calculator for estimating the emissions reduced or avoided from clean energy activities. The Clean Energy Emission Reduction (CLEER) Tool can be used to estimate, identify, track, and report on GHG emissions.
In addition to helping mitigate climate change, energy efficiency can also play a role in helping people adapt to changes in the climate by improving resiliency. Reductions in energy consumption improve the overall reliability and resilience of energy systems and benefit the populations who rely on them. For example, if a major storm forces power plants to go offline, this would cause a sudden drop in the energy supply. However, countries with widespread adoption of energy efficiency measures will be better positioned to respond to this event because they have already reduced their demand for energy and may be able to keep critical infrastructure running during the crisis.
Gender Equality
Sustainable development is only possible when women and men have an equal opportunity to improve their economic conditions and quality of life. Energy-efficient technologies can form the basis for small-scale enterprises and local village-based initiatives. These types of local entrepreneurial activities empower women and help them control their economic future while providing an opportunity for them to become part of a more sustainable, distributed energy economy. Technology can also directly impact women by reducing the amount of time they spend providing for their families. Efficient cookstoves, for example, not only provide cleaner cooking sources but also reduce the amount of time women spend gathering fuel and tending fires. This allows them to pursue other opportunities that can increase the household income. USAID is exploring and promoting these and other ways in which energy is a gender issue with a significant impact, including safety, health, and jobs in the mainstream energy sector. USAID’s Advancing Gender in the Environment (AGENT) - Energy Brief Series showcases advancements towards the achievement of gender equality in the energy sector and identifies areas for further development and exploration.
Improved Health Outcomes
Many developing countries, particularly those with rapidly growing cities, experience high levels of air pollution. Poor air quality can result from many factors, including a large numbers of cars on the road, coal power plants, and wood and other biomass burned for fuel. Energy efficiency reduces energy use and the need for burning fossil fuels, which lowers the emission of harmful pollutants and improves air quality. Everyone can feel the health impacts resulting from cleaner air in their city.
Energy efficiency enables healthy environments indoors and outdoors in several ways. First, cost savings from reduced energy consumption improve the affordability of modern energy-efficient building technology. Building energy management systems, LED lighting, and economizers (a system that uses outdoor air for cooling and heating), are all examples of energy-saving technology that improve thermal and visual indoor comfort. In most cases, efficient technology will have a higher initial price than conventional options. Lower operating costs will provide savings that add up for the owner during the lifetime of the equipment. This same concept applies to building materials that improve comfort, including insulation and energy-efficient windows. Well-lit, ventilated, and comfortable buildings are healthy environments that are affordable through energy efficiency.
Indoor comfort and air quality are also improved by basic energy efficiency maintenance practices. For homes, efficiency can be significantly improved by sealing cracks around windows and doors. Cracks cause drafts and can lead to uncomfortable and unhealthy living and working conditions. Air conditioning systems that are not cleaned and maintained have to work overtime to provide the desired temperature, using excessive energy. Maintenance on air conditioners, boilers, and other equipment improves energy efficiency by enabling them to work properly and improves the quality of indoor environments.
In rural areas, indoor air quality and health can also be improved through the use of energy-efficient cookstoves. The World Health Organization estimates that 4.3 million people die annually from exposure to household air pollution caused by burning solid fuels like wood, charcoal, and other forms of biomass. The number of deaths caused by indoor air pollution rivals deaths from malaria and AIDS in many developing countries. The use of energy-efficient stoves may reduce exposure to indoor pollutants by requiring less fuel to achieve the same or better thermal performance.
Finally, regarding power systems, lowering energy demand through efficiency can improve reliability and decrease power outages. A country’s health infrastructure benefits from a reduced risk of power disruptions to medical equipment and vaccine and medicine cold chains. The process of restoring power or supplying energy through a backup source during a crisis is also faster and easier if less power is needed in the first place.
Alain Mukeba / USAID