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McKinsey: Energy efficiency could save $700 billion

Rather than invent new sources of energy, reducing waste in appliances, homes, and business could yield savings of $1.2 trillion on a $520 billion investment over 10 years, consulting firm says.

Energy efficiency--it's not just the low-hanging fruit, it's the fruit that's lying on the ground, Energy Secretary Steven Chu recently quipped. Now McKinsey has put a number on the potential savings: $1.2 trillion on an investment of $520 billion over 10 years.

The consulting firm on Wednesday released a follow-up report to its often-cited economic analysis for reducing greenhouse gas emissions.

Cost analysis: measures below the baseline on the left will have the quickest return on up-front investment. McKinsey

While there are countless proposals to generate energy in cleaner ways, the McKinsey study concluded that using existing products and practices, such as weatherizing homes or installing combined heat and power systems, could yield vast savings by 2020.

However, there are number of barriers, including the up-front cost, a fragmented array of products covering hundreds of thousands of buildings and billions of devices, and a lack of awareness that efficiency exists as a "fuel source" itself, McKinsey consultants said during a press conference Wednesday.

"If we do nothing, we will waste $1.2 trillion of energy," McKinsey partner Ken Ostrowski said. "Over a decade, (the up-front investment) would be $50 billion a year, which is about five times what we invest today. That investment pays back--it's one of the few that generate environmental benefits and economic cost returns."

The study examined the potential for efficiency in stationary sources, so it does not include transportation. The demand for power could be decreased 23 percent by 2020, which is equivalent to the nontransportation energy consumption of Canada or removing the entire U.S. passenger fleet from the road.

Individual homes and businesses could save about 28 percent off their current energy spending, while the industrial sector could save 20 percent. Within people's homes, electronic devices are quickly becoming a larger portion of monthly electric bills.

When surveyed, the average American estimates that "plug loads" represent 13 percent of energy consumption, but the number is more like 35 percent and growing, Ostrowski said.

Standby power alone, sometimes referred to a home's parasitic or vampire load, is 6 percent to 8 percent of the total. Putting in place efficiency standards to cut standby power could result in energy savings equivalent to the annual electricity consumption of the Netherlands, Ostrowski said.

"These things are significant but fragmented. The awareness levels are not there today, and that's one of the barriers we have to overcome," he said.