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Energy efficiency gap
Energy efficiency gap refers to the improvement potential of energy efficiency or the difference between the cost-minimizing level of energy efficiency and the level of energy efficiency actually realized. It has attracted considerable attention among energy policy analysts, because its existence suggests that society has forgone cost-effective investments in energy efficiency, even though they could significantly reduce energy consumption at low cost. This term was first "coined" by Eric Hirst and Marilyn Brown in a paper entitled "Closing the Efficiency Gap: Barriers to the Efficient Use of Energy" in 1990.〔Hirst, E., & Brown, M. (1990). Closing the efficiency gap: barriers to the efficient use of energy. Resources, Conservation and Recycling, 3(4), 267-281.〕
== Introduction ==
Energy efficiency refers to changes in equipment and behavior that result in increased energy services per unit of energy consumed, while behavioral changes that reduce energy use are often referred to as energy conservation. Energy intensity which measures energy consumption per Gross Domestic Product (GDP) is one indicator of energy efficiency.
Many people have attempted to measure the energy efficiency gap, and their approaches differ based on the definitions of the optimal level of energy use. A popular theme is Hirst and Brown (1990)'s definition: energy efficiency gap is the unexploited economic potential for energy efficiency, in other words, it emphasizes the technically feasible energy efficiency measures that are cost-effective but are not being deployed.〔 Many other studies have used this definition, such as International Energy Agency (2007) and Koopmans and Velde.〔International Energy Agency. (2007). Mind the Gap. Quantifying Principal-Agent Problems in Energy Efficiency.〕〔Koopmans, C. C. and D. W. te Velde (2001). "Bridging the energy efficiency gap: using bottom-up information in a top-down energy demand model." Energy economics 23(1): 57-75.〕
Jaffe and Stavins (1994) identify five types of optimality and the corresponding definitions of the energy-efficiency gap: the economists' economic potential, the technologists’ economic potential, hypothetical potential, the narrow social optimum and the true social optimum.〔Jaffe, A. B., & Stavins, R. N. (1994). The energy-efficiency gap What does it mean? Energy Policy, 22(10), 804-810.〕 In particular, economists' economic potential could be achieved by eliminating market failures in the energy efficiency technology market, while technologists' economic potential could be achieved by eliminating both market and non-market failures. Achieving the hypothetical potential would require the elimination of market failures in the whole energy market, for instance, having energy prices that reflect all externalities. The society can achieve the narrow social optimum by implementing all available cost-effective programs, and the true social optimum can be achieved if the environmental effects of energy generation and consumption is taken into consideration.
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