Energy Conservation Myth is a Vicious Cycle

Studies from the McKinsey group and National Research Council released this week claim that we can substantially reduce the country's energy usage (15-32% by 2020) by replacing inefficient appliances and building materials. The good news: it will only take an investment of $520 billion to produce $1.2 trillion in energy savings. The bad news: the study ignores past experiences and basic economics.

Ironically, conservation is actually encouraging more energy usage. The Manhattan Institute explains, “efficiency increases consumption. It makes what we ultimately consume cheaper, and lower prices almost always increases consumption. To curb energy consumption, you have to lower efficiency, not raise it.”

Unfortunately, the same flawed logic is behind Act 129 of 2008, which requires utilities to lower electricity consumption by 1% come May 2011, and 3% come 2013. So how will PA utilities will lower usage? Most likely by raising the price of electricity as rate caps expire.