Energy efficiency: overcoming the barriers

Abstract

More efficient use of energy is a desirable goal, offering a variety of environmental, social, and economic benefits for both individuals and the nation as a whole. The poor uptake of efficiency opportunities in the domestic electricity sector has been well documented. Despite the economic and technical feasibility of improving energy efficiency, a number of barriers impede this. The free market model being pursued in New Zealand's energy sector relies on the assumption that consumers act as rational economic beings. But in the domestic electricity sector, various social, cognitive, and personal factors undermine this assumption. Furthermore, market imperfections (such as the failure to incorporate environmental costs in electricity prices) mean that efficiency opportunities are often not realised - even when they are in the consumers’ financial self interest.

To overcome these diverse barriers, a comprehensive programme of financial, regulatory, and communicative strategies is required. Overseas evidence indicates this can be successful, even within the broad context of a deregulated energy sector. Government commitment is, however, vital for such programmes to succeed. This need not entail direct government involvement in programme implementation - in fact, independent sector agencies may be better suited to doing this. But an institutional framework must be set in place that facilitates the pursuit of this comprehensive approach by these agencies.

Currently, a comprehensive approach to energy sector management in New Zealand is lacking. Competitive signals do not provide sufficient incentive for the electricity industry or the private sector to promote energy efficiency in the domestic sector. This paper asserts that the New Zealand Government has a role and responsibility to intervene in order to set in place a framework which supports a comprehensive approach to improving energy efficiency, in the interests of sustainable energy management.