How many billions do US businesses and individuals invest in energy efficiency each year?

Energy efficiency investments occur in virtually every sector of the economy. When combined, their total number is substantial — estimates range from about $60 to $115 billion a year in the United States. In this post, we look at some recent estimates of energy efficiency spending, updating and expanding information we compiled earlier this year so that we may better understand the magnitude of these investments and where they occur. These findings provide a foundation for two subsequent posts we will publish in the next month on “Who invests in energy efficiency and why?” and “How can we increase energy efficiency investments?”

IEA World Energy Investment Report

Last week, the International Energy Agency (IEA) released its World Energy Investment report, covering 2016 global energy investments. IEA estimates that $231 billion was invested in energy efficiency products and services worldwide, a 9% increase from its 2015 estimate. For the first time, the agency provides an estimate of efficiency spending in just the United States: $41 billion. IEA does not provide a sector breakout for the United States, but worldwide, it estimates about 58% of these investments is in buildings, about 26% is in transportation, and 16% is in industry. While IEA includes the full cost of building envelope retrofits in its estimates, it includes only the incremental costs for high-efficiency equipment and industrial processes. For example, if a high-efficiency air conditioner costs 10% more than a conventional air conditioner, IEA counts only 10% of the total cost.

AEE Market Report

Advanced Energy Economy (AEE) publishes an annual Market Report that estimates annual revenues in “advanced energy” in the United States, including energy efficiency, advanced vehicles, renewable energy, biofuels, the electricity grid, and natural gas fueling stations. Investments in building and industrial energy efficiency and plug-in and hybrid vehicles came to $94 billion in 2016, an 8% increase relative to its 2015 report. AEE includes only specific market segments for where it has data. For example, for industrial efficiency, it includes only industrial energy management and combined heat and power systems, so some forms of efficiency investment are left out. On the other hand, for efficient equipment and vehicles, AEE includes the full cost of these products and not just the incremental cost relative to the standard products. AEE provides a detailed breakdown of these investments, which we used to prepare the pie chart below. Buildings constitute 73% of the investments, transportation 18%, and industry is only 9% due to the limited categories it included.

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