Study gives hope for new surge in US energy conservation efforts

Energy conservation in the United States now appears to be on the verge of significant expansion. At first blush, it would seem as though Americans recently have been doing a good job of conserving energy. Since the Arab oil embargo of 1973, the US has "produced" more new energy by conservation than all other sources combined.

But advocates are disappointed at how slowly conservation technologies have been adopted.

From a strictly economic and engineering point of view, available conservation techniques could reduce the energy consumed by US buildings by 30 to 50 percent. The fact that consumers haven't rushed to adopt these technologies far more rapidly has been criticized as "irrational" by some conservationists.

Yet to market economist Avrahm Shama at the Solar Energy Research Institute (SERI), the current situation is quite understandable. And from a marketing standpoint, more widespread adoption of conservation techniques appears to be closer at hand.

In a recent study with colleague Kenneth Jacobs, Mr. Shama found that the spread of any new product into the marketplace follows a predictable pattern.

First, it is adopted by innovators who make up about 2.5 percent of the market. These typically are young people who are financially well off, like to take risks, and who rely on "impersonal communication sources" such as books, magazines, and technical studies.

Next come early adopters. Consisting of about 13.5 percent of the market, these also tend to be young and of high economic status. They follow the lead of the innovators and are social opinion leaders.

"Once they adopt a innovation, others are sure to follow," the researchers say. Only then do members of the middle class enter the market. They are followed by those of lower socioeconomic standing, except for about 16 percent who resist adopting new products. . . .

"It appears that the innovation stage is past and that conservation of energy is now in the early adopter stage," Shama and Jacobs report. According to a recent study, 6 percent of all US single-family homes have adopted nearoptimum levels of energy conservation.

At this stage, better and more reliable consumer information about where to obtain conservation supplies, how to combine various conservation technolgies, and their relative cost effectiveness is necessary, the researchers argue.

This goes far beyond the general "awareness" that can be created through conservation ads on TV. Federally mandated utility "energy audits" are a step in the right direction, the researchers say.But even these still will not give people an idea of the net effect of taking a number of conservation steps together.

(Unfortunately, energy savings from such measures as turning down the thermostat, putting an insulating blanket around the hot water heater, and adding insulation in the attic are not always additive.)

Some of this information can be provided by the growing conservation industry. But the Distribution network for both information and devices is, at present, a poor one. Retailers are difficult to find and tend to have a limited selection.

One of the major deterrents to adoption of conservation techniques is the initial cost, Shama and Jacobs point out. Typically, it requires $2,000 to $3, 000 to completely insulate an existing home. Many people simply do not have the money to make this investment.

Also, the savings consumers pocket from these measures do not provide an accurate yardstick of conservation's overall economic value, conservation advocates point out.

For example, new energy sources, whether they be oil wells or power plants.But the fuel and electricity prices that most people pay is an average of old and new energy sources -- a price lower than that of energy from new sources.

Yet it is really against the cost of energy from new plants that the savings from energy conservation should be compared. Economists call this the marginal replacement cost.

And there is another way in which the marketplace is not giving the consumer an appropriate signal. This is the so-called "external cost" of US oil imports.

The Energy Project at the Harvard Business School reported that the cost of increasing US imports by 5 million barrels a day from 9 million barrels a day was estimated at $68 billion to $158 billion a year.

Of that total, $38 billion came from direct costs -- the price of the oil, inflated by the increased demand that allows oil producing nations to raise their price by $5 a barrel.

The remainder stems from indirect economic effects, including the resulting decline in the value of the dollar overseas and reduction in the gross national product.

Thus, there is a considerable economic benefit to be gained from containing or reducing US oil imports that is not reflected in direct energy prices.

Both marginal replacement and external costs form the economic basis for arguments that energy conservation should be subsidized by the government of the utilities. A number of pilot programs are under way in various parts of the country. And soon the recently established Conservation Bank will begin subsidizing conservation measures for the nation's low income families.

For one such loan program, sponsored by the Tennessee Valley Authority, demand was so great that the TVA had to temporarily halt the program. This suggests to the stantially accelerate the rate at which conservation is adopted.