Economic and Human Dimensions Research Associates :: North Kolb Road, Suite Tucson, Arizona Widener University School of Law Harrisburg, Pennsylvania John A. “Skip” Laitner Marcellus Shale Development and Pennsylvania: What Lessons Sustainable Energy? Widener University School of Law Harrisburg, Pennsylvania September 27, 2013 Economic Imperative of Energy Efficiency: An Energy, Climate Change, and Ethical Perspective

Economic and Human Dimensions Research Associates ::.. 1 The Short Road Ahead With the thought that “the ethical viewpoint” begins with a more complete understanding of the “wicked problem” we call energy, we begin with both an opening question and the larger perspective. We will then step back to provide the historical context and explore the scale of energy resources that might be available for development. Next we will link current consumption patterns with the robustness of the future economy, even as we We then explore some (hopefully) useful economic comparisons. Last, we close with final thoughts and perspectives.

Economic and Human Dimensions Research Associates ::.. 2 “We shape the world by the questions we ask” Physicist John Wheeler

Economic and Human Dimensions Research Associates ::.. 3 a)an economist? b)an engineer? c)an NGO? d)a federal employee? e)a member of congress? What exactly would you guess Mr. Binkley to be? Or should we choose instead, ‘ f ‘ all of the above — to the extent that we all may take ourselves much too seriously so that we don’t really ask the better questions?

Economic and Human Dimensions Research Associates ::.. A Deeper Perspective The productivity benefits from the current generation of industrial technologies are generally diminishing. Evidence indicates that, among the biggest reasons for those diminishing returns, is the inefficient use of resources – especially the inefficient use of energy. A social and economic transformation is clearly needed to sustain our economy and move it forward – driven by purposeful effort that includes both directed actions and targeted investments which drive improvements in resource productivity. Energy efficiency – not necessarily new supply – will provide the productive link between today’s economic activity and tomorrow’s future. 4

Economic and Human Dimensions Research Associates ::.. 5 Useful Perspectives on the Historical Gains in Energy Efficiency Compared to 1970 technologies and market structure, by 2012 the routine energy efficiency improvements delivered 82 percent of all new energy service demands in the U.S. since For Pennsylvania, energy efficiency delivered 109 percent! The current U.S. level of energy efficiency in 2012 compared to 1970 is: – 1.5 times our total energy production – 8.9 times our total domestic oil production – 4.4 times our total natural gas production – 4.6 times our total energy imports So this question, why do we always think we need to find and use more energy, but we almost always assume that the efficiency resources are used up and unavailable?

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7 This is by no means unique to Pennsylvania as there is a similar pattern within the U.S., other OECD nations, and the global economy. Projected Historical Annual Per Capita Economic Growth Rate for Pennsylvania Source: Economic and Human Dimensions Research Associates calculations based on Woods and Poole 2013

Economic and Human Dimensions Research Associates ::.. A First Estimate Comparing U.S. Long- Term Energy Resources

Economic and Human Dimensions Research Associates ::.. 9 MORE BY WASTE THAN INGENUITY? Exploring the full energy efficiency potential: ~1400 trillion cubic feet of natural gas equivalent in the U.S. through the year How many TCF of energy efficiency for Pennsylvania? About a 12 to 15 year efficiency supply at current levels of energy consumption. Conventional assumptions about the efficiency potential... an anemic 14% energy (in)efficiency

Economic and Human Dimensions Research Associates ::.. 10 A Comparison of State-Generated Taxes Sources: U.S. Statistical Abstract, 2012; and Energy Information Administration Information on all 50 states are available and, while varying, show a similar trend. to State Energy Expenditures (2010)

Economic and Human Dimensions Research Associates ::.. 11 The New Normal in Pennsylvania’s Economy? The Average Annual Growth Rate by Period of Time PeriodPopulationProductivityGDP 1980 to %1.76%1.99% * Drawn from a 2013 long-term forecast by Woods & Poole Econometrics 2010 to 2040*0.34%1.46%1.81% The worrisome element.... Given the Huge Energy Inefficiencies: Why worrisome? The smaller rate of productivity improvement could mean an average 300,000 fewer jobs over the next three decades.

Economic and Human Dimensions Research Associates ::.. Exploring Energy Future Scenarios (perhaps the most important slide of this talk!) 12 Reference Case Cost of Energy Services Costs in Some Year Investment Expenditures in Some Year Reduced Total Cost of Energy Services in Some Year Remaining Costs of Energy Services in Some Year Millions of Dollars Policy Expenses in Some Year There is an absolute imperative to reduce the real cost of energy services each year!

Economic and Human Dimensions Research Associates ::.. 13 Preliminary Comparison of First Order Economic and Environmental Impacts* Category of Impact MetricNatural GasEfficiency Employment Direct-Indirect Jobs/$MM~10~17 CO 2 Emissions Million Metric Tons per TCF54Minimal Average Cost/User Dollars per Million Btu5.5~0 to 4.76 Water Use Per TCF EquivalentLargeMinimal *Drawn from working estimates using a variety of data and resources

Economic and Human Dimensions Research Associates ::.. With Caveats and these Closing Thoughts for the Great State of Pennsylvania There is no guarantee of absolute impacts and outcomes. The data, comparisons, and scenario results are presented for “insights and not precision.” There is plenty of room for discussion and ideas on exactly how Pennsylvania might act on the insights presented here. At the same time, failure to act on these insights will only ensure a continued weakening of the Pennsylvania and the U.S. economy. 14

Economic and Human Dimensions Research Associates ::.. The difficulty lies not with the new ideas, but in escaping the old ones.... John Maynard Keynes Economic and Human Dimensions Research Associates ::.. 15

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Economic and Human Dimensions Research Associates ::.. Contact Information John A. “Skip” Laitner Principal Economist and Consultant Economic and Human Dimensions Research Associates Senior Fellow, CNA Institute for Public Research Energy, Water and Climate Division Tucson, Arizona c: (571) And also check out our websites: EnergyStressTest.com CNA Energy, Water and Climate Economic and Human Dimensions Research Associates ::.. 18