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Tuesday, November 01, 2011

Not So "Energy Efficiency" States

What does "efficiency" mean?

In general, it means to achieve a result with little or no waste. In economics, efficiency means an action that produces more benefits than costs. Greater efficiency generally is achieved by reducing costs.

Energy efficiency is no different. Produce energy, quite simply, at a lower cost. Business owners understand this concept, and benefit accordingly when energy costs are lower. Apparently, though, the American Council for an Energy-Efficient Economy seems to misunderstand this concept of efficiency.

After all, can it really be said that the ACEEE's "2011 State Energy Efficiency Scorecard" ranks the states according to energy efficiency?

Consider that the top 15 ACEEE states are: 1) Massachusetts, 2) California, 3) New York, 4) Oregon, 5t) Vermont, 5t) Washington, 5t) Rhode Island, 8t) Minnesota, 8t) Connecticut, 10) Maryland, 11) Iowa, 12t) Maine, 12t) Hawaii, 12t) Colorado, and 15) New Jersey.

At the other end, the states ranked worst are 37) Kentucky, 38t) Alaska, 38t) Arkansas, 40t) Nebraska, 40t) Louisiana, 42) South Dakota, 43) Alabama, 44t) Missouri, 44t) West Virginia, 46) South Carolina, 47) Oklahoma, 48) Kansas, 49) Mississippi, 50) Wyoming, and 51) North Dakota.

Strangely, though, of the 15 most "efficient" states according to ACEEE, 10 rank among the most costly energy states in the nation (according to the SBE Council "Energy Cost Index 2011," which ranks the states according to electricity and fuel costs), namely, Massachusetts, California, New York, Vermont, Rhode Island, Connecticut, Maryland, Maine, Hawaii, and New Jersey.

And of the 15 least efficient states according to ACEEE, nine rank among the lowest in terms of energy costs - Kentucky, Arkansas, Nebraska, Louisiana, South Dakota, West Virginia, Oklahoma, Wyoming, and North Dakota.

To a significant extent, ACEEE seems to have the entire idea of energy efficiency backwards. What's going on here?

It's no mystery. ACEEE redefines "efficiency" as being states that best align with the group's particular energy agenda. As noted in the ACEEE report: "Governors, state legislators, regulators, and citizens are increasingly recognizing that energy efficiency-the kilowatt-hours and gallons of gasoline we don't use as a result of improved technologies and practices-is the cheapest, cleanest, and quickest energy resource to deploy... In the fifth edition of ACEEE's State Energy Efficiency Scorecard, we present a comprehensive ranking of the states based on an array of metrics that capture best practices and recognize leadership in energy efficiency policy and program implementation."

The ACEEE rankings have nothing to do with actual energy costs. Indeed, according to any common sense understanding of "efficiency," it's clear that the ACEEE rankings have little to do with true efficiency, and instead, promote some of the most costly states as being most "efficient." This is just another piece of propaganda in the effort to portray a political, green energy agenda as making economic sense when it makes no economic sense whatsoever.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is "Chuck" vs. the Business World: Business Tips on TV.

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