The paradox of efficiency improvements

One of the downsides of improvement projects that you need to be aware of is the possibility that your overall reductions may not actually occur.

How is this possible? Let’s look at some common projects that should lead to reduction in overall usage…

  • Upgrade HVAC system with higher SEER rating
  • Install low-flow toilets and faucets
  • Switch company car fleet to electric/hybrid vehicles
  • Replace fluorescent bulb lighting to LEDs

You run the analysis, and clearly show the payback for purchasing and replacing these items. You get approval, you complete the implementation, and celebrate your success. Then a few months later, you look at the utility bills and the monitoring system, and there has been no overall reduction. What happened? Let’s assume that the implementation was done correctly, and the new systems are working properly.

The problem is that we made an assumption that the usage of lights, or the HVAC system, or water or driving would be the same after the implementation. However, you might see that the usage went up, higher than before, and that increase has basically eliminated your savings.

This has been referred to as Jevons Paradox, initially expressed by William Stanley Jevons back in  1865 to describe coal usage. It states that an increase in efficiency in using a resource leads to increased use of that resource, rather than to a reduction. It has also been called a “Rebound Effect”.

For example, I bought a Toyota Prius last year, to reduce my total gas consumption, especially for commuting to work. On paper, if I drove the same number of miles after getting the Prius, as I did before, then my cost and gas savings would be significant. However, since I spend less money on gas getting to work, and my vehicle is more efficiently using gasoline, I find myself considering driving to places and taking trips, that I might not have considered before. My wife and I were discussing driving from Iowa to Yellowstone Park in Wyoming this summer, since the costs are less with a Prius than my previous vehicle. The increased efficiency makes it easier to use more of that resource, which could offset, or actually increase the overall usage.

If we reduce the energy used per bulb because we installed LED bulbs, there is a natural reaction to be less concerned about shutting off the lights, since the cost per hour is so much less. That can also lead to extra money available, that an individual or company can use to purchase additional items or grow their business, which can increase their electricity usage. Over the long term, you should still see an overall savings in that one area of improvement, but you still need to be aware of this effect. We need to make efficiency improvements, there is no doubt about that, and the projects above are all great projects. I just wanted to bring attention to the fact that you may see an increase. If you want more details, there is a good article on debunking the Jevens Paradox.

So how do we combat this potential phenomenon, especially in the short-term, so you can show the success of your project?

  1. Have a discussion with the team on this concept, to anticipate possible issues, and communicate it to those who could cause that increase.
  2. Take away the money available, based upon the savings estimate. For example, if the facility implementing the lighting project is expected to spend 10% less in electricity, then reduce their budget by 10%, so any overages can be identified and discussed. Another similar option is to increase the cost per KWH or therm or gallon of water, so that the overall costs stay the same, and any increase will cause an increase in their bills, which should also bring attention to the increase in usage.
  3. Before purchasing new machines or items with the extra savings, look for capacity or opportunities to borrow or lease items, before you make a full purchase. Consider using existing suppliers or partner with someone who already has the item. This may still increase your overall usage, but may be less than if you had started from scratch.

The following book, The Jevons Paradox and the Myth of Resource Efficiency Improvements,  provides a historical overview of the Jevons Paradox, evidence for its existence, and how it applies to complex systems.

 

Have you had this occur? How did you address it on a project? Please add your comments below.