America's new energy bill pits two competing philosophies against one another: The idea that fossil fuels will remain the pinnacle of national policy versus the hope that newer and cleaner energy sources will become the long term solution. The contest manifests itself most clearly with the enactment of energy conservation provisions alongside a renewed commitment to such fuels as coal and natural gas.

Ken Silverstein EnergyBiz Insider Editor-in-Chief

While such views appear to be contradictory, they are not. Demand for energy is expected to grow by two percent a year for the foreseeable future and the United States requires a portfolio of resources to meet that expected need. Toward that end, energy conservation is critical -- as is the need for more controversial fuel sources. None of the ideas comes free of charge and energy conservation is no different. It necessitates new technologies, which according to some groups needs a push by government to get into the mainstream of America.

"The energy law represents a 'To Do List' on energy efficiency for Congress and the administration, and the Alliance will work to ensure that all remaining actions are taken expeditiously," says Kateri Callahan, executive director of the Alliance to Save Energy.

Among the provisions passed into law that the Alliance helped bring about involve a $250 to $3,400 tax credit for hybrid or diesel vehicles as well as a home tax credit with a cap of $500. That home credit is achieved if consumers buy new energy efficient doors, insulation or windows, as well as air conditioners, furnaces or heat pumps. At the same time, manufacturers of energy efficient appliances are also eligible for tax breaks. That includes everything from refrigerators, to washers to dishwashers.

The Alliance estimates that by the year 2020, the law's energy efficiency provisions can reduce the expected growth in energy usage by nearly 10 percent. Prior to enactment of the law and since 1973, the group's studies have shown that energy efficiency and conservation measures cut energy usage by 40 percent.

A whole debate swirls around whether smaller energy users would become more responsive to free electric markets. As it stands now and in most places around the country, costs incurred during peak usage are averaged in with non-peak prices. That means consumers are shielded from large price spikes and utilities do not lose money.

Demand Side

But such thinking can be costly. The Electric Power Research Institute found that a 2 percent reduction in energy usage in California in the summer of 2001 would have cut wholesale electricity expenditures by $700 million. Similarly, the Brattle Group said that a 10 percent reduction in peak demand there during the same time period would have reduced wholesale prices by 50 percent.

"On the demand side, most companies are still passive when it comes to releasing capital dollars," says Jeff Hart, CEO of Cadence Network in Cincinnati. "They put it in the budget but it doesn't get spent. Companies still struggle because they don't manage their energy use on holistic basis. An increase in efficiencies can translate into huge savings."

Commercial and industrial clients are particularly affected by high energy costs. Because many industrial facilities are old, it is paramount that they become more energy efficient. Companies are realizing that they can save money if they implement some sensible conservation features and apply new operating procedures.

Controlling demand at large plants or commercial office buildings is sometimes overlooked. Experts can study a facility's technologies and operating protocols and determine where the pitfalls lie. They can then provide a good range of retrofits and the potential savings that those innovations will produce. Any analysis of their energy use might also suggest flexibility, or running key machinery at times when the electricity load is at its lowest ebb.

Businesses, meanwhile, are also getting involved. North Carolina-based Bank of America, for example, has set a goal of reducing annual energy use by 3 percent at its facilities in the state, which take up 8 million square feet. It says it can achieve that by enhancing building operations and educating employees. In 2004, the bank exceeded its own expectations and cut energy use across all of its facilities by 5 percent. That resulted in more than $8 million in savings and cost avoidance, it says. At the same time, Bank of America has a goal of reducing its own greenhouse gas emissions by 7 percent by 2008.

"Between 1990 and 2000, we saved our customers $16.7 billion by helping them implement energy efficient programs," says Gerrit Reinders, director of environment for Johnson Controls in Milwaukee. "The investments in those controls are typically paid through future savings, making them cash flow neutral."

"New technologies to become energy efficient are becoming close to mainstream and in cases where folks use a lot of energy or if energy is critical," adds John Van Gorp, head of the marketing group for Power Measurement in Victoria, Canada. "Industrials can cut their energy use by 10 percent a year. The savings on their energy bills can be dramatic."

Government Policies

Clearly, high energy prices along with the need for uninterrupted power sources are giving energy conservation and the new technologies that enable them a better standing in the market. Disagreement, though, exists as to whether the government should get more involved.

Sterling Burnett, with the National Center for Policy Analysis in Dallas, is of the belief that if people or businesses want more efficient appliances or equipment, then they are qualified to make such purchases without a government mandate. "It is up to consumers and government should not be dictating this."

"My concern is that any mandates or tax subsidies end up costing everyone more," adds Burnett. "People who can't afford the high-end appliances or equipment just hang on to the old ones and those are even less efficient."

There is no dispute as to whether energy efficiency standards or energy conservation is a resource that is available today. And that's why groups such as the Alliance to Save Energy say that it deserves to be given meaningful public policy support -- beyond what the current energy law has done.

It wants tougher fuel economy standards as well as the 50 states to get involved in setting stricter building codes with regard to energy efficiency. Such investments pay off, it says: Energy Star, which is a government-backed program to help businesses and individuals save energy, has returned $75 for every $1 invested. That, in turn, has caused the private sector to get more involved, all while cutting the level of harmful pollutants.

While the industrial sector is leading the charge, commercial and residential users will soon follow. At the same time, the U.S. government seeks to dramatically cut energy use at all federal buildings. The trend nationally is expected to pick up. Energy conservation is no longer taking a back seat among policymakers over the direction of energy policy.