Global energy demand is ever growing. A few years back China was opening a new coal plant every day on average to keep pace with its demand. Luckily they are considering other means of energy production these days, as air pollution is a worsening problem in the country. Most countries – including China – still tend to build more power plants to tackle their shortage on energy. But why not using the available energy more efficiently?

When Amory Lovins saw a typo — “negawatt” instead of “megawatt” — in a Colorado Public Utilities Commission report in 1989, he adopted the term to describe electricity that was not created using energy efficiency and conservation: negative wattage or short negawatt. It is simply unused or non-generated and thus non-existing energy. Lovins believed a behavioural change was needed to decrease energy demand. People should become aware of how much they use and how much they save. Lovins believed a concept like the negawatt could help accelerate the change in mentality of the energy consumers, now able to express the amount of energy they saved.

Introduced in 1989, the concept of negawatts is more interesting than ever. With a lot of countries dealing with problems of energy supply on peak moments – as my own country Belgium, due to the shutdown of two reactors because of safety concerns – and governing institutions such as the European commission who want a deregulated energy market, this concept can be a solution which can be implemented on short-term basis.

But first things first. How do we have to understand this negawatt unit? Imagine a classic 100W light-bulb and then imagine a 15W A-labeled energy saver light-bulb. By replacing the classic with new one you saved 85 watts, or “produced” 85 negawatts.

Replacing a classic light-bulb with an energy saving one can "produce" up to 85 negawatts.

Replacing a classic light-bulb with an energy saving one can “produce” up to 85 negawatts.

But what do you win with this 85 negawatts? Of course you don’t have to pay for the 85 watts you saved, but on the other hand the light-bulb costs significantly more. With energy still being relatively cheap, the wins will not be obvious for most people. That’s were the negawatt market pops in. Make the negawatt a tradeable good and a new market is born. When the energy market is deregulated, energy prices are high when demand is high and prices are low when demand is low. If people are able to sell their saved energy, demand will be flattened out – thus making the chance of blackout’s significantly smaller. The adaption of consumer demand based on energy price is one of the basic pillars of the smart grid (more on that in a later post) and is known as demand response. In this context the consumption of electricity is regulated by a smart meter, which turns household equipment on and off depending on the energy prices.

One can make the objection selling negawatts is selling something virtual, something non-existing. Indeed, the 85watts you saved by installing the A-labeled light-bulb never entered your house’s power circuit, to realize it isn’t needed there anymore and then waits until the owner of the house sells it back. But is selling virtual goods a problem? On Wall Street they sell virtual money all the time. The idea of selling non-used energy actually resembles the already existing system of trade-able emission rights where countries trade polluted and clean air. An sich there’s nothing wrong with selling virtual commodities.


There are many advantages of the introduction of a negawatt market, from households to the global economy.

On the smallest scale, households can benefit as they will be able to lower their energy consumption and bills. More efficient equipment can also improve living conditions. Think of heating or air conditioning making less noise. On a larger scale, energy efficiency can make industries more competitive, resulting in job creation, more flexible government budgets and improved energy security. Not to forget a significant decrease of blackout risk and the resulting economic losses. The implementation of a negawatt market permits the implementation of a deregulated energy market on a national or even international scale. And of course: when we save energy instead of creating more, we can do more while producing the same amount of greenhouse gases or nuclear waste as before. It’s a considerable way towards a sustainable future.


Despite all the advantages, one discovers a very fundamental problem very soon. How do we measure a negawatt? For now that’s an unanswered question. It can only be theoretically determined based on the consumer’s history of energy use. But this also means that a customer who started as being a real energy waster would earn a lot negawatts after an upgrade of his equipment, whereas someone who already was efficient at the beginning of measurements will not earn many negawatts by small upgrades later on. Obviously, such a system is not fair and would punish people who invested early in energy efficient equipement. It’s even possible people would wait until energy prizes increase significantly before they install there energy saving light-bulbs to sell their negawatts at a much higher price. This way the system undermines the aim of stimulating people towards living more energy efficient from today on.

Another big issue is the so-called rebound effect. Many believe the savings will be spend on new things. “Now our lightbulbs don’t use that much energy, we could install fancy garden lighting.” This effect is seen in the automobile industry. Despite the fact that engines became much more efficient over the last decades, we lost most of the savings on bigger and heavier cars on our roads.

Let us not forget the energy suppliers. Why would they ever back a plan to make people consume less of the good they try to sell them? Under current regulation this is not going to work in most countries. But with proper regulation and governmental incentives, a more efficient use of energy can be a win-win for both consumer and producer. When some consumers sell their savings at moments energy demand is high, the energy producer no longer needs stand-by plants which can be turned on when demand peaks –  an expensive investments since these plants don’t operate twenty-four hours a day. Paying the customers for their negawatts turns out to be much more cost efficient for the energy supplier, as test projects in the United States have shown.

Last but not least there is the information problem. A deregulated market assumes customers are aware of their opportunities within the current economical environment. They should have full access to and understanding of the information about energy prices and trends. But in general consumers are poorly informed about the savings on offer. Even when they can do the sums, the transaction costs are high: it is a time-consuming task to identify the best energy-saving equipment, buy it and get it installed if they have little or no technical knowledge.


Despite the fact Lovin wanted to stimulate people to become aware of how much energy they can save by choosing efficient equipment, the negawatt market still isn’t reality today. As we cannot measure a negawatt properly, it is impossible to start up a market for it. Personally I don’t believe this system is ever going to work in the form he proposed. The demand response as applied in a smart grid is much easier – but still difficult enough – to implement. Pilot projects have shown these work in real communities. I believe this is the way to go if we’re discussing conscious and sustainable use of energy.


International Energy Agency


Green Alliance