The Weekly Carboholic: boosting energy efficiency is hard to do

Posted on May 14, 2008

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carboholic

Energy efficiency is tricky. You might think that increasing energy efficiency would be a no-brainer, since it usually pays for itself, improves the reliability of electrical transmission systems, reduces the number of power plants that need to be built, and reduces greenhouse gas (GHG) emissions. You’d be wrong. And last week, The Economist had a great overview as to why improving energy efficiency is so difficult. And according to the article, the reasons that energy efficiency gains aren’t metaphorically exploding all over the place come down to the intersections of these three areas: prices, markets, and governments.

Price affects energy efficiency in at least two ways. The first is that energy efficient products almost always cost more to purchase, and so the up-front costs that consumers see cause “sticker shock”. This is obvious when you compare the price of a compact florescent lightbulb to that of an incandescent – the CFL costs a lot more even though it saves energy over the lifetime of the bulb, so consumers are less likely to purchase the CFL. Similarly, the article points out that energy efficient appliances and residential efficiency improvements are expected to be extremely high and fast:

[H]omeowners, as Lord Stern pointed out in his climate-change report, tend to demand exorbitant rates of return on investments in energy efficiency—of around 30%. They generally want new boilers or extra insulation to pay for themselves within two or three years, says Mark Hopkins, of the United Nations Foundation, an NGO.

This is part of the reason that energy efficiency companies tend to target commercial and industrial customers instead of residential – homeowners are more demanding and are, amazingly enough, dramatically less sensitive to the bottom-line economics of energy efficiency.

Markets augment this price problem in a few unfortunate ways. One way is that homebuilders have no reason to invest in energy efficiency and every reason to cut corners on it. Energy efficient insulation, double or triple-glazed windows, motion-sensing lights, zoned climate control systems, residential geothermal heat pumps, solar cells with battery storage, etc. all increase the cost of the home, making it harder to sell. And the builder gets no financial benefit from adding all those efficiency improvements, since it’s the owner’s long-term energy bills that are reduced in the process. Similarly, most utilities have no interest in reducing the energy consumption of their customers, since utilities usually make profits off the consumption of energy, not the savings of energy. And the Economist has this to say about the financing of these systems:

Financing energy-efficiency investments can also be difficult. In the developing world, capital can be scarce. In rich countries, the savings from making individual homes more efficient are too small and the overheads involved too high to be of much interest to most banks.

Governments have tried to address these various failures of both price and market in a number of ways, some of which have been successful, some not. According to the Economist, national and state regulators are decoupling profit from consumption in order to guarantee a certain profit to the utilities – excess profits are passed back to the consumer as rebates, insufficient profits are extracted from consumers as price increases. And governments are requiring utilities to improve their energy efficiency through a number of methods:

Australia has proposed banning incandescent light-bulbs outright. Many have adopted building codes and appliance standards that dictate minimum levels of efficiency. Several tighten the standards regularly, to foster constant improvement. Japan’s Top Runner scheme, for example, identifies the most efficient appliances on the market in different categories, and then requires all competing brands to improve on them within four to six years. Those that fail face fines….

The 13,000 factories in Japan with the highest energy use are required to improve their efficiency by 1% a year. Those that fail to do so are fined. China’s central government has followed suit, setting energy-efficiency targets for the country’s 1,000 biggest firms.

But some governments, like that of the U.S., have little (and perhaps insufficient) interest in top-down government regulations. So it’s at the intersections, where a market can be created to address a government failing or a price change can be made to correct a market distortion, that the truly interesting ideas come up. The Weekly Carboholic reported on one such plan in Berkeley, California last week, and the Economist reports on couple more:

Typically, an [energy-service company (ESCo)] designs a scheme to reduce a building’s energy bill, borrows money to pay for the kit it needs, and installs and maintains it over a fixed period. Clients do not need to provide any cash up front: the ESCo’s reward comes from retaining most of the savings—out of which it must repay the loan….

The Clinton Climate Initiative, a charity set up by the former American president, is thinking along the same lines. It has persuaded the local authorities in 40 big cities around the world to co-ordinate their investments in energy efficiency.

Energy efficiency is too important to be left to just government. Or just markets. Or to rely on rising prices alone. We’ll need every tool we’ve got, and many we have yet to develop, to improve our energy efficiency enough to have a significant impact on global GHG emissions.

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According to the Albany TimesUnion, a new facility in New York will use flywheels to store energy that can be used to smooth out the supply and load on New York’s electrical grid. This new facility will use, or supply, up to 20 megawatts of electrical power and, in the process of load balancing, will reduce carbon emissions from existing electricity sources by 12,000 tons per year. It’s not a lot, but given that this savings is incidental to the goal of improving the reliability of the electrical grid, it serves as an example of how reducing GHG emissions can go hand-in-hand with other changes.

Flywheels store energy in the physical inertia of a rapidly spinning device. Think of an extra heavy top spinning inside a chamber with electrical wiring on it and that’s the basic idea. The bigger, heavier, and faster you can spin the wheel, the more energy it can store. In this case, the TimesUnion says that the flywheels will be 7 feet across, spin 16,000 times per minute [corrected – used to be 16,000 times per second], and be spun in a vacuum wit magnetic bearings to reduce friction. And the flywheels will be buried in the ground for noise suppression (and likely for safety reasons too).

Interesting technology. I hope it works well – our electrical transmission infrastructure is in such disarray (as with most of our national infrastructure) that anything that could improve reliability is worth considering, and if it reduces GHG emissions at the same time, so much the better.

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Carbon sequestration is plagued by a couple of major problems. The first “well, duh” problem is that there is precisely one commercial power plant that uses carbon sequestration, and how well the technology can be made universal and scaled up to tens of thousands of coal and natural gas plants that need to have their carbon dioxide (CO2) sequestered is unknown. But another problem is that scientists are worried that gaseous CO2 will leak out. There are places, like where the geology of the region kept natural gas contained until it was extracted, where we can reasonably assume that CO2 will stay put. But most of the planet isn’t like that. To this end, Reuters reported on scientists looking into the possibility of liquefying or calcifying CO2 into a solid that could be pumped or buried easily, and would be much less likely to re-gasify and leak back into the atmosphere.

Of course, the costs would be high for either option. But given that many fossil fuel power plants are a long way from suitable geologic formations, liquefying or calcifying the CO2 may be the only option, high cost or not. This does, however, assume that we cannot get away from fossil fuels faster than we can bring wide-scale carbon sequestration on-line. Whether that assumption is a good one or not remains to be seen.

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