Guest Post by Thomas Fuller
A lot of energy efficiency innovations save money on utility bills for businesses, homeowners and even governments that adopt them. So why aren’t they all the rage, taking the planet by storm and reducing utility bills and CO2 emissions overnight?
Partly because you have to spend money to make money. Most energy efficient technology has a price tag attached. If you have a refrigerator that’s good for another 10 years, are you going to buy another one just to save $5 a month in utility bills? Thought not.
It’s also partly because the person who spends the money is not always the same person who makes the money. If my landlord puts solar panels on the roof, he’s making an investment. But I’m paying my own utility bills. I would benefit from his generosity. Well, if he were so generous as to do so, I would be so lucky.
An organisation you’ve probably never heard of spent $6 billion last year on energy efficiency in the U.S. and Canada. They’re called the Consortium for Energy Efficiency, funded in large part by the EPA and DOE, and they’ve come up with a variety of energy savings initiatives, ranging from lighting and water heaters to utility load balancing programs.
But that $6 billion came from rate payers. and although it lowered utility bills by $9.7 billion (and also saved 104,900 GWh of electricity and more than 367 million therms of gas) last year, the sad fact is that the rate payers who got the $9.7 billion in lower bills may not be the same rate payers who paid out the $6 billion. Only 23% of the electric efficiency initiatives target residential ratepayers…
There’s another way to do it, and I think Barack Obama is almost there. Zero or low interest loans to finance the installation of energy efficient devices and things like small-scale solar panels or even residential wind power installations. There are already a variety of incentives for these types of purchases by both consumers and businesses. But we still feel like we’re in the middle of a recession, and that slows down major purchases.
People are generally pretty good about paying back these kinds of loans. The kind of equipment financed usually increases the value of the home or business that puts it in. And the money saved on utility bills is vast.
Combined heat and power plants are as old as electricity–the first power plant ever built was combined heat and power, built by Thomas Edison in 1887. And the US was a leader in this technology, which is just common sense–instead of letting the heat escape as waste when you burn coal or natural gas, use it to heat something, like a building. Or 100,000 buildings, as Con Ed does in New York City.
But we produce less energy today from combined heat and power than we did 10 years ago. Because we don’t have the incentives balanced correctly to stimulate its use.
Instead of paying for inefficient wind farms that keep… getting… more… expensive, let’s get back to financing technologies that we know work well, like CHP and waste to energy plants.
I have no problems with the massive loans George Bush made to banks–it was the right thing to do. I have no problems with Barack Obama’s MBO of General Motors–again it was the right thing to do. We’ll turn a profit on the bank loans, and maybe on GM as well.
So let’s do the same to businesses and homeowners across the country–the rate of return on many energy efficiency innovations is near 40% and the payback for some can be realized in just a few short years. We just need easy credit terms.
Instead of the conversation being about burning fossil fuels, we should be talking about burning money instead.
Thomas Fuller href=”http://www.redbubble.com/people/hfuller
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Being green does not include costs.
So what the battery costs as much as a car, it’s green right? So how about the manufacturing of the battery, and what is this rare earth stuff all about.
One problem with solar power – you need sunlight.
Some character from California said in a meeting the other day that the Ohio Valley should go solar and suggested that the valley was remiss in not doing so. However, a quick look at the solar energy available (i.e., the weather) in the hi Valley shows that solar output from there would not be a useful source.
Many people do not understand that solar power is only adequate in certain regions where the energy is readily available (lots of sun).
“Zero or low interest loans to finance the installation of energy efficient devices and things like small-scale solar panels or even residential wind power installations.”
So who pays for these loans? Oh, that’s right – the American Taxpayer! Sorry, Tom – everything you talk about sounds nice, but we are BROKE to the tune of a $1.3 trillion dollars just this year. Of course, we could defund dubious climate research projects (there are plenty of those), and the inane “National Climate Service” initiative, to help fund energy efficiency – I’d be in favor of that.
Borrowed money at low interest rates isn’t free money. Eventually it has to be paid back. If the Government guarantees it, and interest rates rise so the interest exceeds the savings, then taxpayers will cop the bill for all the defaults. If the timing is right, then an energy efficiency loans bubble could hit just when the US gets over the mortgage bubble. The worst outcome would be if interest rates go up because people start to lose faith in the US government paying back the tens of trillions in government debt. The US$ could collapse, while interest rates cause a depression, and you could end up looking at lovely solar panels on your roof while the economy collapses. My advice is: get to a sustainable economy with sustainable debt levels while you can. An impoverished country has no easy options for a clean environment.
The scary thing about your post is what it shows about how people see borrowing and debt. Government debt is so out of control that people don’t even think about the inevitable consequences. Once it was ingrained that you only spend money if you’ve saved it or you know it will generate a return to repay the debt. Know there’s no need for cost benefit studies. If it sounds good, just borrow and spend. Eventually the US, if it keeps on its present path, has to collapse into a morass of unpayable debts, in the same way that Greece is heading. Germany can bail out Greece for a while, but who will bail out the US?
Please don’t be offended by an Australian lecturing you. My own country is following right behind you. Our present Government plans to borrow about US$40 billion to build a broadband network, replacing one that already covers most of the country, with no cost benefit study at all. Translating to the size of the US economy, that would be a $600 billion project with no cost benefit study.
Writes Thomas Fuller,
This is basically asking, “Why doesn’t the Federal government pursue sensible, market-based investment strategies?” Because the government is not a marketplace, but a collection of overstuffed bureaucracies pursuing political agendas determined by Congresses fumbling in the dark and administrations inspired by ideology and not practicality.
The Federal government shouldn’t be investing in anything, other than roads and defense and its own infrastructure. It shouldn’t be trying to make decisions that are better left to the states, the people (viz. the Tenth Amendment) and most important, the free marketplace.
I’ll bet Con Edison began supplying 100,000 buildings with steam heat from its power plants without any help from the government, because it could make more money doing so. If the government were not subsidizing wind farms, do you suppose anyone would build them?
/Mr Lynn
I’m a landlord. As you said I have little incentive to buy energy efficient appliances but at the same time I can’t tell you how many potential or new tenants complain about CFLs that a previous tenant had left. I have a box full of them. Living in Georgia they are more important then in many places. Light bulbs help heat your home. When you run your air conditioner allot that is a bad thing.
I dislike promoting the concept of a ‘carbon footprint, but cars that are hybrids and utilise a large rare-earth battery have an enormous carbon footprint (due to mining the rare earths such as nickel-cadmium then manufacturing the battery) and the cost of a replacement battery is often more than buying a second-hand conventional car in good condition. Most hybrids don’t compare well on a straight MPG comparison with mid-sized (around 2 litre) conventional car.
Solar water heating does not need sunlight, just light. Generating electricity, though, requires a higher order of thermal eficiency and therefore needs sunlight.
Tom,
You forget that utilities must make a certain amount of profit for their investors, in Florida its 18% by law. Using less electricity by the end user may lower that bill but it does not reduce the utilities overhead for infrastructure & maintenance and other non fuel expenses. The utilities will simply increase the rates to maintain cash flow and the end user will pay the same for less.
I always thought the way to go was to invest in efficiency and not in solar or wind. In an ideal world, we could afford LED lights that are as bright as a standard 60W to 100W incandescent that produce the same light as incandescents, not that bright white light. I know incandescents are being banned and phased out because of CFL’s. However, my mom’s eyes have a hard time in florescent lights, and according to her optometrist, she is not alone. (My biggest complaint against the greens is they don’t think about people at all.) She bought a pack of LED’s lights, but there were too dim and expensive. If LED lights were bright and affordable, think of all the money that could be saved in more ways than one. My mom had to buy special glasses to protect her eyes from florescents. If LED’s produced bright natural light, that expense could have been saved. Then think of all the money that could be saved if we increased fuel efficiency without sacrificing quality.
There’s much more to it than that. Here’s a snapshot. http://www.reuters.com/article/idUSTRE68G3NT20100917
Partial Excerpt:
(Reuters) – U.S. household wealth fell by $1.5 trillion in the second quarter, according to Federal Reserve data on Friday that showed the strain a slow-paced recovery and high unemployment are putting on Americans.
Household net worth fell to $53.5 trillion, well below the $64.2 trillion it had reached at the end of 2007 when the recession officially began, according to the central bank’s quarterly flow of funds report.
Declines in the value of financial assets — especially in stocks and mutual funds — accounted for much of the decline in second-quarter net worth. Stocks alone were down $1.9 trillion to $14.9 trillion, more than offsetting small gains in other areas like state and local government retirement funds.
Consumers pared debt at a seasonally adjusted annual rate of 2.3 percent, the ninth consecutive quarter in which they did so. Home mortgage debt fell at an annual rate of 2-1/4 percent after a 4-1/4 percent drop in the first three months this year.
During the financial crisis that wracked the country from 2007 to 2009, trillions of dollars in housing and financial market wealth was wiped out and heavy household and financial sector indebtedness was exposed.
I am highly skeptical of the veracity of CEE’s figures. They are a government-funded organization, and their interests lie in continued government funding.
Other than adding insulation (to a point), most energy-efficiency “savings” are a mirage. They do not account for ALL costs. Sorry, Tom, but I’m not falling for it.
I keep hearing about all these great energy saving ideas that I and businesses are apparently not smart enough to understand and take advantage of. Truth is, most are not worth it. That is why they are not “all the rage.” Cost is basically the economic statistic that helps people evaluate the true cost of resources associated with various alternatives. Businesses are very good at this as a great deal of effort is made to reduce costs. If returns were that large, they would cash in, and so would I.
Money is not a thing all to its own. It represents the value of human and natural resources required to produce something, as well as the associated opportunity cost. These energy efficient technology ideas are not worth implementing at this point because they cost too much, and require MORE resources than the alternative. You need to consider all of the costs when comparing alternatives.
Money is a proxy for energy. It takes energy (money) to build that new refridgerator, it takes more energy (money) to junk (or recycle) the old refridgerator and interest to finance the purchase. Added together over time and and thne compared with the $5 (or whatever) monthly utility bill savings the purchase may NEVER pay for it self in dollars (or BTUs) Same same for light bulbs, houses, cars. haven’t run an energy (monetary) budget on replacing my 96 Mercury Grand Marquis with 239,000 on the odometer with a Prius but I don’t think there would be a reasonable payback period for the investment.
Now if the government offers a special incentive, say a tax rebate the monetary calculation might work out for me but the energy calculation stays the same, i.e. no gain and is simply shifted to the tax payer. Again with no net monitary or energy savings to society.
The taxpayer subsidization of interest rates that Fuller is advocating probably do not net us an energy savings.
The best way to close the energy gap (and save energy in the long run) is to stop transactions, but that pretty much kills our economy/civilization. So what to do? By their nature no growth economic policies concentrate power and privilege (on both ends of the spectrum). In the future do our children’s children eat monkey chow processed to taste like chicken or become the gardeners/laborers/slaves on a depopulated earth administered by enlightened elites (strongmen).
Only government can hurt everyone.
=================
I reject the premise that the GM bailout was the right thing to do.
Reducing investment costs for some will result in higher taxes for others to recover the subsidy costs. Money isn’t free.
So, the high energy use, low profit companies get subsidized at the expense of low energy use, high profit companies. Reward the weak, tax the strong.
Moreover, subsidized loans will distort the efficient use of capital as companies invest in projects they otherwise would not, based on payback analysis. Capital deployed somewhere is capital not deployed someplace else.
Government intervention almost always results in less efficient use of resources as opposed to the free market which rewards the opposite.
http://www.mckinsey.com/clientservice/sustainability/pdf/A_Compelling_Global_Resource.pdf
“This anthology of articles looks at the energy-efficiency opportunity and how to capture it in nations and companies over the next few years. The opportunity to lower energy costs substantially is compelling. The United States, for instance, could realize more than a trillion dollars annually in energy savings if comprehensive efforts are put in place to overcome barriers and improve energy efficiency across the economy.”
There is low hanging fruit that nobody could rationally object to picking.
The NJ State Assembly passed a law that allows small alternative energy generators to form “generation co-ops” and sell energy back to the grid at wholesale prices, via net metering.
However, they specifically exempted combined heat and power from the program. At current gas prices, you can generate power for under $0.15 per kWh using a small single engine generator burning natural gas. Electrical rates are about $0.18 per kWh for residential. My commercial bill is over $0.30 per kWh during the summer when you add in demand charges.
The State is hell bent on killing CHP systems, but keeps re-funding a solar program (with millions more proposed for off shore wind farms) that is a huge waste of rate payer money. I have to conclude there must be some private interest out there funneling a lot of money to legislatures in order to keep the cash flow going.
The concept of each home having it’s own source of energy makes sense. Each home reduces its consumption from the grid, so the renewables portions are increased and as a percentage of overall consumption from the grid they also increase.
If the governments of the USA and UK invested their funding into individual home schemes instead of the inefficient wind turbines, then there wouldn’t be a worry about where the “loans” need to come from because they are already sanctioned via another route. Also bill payers would actually get and see a real benefit from the ridiculous Renewables Obligation that we pay on our energy bills.
The UK and a lot of Europe has got fed in tariffs which should help. As for solar, as far as I know the technology only needs light energy so bright sunlight helps but any sunlight will make a contribution – so it’s woth having. Also the latest verical wind turbines which look like chimney cowlings seem to be a decent option to help boost your renewables for a minimal outlay.
Let’s see the data on this before we endorse it. And on the massive loans to the banks and GM, too. Tom, your pro-government sentiment is too easily swayed by thinking that it’s ability to manipulate the currency and take from it’s citizens what they possess will remedy all mistakes that it makes and solve all challenges we face. You are just making assertions here and they’re not convincing.
Back when men were wearing, like, you know, wigs and stuff some of them wrote a thing called a Constitution which said that the business of the government is to print the money, deliver the mail, regulate interstate commerce and defend the shores. Is that thing still around anywhere?
More government, more waste.
We’ve been doing ‘energy efficiency’ since Jimmy Carter was president.
Tom, best article, so far. I disagree with the assertion the bailouts were the right thing to do, but I consider that ancillary to your main point. As far as saving energy, I’m heavily involved in adoption and implementation of “smart grid” technologies. I work for a very small rural electric coop(about 3500 meters). Thus far, we’ve spent millions in an effort to get there. From the changing of all meters, to new hardware and software, training, ect. the amount is staggering. In the end, who pays for it? Well, the rate payers do. They’ve actually been charged money to save energy. For those who are in an investor owned utility or a municipality, you should be thankful most haven’t adopted it concept….yet. If things don’t change soon, though, they will be forced to move there. I recently asked a board member of a neighboring coop, when they expected the payback on the investment.(they’ve adopted the same concepts and equipment) He looked at me a bit puzzled and then stated that some of the advantages weren’t expressed in terms of money.
Moving towards more efficiency has always been a natural progression using the traditional market systems. One can’t mandate innovation. This is why the cost of saving is so high. Everyone is for moving to more energy efficient methods and materials, but not when the costs exceed the savings.
Before anyone gets too excited about energy conservation, perhaps they should read the post at the link below. An excerpt:
“. . . energy conservation is a one-time problem. We evaluated the various processes, including homes, apartments, skyscrapers, industrial buildings, shopping malls, and of course industry, and made the appropriate energy-conserving investments. By doing so, over approximately five years, the refining and chemical industries reduced energy consumption per unit of production by more than 30 percent. That was a laudable achievement, and I am proud to have been a part of that.
But what we also found was that, even if more money were spent, there would not be another 30 percent reduction over the next five year period, then another 30 percent in the following five years, and so on. Energy consumption, and energy efficiency, does not work that way. It seems obvious to me, as an engineer, but this seems to escape the notice of the many misguided folks who see sustainability and conservation as a jobs-creating industry that we should have been doing all along.”
http://sowellslawblog.blogspot.com/2010/02/energy-conservation-is-not-sustainable.html
But we produce less energy today from combined heat and power than we did 10 years ago. Because we don’t have the incentives balanced correctly to stimulate its use.
Remember the real estate agents’ mantra, “Location, location, location!”
People are scared to live near the high-voltage transmission lines coming from a power plant. They don’t want to be around any smelly old power plants at all. Think of the children!
Co-generation does happen, but on an industry-to-industry basis, where a company that can use the heat for processing locates next to a power plant. Locally there’s a small electricity provider that burns wood waste that located next to a cannery, sells them the steam from across the street. The arrangements can work well.
But convincing regular people these days that living close enough to a plant to use steam for heating is a good thing? High pressure steam being pumped into a house? Tearing up the streets to lay in steam lines, which the TV has shown us are prone to leaks with manhole covers getting blown into the air and all sorts of nastiness? Not happening. NYC was a lucky example that happened at just the right time in history, in a densely-populated area. You won’t see that again unless you’re building a city from scratch, no matter the government incentives.