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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No more borrowing!
What I get from this is nothing is practical until the guy who is paying for it thinks its practical and forcing a government subsidized source on the payer that is intended to replace a practical source is going to be not wanted by the guy who is paying with his own money and again through the tax.
And if the whole reason for the change is viewed as a fraud then it should be no surprise that the payer views it as purchasing snake oil.
“We just need easy credit terms.” Not!
Fail – slow learner
Go back and try again
From: DonS on September 21, 2010 at 6:33 am
I believe these days there are small print copies available from various dispensers in the White House and the Congressional buildings. Sheryl Crow says to use only one sheet.
😉
Okay, let’s see here:
1. Provide a product and sell it as something everyone should get
2. Throw out an incentive, a carrot on a stick, for purchasing this product
3. Make it even easier to get this product by providing government sponsored and backed loans that are zero interest or low interest.
Sound familiar? Subprime housing market anyone? Student loans??
You provide “free” money and the lending system will eventually collapse on itself after the “product” becomes grossly overpriced and people start realizing they’re being ripped off. Higher education’s day is coming, too.
@Don S:
More government, more waste.
These days, with all the wigs and lace long gone, there are a few upleasant truths we must accept:
-More wealth, more waste.
-More private enterprise, more waste.
-More people, more waste.
And the people who pay for the waste, are not necessarily the ones who make it, especially in the libertarian world commenters like Don S imagine.
The world is complex, accept that. Unless you want to go back to a pre-industrial village economy. Your nostalgia for an idealized ‘democratic’ past is on a par with the green fantatics’ longing for Eden.
Re: the comment about each house having its own energy source. We need to decide if a house that has its own energy source should be allowed to hook into the electric grid with no extra cost. If so, then those of us without our own energy source will have to pay for the availability of the extra generating capacity so that when the private energy source (usually solar or wind) is not available, the extra generating capacity is. If the house with its own energy source feeds back into the grid by running the meter backwards, they will not pay much if anything for the availability of the extra capacity when they need it.
I have not seen this problem mentioned in any discussion of alternative energy supply. It becomes especially significant if the electric company must install new higher cost capacity that can be available very quickly, or operate baseload capacity at lower, less efficient levels so as to be able to ramp up quickly when needed.
Bottom line–there is always a cost, even if it is camouflaged.
Tom, I can’t believe you say things like “low interest loans” (etc.) and act like that’s somehow “free.” It’s not. The way you speak about economics make me wonder if you ever really learned about how economic systems work, because everything you suggest is “good” is unlikely to be so. For government to pick an choose what to subsidize (including fossil fuel production) only wastes money and delays finding the right answers to any real problems we have.
If you really want to reduce CO2 production then you ought to be pushing for nuclear. It’s cheaper than fossil fuels and produces no direct CO2. Anyone who argues the waste problem or the catastrophe problem simply does not understand the technology or the economics. This is one area where France does have it right. Yes, there’s a political problem to overcome about where to put waste because no one wants it in their backyard, but if even a small portion of the money being wasted on “alternative” energy were put to brib…, er, subsidizing some state to put it in their salt dome/ mountain base, etc., the political problem just *might* be overcome. And then there’s Thorium fusion… where’s the Manhattan-like government-backed project to make that possible in the next 10 years?
Your posts make no sense to me at all: not based on your assessment of climate science, nor on your understanding of energy-production technology; not based on your interpretation of the implications of these sciences/ technologies, and certainly not on what you think are good economic/ policy ideas.
The problem is: I don’t know where to start to have a sensible discussion because you seem to have a belief system that I find so flawed in so many ways as to make such a discussion uninteresting.
Anthony, I’m not sure Tom adds value to this blog. If his thinking were cogent, even if believing CO2 might be a problem, then an occasional post could be worthwhile, but this steady diet of his posts is simply innervating. Bring back more serious science to this blog, PLEASE! It’s really gone down hill in the last 3-6 months in that regard. I’m tempted to spend more time at Science of Doom, at least they’re trying to make sense of what’s most important: do we have AGW or not?
If I buy a fridge, there’s a cost associated with putting a fridge in my home; the cost of making it, transporting it, maybe putting it in a showroom and so on. You can express this cost in a number of ways, the price tag, the amount of energy used to make it, indirect costs, and others.
There’s a cost of running it over its life, which will probably be about 15 years.
Then there’s the cost of disposing of it afterwards, transport, the apparatus set up by the government to dispose of it, all of which has to be paid for and all of which take energy. You can view these costs as being spread over the 15 years or so.
Cutting short the cycle because of undue concentration on marginal savings on electricity to run the fridge, almost certainly makes no sense, either to me personally or to the world at large, whether in terms of money, energy, or any other measure.
I’d say that was true of a lot of these other energy saving, carbon footprint reducing schemes, they are shortsighted and probably don’t actually do what they promise, when you look in a bit more detail.
I am very distrustful of big schemes got up by governments altogether, because it often appears that they really don’t understand the problem, or there’s some motive which they don’t want to admit to.
Beware Greeks Bearing Gifts
I was surprised I hadn’t heard of the Consortium for Energy Efficiency if it was saving USD 9.7 billion so I looked at their State of the Efficiency Program Industry 2009 report at http://www.cee1.org/files/StateofEEIndustry2009.pdf
The report is a mine of information and small print from which I have learnt that the estimated savings in 2008 were
► Electricity: 104,900 GWh
► Gas: 367 million therms
►CO2: 61 million metric tons
BUT these savings are estimated based upon new installations in 2008
PLUS installations from 1992 that are still generating savings.
So we don’t know what was actually saved in 2008… but we do know the US per capita cost in 2009 was $12.45 for some of the electrical work… while those lucky enough to live in Vermont actually paid $49.38.
I don’t view Tom’s favorable opinion of the bailouts as ancillary to the point of this article at all. In fact, I think it is the real point. The main goal of pushing AGW is to take from the many and give to the individual, how are the bailouts any different?
Tom, what’s your source for the claim that CEE spending of $6 billion translates into savings of $9 billion?
CEE’s 2009 annual report says they took in $6.1 billion and spent $5.4 billion.
I found no estimates of savings – I’m looking specifically for whether the claimed savings are recurring, the NPV of estimated future savings, or the undepreciated future savings estimates.
As I’m certain you know, my assumption is the claimed savings are the latter and I don’t believe they are real anyway.
I want to look into whether they are realistic, and depreciate future cash flows to present to see whether they made any economic sense.
Roger Sowell,
I agree about the energy reductions. As a mechanical engineer working primarily HVAC systems, I am constantly struggling to meet energy guidelines pushed by non-engineers. While lighting systems are important, air conditioning, heating and refrigeration make up the bulk of most residential and office energy bills. In data centers and telecom, air conditioning is second only to the process power requirements. A 100 watt light bulb uses 876 kWH is left on 24 hours per day, 365 days per year. A 5 ton airconditioner with an EER of 12 (relatively high efficiency) uses 3,600 kWH if operated 8 hours per day for 3 months.
ASHRAE keeps publishing tight energy guidelines, and then other organizations like USGBC push certification for LEED where they push for even tighter energy boundaries. But like Roger says, there’s only some far you go with energy reduction and must look at the consumption.
These improvements in efficiency are not actually met 1/3 of the time even though the design receives certification. In addition, the life cycle costs of the improvements rearely take into account additional maintenance,durablility or actual operation of the equipment. People decide that the 75 – 78 F prescribed in the design is too warm and they adjust the temperature back down to 72 F. They decide that using outside air economizers are to difficult to operate or it is too warm or too cold.
Actually, one of the easiest ways to reduce air conditioning and heating energy is to reduce the size of the dwelling. In Texas and over much of the United States, people keep buying larger and larger houses. In the 1970’s, 1500 square feet was a fairly decent size house. Now single family dwellings are moving to 3000 – 4000 square feet, along with the increased energy bill.
Finally, one of my biggest complaints is the how the governing entities treat data centers and telecom switches. It used to be that they considered these facilities as process loads (as in manufacturing) and this relived many of the restrictions. Now they are looking at the raw energy usage of the facilities and are in shock; many of the data faciilities operate at 100 w per square foot of process load which is nearly all converted to heat that has to be cooled. While I agree we should look to improve efficiency, I don’t see any give or take on what these electronic facilities actually provide to society. They have enabled people to work from home, eliminating transportation and office costs. The have reduced snail mail to advertising and reduced billing process to on-line affairs. They have greatly enhanced communication, and if properly managed will reduce paper consumption. I see these facilities as being “green as a frog”, and the professional engineers should be the ones balancing the trade-offs of energy consumption, reliability and total life cycle costs.
By the way.
CHP as common sense?
Yeah, exploding streets in crowded cities make a lot of sense.
Con Ed can’t pay building owners fast enough to replace that old CHP crap with on-site generators. They never made any money selling that steam, all they did was cost people their lives. Those old 1920’s steam pipes are worth far more as fiber optic conduits than as dangerous inefficient heating conduits.
And if you don’t have the population density of Manhattan, CHP isn’t even vaguely feasible for residential. Other than providing process heat for industrial use, I fail to see the logic.
Tom,
I don’t think it is so simple as low interest rates. The Federal Government does not normally make loans to individuals, they make loans to banks (currently at near-zero interest)… and banks make loans to individuals, assuming the risk on non-payment. If banks judge someone (or company) not likely to pay back a loan, then they are just not going to accept the risk of the loan, or at a minimum, charge high enough interest to compensate loan risk. Banks exist to evaluate and minimize loan risk (not that they always do a good job!), but Government at any level is completely ill-suit to do this.
Now it might be possible to work through local utilities and have loans for energy-saving home improvements automatically included in utility bills, and tie the utility rate for the building to the loaned value of the energy efficiency improvements, but there is currently no mechanism (that I know of) for this to be done. No matter what, there would be significant costs associated with any system to do this kind of thing. There is no free lunch available with energy savings; that is why it is not happening.
Thank you for a very thought-provoking post, Tom! As a consulting scientist who has worked in the field of industrial energy efficiency & pollution control for >25 years, I’d like to give a bit of perspective from that side of the balance sheet….
If there is anything that industry dislikes above all else, it is uncertainty. My clients must make plans for factory siting & construction, technology selection, manpower requirements etc. years & even decades in advance. They go nuts with all this back & forth over energy policy, climate change regulations etc. and just want some way to budget for eventual costs so they can adapt to a new manufacturing environment. They presently face two certainties: costs for energy will continue to increase, and carbon emissions will be regulated.
My clients now simply accept that the EPA will institute carbon emission regulation in 2011, and that they will have to comply. Cap & trade was a way to make it a bit more palatable, but in all honesty, they are in the business of producing manufactured goods & not credits, so they really didn’t give a wit what happened to cap & trade. If they can budget for change, they can figure it into the costs of the goods they sell to John Q public.
Congress will try to play games with holding up EPA’s Clean Air Act funding, lawsuits will be filed etc. but my clients believe that carbon regulation will eventually occur, regardless of what happens in November 2010 and beyond. Despite what many think, the strategy that the EPA is presently taking is bullet-proof. Please see:
http://www.bloomberg.com/news/2010-09-14/epa-issuing-u-s-carbon-limits-guidance-soon-agency-administrator-says.html
Even with a wholesale change of parties in the White House and Congress, I don’t see how this juggernaut can be stopped. Thus far, all the court battles have gone to the EPA. Sad but true.
@Wade The LED lights you (or your mother) purchased are basically a scam. They do not produce really usable white light and not very much light output.
If you see LED lights for sale, and you look closely and see LOTS of LEDs in the “bulb”, just walk on by, these are not a bargain, they are mostly useless.
However, there are some LED “bulbs” which use one (or a small number) of much higher power LEDs. These do give a lot of light, and the spectrum is much more balanced. The problem is, that for reasons that escape me, they are VERY expensive. They should be selling for around $20 each, they actually sell for more like $100. Once the price comes down I (and a lot of other people) will buy them.
JP Miller: I agree with you that Thomas Fuller, author of many recent guest posts on WUWT, makes little sense most of the time. Still, he has a point of view and an agenda,
and it is worth reading if only so we can point out the flaws.
His views are fairly typical of many who have zero understanding of physics, chemistry, engineering, and economics. Thank goodness his type do not build bridges, buildings, or oil refineries. As the old saying goes, if they did, the first woodpecker that came along would collapse civilization.
stick to climate science sir … your economic ignorance is stunning …
“the rate of return on many energy efficiency innovations is near 40% and the payback for some can be realized in just a few short years. We just need easy credit terms.”
If they really did return 40% then someone would easily find a way to finance them. Are you really that daft about econimics ?
I know a landlord who who put in a geothermal loop, heatpump and solar panels. he was getting a bit over 150$/mopnth in higher rent, because it was saving a couple of hundred dollars for the tenants.
as for 23% targeted for energy saving initiatives, it is probably right. residential energy use cannot be more than 23% of the total energy cost on immovable systems ( like houses, stores and factories )
Sorry, but bailing out banks and GM wasn’t the right way to go.
The problem was people not able to pay off high-interest mortgages, not able to buy cars, etc. So, any bailout money should have gone directly to the consumers, not the producers. Giving the banks more money doesn’t help the people who still cannot pay that high-interest loan. And giving GM money doesn’t mean people will be able to buy their cars.
The money should have gone directly to the consumer, so they could, ya know, consume. Giving each household say $50,000 earning below a certain threshold would allow them to pay their mortgages for several months, buy a new car, buy clothes for the kids, buy some furniture, invest, etc. Even if they didn’t spend the money wisely, they’re still spending the money, and businesses would benefit. Any who chose not to spend the money wisely would then deserve wherever they end up.
To me that would have been the smart thing, apart from doing nothing.
Djozar says:
September 21, 2010 at 7:18 am
I see these facilities as being “green as a frog”
So do I… but then I might draw the line at the servers hosting Real Climate ☺
Yea, Tom’s going to buy me a new frig and give me a low/no interest loan out of his own pocket…
….so the rest of you tax payers won’t have to
Isn’t that sweet……
Tarpon says: JP miller says:
Completely agree with both comments. Where on earth have you been or where have you come from Mr. Fuller? The US government is out of control and we don’t need them in anymore things at present. We are broke now because of them. Sorry if I sound rude, but I cannot agree with anything you wrote.
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.
That kind of equipment tends to be part of the home, and people are defaulting on mortgages right and left. People are also realizing what I read about a decade ago, home ownership no longer makes sense. With rising property taxes, maintenance costs, new homes being so expensive, and the now-demonstrated fact that homes may not hold their value, renting makes more sense. Try convincing landlords to get such energy-efficient changes, they are well aware of the payback period of any such “improvements.”
(Side rant, feel free to snip: Home ownership is now a myth. When you own something, it is yours to keep. Where there are property taxes there is no ownership, as the state can take your home if you don’t pay what they demand. That’s not ownership, that’s leasing.)
It must be a “California” thing to think those changes increase the value of a home. Nearly all solar panel systems look ugly on a home. Used home buyers also see the maintenance issue, something else that’ll need to be paid for. With panels on a roof, a simple shingle re-roofing becomes a major panel tear-off and re-install, at a point where you’ll likely be putting up new panels anyway, actually more likely a complete whole new system. Who needs the hassle?