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
Discover more from Watts Up With That?
Subscribe to get the latest posts sent to your email.
Tom your economic illiteracy knows no bounds. To baldly state that you do not mind all the unfunded borrowing the Government does without any, even meek, attempt to consider the cost really proves you are a watermelon
Dave says:
September 21, 2010 at 9:58 am
I guess you missed it this time: It is about YOU dying of hunger!
More illogic Tom. This is why this kind of thinking is often attributed to “The Looney Left”. You should try some real world experiments and perhaps reality would sink in.
Everyone is interested in reducing cost for themselves. But most efficiency schemes increase overall costs. Imagining that the government has magic money to give away without consequence is a basic staple of the left. Subsidies don’t change the equation, just redirect the responsibility for repayment to someone else….. Like your children. You write about our responsibility to others, yet you can’t see this?
I own my car free and clear. It gets roughly 30 mpg combined. Edmunds rates the 2010 Prius at 50 combined mpg. I paid $14,900, the Prius is $25,000 with less features, and smaller size. At $4/gallon, it would take 180,000 miles before I’d realize any fuel savings, and I’d still have to make up the interest on the extra 10k. At 200,000 miles, the Prius batteries are due for replacement. $4,000 bucks, and I’m still waiting to save money. Forget the subsidies, they’re just transferring the cost to my children.
It’s the same with nearly everything. And the economics only worsen when you owe nothing on your current car/appliance. We should focus our efforts on securing abundant energy now and into the future. Let the free market drive efficiency.
Most people are woefully ignorant of economics — and greenies seem to be oblivious to the whole thing. If the market won’t support something without a subsidy, then it is not practical. Most of these ideas are just window dressing to redirect money into someone’s pockets. In most cases, the best thing for government to do is nothing.
Here is the stark reality, as I see it. And, I might add, this view is the common view (dare I say consensus?) of people in the oil and gas industry.
OPEC has a firm grip on the price of oil, within a small range. They can, and do, agree to restrict output or increase output to maintain the price. OPEC is not dumb; they fully appreciate the break-even costs of each form of basic energy: conventional natural gas, shale gas, methane hydrates, LNG from stranded gas fields, coal-bed methane, bio-methane, coal, shale oil, tar sands, hydrogen, algae-oil, gas-to-liquids, bio-diesel, bio-ethanol, solar, wind, tidal, waves, ocean current, ocean temperature difference (OTEC), geothermal, nuclear, and any others.
There is a reason that OPEC selects the price of oil at any given time. Presently, $75 per barrel is the price, and one should ask why does OPEC not charge $750 per barrel? The answer is, of course, that all or most of the above forms of energy would be economic and the sales of oil would decline. It should be noted that OPEC did whatever it took to bring the price of oil back down from the peak of $140 per barrel of just two years ago.
Therefore, until OPEC runs out of oil, they will continue to price oil at just below the point where any competing technology makes economic sense. That is not going to happen for a very, very long time. Estimates of OPEC oil reserves and the time to consume them result in oil running out many decades, perhaps centuries from now. Oil discovery and production technologies continue to improve, which pushes the end date out even more.
Governments can try, as some presently are doing, to subsidize alternative forms of energy, but it is a hopeless and never-ending effort. Those funds would be far better deployed in other ways.
Some marginal alternative energy projects will be economic, as for example a solar rooftop PV system where the local utility charges 35 or 40 cents per kWh as their highest price on a tiered-pricing system. Similarly, small distributed generation systems will be attractive where power prices are sufficiently high. In sum, though, these projects are trifling compared to the world’s energy needs.
Just some things to think about. OPEC is no dummy. They have the control. And the oil. And, there is absolutely nothing anyone can do about it.
I write about this under the heading The Grand Game on my blog.
Layne Blanchard says:
September 21, 2010 at 10:13 am
“There is no free lunch”, everybody pays it in the end, spiced however, because only then one realizes how big was that “lunch” where, and this is the worst part, we were not invited.
(*)from an experienced third worlder
Pragmatically, massive loans to banks was the right thing to do. First of all, commerce depends upon a healthy financial system. Second, it was not a significant risk as demonstrated by the fact that the government will make $ on these loans. Third — and most importantly — the government has guilty hands in causing the panic that led the need for these loans. Although bank greed played a role in the panic, much more fault lies at government for its CRA, Fannie Mae & Freddie Mac activities (and the list goes on). These activities occurred over multiple administrations, and congressional “bullying” played a large role.
The GM loan is somewhat different. To some extent, you can say that the economic panic caused by government hurt GM and therefore justified the loan. However, the impact was not nearly as direct. But perhaps one could argue that government “bullying” decades ago forced GM management to agree to labor contracts that had only one chance to be supported by sales — that was by selling high-margin vehicles. Nevertheless, there are several differences from the bank loans. First, the loans did not fix the labor-cost disadvantage that GM has, and therefore the loan is more risky. Second, as administered, the loan reeked of political favoritism. Rather than allocating assets to those who had a right to them via collateral contracts, the GM loan awarded assets to entities that helped elect the administration and will help in future elections.
Loans from government are tempting. The government can borrow $ cheaply, and the party in power can tilt the funds to its political allies. However, government loans distort the market for loanable funds. Money is removed from businesses and people who can produce ongoing jobs, and the destination of the money is directed by politically motivated individuals.
Layne Blanchard says:
September 21, 2010 at 10:13 am
Forget the subsidies, they’re just transferring the cost to my children.
Wrong!. Experienced third worlder has to say the following: YOU will pay it!, and suddenly, when you less expect it. It’s just one of these days, not more than one year from now.
The question is: “To burn or not to burn”, or rather, “take them to the stake or to the lunatics’ asylum to re-educate them”
This reads like an advert for double glazing.
Loans for alternative energy sound nice, but fail to take into account the state of technology today.
Solar power plants that are already built have efficiencies in the 10% to 12% range. This represents ONLY the captured energy from whatever sunlight strikes the panels.
On top of this, the solar plant itself has between a 15% and 33% activity ratio – i.e. how often it actually is producing power. This compared to 90%+ for conventional power plants.
But the first point is the issue: present technology yields power at a 10% to 12% ratio – absolute cutting edge technology raises this to perhaps 18%.
But within less than a decade, solar power can achieve 30%+.
Throwing tons of money – loaned or otherwise – just enshrines the inefficient technology and may in fact stunt the development of the better ones. There are entire sectors of solar such as thin film and Silicon Germanium which will have NO place in the future solar spectrum, but would very likely become entrenched if a tide of money (and the economies of scale that follow it) inundate the solar industry now.
But we can just replace them, you might say.
Well, who is going to want to replace hundreds of billions of dollars of solar plants when their lifetime is in the 3 decade range?
We don’t seem to have the will to replace 2 decade old coal plants – why should the 12% solar plants be any different?
A coherent vision and a plan is something I would support; throwing money at a perceived problem I do not.
This is one of Tom Fuller’s best articles, because it is one of his shortest articles.☺
Fuller writes: I have no problems with Barack Obama’s MBO of General Motors–again it was the right thing to do.
Anyone who thinks that it was “right” for the President to personally boot out the elected CEO and half the Board of Directors from a major auto maker and replace them with his cronies, then give away a large part of the company to overpaid assembly line workers while stiffing thousands of mom ‘n’ pop bond holders, and shoveling multi-$billions to prop up private companies must be wondering why other Presidents never did the same things with American Motors, Packard, Studebaker, Fisher, etc., etc.
The answer, of course, is that it is un-American for a President to personally interfere in markets when there is a bankruptcy code in place to handle such situations. Further, every action Obama has taken with regard to GM and Chrysler has been detrimental to the employees and shareholders of GM’s competitors and to U.S. taxpayers, who must fund the difference between subsidized loans and market rates.
Tom Fuller, our unscientific post-modern marxist opinion generator preaches his big-government nonsense here because no one reads his newspaper blog. Marxist economics is based on a fool’s understanding of human nature, and on the equally foolish presumption that the government bureaucrats and politicians who got us into this mess have the answers. They don’t, and any action the government takes will make matters worse, and will cost far more than the free market alternative. It will enrich favored special interests, and create a new and never-ending federal bureaucracy to fix a non-problem.
To put things in their proper perspective:
1. Government is force
2. Good ideas do not have to be forced on others
3. Bad ideas should not be forced on others
4. Freedom is necessary for the difference between good ideas and bad ideas to be revealed
Tom Fuller is a big government believer and advocate, totally deficient in understanding human nature and economics. If his post-normal mind was not already made up, comprehending the four points above might have caused the scales to fall from his eyes; government is not the solution, it is the problem.
As being an “experienced third worlder” I have just remembered what you are going to experience, and, most importantly, when you are going to experience it:
The correction for these problems is devaluation, but then it comes the question: When?.
Well, the best time to do it, it is right after an election.
This sort of things are usually postponed or delayed to such ocassions.
However, though it will make you poorer for awhile, it does the “trick” of an inmeadiate awakening to reality, and the sooner the better. After that, with a less expensive currency, your exports and jobs will increase.
It is like pressing a reboot button: It is healthy. Just imagine the wonders it does: All those GM big salaries Smokey talks about, that magic wand turns them instantly lower than before!
Though last but not least, those who know it, wonder what are they buying?
Here in England our government has now given up trying to operate under the pretext of “Saving The Planet”; they now acknowledge that all they are doing is raising taxes to generate revenue for an otherwise UNSUSTAINABLE government.
Here’s how an imbecilic “what if …” is going to have a direct and very expensive effect on the ordinary taxpayer here in this Green-afflicted land:
http://www.telegraph.co.uk/news/newstopics/politics/liberaldemocrats/8016774/Liberal-Democrat-Conference-Oil-price-could-double-in-return-to-1970s-style-shocks.html
I didn’t notice you mentioning the GM bond holders.
Smokey says:
September 21, 2010 at 11:51 am
Bravo! Well said Sir!
What about the energy to manufacture that new energy saving appliance which in many cases is greater than the appliance consumes over it’s live expectancy.
Phasing out appliances before the expected live will increase energy consumption in the manufacturing and transportation portion of its live, actually increasing energy consumption overall.
Tom. I didn’t even bother reading the comments & almost gave up on the post.
I am from the UK & saw from mid 2008 that Obummer was anti-USA.
Sad that you still can’t
DaveE.
“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.”
Actually it’s a rather simple equation for most people.
5*12*10 = 600.
Is cost of new fridge < 600? If so, then buy.
A glib "thought not" doesn't really make any sense unless you didn't do the maths properly and thought you'd come up with something more illustrative.
Bart Verheggen says:
September 21, 2010 at 6:19 am
Probably right, there’s low hanging fruit! So in the UK the plonkers go for condensing flue boilers.
I’ve never been a fan of these ‘instant hot water’ systems, my experience has always been that they don’t bloody well work! After ‘renovation’ my experience has not been revoked, they don’t work!
Solar heating on the other hand, may have worked.
DaveE
DaveE.
Businesses are not investing in energy efficient technologies because they do not see them as a cost benefit, if the investment costs more than they save in energy usage it is not worth it. There is nothing complicated about it. It is the same reason why buying a hybrid car is a waste of money, the money save on gas does not equal the added cost of the car.
Investing in solar panels does not save you money as the cost of the installation and equipment is not offset by the energy savings, even long term.
Government energy efficient programs have been shown to be a fraud,
Energy Star Program: Covert Testing Shows the Energy Star Program Certification Process Is Vulnerable to Fraud and Abuse (U.S. GAO)
Obama’s EPA Gave Energy Star Certification to ‘Gas-Powered Clock Radio’ and 14 Other Phony Products, GAO Says (CNS News)
Energy Efficiency just increases energy usage due to the Jevons Paradox,
The Efficiency Paradox (Peter Huber, Ph.D. Mechanical Engineering, MIT)
The Virtue Of Waste (Peter Huber, Ph.D. Mechanical Engineering, MIT)
The Jevons Paradox (CounterPunch)
It was not the right thing to bailout the banks or nationalize GM,
The Great Bank Robbery of 2008 (Robert P. Murphy, Ph.D. Professor of Economics)
What Was the Point of Bailing out GM? (Daniel J. Ikenson, M.A. Economics)
Failed businesses need to go bankrupt but thanks to two economically illiterate presidents in a row we got zombie corporations.
@ur momisugly CRS, Dr.P.H.
The EPA’s position is not bulletproof,
Scientific Shortcomings in the EPA’s Endangerment Finding from Greenhouse Gases (PDF)
(The Cato Journal, Volume 29 Number 3, pp. 497-521, 2009)
– Patrick J. Michaels, Paul C. Knappenberger
Layne,
I always say that people who own a Prius cannot do basic math. After explaining the fuel cost vs. car cost difference + maintenance over time to a friend who bought one the best he could come up with was it has a cool dashboard.