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.
The 2008 banking crisis was a bit more complicated than a normal bank failure:
“AIG has been executing a clear, methodical, and orderly wind-down of AIG Financial Products Corp. (AIGFP), which is the business that wrote the credit default swaps that were the main source of AIG’s liquidity issues in 2008.
AIG’s strategy remains to exit the vast majority of the risk at AIGFP by the end of 2010. Any remaining positions, which will be largely de-risked and not require active management, will either be managed by AIG or third parties.
AIGFP reduced the number of positions in its portfolio by 54% in 2009 to approximately 16,000, and the notional amount of derivatives outstanding fell below $1 trillion from $2.7 trillion in 2008.”
Note the amounts JUST for AIG (2.7 trillion), then expand this by numerous other world wide banks:
http://www.reuters.com/article/idUSMAR85972720080918
Now note the estimated total value of Credit Default Swaps (not including deriviates) from wikipedia:
“Credit default swaps have existed since the early 1990s, but the market increased tremendously starting in 2003. By the end of 2007, the outstanding amount was $62.2 trillion, falling to $38.6 trillion by the end of 2008.”
Include derivatives and this number jumps to over 500 trillion @ur momisugly ~ 2007:
http://en.wikipedia.org/wiki/Derivatives_market
Now realize that these are UNREGULATED entities with the power of rapid collapse, just like the stock market, that the United States GNP is about 15 trillion and the estimated world GNP (varies depending on source) is roughly 55 trillion.
Now compare the GNP’s to the investments in Default Swaps and Derivatives and one might see that there could be a problem if a slide occurred in these markets and affected the banks (possibly much like those that resulted in the depression).
Banks need income to make short/long term loans to industry and individuals. If that income dries up then the loans can’t be made. If enough banks are affected, then the serviced economy is in a world of hurt with plants shutting down and workers furloughed. The only solution would be to print money and provide it to lend (bailout) while attempting to resolve the crises.
Although there has been some attempt at regulating some of these markets for economic protection, the scale of the problem as can be seen in the numbers is immense and some reputable economists are still predicting a possible doomsday that will not be so easy to recover from : http://www.portfolio.com/views/blogs/daily-brief/2010/08/25/nouriel-roubini-tweets-growth-approaching-zero
These problems came about primarily from gradual disassembly of the Glass-Steagall Act (http://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Act) that was set up to regulate banking during the previous US depression in an attempt to prevent a recurrence. In addition no controls were ever established for the new forms of trading such as Default Swaps and Derivatives (business can be trusted attitude).
Truly, nations are doomed to repeat history when unlearned.
As for spending 5-20$ for products that “might”save me 10-40$ before it breaks is not too logical to me. I would prefer to take understood tech (hot water solar panels/insulation) with an understood and certified payback. Even better if it is something that I can build/install.
“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. ”
Just defund the EPA.
Energy Investment won’t improve the economy, because the economy isn’t here.
The real shovel ready energy investments & industries are overseas.
So, technically, the recession may have ended last year…for the global industries that are growing.
We are subsidizing a growing economy, just not ours.
We are being farmed.
BFL, if you want to know what happened read this book,
Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse (Thomas E. Woods Jr. Ph.D. History, 2009)
They tried interest free loans in Australia on solar and pink bats. The scheme was rorted. It was so bad a government with a massive majority was turned into a minority government after just one term.
Let’s not forget fanny mae and freddy mac in the US. Where are we now?
Sorry, but this is a stupid idea.
Or, you’ll just buy someone else’s carbon allowance – that guy in the 3rd world won’t have much use for it whilst he’s dying of hunger.
No doubt. (The worst of communism AND imperialism.)
In an era when it is fashionable for electricity suppliers to embrace the green goodness, the price of electricity to the consumer will rise. It will rise if the consumers en masse decrease their consumption, becuase the utility will lose sales and hence profit, so the price goes up. It will increase as well if people increase consumption, because the utilities have to invest in more capital works.
I’d be interested in this exercise. Write to your electricity supplier, ask under which conditions your electricity account can be made to fall; and then post the replies here if Anthony agrees.
RW
“Actually it’s a rather simple equation for most people.
5*12*10 = 600.
Is cost of new fridge < 600? If so, then buy."
I agree that in this case it's pretty much that simple, but for most other cases it is not.
To get a full life cycle cost analysis, you have to look at:
– The cost of capital, including the small amount of interest earned over the 10 years.
– Inflation of electrical costs.
– Installation and disposal costs.
– Maintenance costs; saving the old one would probably cost more than the new one in maintenance.
– Reliability of the new equipment – most new equipment are not as durable as the old fashioned equipment.
– Capacity of the new vs. old equipment. If the old equipment has more space, then it's not a one-to-one trade off.
I have to do this evaluation for almost every project I do, especially government projects or LEED projects. If you interested (or jus bored) DOE has a program called BLCC5 that will model most of these parameters and allow comparisons of systems.
In all debates about “saving” energy, overlooked are Human Nature, relative prosperity and market elasticity.
Human Nature: low energy light bulbs consume less electricity so cost less to power. That means you can have more lamps and leave them on longer for the same cost. Here in France restaurants and shops are festooned with low energy lights left on all day and evening all year round.
The net result is that utility bills are about the same, power consumption the same, but more lights are left on for longer so consumers benefit from more lighting, less worry about switching them off, but hardly benefit at all from reduced cost because prices go up each year anyway.
Prosperity: it cost 35 pence (UK) per gallon to put petrol in my first car in the early 70s. I remember years later when petrol prices approached £1 per gallon, commentators confidently predicting some people would drive less and less and others stop using their cars altogether. Petrol in the UK is now about £1.20 per litre (more than £5 per gallon, more than 14 times of the price in the early 70s – in large part due to taxation including so-called green-tax) yet car ownership increases and people use their cars more and more. Reason, the cost at £5 per gallon comparative to income is now lower than 35 pence was in the early 70s, plus lean-burn engines, reduced weight cars have resulted in increased miles per gallon. Thus more miles driven, more fuel consumed at same cost.
Market elasticity: making consumables cheaper increases the rate of their consumption.
Poptech says:
September 21, 2010 at 6:13 pm
@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
======
REPLY:
EPA considered all of that & struck down numerous lawsuits by US Chamber of Commerce etc.
Here:
http://www.epa.gov/climatechange/endangerment/petitions.html
“EPA determined in December 2009 that climate change caused by emissions of greenhouse gases threatens the public’s health and the environment. Since then, EPA received ten petitions challenging this determination. On July 29, 2010, EPA denied these petitions.
The petitions to reconsider EPA’s “Endangerment Finding” claimed that climate science can’t be trusted, and asserted a conspiracy that calls into question the findings of the Intergovernmental Panel on Climate Change (IPCC) , the U.S. National Academy of Sciences , and the U.S. Global Change Research Program. After months of serious consideration of the petitions and of the state of climate change science, EPA found no evidence to support these claims.
The scientific evidence supporting EPA’s finding is robust, voluminous, and compelling. Climate change is happening now, and humans are contributing to it. Multiple lines of evidence show a global warming trend over the past 100 years. Beyond this, melting ice in the Arctic, melting glaciers around the world, increasing ocean temperatures, rising sea levels, altered precipitation patterns, and shifting patterns of ecosystems and wildlife habitats all confirm that our climate is changing.”
Re: Poptech:
“BFL, if you want to know what happened read this book,
Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse (Thomas E. Woods Jr. Ph.D. History, 2009)”
Review excerpt:
“With a foreword from Ron Paul, Meltdown is the free-market answer to the Fed-created economic crisis. As the new Obama administration inevitably calls for more regulations, Woods argues that the only way to rebuild our economy is by returning to the fundamentals of capitalism and letting the free market work.”
Observation, as pointed out, is that it was an unregulated, no oversight free market that resulted in the depression and the 2008 fiasco. For truly free markets perhaps we should step back to the 1890’s when child labor existed in all it’s glory (and still does in some “competitive” markets overseas). Business about profits and nothing else can get completely out of control much like an alcoholic gambler. This is especially true with the corporate entity which was primarily established to limit personal liability. There is rarely any personal attachment of corporate boards and CEO’s to the business that they run except for the salary’s that they make. If the structure goes under, they are rarely hurt (unless rarely of course, fraud is proven) but everyone else, worker, investor and economy, will suffer.
Logic would dictate that free markets are a lopsided process and need some oversight to the extent that commercial enterprises play fairly. An example of this are Mil-specs and government contracts of which many complain about the complexity there-in. They got that way precisely because of free market “cheaters”. Let’s say that the government issues a contract for a commercial leather coat and then the coat turns out to deteriorate rapidly because of substandard quality that was not specified in order to save money (like some Wal-Mart leather coats). A review will then cause the Mil-spec to be tightened and an extensive testing requirement added. Many cycles of this can occur until the Mil-spec becomes quite literally unwieldy. Unlike you or I which take pot luck or a best buy based on a review or a friend’s recommendation, the government spends taxpayer money for these products which should be accounted for.
Completely free markets lead to chaos. Everyone thinks we have too many regulatory agencies, well let’s start with abolishing the FDA and OSHA and then see how much risk that you have for bacterial or heavy metal poisoning in that next can of food or for getting an appendage caught in an open machinery belt (hey you do TRUST the free market don’t you). Historically (not a favorite subject these days), these government agencies were set up BECAUSE of business abuses that resulted in maiming and death solely for profit margins. I agree to the extent that these kinds of agencies can become unwieldy but a large part of this is, again, because of business rule skirting at every corner (the “free market” “max profit” way).
Similarly, some business should have more oversight than others. A best example is the health insurance company deregulation that occurred in the 1980’s which caused a much larger number of companies to chase an ever smaller patient base per company until only the healthiest could afford to be covered. Why this was never obvious to anyone is beyond me.
Imagine the economic efficiency that would occur if everyone were “honest Johns”. Unfortunately free market naked profits stand in the way.
Ed Reid,
What we did in the 1980s was to reduce specific energy consumption in chemical plants and oil refineries in the USA, as mandated by President Reagan’s law on the subject.
Our 30 percent improvement (a bit more, actually) was measured on the basis of a unit of production (or raw material consumed), thus for a refinery we were looking at something like 750,000 Btu’s per barrel of crude oil refined as the base case, then approximately 500,000 Btu’s per barrel after the energy reduction measures.
CRS, Dr.P.H.
I am aware of the EPA’s position but what was decided in court was that the EPA can regulate if it can establish that CO2 is harmful. Thus what is presented in the paper has not been argued in court yet.
Stating the EPA’s position under an liberal administration is meaningless.
BFL says at 3:02 pm [ … ]
You had better be careful, with that post you’re close to depleting the world’s stock of red herrings!
So leaving Wal-Mart and your other fishies aside, no one is demanding an unfettered free market. There are appropriate places for regulation, such as contract law enforcement, uniform measurement standards, laws against fraud, etc.
The problem is that the government now wants to take over companies — and even entire industries. With no other competitor to enforce efficiency, hold down prices, or provide alternatives to the government’s company store, how do you think that will work out? Do you never wonder who pays for the ever-expanding new layer of no-value-added bureaucrats?
Ask someone who’s started his own business and has to meet a payroll what the free market means.
Better yet, start your own business. Then try to compete with the government.
Report back on how well monopsony works.
BFL, there are some excellent books on the subject,
Financial Fiasco: How America’s Infatuation with Homeownership and Easy Money Created the Economic Crisis (Johan Norberg, M.A. History)
The Housing Boom and Bust (Thomas Sowell, Ph.D. Professor Emeritus of Economics)
Poptech says:
September 22, 2010 at 4:39 pm
CRS, Dr.P.H.
I am aware of the EPA’s position but what was decided in court was that the EPA can regulate if it can establish that CO2 is harmful. Thus what is presented in the paper has not been argued in court yet.
Stating the EPA’s position under an liberal administration is meaningless.
=======
REPLY:
Poptech, USEPA holds all the cards. They will use the Clean Water Act to demonstrate harm to coastal waters due to acidification and its effects upon calcifying organisms such as coccolithophores.
Please see: http://earthobservatory.nasa.gov/Features/Coccolithophores/
The major coal-fired utilities have already folded to this position & are getting ready to do whatever EPA tells them to do. Industry groups such as API are filing suits, but they’ll be crushed.
Industry always screams when EPA sets regs, & then EPA wins and industry either submits or moves offshore. Coal-fired plants can’t move. Watch and see.
CRS,
There is extensive scientific literature arguing against damage from acidification and the court case are not over. If the EPA starts going after coal plants and consumers see their electric rates go up you will see Congress take action to stop the EPA. Watch and see after November. This is not over.
For those interested in what the EPA is up to in climate change, this is a good read:
http://www.nytimes.com/gwire/2010/05/13/13greenwire-epa-issues-final-tailoring-rule-for-greenhouse-32021.html
The EPA’s “tailoring rule” was an important maneuver to exempt a lot of small players & rope in the big actors (coal powered utility fleets). Note the dates and timelines.
Poptech says:
September 22, 2010 at 8:52 pm
CRS,
There is extensive scientific literature arguing against damage from acidification and the court case are not over. If the EPA starts going after coal plants and consumers see their electric rates go up you will see Congress take action to stop the EPA. Watch and see after November. This is not over.
—
REPLY:
Poptech, I understand your position! However, in this grand chess game, the USEPA moves very slowly & deliberately….they are experts at this stuff.
I admit that there is conflicting scientific information on ocean acidification; however, unlike the IPCC, the EPA actually collects & analyzes its own data in its own labs (or under contract with universities), so they are immune to the “Climategate” tag. EPA’s scientists are very, very good, and the courts will consider this.
Regarding the US Senate, it will only matter if the GOP can garner enough seats for a veto-proof majority. I don’t see that happening at this time.
It ain’t over ’til it’s over, but the EPA lawyers are top-guns (I know several), and they are not easily cowed by industry. The model that the EPA is following is tried & true, and with the Supreme Court decision, I don’t see many arrows in the quiver against them. This will be very interesting….stay tuned!
For some reason my other comment never appeared.
[Reply: Nothing in the spam folder. Can you re-post? ~dbs, mod.]
Well said. People are only interested in the short-term. They can’t see the benefits of making investments to save them big money in the long term.
Someone above made a comment about solar not being a good resource in parts of the country like Ohio, compared to California. Yes, California has more sun. Ohio probably has about 80% of the sun hours that the sunniest parts of the America, but still a lot more sun than Germany who has made the largest investments in solar.
Decreasing our energy costs has a much larger social impact. We will decrease our dependence on foreign fossil fuels.
MA Solar Installer says:
“We will decrease our dependence on foreign fossil fuels.”
The Department of Energy was formed after the first OPEC oil embargo [1973] with a mandate to ‘reduce our dependence on foreign oil.’
How’d that work out? ☹
How exactly does using solar reduce our foreign oil consumption? Solar generates electricity not transportation fuel.
We are currently “energy independent” generating electricity as we get 48% from Coal, 21% from Natural Gas, 20% from Nuclear and 6% from Hydroelectric. We do not use oil to generate electricity,
Only 1% of the United States electrical generation comes from oil (EIA)
5 Myths About Breaking Our Foreign Oil Habit (The Washington Post)
The Idiocy of Energy Independence (ABC News)
Multi-Billion dollar energy companies do not invest long-term? Really?
For “Smokey says @ur momisugly 6:31 PM:”
Sorry, I thought I was clear that I was NOT talking about owners that have a very personal interest in their company and its efficiency. I was aiming at corporate structures in which the rulers have few if any reasons to be emotionally involved in their corporations success or morality and many of which have an unethical alliance in one way or another with the government(s) and depend on a bank of lawyers to keep the righteous at bay.
Energy independence in the US should refer only to oil as used in vehicles but really refers to the green agenda of no coal/gas/atomic and except for the elite, a return to the basics:
http://www.green-agenda.com/globalrevolution.html
Some other scary elitist quotes:
“Complex technology of any sort is an assault on
human dignity. It would be little short of disastrous for us to
discover a source of clean, cheap, abundant energy,
because of what we might do with it.”
– Amory Lovins, Rocky Mountain Institute
“The prospect of cheap fusion energy is the
worst thing that could happen to the planet.”
– Jeremy Rifkin,
Greenhouse Crisis Foundation
“Giving society cheap, abundant energy would be the
equivalent of giving an idiot child a machine gun.”
– Prof Paul Ehrlich, Stanford University
The major problem is that the one political side is in strong support of corporate government and the other side just the extreme opposite (except of course where donations or grants are necessary) with few politically in the middle. Personally I am tired of voting for either because it is a poor way to try to balance two evils. So perhaps it is just a matter of time……