Bob Herbert's column in the NYT yesterday makes two points: One, efficiency and conservation are the smartest strategies to combat our energy woes; two, it's very difficult to talk about efficiency and conservation without being boring as paint.
Efficienciezzz ... 23
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Posted 11:48 AM on 6 Aug 2008
by David Roberts -
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David Roberts is staff writer for Grist. You can follow his Twitter feed at twitter.com/drgrist.
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Jon Rynn Posted 4:22 am
06 Aug 2008
I don't want to turn this into a marketing problem, maybe it's a "categorization" problem. Now, I don't know if talking about buildings and transportation sounds more interesting than talking about efficiency, but maybe if you talk about how buildings can produce energy...or how they can produce energy, assuming a lower level of demand because all this gee-whiz technical stuff is going on inside the building....or, talk about electric vehicles or transit, how you get around, blend that in with energy problems, etc., then the efficiency becomes part of the entire solution, it's built in, as opposed to being this separate 'thing", that makes people's eyes droop. Assuming the other stuff doesn't make people's eyes droop. I mean, efficiency really is a systemic problem anyway, and it's much more interesting to talk about the architecture of the whole system.
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Sean Casten Posted 4:40 am
06 Aug 2008
Show of hands: who thought HTML coding was fascinating prior to the Netscape IPO? Can you name any government policy that set out to create the world wide web?
Of course not - but we frame our energy conversation as if the gov't has to know what's coming, evaluate all those options and then figure out how to shift policies to encourage the best options to go forth. And we frame it that way because we've always set our energy policy that way, which gets us into a pork-fest rather than a world in which capital can be rationally allocated.
All of which kind of comes full circle, because if you think efficiency is boring, wait'll you hear me rant about market liberalization! But still, the problem isn't that efficiency isn't sexy, but that investors - who don't give a damn whether or not policy thinks something is sexy but are looking for good investment opportunities - face so many barriers that prevent them from realizing the value they create. And yes, the challenge between here and there is to get politicians to admit that market liberalization is sexy. But politicians spend lots of time talking about things that are really boring. Watch C-SPAN if you don't believe me!
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Jon Rynn Posted 5:07 am
06 Aug 2008
In fact, I'm sure you can tell stories of managers not implementing efficiency measures because it would cost their department money up front, which would make their profits go down -- for that department, even though in the long-term the company as a whole would be more profitable.
So, there seems to be some kind of mental blinders on when the investment return is too far off in the future -- which is why it took huge government subsidies to get the mortgage industry going, I mean, you can write off your mortgage interest! Then, finally, something as long as a 30-year loan was offered, as a normal thing to do. But without that government subsidy, I doubt it would have happened.
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Sean Casten Posted 5:25 am
06 Aug 2008
There is a tremendous amount of societal value created by energy efficiency and conservation. But the investor who commits capital to those activities is able to recover only a tiny sliver of that total value from variable energy cost savings. They don't get credit for environmental benefits, nor enhanced energy system reliability, nor reduced demand on imported fossil fuels (with associated benefits both on national security and balance of payments), nor any number of other gains. Meanwhile, across the ledger, those who do things that have big societal costs associated with them are massively subsidized, whether through ratepayer guarantees on the electric side, or the use of general funds (e.g., income taxes) to secure fossil energy supplies - through military actions and otherwise or simply the huge tax breaks that we give to the fossil fuel industry.
And all that is of course before we get into split incentives in building leases or industrial reluctance to invest in non-core energy conservation measures (which I presume are the issues to which you are referring).
So while one can certainly argue that we aren't investing as much as we should in efficiency, it's myopic to presume that the problem is that efficiency isn't sexy enough, or that investors aren't savvy enough to know a good opportunity when they see one. The underlying cause is that we have crafted a set of policies that so heavily skew the playing field as to substantially lower the investment thesis presented by efficiency from the view of the individual investor. Yes, society still realizes those benefits, but that noble benefit doesn't affect capital deployment.
Ergo, my point that the focus shouldn't be on whether efficiency is sufficiently sexy relative to solar, or nuke, or clean coal, or any other hot energy babe du jour. The focus should be on getting rid of those policies that cause such massive market distortion and resulting misallocation of capital.
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Jon Rynn Posted 5:41 am
06 Aug 2008
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Sean Casten Posted 5:50 am
06 Aug 2008
Here's the interesting bit: DOE had looked at this technology years ago and concluded that it didn't make sense, because the energy savings at historic steel mill energy costs only brought this thing out to an 8 - 10 year payback and the mills wouldn't invest. They're taking another look now because of the increase in energy costs which - on an all else equal basis - ought to cut the payback down to 4 - 5 years. That all sounds very reasonable, but let's parse:
For expensive, next generation technologies that get the Sexy label (solar, nuke, etc.), the policy logic says "Technology X is good. It doesn't work without energy costs of Y, which is Z greater than current energy costs. Therefore will will provide a subsidy of Z". Meanwhile, for cost-effective, ready-for-prime-time technologies that are not fortunate enough to get the Sexy label (efficiency, conservation, etc.), the policy logic says "Markets are perfectly rational. Technology X is not being deployed. Therefore, technology X must not be good."
Both of those worldviews exist within our energy policy (and indeed, probably inside an awful lot of otherwise contiguous brains!) And yet they are fundamentally in conflict with one another, since one philosophy leads to a raft of subsidies that distorts markets and prevents investors from rationally allocating capital, and the second presumes that markets are optimal and capital not presently deployed is, ipso facto, sub-optimal.
As long as we continue to frame the debate as if we simply need to stick more technologies on the Sexy list, we don't address this underlying problem. So let's fix the problem. After all - going back to this steel mill example - we would have been vastly better off to get these efficiency technologies deployed years ago, since we then would have removed some fraction of the upward pressure on demand that is pushing the cost of energy up. Instead, we have defaulted to a perpetually reactionary path that insists on not buying a motorcycle helmet until we have demonstrated to our satisfaction that we are capable of crashing at high speeds and sustaining massive head trauma.
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PermieWriter Posted 5:53 am
06 Aug 2008
Time and time again, when people get defensive and say, "Hell no, I don't use CFLs," or insulation or double-paned windows, it's not about the money they'd have to invest or the look, it's about being told that they have to do something. Many, many people just hate being told to do something that is in their and the rest of our best interest simply because they're being told to do it. Efficiency marketing has a long way to go.
Eat what you grow, grow what you eat
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Sean Casten Posted 5:57 am
06 Aug 2008
At least on the electric side, I think a pretty strong case can be made that humongolicious increases in the deployment of efficiency would follow any subsidy removal. We've got industrials out there today paying 4 - 5 cents/kWh for their electricity. We've got utilities getting new power plants approved that will require 10 - 14 cents/kWh delivered rates to conform with modern rate law. And we've got subsidies to Sexy Tech like solar and nuke that can approach 20 cents/kWh on an all-in basis.
That's a hell of a spread. And since a kWh of conservation is just as environmentally pristine as the kWh from the solar panel (and a hell of a lot cleaner than the one from the new central plant), that spread causes massive distortion. Knowing that the industrials aren't investing in conservation to deliver 3 cent savings doesn't mean anything in a vacuum. But if we take the other two datapoints to conclude that society values new load at 10 - 15 cents with a 5 - 10 cent premium if it's clean, it's hard not to conclude that this is an awfully goofy test of rationality. How much efficiency would those industrials invest in if they got a 10 c/kWh credit on any load reduction.
And of course, that only includes one set of subsidies!
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Bart Anderson Posted 6:04 am
06 Aug 2008
I think conservation has been ignored by markets because it has not been seen as sexy. Sean makes some good points, but markets often have blind spots and I think conservation is one of them. (The great investors and business people are able to see the blind spots and exploit them.)
I think this will change, as the awareness percolates through our consciousness that fuel prices are going to continue to go up, and that alternate fuel sources are over-hyped (= bad investments).
One other thought -- why do we consider conservation not sexy?
Is there a chance that it might be that the US viewpoint might be a wee bit infantile?
Reminds me of correcting the papers of high school students who found Shakespeare, Steinbeck, Dickens, etc. boring.
Judging from the mass media, we prefer to be exposed to:
Fast cars, raw sex, explosions, invading foreign countries, fighter planes, torture, obesity, magical diets, stupid decisions, whining about the consequences of stupid decisions.
On the other hand Paris Hilton has a fairly intelligent contribution to the energy debate:
Paris for Prez?
Bart
Energy Bulletin
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Millstone Posted 6:09 am
06 Aug 2008
Generally I'm most familiar with the potential for residential improvement but have certainly read a good but about industrial consumers as well. Commercial improvements I'm less familiar with, but I know potential was there.
Anyhow I see a number of problems with getting private capital involved in pursuing EE projects:
As you mentioned earlier, the private company doesn't capture any of the long term benefits of their work. I can imagine a scenario in which the potential for profit seriously declines after taking care of the biggest players.
Buildings have a much longer lifespan than cars, so thankfully they can be retro-fitted; however, there isn't much incentive to pursue serious EE imporvements if you can't wait out the long ROI. I'm not sure but I would bet there is an invserse relationship between amounts of energy consumed and average time spent in a building.
Electricity still too cheap.
For residential I imagine we could see demand for EE increase if building codes were strengthened and people could see the tangible benefits of improved EE around them. In particular I feel like many of the dwellings used as poster children for EE are simply not aesthetically pleasing to most people, which I suppose is a result of #3 whereby as cost increases concerns about aesthetics will fall.
Really I think it boils down to cost and as you mention about the steel technology, the ROIs are getting shorter and shorter.
As for the sexiness factor, I think it is inspired by all of the things mentioned so far. It has kind of school marm vibe going on, finger wagging, concerned looks and this on top of the sort of elitist attitude of "OMG you aren't using CFLs, you must use CFLs!"
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David Roberts Posted 6:30 am
06 Aug 2008
The key, as others have noted, is to get it out of the realm of personal virtue and into the realm of policy -- specifically supply policy. Let's drill for efficiency! Let's invade the electricity sector and secure its efficiency reserves! Let's have sex with Paris Hilton while smoking a cigar and riding a Harley! OK, that last one doesn't really work, but I was in the spirit ...
grist.org
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Jon Rynn Posted 6:36 am
06 Aug 2008
So we have a disadvantage by having quarter-obsessed financial wizards. Again, might be a place for the government to move in (an unexploited niche?), to fund long-term investments. I know, there isn't the stick of the private market here, but historically, government "development" banks have done pretty well. Sorry to have to advocate for a government solution here, but it's something to consider -- and of course, it would be best to couple this with ending of warping subsidies and regulations.
And by the way, I will also point out that, like family run businesses, employee-owned-and-operated businesses would be more open to longer term investments.
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amazingdrx Posted 6:57 am
06 Aug 2008
Link efficiency to good jobs. It's just that simple. Subsidize conservation and efficiency and it will create an employment boom.
That's how you tap the sex drive.
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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Sean Casten Posted 7:12 am
06 Aug 2008
Fun fact: Since 2000, we've deployed 45 GW of CHP, all from the private sector and all in response to nothing more than market signals external to gov't stimulus. Could we have done more with proper stimuli? You bet. But the only generation that has added more capacity during that period is natural gas central station at ~ 100 GW. Most of which currently isn't running because of high gas costs, but that's another story.
The point is that this has happened in spite of gov't sops to all sorts of other industries deemed sexy, and society is the better for it. And during the same period, in spite of all sorts of subsidies, we haven't built any new coal or nuke.
This is getting off topic of efficiency and conservation specifically, but simply to point out that a government policy can be crafted to incent efficient capital allocation, and doesn't have to do so in the guise of a specific desired outcome beyond, well, efficient capital allocation. Could we instead say, in effect, "F*** efficient capital allocation. Just throw money at efficiency." Sure. And it would work. But it would distort farther, leaving some other good idea under-utilized and failing to address the underlying problem.
Bottom line is that I may simply be more optimistic than you about the potential for thoughtful energy policy - in no small part because for the first time since Jimmy Carter, energy policy is an electoral issue. Politicians are now finding it necessary to get educated on these topics if they want to get elected. Given the facts on the ground that they are coming to discover - and given that our previous energy policies were crafted largely by folks who didn't find it politically beneficial to learn those facts - I don't think its all that naive to expect something more than incremental shifts in who gets to eat at the subsidy trough.
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GreenMom Posted 2:52 am
07 Aug 2008
Jobs are sexy. People need jobs. Blue collar workers desperately need more blue collar jobs.
I'll recycle my old contest entry, which amazingdrx helped with...
Clean Energy. Green Jobs. One Living Planet.
We gotta link clean energy and green jobs. Van Jones / Green For All have it right.
Sean, you may not like subsidies, and yeah, they create market distortions, and yeah, we may yet have an opportunity to reform the regulatory system and ass-backwards Federal subsidies.
At the same time we need to subsidize, a la states and locals:
Businesses making energy efficiency improvements
Community colleges teaching green job skills
Wind and solar too.
None of this stuff is mutually exclusive, but in order to create public buzz for energy efficiency AND all this other stuff, we need to keep repeating the mantra:
Clean Energy. Green Jobs.
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stopgreenpath Posted 4:00 am
07 Aug 2008
It is the only thing that will make people think twice about leaving the lights on - a cash dividend for "good behavior."
It is truly insane to me that we are not serious enough about renewable energy/ reducing GHGs to have a Germany / Spain / Japan / (enter almost any country here) level FIT, but we are serious enough to permanently slaughter millions of acres of wildnerness? I'm sorry, but you CANNOT have it both ways.
Local POU renewables with generous FITs will make efficiency PAY OFF for everyone. Let's do this!!
the greenest energy is that which you needn't ever produce.
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Biodiversivist Posted 8:11 am
07 Aug 2008
Sexiness here is being used as an analogy for profitability. However, sexiness (the real deal) has everything to do with consumer purchases and proclivities. Status seeking urges would not have evolved without sex. Would it be cool (sexy) to own a three bedroom, 2.5 bath home with a living room, study, dining room and kitchen that is totally solar powered (no heating or electric bills)?
In the end, it all comes down to biodiversity. Poison Darts--Protecting the biodiversity of our world
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amazingdrx Posted 8:49 am
07 Aug 2008
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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Sean Casten Posted 8:52 am
07 Aug 2008
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amazingdrx Posted 9:02 am
07 Aug 2008
Ask your kids. They'll tell you. All the girls and guys want prospective partners with good, fullfilling, socially positive jobs.
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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spaceshaper Posted 9:51 pm
07 Aug 2008
Drill, drill, drill. Doesn't work. Sexy.
Conservation. Works well. Boring.
Cellulosic ethanol. Doesn't work. Sexy.
Biomass CHP. Works well. Boring.
LEDs. Don't work. Sexy.
CFLs. Work well. Boring.
Hydrogen cars. Don't work. Sexy.
Public transportation. Works well. Boring.
Clean Coal Technology. Doesn't work. Sexy.
Renewables. Work well. Boring.
Vertical urban farms. Don't work. Sexy.
Traditional rural farms. Work well. Boring.
Of course there's always the exception that proves the rule:
Paris Hilton. Doesn't work. Sexy.
George Bush. Doesn't work either. Boring.
The true meaning of life is to plant trees, under whose shade you do not expect to sit.
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Sean Casten Posted 11:17 pm
07 Aug 2008
The metaphor can be pushed too far, but there is a strain in the R&D end of our energy policy that is always on the lookout for strange. A friend at NREL once summed this up for me by telling me that he thought gov't was really good at developing technologies up to the "valley of death" and then throwing them into it - meaning that they could deploy lots of resources on stuff that the private sector wouldn't touch, but then found themselves having to abandon once they got the technology to the point that it was almost - but not quite - ready for the private sector to take the lead on commercialization.
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Jon Rynn Posted 12:14 am
08 Aug 2008
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