I previously noted that the financial crisis is likely to be very bad news for renewable energy developers dependent upon access to credit for their cash-hungry projects. Geoffrey Styles points out that a credit crunch will also affect consumer-driven efficiency improvements:
If consumers can't obtain attractive financing for more efficient appliances, heating systems, or rooftop solar power installations, the markets for those products will languish, and their aggregate impact on energy consumption and greenhouse gas emissions will be less than hoped, at least for the next few years. That also applies to more efficient cars, especially those involving technologies that add significant up-front costs.
There are few different things going on here. One is that consumers often make large purchases on credit. As credit tightens, many will simply be unable to obtain that solar water heater, for lack of access to favorable loans.
A second issue is consumer confidence. There's a tendency to simply hunker down when times are bad. And while generally consumption is thought to bring pressure on natural resources, the environmental math becomes trickier for products that are themselves consumers of energy. If you drive a 1983 Grand Cherokee, you do the world a favor by swapping it for a Prius.
A final problem is that the financial return on efficiency improvements actually drops when money becomes more expensive (that is, when interest rates go up). If you spend $1,000 on some new double-glazed windows that save you $100 a year in heating costs, you'll make your money back in about 15 years, assuming a 5 percent interest rate. Why fifteen years and not ten? Because you could also put that $1,000 in the bank and get a nice 5 percent return. If the interest rate goes up to 10 percent, however, your investment in double-glazed windows will pay itself back ... never.
On the flip side, if the credit crisis turns into a general recession, people will simply start using less energy to try to bring down their discretionary spending, much as they've curtailed driving in response to high gas prices. Unfortunately, such temporary cutbacks don't offer much in the way of structural, long-lived solutions to greenhouse gas emissions. And more to the point, analysts aren't really expecting the slowdown to affect carbon output very much.
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Comments
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mleonard Posted 5:49 am
23 Sep 2008
Are there some meaningful benefits to the Volt? Sure - R&D on battery technology, and further public exposure to electrification of vehicles. But we'll see how many of these GM produces a year, and how they position the car in terms of marketing and availability.
Don't forget their old electric vehicle program - they made a few EV-1's, had waiting lists from consumers to buy more - then killed the program citing "lack of consumer demand" - but they got some good credentials (for a while) from the whole process.
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Bob Wallace Posted 6:42 am
23 Sep 2008
And that EV-1? How long was the waiting list for a very limited range, expensive electric? Even a few hundred potential customers wouldn't work unless you used the Tesla model.
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racc Posted 7:44 am
23 Sep 2008
In tough economic times when credit is tight for companies and individuals, the focus should be on building high-speed rail, public transit and cycling infrastructure. Not only will this create jobs, it reduces people's transportation costs and keeps more money in local economies. Credit should also be much easier to come by and less expensive for public agencies. Labor is likely also less expensive so the cost of public infrastructure projects will be less than in boom times. It is not like anybody will be building houses for awhile.
GHG emissions fall in tough economic times due to less consumption, reducing the need for techno fixes.
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Duggles Posted 10:14 am
23 Sep 2008
Despite high hopes, the EV1 ended up being a money-loser for GM, said Berisa. The battery packs alone cost about $35,000 each to produce. (Getting consistent quality was a problem, he said.)
"The people who were leasing those cars for $350 a month were getting a killer deal," he said. "They just didn't know it."
I guess that's why they killed the electric car. Remember, no one bought an EV1, they just leased it.
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Adam Stein Posted 1:16 am
24 Sep 2008
www.terrapass.com/blog
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amazingdrx Posted 1:29 am
24 Sep 2008
It went too far though. Now people can't even afford to buy gas.
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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