Thank you American Council for an Energy Efficient Economy for clearing the decks to talk about tax policy and energy efficiency – enabling me with its Three Tax Reforms to Encourage Modernization of the Manufacturing Sector.
Allow me to divulge some truths about our confiscation, er I mean, federal tax policies. In five words: small business gets the shaft. Small businesses earn their profits in the US and they are pass-through entities, the profits from which are taxed at the owners’ personal tax rates far above typical effective corporate tax rates. The IRS extracts a pound of flesh for every three pounds produced. Corporations; not so much. (see the chart nearby). I can tell you why/how but that’s a story for beer time somewhere.
A case study in monetary and tax policy perversion of capital: Interest rates are nearly zero as the Ben Bernanke prints money to finance the deficit and debt. Taxes (the “cliff”) are set to rise in a few days so what are corporations doing? Dumping cash to shareholders. Costco for one is borrowing $3.5 billion to pay a one time $3 billion special dividend to shareholders. The debt will be repaid by future earnings. And former CEO, Jim Sinegal wants the rest of us and in particular small business to pay higher taxes. Hypocrite.
In fact, as of last week reported special one-time corporate dividends totaled roughly $23 billion and note, Apple with $90 billion in cash is not included in this list.
Conclusion: taxes matter.
The first proposal by ACEEE is to lower the tax on repatriated money. ACEEE claims the cost to the treasury would be low. I disagree. The cost to the treasury will be negative. In other words, the treasury will increase its haul because the current 35% of $0 is $0. Ten percent of hundreds of billions of dollars is billions and billions of dollars – not even counting the ensuing corporate, income, property and all kinds of taxes business expansion in the US will deliver. I have no doubt the majority of lawmakers in Washington are clueless about these things. A confiscatory tax rate that can / will be / is avoided produces no revenue to the treasury. The result is a pre-cliff surge in tax revenue in 2012 on LOW taxes followed by a dearth next year. I’ll provide the data when it becomes available.
- Bottom line: I strongly agree with ACEEE that repatriated dollars should be taxed at a far lower rate, if taxed at all.
The second proposal is to use accelerated depreciation to get a near term tax benefit from energy efficiency projects. ACEEE claims this will not cost the treasury anything because it simply shifts the tax burden to out years. I too like this policy but I would want it across the board. Defining an energy efficiency project would be a mess. Trust me. We have seen many absurd claims in self-directed (customer directed) / opt-out (of EE programs) projects. Companies, let alone the IRS, do not know what energy efficiency is. For example, spending money to consolidate manufacturing to one facility, or from two shifts seven days a week to three shifts five days a week is NOT energy efficiency. But customers think it is.
- Bottom line: I agree with ACEEE but let’s use accelerated depreciation across the board for all types of investment.
The third proposal is a tax credit of 35% of the investment in EE to be repaid over 10 years. I understand the benefit but linking it to reality is a bit more complicated than the first two. If the project lowered energy consumption by the cost of implementation over 10 years (e.g., 10 year payback), this gives the customer a tax incentive in year one to be repaid over the 10 years. So it seems like financing the tax payments.
- Bottom line: This wouldn’t be attractive to me and like the second one, it is too burdensome and easily gamed.
Number four is Jeff Ihnen’s idea: lower the corporate tax rate across the board and nix all the perverting tax loopholes and credits. Let’s move from the highest corporate tax rate in the world to one of the lowest, say 10%. Eliminate the tax on repatriated capital. The treasury is getting nothing from it now and allowing those dollars to flow back will allow companies to expand here in the US, creating corporate income tax, jobs and associated personal income tax. A summary of enormous benefits:
- Jobs – Washington’s clueless fixation.
- Higher tax revenue.
- MORE energy efficiency.
- Insourcing jobs.
- Capital will flood into the most productive country in the world – ours.
- Greenhouse gas reduction – think of that! China is building coal plants willy nilly. The US is shutting them down ON TOP of being more energy efficient and more productive.
Everyone except perhaps our foreign competitors and Washington wins here. However, there remains one mammoth obstacle: ignorance and/or lust for power in Washington. Lowering and flattening the tax code while getting rid of deductions and credits takes away power, manipulation, and ability to divide the electorate to win or buy the next election.
 Home owners may think this is good but there is no free lunch and I can explain that another day.
 Energy efficiency builds the bottom line and taking less in taxes makes it more attractive.
Last week I took a survey by AESP as they are gathering a pulse on where hacks like me think the trends are heading. This coincided with last week’s rant regarding the end of lighting, and I essentially gave AESP a special edition rant in the survey, for free! Unfortunately, I didn’t save my responses so I will just redo them.
In my responses, I used parallels between energy efficiency and diet and health. They are amazingly comparable. Much of energy efficiency is akin to diet soda and low-fat ice cream. The masses assume that, like doing a lighting retrofit, consuming diet soda and this, that, and the other low calorie crap will make oneself better off than they otherwise would be. The following is my view on diet soda, and I am not a conspiracy nut: consuming diet soda makes people ravenously hungry. Although I can count on one hand the times I drink a diet soda in between meals in a year, about an hour after doing so, I need a triple bypass Whopper and a pound of fries with a birthday cake and a bucket of ice cream to tamp down the ensuing hunger pang. Consumers would be better off drinking corn syrup and skipping the feast to follow.
Energy efficiency, like diet and health, must include the right consumer choices, a permanent lifestyle (behavior) adjustment, knowledge, and measuring the bottom line to be successful over the long term.
I already mentioned that lighting and other widget retrofits are the fat free, sugar free Twinkie of energy efficiency. All else equal, they will make you better off than you would otherwise be. However, all else is usually not equal. People start to consume more of this crap and more other crap. Moreover, the bottom line is the energy bills and the bathroom scale, not how many kWh saved on this or calories saved on that.
Successful, lasting energy efficiency requires making changes that move in the right direction, and not sloughing off in other areas. It requires constant monitoring of the bits and pieces of energy consuming devices and most importantly, monitoring the bottom line energy consumption.
The biggest barriers I see for the permanent EE lifestyle are lack of expertise and lack of time on the consumer side. I am talking about commercial and industrial customers here. I don’t know whether it is the three or four dollar gasoline, utility-delivered-energy price volatility, competition, public image, or other things, but interest in energy efficiency at the customer level is several fold greater than it was 10 or 12 years ago. On the flip side, staff levels are down across the board for public and private facility management. Many customers, when provided with sound information, the right follow-on services, financial impact data, and services like verification of energy BILL savings, will buy on.
This article from the Shelton Group was published on the same day I received the AESP survey, and it further beats my drum. Everyone thinks they are saving energy, while at the same time they say their energy bills are going up. This is clearly the diet soda effect. The article discusses ongoing nudges, reminders, warnings and such about rising energy bills related to certain activities. That’s all good, but as I said months ago, the consumer has to give a damn or they will tune out this noise. This is why in the AESP survey I said, “Residential programs are going to take a pounding in coming years because of a combination of codes and standards for appliances and lack of damn giving by this customer segment.”
I forecast that, in a way, the energy efficiency industry is going to parallel trends in the US economy over the past decades. The industry will become more service and information based and less so on hardware and equipment. Like manufacturing, hardware and equipment will always be a vital component to energy efficiency, but the big money and impacts will come from systemic top to bottom attention to energy efficiency detail.
 AKA “pop” according to portions of the Midwest populous.
 Follow on services can be as simple as more specifically defining the scope of a contractor and reviewing “shop drawings” to more detailed specifications.
Believe it or not, I did not have a rant topic in mind going into Saturday morning – my rant writing time. But the fog burned off quickly as a topic came into view – one that arose during the prior week. Incidentally, I once heard a “meteorologist” instructor say he always scolded his students for saying fog “burns” off. Instead, they should say the fog lifted. What? Fog is suspended water droplets, not vapor. Water vapor in air, or as steam, is invisible. When fog “burns off,” it changes from visible water droplets to invisible vapor, so while “burn off” isn’t exactly correct, it’s better than “lifted”.
As I understand it, certain regulatory agencies are getting bored with lighting. Hallelujah! Lighting is kind of like the Star Wars movie that nerds watched 26 times. At some point, it reaches saturation; it is no longer interesting, and it becomes boring. And even as a seven year old, I would be asking how can that garbage can on tiny wheels propel itself in sugary sand?
What comes after lighting? There are a number of packaged control products for mass markets including convenience stores and rooftop units. I’m actually excited about these widgets because they require sound HVAC design knowledge so certain things like the following do not occur: coils freeze into a block of ice, warm air stratifies into wide temperature variation from floor to ceiling, cold air dumps onto occupants making for cold spots in the occupied space, occupants die of asphyxiation (a slight exaggeration), and god forbid the beer isn’t cold.
After lighting, there is also of course, my favorite: the elimination of stupid and/or incomprehensible HVAC system design and the riddance of most energy hemorrhaging from systems and processes. This is virtually limitless in large buildings.
Moving onto the main topic of this rant: new construction. First, let me interject this hot tamale. Some program metrics for new construction success include post-construction energy consumption that matches energy model predictions. No. No. No. No. No. Say it with me. NO! Who cares if the answer is correct? This is the WROOONG metric. How much energy does the building use compared to similarly functioning ones? That is the metric. Customers shouldn’t give a rats if the answer is correct. They don’t get paid for that, and their energy bills aren’t lower as a result. This is an issue I came across TWICE last week in two different states! Regulators and program administrators – are you listening?
Now, understanding that the goal is low energy consumption, NOT right answers, although right answers are typically illusive, there are generally two categories in which to achieve low energy consumption. The first one is to select designs that are inherently simple and extremely difficult to screw up, and NOT extremely difficult to run with low energy cost. The second category includes innovative design, and I mean innovative design. There is nothing so common as “innovative design”.
What am I talking about? Innovative design? I can define this two ways, one for energy geeks and one for common people (not the song – BTW, the William Shatner adaptation is hilarious – good listening for a bad day). The energy geeks dividing line between standard fare and innovation is the common building simulation engine, DOE-2. If DOE-2 can handle the simulation in its entirety, there is no innovation; only incremental upgrades for a multitude of building and equipment characteristics.
The common person definition can be demonstrated with cars. The common automobile with four wheels, engine in the front, and sundry features such as a moon roof and rear camera dummy crash avoider is not innovative. Make em small. Put in tiny engines. Lower the drag coefficient (make them aerodynamic) and so on. Unfortunately, at this point there are few examples of innovative cars, but let’s just use the hybrid and the plug-in hybrid as examples of breaking the mould. The key breakthroughs include energy recovery from braking and an engine that operates in its sweet spot efficiency-wise whenever it needs to run. From an energy perspective, it smashes the model.
Similarly, there are building features that smash the model in ways that aren’t exactly like splitting the atom. Some include radiant heating and cooling, displacement ventilation, smart but easy demand controlled ventilation, and multiple types of energy recovery. The key is application of the technology to appropriate building types with specific needs, keeping it simple and making it difficult to screw up operationally, and keeping occupants comfortable. The DOE-2 engine doesn’t handle this stuff.
Since physical and absolute barriers for efficient equipment – lights, heating, cooling, controls for standard systems are nigh, I would guess the next moves would include the riddance of theoretically efficient but practically unworkable systems from energy codes.
 To use the old cliché, broken clocks are right twice a day, and so there is a difference between correct answers and correct calculations in many cases, especially when entering an error band.
The day after last week’s election, the headlines included discussions about the “fiscal cliff” coming on January 1, 2013, when the “Bush” tax cuts expire and substantial automatic spending cuts kick in. I guarantee this will not come and go without high drama. First thing after the election comes the ceremonial token olive branches, and five minutes later both sides return to sharpening their heals and digging in.
I would say energy efficiency has it’s own version of the fiscal cliff coming, and that is the end of the gravy train – lighting retrofits – the so-called low hanging fruit, a term I adore as much as the end of the day. Actually, it will be more of a descent into Death Valley as mandates phase out old-fashioned T12 and incandescent light bulbs. So what is the solution to the Death Valley Spiral? Vampire loads! This I read recently on a blog post or email. Going after vampire loads would be like making car radios use less power to improve gas mileage. Vampire loads don’t amount to squat, and I mentioned this in a blog a long time ago, but I just reran my own home tests.
First, what is a vampire load – energy consumed when a device is turned off. Leaving things on – like stereo and home entertainment equipment is not a vampire load. Here is my vampire load study:
The cable box DVR takes about 15 minutes to boot up, and it seems to not really have a power off mode, but if one likes to wait 15 minutes three times a day to save $20 in a year, go for it. Granted, this could certainly come with better not-in-use power characteristics. Nevertheless, this IS NOT a phantom/vampire load anyway. The VCR/DVD player burns a stunning 1 Watt, most likely to burn the digital clock on the display.
What is one frontier you never read or hear about? Stupid use of expensive fuel, and the most expensive fuel is electricity. If the country wants to take giant steps toward reducing energy consumption, why not promote fuel switching from dumb uses of electricity to natural gas wherever possible.
Last March or so, I bought a retractable clothesline for $12.95 at Menards. Simple payback: about 7.5 weeks (5kW, half hour per load, load per day, 10 cents/kWh). With the deck and clothesline on the north side of the house and winter coming, the “efficiency” of the clothesline is not so grand, so I’m staring at my 5 kW electric dryer.
Why do I have an electric dryer? Because in the La Crosse area, the standard apartment lease comes with “hookups” for washer and dryer but no washer and dryer. So, the hookups of course include electric-only energy sources for clothes dryers. Our choice, therefore, when moving here was electric dryer or the thrill of the Laundromat.
These hookups without appliances are as commonsensical as the Wisconsin bubbler. Tenants have to buy and lug washers and dryers from place to place? Why not refrigerators and stoves too?
The mom and pop stores around here, where I prefer to shop because service to me is king, do not even carry gas dryers. Electric water heaters are another travesty. Using electricity to dry clothes and heat water is the same as buying a Husqvarna 5kW generator that burns gasoline to make toast in the morning.
In a triple or quadruple irony, it reminds me of the Nissan Leaf commercial. Speaking of double ironies, you have to sit through an ad to watch the Leaf ad on YouTube. Electricity is actually a smart fuel for cars, just as wind is for power generation, but there are about 46 physical limitations and barriers for making it a decent full blown alternative to liquid or gaseous fueled transportation.
Some barriers to smart fuel switching include old school energy program thought. Without an exhaustive investigation, I am not aware of any programs that provide incentives to switch from expensive, and from a resource perspective, more wasteful electricity to less expensive natural gas.
The fuel switching is a matter of cross-subsidization where, for example, an electric customer gets a rebate from the electric utility for switching to natural gas. The electric rate payers are benefiting the gas customers. If you stop and think about this a little bit, it is entirely foolish. When the electric utility throws money at a customer for installing more efficient lighting, it benefits the light bulb manufacturers – in CHINA! What is the difference to the electric rate payers OR the electric utility? Electric rate payer money via EE programs is used to reduce demand and sales of electricity while benefiting others customers and other retail sellers of stuff. What difference does it make whether the stuff is light bulbs, insulation, windows, automatic controls, or natural gas?
And consider this, nearly all the new electrical generating capacity is produced by natural gas. We pay to build natural gas plants, poles and wires to produce electricity at perhaps 70% efficiency (roughly for combined cycle plants) to power water heaters, clothes dryers, stoves and other stuff. Therefore, we use more natural gas, not less. As a result, we require more infrastructure for both natural gas and electricity delivery.
Not promoting fuel switching costs consumers at every turn. What is the problem here? Figure it out. Let’s go.
 Not knowing what a bubbler is is about as shameful as not knowing the name of a character on an HBO drama series, or the third string center for the Packers – from the 1988 squad.
It has been a while since I’ve picked on an economist for his or her seemingly foolish statements and theories (other than the Ben Bernanke but I’ll get back to him later).
Ed Dolan, university / government wonk, states in an interview that there is no lock-step relationship between economic growth and energy cost. Rather, the world’s best performing economies have substantially increased their energy efficiency in terms of energy consumption per gross domestic product (GDP). He states while the OECD countries (Organisation for Economic Co-operation and Development) – about 35 mostly free countries – increased efficiency by an average of 55%, the United States did “a little better” at 81%. A little better? That is enormous.
Ok. There is a lot to chew on here. First, of course the economy does not move in lock-step with energy prices. If it did, our GDP growth would have been 200% cumulative over the past few years since the hydraulic fracturing boom for natural gas began. Instead, we’ve been growing at the glacial pace of less than 2%. Like carbon dioxide and global warming, “experts” argue whether ambient CO2 levels are a function of global temperatures or if global temperatures are a function of CO2 – what follows what in other words. No comment, because I don’t know and I’m burned out on that topic. But I would say energy prices and economic growth are barely related except in extreme long term cases, perhaps more than a year. The economy can impact energy prices or energy prices can clearly affect economic growth, despite Mr. Dolan’s assertions. Consider what the fracking boom has resulted in:
- Royal Dutch Shell is building a $10 billion plant in Louisiana to convert natural gas to diesel fuel.
- Pennsylvania recently won a three-state contest to land a multi-billion-dollar chemical plant, again from Shell. This plant will make ethylene, a feedstock for plastics.
- Several years ago, ammonia plants were being dismantled and shipped overseas for re-assembly and production. This is reversing, and ammonia production is booming in the US again. Ammonia is a key ingredient for nitrogen-based fertilizers as well as a refrigerant.
- Chevron Phillips will be building several chemical plants in Texas and Louisiana.
- Nucor is building a $750 million steel plant on the Mississippi in Louisiana. The feedstock for this is iron ore. I wonder where they may get ore?
- Even textiles, yes, textiles, are moving back to the US. Brazil’s Santana is building a denim plant in Texas.
Then there is the incredible job machine to drill for the natural gas and manufacture the stuff to support it. Despite the political class fighting to claim credit for the low unemployment in Ohio, it is the hydraulic fracturing boom that is soaking up the unemployed and drawing business from around the country/world. Economists at Citigroup estimate 3.6 million additional jobs from the fracking boom by 2020. This is moving the needle and not just helping out a few obscure businesses.
Back to Mr. Dolan’s commentary – he seems to imply that energy costs don’t matter but energy efficiency does. What is the difference in using a million decatherms at $5 (low cost) or a half million decatherms at $10 (efficient) in his context. This is the case we have compared to Europe where natural gas prices are triple or more than we have here in the states. Since the efficiency difference is a little higher compared to some countries and a little lower compared to others, cheap natural gas gives the US enormous advantage in a broad swath of the economy.
Natural gas is not like petroleum, the price of which is set in the global marketplace. At this point, natural gas is primarily a land-locked commodity transported by pipelines and not cost effectively by ship, although this will be coming. Therefore, low natural gas prices are a boon to the countries that have it. Natural gas prices are thus just as effective as efficiency at lowering production costs and improving profit. Obviously, I’d advocate for efficiency as a risk mitigation strategy in this case.
I agree with many things Mr. Dolan states. One is that traditional mineral rich parts of the world are less free and less industrious; in my opinion because they have wealth to spread around, and that wealth is controlled by thugs like Hugo Chavez and Vlady Putin. I agree with his concerns about environment-be-damned, “low-competence” Russia. With massive conventional sources, they can waste it and be competitive, and take that energy to the world market with very little margin for environmental disaster – see Chernobyl.
The interviewer then asks about the Ben Bernanke’s money printing, romantically known as quantitative easing, which sounds like a laxative. Mr. Dolan says it isn’t the magic bullet. This is correct. It isn’t a bullet at all. It’s a stool softener.
Just like energy prices, interest rates can lead or follow the economy. Unlike Mr. Dolan, the Bernanke seems to think interest rates are virtually the only parameters of economic fuel. It’s like having a pig of a building and all the Bernanke knows is lighting. He retrofits the lighting with T8 lamps (tubes). Still a pig. He replaces them with 28W lamps. Still a pig. He removes lamps. Still a pig. He limits fixtures to one lamp per fixture. Still a pig. He cuts the wires in the panel and gets electrocuted. Still a pig. And there remains a plethora of unintended consequences due to sheer ignorance, like people can’t see and have to walk across the street to use the restroom. Possibly, the pig is running its chiller all year because the outdoor air dampers were wired shut and half the heating valves are shot requiring the discharge temperatures to run at 48F all year. Possibly something else is wrong. Do ya think? Forcing one parameter to obscene levels cannot make up for Everest size problems and barriers elsewhere.
Jeff Erickson of Navigant Consulting presented an interesting paper at last week’s American Council for an Energy Efficient Economy (ACEEE) Summer Study for Buildings. The title was, “Occupy Wall Street and the Tea Party Battle over Energy Efficiency.” I thought it was just clever (aka bait and switch) advertising, but the presentation featured, almost exclusively, how the free market, small government tea party and the profit-bad, regulation-good occupiers might view energy efficiency.
The tea party would favor consumer choice for incandescent light bulbs and gas guzzlers over government regulation of these common, and other uncommon for that matter, consumer goods. They would also advocate free markets for energy supply. The problem with this notion, however, is that the utilities were developed on a regulated monopoly business model, I would guess for economies of scale reasons. Also, natural gas and electricity are more like public benefits, as are roads, water, and sewage systems.
Free enterprise exists where barriers to entering a market are reasonably affordable, where access to consumers is vast, and/or where the product or service is pretty much optional. In my case as an electricity consumer, for example, the street transformer, the wires feeding it, and the wires going to my house from the transformer up to and including the meter, are owned by Xcel Energy. I can only guess where the electrical supply actually comes from, but it is safe to say Wal-Mart is not an option for buying electricity at this point.
Consumer choice for electricity, for me, realistically includes: (1) Xcel Energy, (2) a natural-gas-fired generator, (3) photovoltaic / batteries, or (4) other options that are even less cost effective. At the current bargain basement cost of about 70 cents per therm of natural gas delivered to my house, I could generate electricity for roughly 12 cents per kWh. This, of course, does not include the $4,000 (or whatever) cost for the electrical generator churning out electricity with a stunning 20% efficiency.
Switching gears for a moment, I’ve overheard discussions of how the deregulations of the telecom and airline industries have been failures – how? Apparently because many carriers filed for bankruptcy. These are failures of adaptation, not failures of market changes. Nearly all, if not all the legacy airlines have filed for bankruptcy and others like Eastern and PanAm were essentially liquidated. These legacy carriers were saddled with unsustainable contracts with unions. The “solutions” included crippling strikes and/or eventual bankruptcy to put these doomed-to-fail contracts through the shredder and start over.
I was just explaining to my friend how Delta Airlines had retrofitted their planes to have skinnier chair cushions to shoe-horn another row or two of seats into their cattle-class cabins. His response: “Dude, but you can still fly practically anywhere for $400.” True. In twenty years of business travel, plane tickets haven’t budged much at all, EVEN with much higher fuel costs. I bet that non-fuel cost per passenger mile has actually declined over the same period because new low-cost carriers like Southwest, Frontier, and Jet Blue have joined the market. I call this a huge victory for consumers. Telecom, the costs for which I know much less about, has been a similar smashing success. Long distance is so cheap at any time of the day, it isn’t worth tracking – better than the buck a minute for “collect calls” from the 1970s. Half the readers probably don’t know what a collect call is. Again, a few bankruptcies of cement-shoed companies later, consumers have benefited hugely.
Deregulating utilities, electricity in particular, has never been successful to my knowledge because it meets none of the criteria above. Consider water and sewer, which, like electricity, are necessary for modern life. It is less expensive (and hassle) to hook up to a central municipal system that uses vast economy of scale to provide these critical services at a virtually negligible “startup” cost, and very low operating cost. It also provides environmental benefits of lower risk by poking fewer holes into the water table and better containment of nutrient-rich sewage. I’ve seen lakes go from green algae bombs to nice clear water in just a few years with the installation of municipal sewage systems for homes that lined the lake shore.
Regulated monopolies that exist with large centralized providers of “the necessities of life” will continue to be the best option for consumers – for as far as the eye can see. Policies to minimize cost with reasonable environmental regulation are necessary, while consumer choice is preferred.
This is why, in my opinion, our industry needs to lay off mandates for “unequal” alternatives. Unequal alternatives include standard and halogen incandescent light bulbs, CFLs and LEDs. Each has one or more substantial differences in cost and output, including color rendering and full startup time. Conversely, standards for some consumer appliances have demonstrated in numerous cases to be huge successes. One example is the lowly refrigerator. Energy consumption for refrigerators has fallen by almost three quarters since the early 1970s while inflation adjusted cost has barely budged at all. More importantly, cold is cold. The beer, ice cream, and lettuce don’t know the difference.
Other success, of course, includes cost effective lead-by-carrot programs that incentivize cost effective, efficient alternatives – and no, I am not repeating myself. The programs AND the products and/or services shall be cost effective for consumers. Energy efficiency shall be the lower cost resource alternative to more power plants, fuel, poles and wires. This is something the tea partiers should get behind with some well-presented market information.
Unfortunately, some products and services in life still require cash – coins or paper. Some of the last places I use these anachronisms include taxis, and… and tips, or an occasional soda machine. Oh and the beloved antique parking meters and toll roads in some places. Here is something to consider: if the meter only takes coins, skip it. You’ll spend $50 of your time finding a few bucks of quarters somewhere and running to the meter every hour or two – all to save a $10 parking ticket.
A few times a year when traveling with others, we need cash or coins for a parking meter. How much money do you have? Nothing. Nothing. Yes. Nothing. Yes? What does that mean? As an answer to, “how much money do you have?”, “yes” is about as useful as some benchmarking results I’ve seen.
There is benchmarking, and there is BENCHMARKING. Most consultants say they do it, but it typically varies somewhere between almost useless and misleading information. Why? Because they tell you how many coins and bills they have in their pockets and not how much MONEY they have in their pockets.
The typical benchmarking reports energy consumption in Btu or kBtu (thousand Btu) per square foot. The value of a Btu of energy depends on its form. Is a hunk of wood with 100,000 Btu worth more than a therm of natural gas (80 cents on my last bill), or 30 kWh (more than $3 on my last bill) – each with approximately the same Btu content? A chunk of firewood with equal Btus to that of a therm of natural gas is worth less than the natural gas, and natural gas is worth less than equal Btus in electrical form. Why? Because natural gas and electricity are more useful and flexible forms of energy.
In every benchmarking thing I’ve seen, all Btus (electrical and fossil) are mixed together. In some cases, the electrical Btus, which are worth five times as much as fossil fuel Btus, count the same. This is worse than worthless because it can be terribly misleading.
Recently in a meeting I quipped, “I hate it when fossil and electric Btus are mixed together for benchmarking.” The guy next to me said, “Well, it’s like city mpg versus highway mpg.” Come again? I bit off a piece of my tongue and mentally rolled my eyes. This is exactly the same as valuing one dollar bills the same as five dollar bills. It’s worse than worthless. It is misleading.
Other benchmarkers at least true up the Btus to provide some sort of apples to grapefruit comparison. They use source Btus, which are those thermal Btus back at the power plant used to generate the electricity. These are then added to fossil fuel Btus from the site (building). This is better but still not very useful.
ENERGY STAR® for commercial buildings uses this method to determine the energy score of a building. This source energy comparison serves its purpose quite well for ENERGY STAR, but what it fails to tell the owner is, where is the opportunity – what fuel, and what might the opportunity be worth?
The chart below, for example, shows energy intensity for three hypothetical elementary schools, each with full air conditioning, and each with realistic energy consumption. You can see how terrible site Btus are for comparing energy performance, but yet amazingly, that is what some in our industry use. It can easily provide upside down results as shown – the worst building has the lowest site Btu consumption because all the Btus used at the site are expensive electrical Btus.
Useful benchmarking takes a human brain with experience because buildings are rarely as clean cut as these in the example. Buildings are used in different ways, particularly in the summer. They have additions, sometimes many, with different types of systems. They may share meters and almost always have multiple meters. Just knowing if you have all the meters, and only the right meters, takes experience and expertise to flag something that simply does not look right.
Did I mention some buildings, especially schools and some industrial facilities, are only partly cooled all year? ENERGY STAR® benchmarking for these facilities is going to be somewhat to very misleading. To qualify for the ENERGY STAR®, you can’t cheat, letting occupants swelter in hot weather. In other words, you can’t earn the ENERGY STAR® by letting the occupants freeze in winter, cook in summer, and sit in the dark all the time.
If your benchmarking tool, or guy, can’t tell you whether a building is a fossil fuel hog or an electricity hog and then convert it to a ballpark energy saving potential in dollars, call somebody else. You can’t buy stuff with a payback and you can’t buy stuff with an ENERGY STAR® score. What you need to know is, “What can I do about my cash flow?”
 Btu = British thermal unit – heat required to raise the temperature of one pound of water one degree Fahrenheit.
 It takes three Btu of thermal energy to produce a Btu of electricity but it also takes power plants and transmission and distribution to deliver to the customer; thus the multiple of five rather than three.
 Energy use per square foot or “SF”.
Widgetitis: Obsessive compulsion to build canals with teaspoons – or meet program goals with showerheads.
A short story about economist Milton Friedman from The Wall Street Journal sort of sets the stage for effectively meeting program/portfolio goals in big chunks:
“Milton recalled traveling to an Asian country in the 1960s and visiting a worksite where a new canal was being built. He was shocked to see that, instead of modern tractors and earth movers, the workers had shovels. He asked why there were so few machines. The government bureaucrat explained: “You don’t understand. This is a jobs program.” To which Milton replied: “Oh, I thought you were trying to build a canal. If it’s jobs you want, then you should give these workers spoons, not shovels.”
Widgetitis is a term I “coined” this week for the title of my ACEEE paper to be presented in August at the Summer Study for Energy Efficiency in Buildings. The context is obsession with products and stuff which have evolved to the point of diminishing returns, total free ridership, and grasping for rather absurd widgets to get savings goals. Meanwhile, Rome burns with buildings hemorrhaging energy like a severed jugular in a Freddy Krueger movie. Some examples, Jeff?
My favorite: the programmable thermostat. We have evaluated these things all over the country and the savings are abysmal for numerous reasons which I explained in a past brief. If the customer gives a damn and would program the thermostat, they would already be manually controlling their old fashioned thermostat precisely per their occupancy patterns. My mother, for example, turns the stat down when she goes to bed or leaves the house for whatever reason. She may leave the house for her grandson’s evening ballgame or a weekend away, or she may spend the night watching TV and the weekend hosting guests. Do ya think a programmable stat is going to save anything here? No! It will waste energy and make Mom angry. The person that doesn’t give a damn will put it in override all the time. The person that does give a damn will override it for manual control.
The occupancy sensor for lighting. For reasons similar to the programmable thermostats, savings for these things can run in the red. People who care turn the lights out when they leave the room. For these applications, occupancy sensors waste energy when they replace manual switches as the controller leaves the lights on for a while after the room is vacated. This delay is necessary. Otherwise, lights would turn off every time an occupant sits or stands still. Which brings me to the next point; the damn things turn the lights off while you work studiously. You have to move about four feet to trigger an infrared sensor. Blinking your eyelids will almost trigger an ultrasonic sensor. When I walk into our supply room controlled with an infrared occupancy sensor, I’m 5 paces into the room before the lights come on. Good thing I know where the X-Acto knives are stored or I may hemorrhage like that Freddy Krueger victim.
Computer control software. This is software that is installed on a network server and shuts down or puts corporate and school computers to sleep. The problem again is, many/most people shut down their computers normally at 5:00, but to be safe, these systems don’t shut them down till 7:00 resulting in longer run times. And who uses a desktop computer now days? People use laptops, tablets and iPads that burn an incredible 23 Watts max and they take them home at night!
Server farm virtualization. Technology moves so fast that those suffering widgetitis weren’t able to catch this virus. Whoa, that’s like a quadruple pun – like a double eagle, a 75 foot swish, a 109 yard kickoff return, back to back perfect games, or hitting for the cycle twice – in one game! I know as much about body embalming as I know about computer networks, but server virtualization includes loading up machines and making them work at full(er) capacity rather than have five times as many partly loaded machines. The objective is to reduce the number of servers required and energy savings come along for the free ride. Virtualization saves money by requiring less hardware and is therefore, an undisputed free rider – not to mention that it would crash benefit/cost tests.
Dishwasher pre-rinse heads. I know less about this technology than embalming. Obviously it reduces water (presumably hot water) consumption for commercial dishwashers. I don’t know about you, but to me cleaning dishes is like fighting fires. You can dribble water forever or blast it for a second. This may be a perfectly viable measure, but Rome continues to burn.
The most recent case of widgetitis came to our attention recently – a doozer: tight sealing damper blades for a skyscraper to reduce infiltration. Rome burns. I’m sure everything else in the building is running in tip top shape, milking every bit of value from every Btu consumed.
The crux of my ACEEE paper is to eradicate widgetitis in new construction programs. When I see new construction reports that only include occupancy sensors, daylighting controls, energy recovery, efficient this that and the other, more insulation and better windows, why bother? Ok. There, this provides some benefit cost information for decision making but does it bring innovation to the table?
All these criteria and specifications can be legislated – meaning they can all become part of the code and there is an end of the road for this across the board. Two examples that have reached the end of the road: motors and exit signs. Then what, Widgetman? There will still be plenty to do in new buildings and even more for existing ones.
Innovation: the creation of something in the mind. Widgets, while vast, are limited. Applying, assembling, and controlling them to minimize energy consumption is not.
Possibly the greatest thing about energy efficiency is there is no limit to learning. In what other occupation can engineers work with social scientists, urban planners, economists and 16th century Mongolian art majors? Last week I attended a presentation by Christopher Russell, energy efficiency and finance swami, or is it guru? The higher ranking one. Or maybe I should just call him Colonel Russell.
His presentation started with the tale of two college campus facility managers, Doug and Dave as I recall, with names changed to protect the guilty. I’ll call them Dick and Harry for double protection.
It doesn’t happen very often, but every once in a while a person tells an energy efficiency program or project fable that I find myself violently agreeing with. In this case, Doug, er I mean, Dick was presented as an all-too-familiar customer representative/facility manager. His attitude is “energy is a necessary evil, a fixed cost, and not a resource to be harnessed,” and his idea of success is to keep the phone from ringing with problems and complaints. Gee, this sounds just like many HVAC and automatic controls contractors. Just slap it together, stop the phone from ringing, and move on to the next project. I don’t care what the energy consumption looks like, just stop the complaints. Who cares what the energy implications are? But I digress.
Doug Dick is a status quo thinker. He believes the pie is fixed and everyone must fight like a boorish thug for their budget. Then, once his slice sequestered, hoard it, and if necessary, spend it to (god forbid) reduce the budgeting leverage for next year. This is standard practice for government, by the way, including the Navy (at least back when I was there).
Dick Doug is eventually handed a mandate from on high to reduce energy consumption in campus facilities by XX%. Hire an energy efficiency professional to best determine maximum return on investment? Hell no. That would cost a lot of money, make Dick look dumb (he thinks), and the EE pros will recommend a slew of projects that upper management may get their hands on, which results in Dick having to do even more stuff! Rather, Dick decides to be proactive for a change and implement an expensive project that will drag on a couple years to keep the greens off his back. In this two year span, he thinks the fad will blow over… and then it hit me. Dick, the facility manager, is like the Taliban. He is dug in, resistant, and will never surrender. He will weather the storm and wear down his adversaries with brutally intransigent patience.
I have a great deal of passion for energy efficiency or I wouldn’t be in this business for 16 years. Reasons include; non-renewable resource preservation, saving money and increasing profit, risk mitigation, and all that sustainability stuff. However, thanks to Mr. Russell’s analysis and one question I asked, something like a cold fusion miracle occurred. He used an example, but I made up my own. A detailed assessment for a new energy management system has been completed and the project data is shown in the table nearby. I’m not going to puke all that information back at you in words, but I would just point out the lousy 5.8 year simple payback. Most customers would laugh and tell you to get lost because they only do projects with a simple payback of 2.0 years or less. A million years ago, I wrote an Energy Brief explaining why simple payback is a terrible metric to make decisions with. One reason it is lousy, as discussed way back then, was because payback has nothing to do with wealth. For example, what does a 2 year payback tell you about how much working capital the project will generate? I can’t buy lunch with a payback.
The annual cash flow shown includes the 15% down payment the smart guy, Dave, er Harry represents the plunk down of $39,000 for this project. Over the 10 years of the loan there is a positive cash flow (savings greater than payments) of about $2,000-$6,000, depending on the interest paid on debt, which is tax deductable. That looks pretty cool but still not that hot, Jeff.
Then we have the cumulative cash flow, and wow, this is suddenly becoming impressive. At the end of the 20 year life of the project the cumulative cash flow is $360,000 for a not-too-shabby internal rate of return of 18% on the original $39k down payment. Or you can do nothing and destroy $585,000 in capital on wasted energy. Try to get that kind of return in the stock market! Speaking of which, I have that comparison too.
Warning: Place your index and middle fingers over each eye socket before gazing at the chart – to keep your eyeballs from popping out of your skull.
I apologize for the positive message this week. This was a pathetic rant. Next week I will discuss other features and benefits for investing in energy efficiency.
 Note this is for demonstration purposes only. The wealth created by doing the project is
 7.5% compounded average gain since 1972
The best thing about working in our industry is the potential for continuous learning, unlike nearly any other field. There are enough things to learn about buildings, manufacturing, systems, how they are built, as in design, construction and commissioning to fill a 45 year engineering career. One always finds something “new” even in old buildings – bizarre design concepts for example. Have you ever seen how Fig Newtons are made? It isn’t easy.
Engineers might think, what else is there to programs besides determining energy savings, simple payback and possibly ROI? About 75%, if not, more. There are market assessments, energy-savings potential studies, program development and implementation, and evaluation. Skills needed to support the industry include marketing, economics, statistics, sociology, psychology, political science, and criminal justice. Well, maybe not so much of the latter just yet.
The topic of this rant is energy savings potential studies; in other words, the potential for energy savings in a market, which is typically defined as a state or a utility’s service territory. There are four levels of potential:
- Technical potential: this is how much energy could be saved regardless of cost-effectiveness. When the federal government talks about potential, this is it because they never care about cost effectiveness. We, on the other hand, live in the real world with constraints.
- Economic potential: That’s right – the subset of the technical potential that is cost-effective by some definition like “total resource cost”, “ratepayer impact test”, and “utility cost test”. Some of these have squishy benefits included in them like societal benefits and you can assign to that whatever you want – like the value of not looking at a transmission line makes society 0.0001% more productive due to the avoided bad mood of workers and its impact on productivity. Or electromagnetic fields that cause cows to produce less nutritious milk and calves with three eyes. Or lower criminal justice costs because less infrastructure provides less opportunity for copper thieves. They will have to steal something else and maybe that something else will be less dangerous resulting in lower healthcare costs paid by the lowly taxpayer.
- Market potential: This is how many of the economically justified measures can get implemented. This is tricky as consumers are irrational so I used to say market potential is a subset of economic potential, but not really. For example, back in “Replacing the Burger” I talked about how people would rather get 500 points toward a free Starbucks than buy a CFL with a payback of one month and a life cycle savings of $4,000.
- Achievable potential: I’m not positive on this one but I believe this is a subset of market potential and differs by limited funds of any program. While you could convince 1,000 customers that doing something is smart, you only have money to reach three of them, in addition to your mother and one coworker.
Results from potential studies contribute to a lot of important things, like determining how many millions of dollars to spend on programs, what customer sectors, technologies and services have the greatest potential for return on ratepayer investment.
I think it’s a pretty good guess that just about everyone reading this has shot baskets with a basketball. Most likely not everyone who has shot baskets has done so with their eyes closed – just tried it before – something stupid to do in a game of h-o-r-s-e. Or, have you turned off the headlights while driving down a dirt road at 60 mph in the pitch black of night? Just for fun? I actually feel I have a little more control in the latter situation.
What do you want to achieve when you shoot a free throw with your eyes closed? Not to look like a fool right? You want to at least hit the rim; not throw an air ball or something over the backboard clanging around in the iron back there. Even a brick would be satisfactory and give you a feeling of achievement.
Some potential study requests for proposals ask for the blindfolded free throw, probably expecting the results of Larry Bird and Danny Ainge at the free throw line with their eyes open. (I’m an old timer and I don’t know any of the thugs in the current NBA– back then, they only had cartoon thugs, like Dennis Rodman).
The blindfolded potential study consists of do it fast with no or very little primary research, which means no talking with customers or investigating their facilities.
Our role in these things is typically data collection and measure ID. My expertise does not include crunching the data and puking out numbers that serve as targets for program portfolios. But common sense tells me you’re going to get much, much more reliable information with a decent set of primary data. We just bid a project with in-depth site surveys of 950 homes. Now THAT is primary data and it will produce the best estimates possible I have to believe.
How does one handle a study with no primary data? I’m not sure but I think it includes a heavy dose of looking out the rearview mirror, applying new codes and standards going forward, extrapolating the curve for new codes and standards, and copying what the neighbors are doing. A blindfolded study cannot uncover new potential that programs are totally or mostly missing. One could also apply some economic analysis due to market acceptance of technologies and its impact on cost – and how that cascades down to market and achievable potential. This method I say is to pick and answer and reverse engineer the arithmetic to make it so.
As an example, the following chart demonstrates the results of a potential study I saw a few years back. The data have been removed and the years were different (I just pulled energy numbers and years out of the air but the graphic looks almost exactly like the one it mimics). Look at the results of the study – it’s purely an extrapolation of what has been happening. Congratulations. The result is the goals actually caught up to what was happening anyway.
I plead guilty as well if I can’t get my hands on SOME sort of real data. But how much do you suppose was paid to produce the results above? No idea here but it’s pretty safe to say the answers were destined before the data were collected.
I came across this interesting study performed by engineers from Columbia University. It shows energy intensity per square meter (don’t ask) of building footprint. As I said, it’s interesting but not very useful. It does not include building square footage so obviously the Chrysler building is going to consume more per square meter than some brownstones on the upper west side.
I also doubt the crude end-use analysis showing only 5-10% of electricity consumption from cooling. These buildings probably require mechanical cooling half the year on average, some probably all year. A bleeding edge cooling system will require 1.3 Watts per square foot at full load. The actual average efficiency is probably half as good, doubling the power/energy required for cooling. Throw on poor control of typical systems and it’s probably closer to 3 W per square foot on average and roughly 3 kWh per square foot for a good system and 4-5 kWh per square foot to middlin to poor one. Now you’re in the neighborhood of lighting consumption. End-use data from various sources confirm, cooling’s share of energy consumption is about 30% in the NYC climate.
Before I get to this week’s rant, or I should say, this week’s primary rant, I need to share this with you. Just before the holidays in Strange Magic,I tore into hands-free energy audit software. All you need is an address and billing information and voila, there it is; an energy audit that tells you everything you need to know to cut your energy bills by a certain guesstimate.
This week I came across an apparent competitor to the one discussed in Strange Magic, so I viewed their online charting and graphics. They present analysis via bar chart for various end uses; lighting, cooling, heating, miscellaneous, and so on. They present current consumption and potential consumption for each of these, demonstrating a savings of course. It took about three seconds for my eyes to pick up the fact that the ratio of all the end uses looked very similar. Sure enough every single one of the seven end uses has a potential to save almost exactly 23%. That will never happen. It would be like every guy on a 12-player roster scoring exactly 10 points. That isn’t how it works. Ever.
Now dude, this is bordering on fraud if you ask me. What did I say in Strange Magic? The best you can do is guesstimate savings potential for the entire building with the information you can get from billing records and a street address. Do not be fooled by this crap!
You old gray hairs like me would remember the days when they had cartoons before the movie started. That was the cartoon, except for it is serious as a brain tumor. On with the main attraction.
Our beloved California is once again “leading” the nation in energy efficiency policy. This time the target is… drum rolllllll… the phone charger! More accurately, all chargers – so-called “vampire loads”. So this week’s rant features analysis and research conducted in my house.
I’ve seen a number of articles on this topic but this one from Energy Efficiency News seems like a good one.
This is California with 37 million people and so the numbers are incomprehensible until we start pealing back the onion. These charger devices are reported to consume 8 billion kWh, or 8,000 GWh. There are 12 million households in CA, averaging 11 chargers per household: 120 million chargers. Do the math and you get 17 kWh per charger saved annually. If they are saving energy 24/7/365; dividing 17 kWh per year by 8,760 hours/year results in 1.9 Watts saved every hour of every year for every charger in the state. The article states that this is 40% savings, so the average charger wastes almost 5 Watts all the time according to California. See nearby chart for clarification.
So is this reasonable? Here are my findings using a “Kill A Watt” 120 Volt power meter:
- My phone, Motorola Droid Pro smart phone: Consumes about 7 Watts while charging, and turned on. Once it’s fully charged, it cycles between 0 and 3 Watts, mostly on zero. When the screen is turned off, you have to wait a long time before it gets a micro shot of 3 Watts. So it uses almost nothing when plugged in, turned on, not in use and fully charged. When it tells me it’s fully charged, unplug it to save energy, it would take 16 years to save a (one) kWh. I’ll get right on that.
- iPod Touch: This thing is identical to the iPhone without the phone part. It guzzles a whopping 3-4 Watts while charging AND in use.
- Dell Mini Computer: Booted up with the lid closed and monitor off uses 7 Watts. With the monitor on, 11-12 Watts. In use while charging full blast: 30 Watts. Shut down with a full battery: 0 Watts.
- Dell 4200, 12 inch laptop (my real computer): Booted up, running a bunch of apps, monitor on and charging full blast: 40 Watts. All else equal with the battery fully charged: 16 Watts. Shut down on a full battery: 0 Watts.
- Rayovac battery charger with 4 AAA batteries: 3 Watts. I don’t know how these things work exactly but they seem to consume consistent power. The batteries are always warm – 3 Watts warm.
So first off, as one blogger pointed out, saving energy by eliminating “vampire” loads is crap. Vampire loads don’t amount to squat. I’ll tell you want does amount to 10% of squat: not shutting down equipment like computers, stereos, DVRs, and stuff like that. But these aren’t vampire loads. They are load loads for crying out loud.
The vampire loads with my electronic stuff, which has to be pretty typical of battery chargers, is virtually zero.
Back to the battery charging. The power factor on these battery chargers is poor, at only 0.5 or so. Could it be this is what the once-golden state is targeting? Not so much. Poor power factor simply requires more current on the wires from the generator to the device. More current means more line losses. Line losses from generator to point of use are roughly 10%. So if we take 10% of 15 Watts (the remaining 0.5), ooh, ooh, 1.5 Watts. Well I’ll be darned.
This is within the realm of possibility but probably not likely. All of these 11 devices per household would have to be in use 24/7, at least (?). The savings is probably closer to one third of that claimed, or perhaps a quarter. The devices most likely use substantially less than 15 Watts on average – see the phone Wattages above.
But who gets the savings from power factor correction? Not the consumer; at least directly. Residential customers in every precinct I know of pay nothing for crappy power factor. It all boils down to reducing losses by my guesstimate of 7 Watts per household, or a whopping 6 kWh per year per household. You’d “save” more by reusing your towels a couple times per wash, in a couple weeks.
But remember, consumers don’t save. It’s actually the utility that saves. In a regulated market, some of that would flow to the consumer in the form of lower rates because the utility recovers more revenue for given assets: generation, poles, wires and fuel. However, the amount is so tiny, it’s within the margin of error I’m sure most likely upgrading chargers is a waste of money for consumers.
Rambling on just a little more, The Washington Post report on this, calling it “vampire battery chargers,” says “Chargers waste electricity by continuing to draw electricity even when a battery is full and suck energy when laptops, cellphones, digital cameras and other devices aren’t plugged in.”
Chargers continue to draw power even when the battery is full? Well duh! The device is still running. As I found in my tests, shutting down the device with a full charge and the thing plugged in results in ZERO energy consumption. Maybe I should call Kill A Watt because their meters don’t work, apparently. Chargers still draw power when nothing is plugged in? None of mine do at least to the threshold of a tiny 1 Watt.
Lastly, the Times article says chargers waste up to 60% of what they consume. What happens with this 60%? Energy waste is almost always if not ALWAYS given off as heat. We’ve established that laptops consume about 15 Watts provided by a “charger” – an electronic doohickey (rectifier or something like that) that converts 120 Volts of alternating current into a few volts of direct current for computer consumption. This is the only place this ~50% waste can occur because my power cords aren’t melting. A 15 Watt CFL from my laboratory heats up to about 160 degrees. My charger: 85 degrees, while delivering 16 Watts.
It’s been a while since my heat transfer courses but I can promise the heat loss from the CFL is a complicated model because of the geometry. However, it is safe to say it has a lot more surface and better orientation to enhance heat transfer. That being the case, if both the CFL and the charger are wasting 15 Watts, the charger should be much hotter due to its small size (next to Bailey’s paw for scale) and lousy heat transfer characteristics. So I conclude there is very little real energy loss from these devices. To cover the phones, their charger physical size and profiles are much smaller and not warm at all.
I declare these vampire losses to be more of a flying rodent loss and somebody, preferably a team of engineers should spend a day or two, determining the real savings because it isn’t 2 Watts per charger as claimed.
And BTW, the power factor of that CFL 0.59. Uh oh.
The race is on to develop and deliver next generation successful energy efficiency programs. There is indeed innovation in the marketplace. The days of what I call “hamburger selling” will end, probably in the next decade. Selling EE in these cases is like selling hamburgers – who can sell the most and the cheapest hamburgers that people will eat. The product is unsophisticated – lighting, primarily. The market is huge and opportunities ubiquitous. Marketing and selling the burger is the name of the game and will be for a few more years.
In the past five years, energy efficiency has spread like wildfire across the country and although it’s a little twisted, if you consider all the vegetation, grass, trees, shrubs, and scrub as EE potential, the wildfire has consumed only the grass. The grass will soon be gone. How will the shrubs, scrub, and trees be reeled in? It will require a combination of technology, but more so intellect and selling things (programs) people want.
What will this look like? I’m not telling because it’s intellectual property, but I will say I can see it beginning to happen in the residential sector. Last week we attended the Midwest Energy Solutions Conference hosted by the Midwest Energy Efficiency Alliance, in Chicago. As I mentioned in The Super Genius Grid, somebody will develop an app to make EE into a game or social media thing of some sort. Sure enough, this is beginning to happen via residential behavior-based programs. One such program is delivered by Efficiency 2.0.
Part of the next swath of EE will be developing programs that people want to buy or participate in. That’s what E 2.0 is about. It amazes me how consumers respond – irrationally all the time – which helps explain the iPhone, iPad, iThis, iThat, iOther and the i-got-to-have-it. The E 2.0 program offers points and awards to “empower” customers to reduce their energy consumption. They partner with communities to compete with one another and to offer free money for spending at local businesses. Like mom and apple pie – who wouldn’t want that? The winning community gets a free solar panel for one of their schools – woohoo!
The E 2.0 program is a psychological program (my term) where communities are profiled as to where they shop, what they buy and all this stuff, like grocery club cards do. They see what you buy and they provide coupons and discounts for that stuff or related stuff.
If I got the message correctly, consumers don’t want useful real information, which as I understand it is what OPOWER delivers. OPOWER, again per my understanding provides data on how your bills compare against those in your community and how you compare against yourself in past years. They tell you if you turn your thermostat down 2 degrees no one will notice and you’ll save $50 per year (asterisk, asterisk). This seems like useful information to me but the message I got from E 2.0 and a somewhat similar provider, Simple Energy, is that customers want gimmicks, games, prizes, lotteries, and free stuff, NOT information.
Apparently consumers like lotteries and this is obviously true when it comes to state lotteries and the gaming industry. I officially gambled once, in Vegas. It was a stop on a road trip to California and when in Vegas… I played the quarter slot machines starting with $10. I think I plunked 40 quarters into the machine consecutively with no wasting time winning anything, at all. I was done in 5.75 minutes and hooked like a crack addict. No really – I said, “Boy that was fun. Let’s get moving.” I don’t even like “illegal” office pools, like Super Bowl, er I mean, “The Big Game” or the NCAA tournament where there is a 100% payout and no taxes. I have no interest in dumb luck.
I avoid as much as possible anything with unfavorable odds including insurance, gambling, and investing. “Investing” in an insurance policy because the premium seems cheap relative to the policy amount is stupid and a loser all day. I already told this story a while back. Gambling – ever seen a millionaire gambler? Not for long. If you believe in the possibility of wealth creation via gambling you probably believe in water running uphill. Investing – fund managers claim they can beat the market. Bull.
Ran in the ditch there a little but needless to say, to me information is useful. Games: don’t have time and who cares? However, this is very similar to old-school marketing versus “stupid” social media. I get it and I’ll get with the program.
The E 2.0 guy said people don’t care so much about what their neighbors are using for energy. Whoa! This flies in the face of the OPOWER message to compete against your anonymous neighbors. Why do people not care what their neighbors use? Because everybody thinks they are different – just like you did in high school, when you wore the exact same kind of stupid stuff everyone else wore; listened to the same music; had the same sneakers; watched the same TV shows and on and on.
I can vouch for everyone thinking they are unique. Large energy users included, think they are different than everyone else when, in fact, the first and second laws of thermodynamics are universal. Sure facilities are different. That’s why we need to look at stuff and analyze stuff specific to them but we don’t have to have been born in the building and spent our entire living breathing lives there to know what’s going on.
This is the challenge, however – savings from these programs run a few percent of consumption, maybe 2%-5%. This may not sound like much but it is I believe including all customers and that would be huge. The challenge is how to measure and verify savings on such a tiny scale. These numbers are far down in the weeds. If a kid leaves home for college it will have more impact – my unscientific guess that I would pretty well guarantee.
The other problem that the E 2.0 guy nonchalantly said is that when the program is pulled, all that remains is the measures implemented – the ENERGY STAR stuff, CFLs and whatnot. Like leaving Weight Watchers, people go back to Twinkies, Ding Dongs and diet soda.
In the end, it comes down to prizes, dumb luck, games and gimmicks (which most people prefer apparently) versus benchmarking, competition, action and generating wealth for the sake of generating wealth. That is, the E 2.0 versus the OPOWER way of thinking.
The race is on!
One other thing I noted in a separate session at the conferences was that in 2007, James Inhofe and Hillary Clinton slipped a provision into a law to require ground source heat pumps be evaluated against alternatives for HVAC system replacements on a 20 year life-cycle cost basis – for every new federal facility / system replacement. Senator Inhofe is Mr. “climate change is the biggest fraud of our time”, but he supports efficient heat pump systems. Why? Could it be the International Ground Source Heat Pump Association is headquartered in Stillwater, home of Oklahoma State with board members including from big companies?
In the DUH column this week, suburbanites with efficient McMansions and a 40 mile commute use more energy than inner-city dwellers.
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