Archive for Energy efficiency

Greenwashing at KB Home

Poor attic insulation melts snow
I took this picture on February 7, 2010, in Denver’s Stapleton New Urbanist development in Denver.  Most of the houses in Stapleton are EnergyStar qualified, but this picture tells a story about some that aren’t.  The blue house in the background was built in 2009 by Wonderland Homes.  The tan house in the foreground is a KB Home built in 2008. 

Note how the still-falling snow is melting on the north-facing roof of the tan KB Home, but not on the similarly oriented roof of the blue Wonderland home.  Also note that clear lines of unmelted snow where the roof trusses add an extra layer of insulation between the attic and the roof.  This is a clear sign that the KB Home (NYSE:KBH) lacks sufficient attic insulation, and enough heat is escaping from inside the house to the attic to melt the snow on the roof as quickly as it is falling.  Nor was it just this one house… all the houses I saw that were built by KB showed signs of snow melting on the roof, while all the houses I saw built by other builders (New Town Builders, Wonderland, and McStain) showed no signs of melting.  Many were built in 2007, before either of the homes in the photo.

I was shocked.  The Stapleton website proudly proclaims “Since 2006, every Stapleton builder had been an EnergyStar partner.” I’d taken this to mean that every home built in Stapleton since 2006 was an EnergyStar home… an assumption I’m sure Forest City (NYSE:FCE-A) and KB Home would love us to assume.  Instead, I have to assume it means that KB builds some EnergyStar homes, somewhere.

KB’s web page for their Coach Series homes in Stapleton displays the EnergyStar logo in two locations.  One logo appears with the text “An EnergyStar qualified neighborhood” (emphasis mine) and the other is in a box that says “Save 30-45% on your utility bills with a new KB home compared to a home built as recently as the 1990s.”  The implication is clearly that the Coach series homes are EnergyStar homes, but my photo shows clear evidence that they are not.  (Ironically, the New Town and Wonderland websites display the EnergyStar logo much less prominently.)

From page 19 of KB Home’s2009 Sustainability Report [pdf]: We have a long history of building ENERGY STAR qualified homes. The percentage of our homes that are built to this exacting standard has grown from 1% of our home deliveries in 2001, the year we began working with ENERGY STAR for Homes, to 37% in 2008. One-third of our divisions built every one of their new homes to this standard in 2008, and only one of our divisions did not build at least some ENERGY STAR qualified homes.

I’m underwhelmed.  First, EnergyStar is not an “exacting standard.”  An EnergyStar home must save at least 15% of the energy used by a standard code-built home.  According to a 2008 National Renewable Energy Laboratory study [pdf p.14], “for a 2,000-gsf house built to achieve 30% energy savings relative to standard practice, a homeowner can save $512 a year more on his or her energy bills than the extra cost of the slightly larger mortgage.”  In other words, this “exacting standard” leaves a lot of money on the table, even when the additional cost (and mortgage) is accounted for.

Further, 37% EnergyStar qualified is better than your average homebuilder… but your average homebuilder does not plaster their website with the EnergyStar logo. 

I wonder if the owner of the tan house (or any of the many other KB Homes I saw with melting snow on the roofs) think they are living in EnergyStar homes?

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Is There a Tradeoff Between Economics and the Environment?

Tom Konrad Ph.D.

California’s RETI process lends insight into the near-term prospects of Solar, Wind, Geothermal, and Biomass.  

In September, California’s Renewable Energy Transmission Initiative (RETI) released their Phase 2A report, which outlined potential transmission corridors to collect renewable energy from Competitive Renewable Energy Zones (CREZ) that had been identified in previous phases.  As part of Phase 2A, they also screened each CREZ for environmental impact, and the potential difficulty of obtaining land for renewable energy development.  

I previously looked at the results from Phase 1A and gained some insight into the cost of renewable energy technologies.  However, what renewable energy projects actually get built has to do with a lot more than just economics.  If it raises too many environmental concerns, such as infringing on endangered Mojave Ground Squirrel habitat, it isn’t going to get built.

Drawing on the spreadsheet "Supplemental Materials, CREZ Data" I put together the following charts, graphing the economics of each type of renewable energy in each CREZ against the expected environmental impact of that CREZ.  

Each circle represents one type of renewable energy at one of 35 CREZs.  Concentric circles in different colors appear where a single CREZ offers multiple types of renewable energy development.  The only difference between the two graphs is the size of the circles.  In the first graph, circle sizes represent the potential annual energy production (GWh/yr) of a CREZ, while circle sizes in the second shows power rating (MW.)  Geothermal and Biomass resources are relatively larger in the first graph because these are typically baseload technologies generating electricity near peak capacity all the time, while solar and wind are variable.

The cluster of circles in the middle right represent resources outside California: they were not rated for environmental concerns, so I assigned them an arbitrary value in the middle of the range in order to display them on the charts.

Economic/Environmental Tradeoff?

I found it surprising that there is little evidence of a tradeoff between economic viability of CREZ’s and environmental impact.  In fact, the circles in the graphs above are generally clustered along a line from the lower left (high environmental impact, bad economics) to the upper right (little environmental impact, good economics).  A tradeoff between economic viability and environmental concerns would manifest itself in a clustering along a line from the upper left (bad economics, little environmental impact) to the lower right (good economics, large environmental impact.)

Considering these four major renewable energy technologies, as they might be deployed in California, there is no real tradeoff between economics and the environment.  The best economics coincide with the least environmental impact.  If we were to include energy efficiency in the analysis, the trend would be even more pronounced: energy efficiency has the best economic profile of all, yet avoids the use of energy and hence does less harm to the environment.

The exception here is biomass.  The small green dots don’t show a pronounced trend in any direction, meaning that there may be some tradeoff for biomass.  Such a tradeoff would not be surprising, because harvesting plant matter on a large scale is bound to have significant ecosystem impacts.  Note that Biomass here does not include such technologies as waste to energy, which can be environmentally benign, or even an improvement compared to land filling.  In this study, the biomass in remote regions that do not yet have transmission, since lack of sufficient transmission was one of the requirements to be a CREZ.

With clean energy, it may actually be possible to do well while doing good.

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Cheap and Free Ways to Promote Energy Efficiency

by Tom Konrad, Ph.D.

Big spending Demand-Side Management programs are not the only way to promote Energy Efficiency.

The Sierra Club’s Rocky Mountain chapter has decided that one of their priorities for 2010 is promoting Energy Efficiency. Since that decision was, at least in part, due to my suggestions as part of their Energy Committee, I volunteered to chair the effort for at least as long as I’m still in Colorado. (I’m planning a move to Connecticut with my wife, but we are waiting for our house to sell first.)

In normal times, we might consider lobbying the state government for incentives to promote energy efficiency, such as those offered as part of the stimulus package. However, a state legislator who came to our last Energy Committee meeting was quite clear: Colorado will be eliminating all (or nearly all) tax incentives next year, so Energy Efficiency programs that rely on state funds are not going to be an effective way forward. For people who, like me had hoped to use Colorado’s recently passed 85% tax credit for PHEV conversions next year, that means we’re probably out of luck. You heard it here first.

Not All Bad News

As I wrote at the start of the financial crisis, even though there may be less subsidies for energy efficiency, leaner budgets make people more open to the idea of cost saving from energy efficiency. Since subsidies are less likely to be available to break down some of the cost barriers against energy efficiency, it makes sense to use our efforts to break down some of the non-cost barriers.

Eric Hirst of Oak Ridge National Laboratory identifies these barriers to energy efficiency improvements:
Barriers to improving U.S. energy efficiency:

Structural barriers­conditions beyond the control of the end user

  • distortions in electricity pricing
  • supply infrastructure limitations

Behavioral barriers­conditions that characterize end users

  • efficiency attitudes and awareness
  • perceived riskiness of efficiency measures
  • obtaining and processing information
  • limited access to capital
  • misplaced incentives
  • inconvenience, loss of amenities

The ones that might be addressed without much money are:

  • efficiency attitudes and awareness
  • perceived riskiness of efficiency measures
  • obtaining and processing information
  • misplaced incentives

Attitudes and Awareness

This barrier has to do with people’s mistaken beliefs: For instance, the belief energy efficiency always requires giving something up (not true: a better sealed and insulated home is less drafty and more comfortable as well as being more energy efficient.) Similarly, some people like to waste energy because conserving is un-macho.

Public relations efforts to make people feel better about efficiency can be very inexpensive. For instance, SMUD’s monthly reports to its customers as to how their consumption compares to their neighbors is something that could be emulated by other utilities.

Another method that might also help to make energy efficiency a social norm also involves competition with neighbors: households with low energy use might also be given inexpensive yard signs, allowing them to brag about their energy sipping lifestyle. This might also address some of the perceived riskiness barrier, because when people see others doing something, they are much more inclined to feel that it is both acceptable and safe.

Misplaced Incentives

Misplaced incentives occur when the person who would pay for efficiency improvements is different from the person who pays the energy bill (and would receive the benefits.) Two examples are landlords and tenants, and homebuilders and home buyers.

Builders have been making strides communicating the energy efficiency of their homes through various certification schemes, such as LEED, Built Green, and Energy Star. When the building buyer can assess the efficiency of a building because it carries a widely recognized green certification, he is likely to be willing to pay more for that building. The same is true for renters.

These voluntary moves are a start, but making energy use disclosure mandatory, as opposed to voluntary, should help bring along the reluctant majority who are not already following these practices. If an energy audit or past energy bills were required to be provided by the seller or landlord whenever a building is sold or leased, buyers and renters could decide for themselves how much more they would be willing to pay for an efficient building, and the current owner would have an incentive to make cost-effective improvements beforehand.

Markets and Information

Efficient markets require good information. A large part of the reason that so many opportunities for energy efficiency exist is that information about energy use is not widely available and often difficult to come by. Measures such as those I suggest above all improve information about energy use, and hence should promote the more efficient use of energy at very little cost.

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Managing the Peak Fossil Fuel Transition 

EROI and EIRR

by Tom Konrad, Ph.D.

Current renewable energy technologies must be adopted in conjunction with aggressive Smart Growth and Efficiency if we hope to continue our current standard of living and complex society with diminished reliance on fossil fuels. These strategies have the additional advantage that they can work without large technological breakthroughs. 

Energy Return on Investment

Energy keeps our economy running.  Energy is also what we use to obtain more energy.  The more energy we use to obtain more energy, the less we have for the rest of the economy.  

The concept of Energy Return on Investment (EROI), alternatively called Energy Return on Energy Invested (EROEI) has been widely used to quantify this concept.  The following chart, from a SciAm paper, shows the EROI of various sources of energy, with the tan section of the bar representing the range of EROIs depending on the source and the technology used.  I’ve seen many other estimates of EROI, and this one seems to be on the optimistic (high EROI) end for most renewable energy sources.

The general trend is clear: the energy of the future will have lower EROI than the energy of the past.  Low carbon fuels such as natural gas, nuclear, photovoltaics, wind, and biofuels have low EROI compared to high-carbon fuels such as coal and (formerly) oil.   

The graph also clearly shows the decline in the EROI over time for oil.  Other fossil fuels, such as coal and natural gas, also will have declining EROI over time.  This happens because we always exploit the easiest resources first.  The biggest coal deposits that are nearest to the surface and nearest to customers will be the first ones we mine. When those are depleted, we move on to the less easy to exploit deposits.  The decline will not be linear, and new technology can also bring temporary improvements in EROI, but new technology cannot change the fact that we’ve already exploited all the easiest to get deposits, and new sources and technologies for extracting fossil fuels often fail to live up to the hype.

While there is room for improvement in renewable energy technologies, the fact remains that fossil fuels allow us to exploit the energy of millions of years of stored sunlight at once.  All renewable energy (solar, wind, biomass, geothermal) involves extracting a current energy flux (sunlight, wind, plant growth, or heat from the earth) as it arrives.  In essence, fossil fuels are all biofuels, but biofuels from plants that grew and harvested sunlight over millions of years.  I don’t think that technological improvements can make up for the inherent EROI advantage of the many-millions-to-one time compression conveys to fossil fuels.

Hence, going forward, we are going to have to power our society with a combination of renewable energy and fossil fuels that have EROI no better than the approximately 30:1 potentially available from firewood and wind.  Since neither of these two fuels can come close to powering our entire society (firewood because of limited supply, and wind because of its inherent variability.) Also, storable fuels such as natural gas, oil, and biofuels all have either declining EROI below 20 or extremely low EROI to begin with (biofuels). Energy storage is needed to match electricity supply with variable demand, and to power transportation. 

Neither hydrogen nor batteries will replace the current storable fuels without a further penalty to EROI.  Whenever you store electricity, a certain percentage of the energy will be lost.  The percent that remains is called the round-trip efficiency of the technology, shown on the vertical axis of the graph below, taken from my earlier comparison of electricity storage technologies. (Click to enlarge.)

Storage Technology Comparison

Round trip efficiency (RTE) for energy storage technologies is equivalent to EROI for fuels: it is the ratio of the energy you put in to the energy you get out.  You can see from the chart, most battery technologies cluster around a 75% RTE.   Hence, if you store electricity from an EROI 20 source in a battery to drive your electric vehicle, the electricity that actually comes out of the battery will only have an EROI of 20 times the RTE of the battery, or 15.  Furthermore, since batteries decay over time, some of the energy used
to create the battery should also be included in the EROI calculation, leading to an overall EROI lower than 15.

The round trip efficiency of hydrogen, when made with electrolyzers and used in a fuel cell, is below 50%, meaning that, barring huge technological breakthroughs, any hoped-for hydrogen economy would have to run with an EROI from energy sources less than half of those shown.

Taking all of this together, I think it’s reasonable to assume that any future sustainable economy will run on energy sources with a combined EROI of less than 15, quite possibly much less. 

It’s Worse than That: The Renewables Hump

All investors know that it matters not just how much money you get back for your investment, but how soon.  A 2x return in a couple of months is something to brag about, a 2x return over 30 years is a low-yield bond investment, and probably hasn’t even kept up with inflation.

The same is true for EROI, and means that users of EROI who are trying to compare future sources of energy with historic ones are probably taking an overly-optimistic view.  For fossil fuels, the time we have to wait between when we invest the energy and when we get the energy back in a form useful to society is fairly short.  For instance, most of the energy that goes into mining coal comes in the digging process, perhaps removing
a mountaintop and dumping the fill
, followed by the actual digging of the coal and shipping it to a coal plant.  Massey Energy’s 2008 Annual Report [pdf] states that "In 2008… we were able to open 19 new mines, and ten new sections at existing underground mines."  This hectic rate of expansion leads me to believe that the time to open a new mine or mine section is at most 2 years, and the energy cycle will be even quicker at existing mines, when the full cycle between when the coal is mined and when it is burnt to produce electricity requires only the mining itself, transport to a coal plant, and perhaps a short period of storage
at the plant.  Most coal plants only keep a week or two supply of coal on hand.

In contrast, Nuclear and Renewable energy (with the exception of biofuels and biomass) present an entirely different picture.  A wind farm can take less than a year to construct, it will take the full farm life of 20 years to produce the 10 to 30 EROI shown in the graph.  Solar Photovoltaic’s apparent EROI of around 9 looks worse when you consider that a solar panel has a 30 year lifetime.  Only a little of the energy in for Nuclear power comes in the form of Nuclear fuel over the life of the plant: most is embodied in the plant itself.   

Jeff Vail has been exploring this concept on his blog and the Oil Drum.  He refers to the problem of the front-loading of energy investment for renewable energy as the Renewables Hump.  He’s also much more pessimistic than the above chart about the actual EROI of most renewables, and found this chart from The Economist which illustrates the up-front nature of the investment in Nuclear and Wind: 

In terms of EROI timing, those technologies for which the cost of generation includes more fuel have an advantage, because the energy used to produce the fuel does not have to be expended when the plant is built.

In a steady state of technological mix, EROI is the most important number, because you will always be making new investments in energy as old investments outlive their useful lives and are decommissioned.  However, in a period of transition, such as the one we are entering, we need a quick return on our energy investments in order to maintain our society.  Put another way, Jeff Vail’s "Renewables Hump" is analogous to a cash-flow problem.  We have to have energy to invest it; we can’t simply charge it to our energy credit
card and repay it later.  That means, if we’re going to keep the non-energy economy going while we make the transition, we can’t put too much energy today into the long-lived energy investments we’ll use tomorrow.

To give a clearer picture of how timing of energy flows interacts with EROI, I will borrow the concept of Internal
Rate of Return (IRR)
from finance.  This concept is covered in any introductory finance course, and is specifically designed to be used to provide a single value which can be used to compare two different investments with radically different cash flow timing by assigning each a rate of return which could produce those cash flows if the money invested were compounded continuously.

Except in special circumstances involving complex or radically different size cash flows, an investor will prefer an investment with a higher IRR.

Energy Internal Rate of Return (EIRR)

I first suggested that IRR be adapted to EROI analysis by substituting energy flows for investment flows in early 2007.  I called the concept Energy
Internal Rate of Return, or EIRR
.  Since no one else has picked up the concept in the meantime, I’ve decided to do some of the basic analysis myself.

To convert an EROI into an EIRR, we need to
know the lifetime of the installation, and what percentage of the energy cost is fuel compared to the percentage of the energy embodied in the plant.  The following chart shows my preliminary calculations for EIRR, along with the plant lifetimes I used, and the EROI shows as the size of each bubble.

 EIRR

The most valuable energy resources are those with large bubbles (High EROI) at the top of the chart (High EIRR.)  Because of the low EIRR of Photovoltaic, Nuclear, and Hydropower, emphasizing these technologies in the early stage of the transition away from fossil fuels is much more likely to lead to a Renewables Hump scenario in which we don’t have enough surplus energy to both make the transition without massive disruption to the rest of the economy.

How to Avoid a "Renewables Hump"

Note that the three fossil fuels (oil, gas, and coal) all have high EIRRs.  As we transition to lower carbon fuels, we will want to keep as many high EIRR fuels in our portfolio as possible. 

The chart shows two renewables with EIRRs comparable to those of fossil fuels: Wood cofiring, and Wind.  Wood cofiring, or modifying existing coal plants to burn up to 10% wood chips instead of coal was found to be one of the most economic ways of producing clean energy in the California RETI study. The scope for incorporating biomass cofiring is fairly limited, however, since it requires an existing coal plant (not all of which are suitable) as well as a local supply of wood chips.  Some coal plants may also be converted entirely to wood, but only in regions with plentiful supplies of wood and for relatively small plants.  The EIRR for this should fall somewhere between Wood cofiring and Wood Biomass, which is intended to represent the cost of new wood to electricity plants.

Natural Gas

To avoid a Renewables Hump, we will need to emphasize high-EIRR technologies during the transition period.  If domestic natural gas turns out to be as abundant as the industry claims (there are serious doubts about shale gas abundance,) then natural gas is an ideal transition fuel.  The high EIRR of natural gas fired generation arises mostly because,
as shown in the chart "it’s a gas" most of the cost (and, I assume energy investment) in natural gas generation is in the form of fuel.  Natural gas generation also has the advantage of being dispatchable with generally quick ramp-up times.  This makes it a natural complement to the variability of solar and wind.

However, I think it is unlikely that we’ll have enough domestic natural gas to both (1) rely much more heavily on it in electricity generation and (2) convert much of our transportation fleet to natural gas, as suggested by T Boone Pickens.  We’re going to need more high-EIRR technologies to manage the transition.  Fortunately, such technologies exist: the more
efficient use of energy.  

Energy Efficiency and Smart Growth

I have been unable to find studies of the EROI of various efficiency
technologies.  For instance, how much energy is embodied in insulation, and how does that compare to the energy saved?  We can save transportation fuel with Smart Growth strategies such as living in more densely populated areas that are closer to where we work, and investing in mass transit infrastructure. 
The embodied energy of mass transit can be quite high in the case of light rail, or it can be very low in the case of better scheduling and incentives for ride sharing.

Many efficiency and smart growth technologies and methods are likely to have much
higher EIRRs than fossil fuels.  We can see this because, while the
embodied energy has not been well studied, the financial returns have. 
Typical investments in energy efficiency in utility run DSM programs cost
between $0.01 and $0.03 cents per kWh saved, much less than the cost of new fossil-fired generation.  This implies a higher EIRR for energy efficiency, because part of the cost of any energy efficiency measure will be the cost of the embodied energy, while all of the savings are in the form or energy.   This relationship implies that higher IRR technologies will generally have higher EIRRs as well.  

Smart growth strategies also often show extremely high financial returns, because they reduce the need for expensive cars, roads, parking, and even accidents [pdf.]

Conclusion: Brian or Brawn

The Renewables Hump des not have to be the massive problem it seems when we only look at supply-side energy technologies.  By looking at demand side solutions, such as energy efficiency, conservation, smart growth, and transit solutions, we need not run into a situation where the energy we have to invest in transitioning from finite and dirty fossil fuels to limitless and clean renewable energy overwhelms our current supplies.  

Efficiency and Smart Growth are "Brain" technologies, as opposed to the "Brawn" of traditional and new energy sources.  As such, their application requires long-term planning and thought.  Cheap energy has led to a culture where we prefer to solve problems by simply applying more brawn.  As our fossil fuel brawn fades away, we will have to rely on our brains once again if we hope to maintain anything like our current level of economic activity.

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Market Predictions

Predicting market moves is notoriouslly difficult, but I’m feeling pretty good about my recent efforts.
On October 11, 2008, I stoped being a permabear and said, “the market as a whole now seems to me to be fairly valued.” The S&P 500 closed the previous Friday just below 900; today it closed at 919.32. In the fear that abounded last October, it was a hard call to be even that bullish, bit it seems to have worked out.

On June 2, I said we were near a market peak/ The S&P 500 closed that day at 944.74, and is currently down 3% almost a month later, having only bearly exceeded that number by a fraction of a percent.

Since I’m currently short-term bearish, I’ve started a series of articles not to by now, but to buy when a market decline puts them back on sale. Here are may clean enrgy shopping list articles so far:

  • Transmission stocks
  • Energy Efficiency Stocks
  • Clean Transport Stocks
  • Why market timing makes sense
  • Two Landfill Gas and Three Geothermal Stocks
  • Five Solar Stocks
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    WillYouSacrificeUs?

    Chevron’s willyoujoinus campaign rubs me the wrong way.  What is the message here?

    • I will use less energy
    • I will bike to work 3 days a year.
    • I will leave the car at home more.
    • I will use solar power.
    • I will reuse things more.

    To me, this seems to be saying:

    1. Taking small steps is enough (3 days a year!!!?)
    2. Sacrifice is required (leave the car at home, use less energy, spend a lot on solar panels.)

    These types of messages undermine energy efficiency.  There are many ways to save energy which don’t involve inconvenience, and help your bottom line.  For instance, you can now buy a power strip for your TV or computer which switches off all the peripherals when the main electronic device is switched off.  If you just set it up to turn off your VCR and DVD players when the TV is off, that will probably be a savings of 50 watts.  If the TV is off 18 hours a day vor a year, that’s over 330 kW, or a savings of about $60 in the Northeast, $47 in California, or $33 in Colorado… but the powestrips cost only $25-$40, depending on which version you get… more than a 100% return in one year.

    Saving energy does not need to be about sacrifice.  I ride the bus out of choice… I’m less likely to get in an accident, and I can get work or reading done in the process.  One day they were doing maintenance on the standard diesel that serves my route, and instead the bus was one of the newer hybrids.  The ride was much smoother… so RTD saving energy by using a hybrid not only saved the transit district money, it made the passengers more comfortable.

    Energy Efficiency is a win-win.  When Chevron equates it to sacrifice, everyone loses.

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    ARRA Symposium notes, March 10 2009

    I’ll be referencing these notes in an article to be published on AltEnergyStocks.com as What the ARRA Means for Clean Energy: One State’s Example on March 15th.

    Read the rest of this entry »

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