Wednesday, June 19, 2013

Crossing the Energy Divide: Moving from Fossil Fuel Dependence to a Clean Energy Future


Book Review: Crossing the Energy Divide: Moving from Fossil Fuel Dependence to a Clean-Energy Future by Robert U. Ayres and Edward H. Ayres ( Wharton School Publishing 2010) Kindle Edition

I found this to be an excellent book which cuts to the heart of the matter of energy in sufficient detail. The approach is practical and realistic with each energy source examined and some good ideas about increasing energy efficiency and redesigning industries, utilities, houses, cars, power grids, and cities for the future. The authors are two brothers, one a physicist and economist, the other a journalist specializing in health and sustainability.

The first point they make is that energy is far more important to economics than is generally acknowledged. The authors contend that energy services are a major component of what drives the economy. The authors also acknowledge that the transition to renewable energy is likely to take several decades and is not currently as feasible economically or technologically as advocates have depicted. The question is what to do in the meantime. The authors suggest that we “radically reform our management of the existing, fossil fuel-based system …” so we can dramatically increase the amount of energy services we get per unit of energy. One method of doing this is capturing waste heat. The authors note that in 2005 two steel companies began doing this at two facilities. Their resulting generation of 190 MW from waste heat that year was more than the entire output of the solar photovoltaic industry.

The authors advocate an energy management strategy. They estimate energy efficiency in the U.S. at a mere 13% (compared to 20% for Japan) and suggest that could be at least doubled with existing technologies. It’s all about doing more work with less energy. Such strategies do not require massive capital and often result in savings to those who implement them. Ayres, along with Benjamin Warr, revealed the Ayres-Warr growth model that showed how energy and work drive economic prosperity along with capital and labor. They showed that “technological progress” could be seen as “the increasing thermodynamic efficiency with which energy and raw materials are converted into useful work.” This is fairly straightforward and logical. Being efficient saves money. “Labor and capital extract energy; they don’t make it.” What they mean is that energy is not a product of labor and capital but a prerequisite to economic activity.

They mention three ‘disruptive phenomena’ that are irreversible: 1) post-peak oil where production will cease to outpace consumption (a point which we are near), 2) efficiency limits of old technologies based on fossil fuels such as the internal combustion engine and steam turbines, 3) escalation of climate catastrophes in the manner of storms, floods, droughts, wildfires, and sea level rise. Reduction of greenhouse gases, energy independence, and energy security are all stated U.S. interests.

The authors talk about the difficulties in determining the risks or hidden costs of climate change and how aggressive we should be in mitigating its effects. Another issue they mention is the notion of ‘energy independence’ which has been touted as possible by such measures as drilling in the Arctic Wildlife Refuge or building more coal-fired power plants. They dismiss those ideas but note: “The path to energy independence lies in the institutional and legal structure of the U.S. energy system, not under the ocean bottom.”

(Although since the very recent unconventional shale gas and oil revolution, we are much closer to energy independence for the time being.)

The authors advocate energy recycling as a much more viable means of producing carbon-free energy quickly with available technology than renewables at present. In 2005 the nation’s recycled energy output was about 7 times its solar energy output. They say that current recycled energy is only about 10% of what could be produced. Using fossil fuel more effectively through ‘cogeneration’ – waste-heat recycling, ie. combined heat and power (CHP) is available to coking, smelting, refining, chemical processing,  and carbon black producing industries. Natural gas decompression can also be converted into energy. These are far cheaper than solar PV technology and wind turbines at present. There are several ways to turn waste-heat into electricity in the various industrties. In addition to high-temperature heat and decompression in the above scenarios, there is also low-temperature heat. Electric power plants often waste such heat that could be used to heat houses.

Apparently electric power plants are very inefficient – avg. of about 33%. This efficiency has not improved in decades. Much of the inefficiency has to do with transporting energy over wires from centralized plants. Small de-centralized CHP applications (DCHP) – in places like universities, shopping districts, and apartment houses can be developed and can be very efficient. Decentralization simply means that the loss of power from transmission is eliminated. The problem is that such applications are often illegal in the U.S. due to outdated laws that created the power monopolies. DCHP has been used routinely around the world for a long time – ie. in so-called “district heating” in dense city environments.  The benefits are obvious.

“If power and heat could be cogenerated in individual buildings in the United States while retaining connections to the grid, virtually all new additional capacity could be decentralized.”

The bottom line is that we could develop efficient carbon-free energy with existing technologies and save hundreds of billions of dollars. (The IEA acknowledges this). This would seem to be a no-brainer but politics and corporate interests have powers not easily relinquished.

Large centralized power plants use steam-generation which is old tech but newer small gas turbines and diesel engines have improved in efficiency and are more portable for decentralized uses. An added benefit is that waste-heat can be used locally where it is needed, as in individual buildings for space-heating. Jeremy Rifkin and many others have promoted the idea of lateral power and micro-power plants from renewables but the same can be done with existing fossil fuel technologies with drastic improvements in efficiency, and thus drastically lower emissions as well. Efficiency is about a third (33%) when calculating the energy of a barrel of oil equivalent to electricity at the meter. That is just the efficiency of generation and delivery. There is also end-use efficiency – how efficient the consumer uses the energy. An example given is that of an incandescent light bulb = 5% efficiency compared to a compact fluorescent light bulb = 15 % efficiency. If each is multiplied by the efficiency of generation/delivery (33%) the numbers for total efficiency are just 1.66% and 5%!

“If you add up all the different kinds of energy use in the United States, the overall efficiency just for producing useful work is around 13 percent”

Waste-energy recycling in the short-term offers a much better economic and feasible opportunity to reduce carbon emissions than do all renewables combined, even with new renewable capacity doubling every year.

Studies suggest that retirement of the most inefficient (and polluting) of the nearly 4000 U.S. centralized power plants and decentralizing all new capacity could ramp up efficiency from the current 33% to 60%. That would be a vast improvement economically and environmentally.

Economic theory, indicators, and economic well-being are discussed. The authors, like many modern economists, see the limitations and misleading nature of something like GDP being a good indicator. Immediate cost/benefits are typically favored over long term ones and not all economic activity is good or beneficial. Social and environmental well-being also need to be taken into account. Cooperation is required in these efforts.

The authors offer 8 “Main Girders of the Energy-Transition Bridge”. All can be begin to be implemented with existing technology and most offer quick payouts:

1)      Recycling waste-energy streams – only about 10% of what can be done is being done, they estimate. This alone can provide up to 10% of our electricity needs.

2)      Utilizing combined heat and power (CHP) – most of this potential is untapped and politically blocked. Decentralizing would be required.

3)      Increasing energy efficiency in industrial processes and buildings – many untapped “double-dividend” opportunities here, they say.

4)      Increasing energy efficiency in consumer end uses – this has been well-publicized and partially tapped in the form of hybrid cars, energy efficient appliances, compact fluorescent bulbs, multipane windows, but more potential.

5)      Kick-starting the micropower revolution, or “rooftop” revolution – utility monopolies on power distribution are the main obstacle.

6)      Substituting energy services for products – we don’t really seek energy but the services that energy provides, so that should be the focus.

7)      Redesigning buildings and cities for climate change – all new construction and transportation need to be designed for maximum efficiency. Cities under threat from climate-generated events need to prepare.

8)      Reforming fresh-water management strategies – poor water management wastes vast amounts of energy and much could be improved with investment in better and more efficient strategies and infrastructure.

One analysis (ACEEE in 2008) concluded that of energy-service consumption increases in the last 38 years energy-efficiency improvements accounted for ¾ while new supplies of energy only accounted for ¼. Efficiency improvements have been called the hidden energy boom. The bad news is that the efficiency gains are likely lead to greater economic growth which in turn lead to greater energy consumption. Population growth was also likely a factor in increased consumption but was not mentioned here.

The term for energy doing useful work is ‘exergy’. This is the correct way to define efficiency as some measures of energy efficiency can be misleading. In exergy terms our energy economy runs at about 13% efficiency. The authors give examples of several industrial energy-efficiency investments that paid off extraordinarily well and relatively quickly. Of course, these improvements also cut emissions. The authors think that many executives and politicians are confused about the vast possibilities of investing in energy efficiency – due to improper definitions of efficiency and possibly ideological and business-cultural reasons as well. Growth has been favored far and above efficiency but efficiency has arguably increased the economic viability of companies just as well. Lack of attention to company energy use and cost management may also be factors. Executive focus on market share and growth may even reduce overall profitability but still rewards management. Focus on mergers and acquisitions is an example – where evidence suggests that only a small percentage has increased value for shareholders. They mention the idea of ‘industrial ecology and one of its fundamental principles:

“An operation that mimics nature by recycling its waste – including its waste-energy streams – puts less waste into the environment.”

Oddly, many of these waste-reduction payoffs have been induced by government – either by the carrot of incentive or the stick of regulation.

The authors mention the Public Utilities Regulatory Policy Act (PURPA) of 1978, revised in 1992. This allows industries to produce power from their waste streams and sell it to utilities at prices determined by the utilities. But they still cannot sell it to other, closer, consumers or industries. Such price-fixing by utility companies has hurt things like net-zero metering for solar and wind power where excess production can be sold back to the grid at a utility-fixed price most often below their own energy prices (though I think things have improved in some states in the last few years). This also stifles the effectiveness of federally mandated increases of renewable power. Another problem with PURPA is that many states have tended to ignore it. The biggest hurdle is the restructuring of the power grid itself. Local independent producers of power can add to the grid and save money by having greater efficiency and less loss of energy meaning less carbon emissions. The coming (presumably) micropower revolution would likely drastically increase efficiency, increase reliability of power, and provide better distribution during peak-load times. Coal lobbies and interests have been a hurdle to local, distributed, decentralized micropower but that influence is likely waning as coal loses its electricity market share to natural gas. The advantages of decentralization are gradually becoming more apparent. Low-temperature heat utilization is an advantage of decentralization. Local power production has less T & D (transmission and distribution) costs and less redundancy (back-up power) costs. Centralized power plant power runs at 33% efficiency while localized power that utilized waste-heat can run at 50-80 % efficiency. The authors estimate that CHP could cut ghg emissions by 15-20% and that early IEA estimates of 4% were way low. Decentralization increases energy security by not providing big targets for massive power interruption by terrorists or natural disasters. Copper and metal theft would also be reduced. Such theft is a continuing problem –there was such a theft here a few days ago that resulted in power outages. The authors estimate 20-25 years for the full transition to decentralized power and optimized CHP utilization with trillions of dollars in savings over building more centralized power plants. Centralized power monopolies are protected by federal and state laws against others selling power, transmitting power, and government subsidization of this least efficient power production. The authors also note that power decentralization is practically inevitable as old centralized power plants depreciate and demand for electric power increases due to more and more plug-in electric vehicles. 

Liquid fuels and the implications of a reduced-car future is the next subject. Gasoline powered motor vehicles are very inefficient with payload efficiencies as low as 1%. Hybrid and electric cars only increase it to 2-3%. Corn ethanol and bio diesel offer slightly less emissions but require much fossil fuel to make and make corn and soy prices rise. The “ethanol scam” has been extensively written about and various ‘energy return on investment’ (EROI) studies indicate that ethanol (and biodiesel) production use nearly as much energy as they create. EROIs for ethanol range from less than 1 (loss of overall energy) to the range of 1.29 to 1.65. Oil in contrast is 15 and in 1930 was about 100. There are other negatives to ethanol and biofuels as well: pollution, pesticide use and runoff, massive water use, using up valuable cropland, soil depletion, etc. Any gains would be marginal for corn or soy based biofuels. Cellulosic ethanol from wastes may be slightly better but technology is not yet mature. Bio-diesel offers a bit better scenario as diesel engines have a better fuel-burn efficiency (50%) than gasoline engines (27%) but they also put out more emissions, soot, and other particulates. Indeed, traffic congestion and exhaust pollution are major problems in cities. Bicycles have much potential as a mode of transportation in cities if the cities are designed for it. E-bikes, equipped with a battery possibly partially solar powered. China has 30 million e-bikes out of 450 million bikes. Access to a biking grid as well as safety are big issues, esp. in the car-heavy areas of the U.S. Bike sharing and car sharing also have urban potential. The success of hybrid vehicles has changed the culture a bit. The authors predict that future electric cars specifically for short urban travel will have less power, zero emissions, and much greater efficiency than gas-powered cars or current hybrids.

Airplanes use about 10% of transportation fuels in the U.S. but in terms of passenger-miles each passenger uses the equivalent of driving a Hummer alone to his or her destination. Hydrogen, liquefied natural gas, and algae-derived biofuels offer possibilities for powering jets post-oil. Increasing CAFÉ standards for jets as well as cars is one transition option.

Planning for climate change includes mitigation – reduction of greenhouse gas emissions and adaptation – preparation for situations that are likely already in motion such as storm surges, sea level rise, storm intensity, droughts, floods, and wildfires. Vulnerable areas near coasts had best have a plan. Superstorm Sandy was a recent reminder. If cities are treated as ecosystems the planning for their health and resiliency to endure catastrophic climate events is improved. They mention congestion improvements such as the adoption of bus rapid transit (BRT) systems. These systems of unimpeded bus routing can save time and energy and cut congestion. Light rail systems are also having much success in this regard in places like Houston and Charlotte. Such transportation systems are also cutting emissions and will improve further as bus fleets convert to compressed natural gas and plug-in electrics. Better building standards will also help cities plan for climate change. Moving building electrical systems above flood prone areas and having back-up solar and/or micropower plants can also help.

New construction of “low-energy” houses utilizing better insulation and especially passive solar, have proven to save money. Such projects in Germany resulted in cutting energy costs below half of previous construction. In other European countries the gains were even more dramatic. Retrofits won’t be as good but may be more practical for some areas. The solar PV rooftop revolution also looms on the horizon. More efficient cadmium-telluride solar cells can save money but have to utilize rare elements (mined in China with little regulation) and create toxic waste (including spent solar panels). There is not enough of the stuff in the earth to matter but other thin-film technologies show potential as well.

Regarding the question of how to prepare and deal with disaster, they give the case of the town of Valmeyer, Illinois, south of St. Louis. The town was destroyed by the Mississippi River floods of 1993 and they decided to rebuild on a bluff 400 ft higher and 2 miles away. Good choice since the floods of 2008 would have destroyed the old town again. They rebuilt with energy efficiency, sustainability, and renewables. The authors give four goals for such rebuilding (and retrofitting): 1) Space-conserving development – less sprawl, less heat-absorbing pavement, and shorter travel-times; 2) Public transportation oriented – buses, subways, car sharing, and plug-in electric vehicle can be designed into the mix; 3) Living space oriented – less car traffic means less paved areas and more room for greenspace, biking and hiking paths, etc; 4) Low-energy, low-emissions buildings – new design offers better opportunities for this than retrofitting.

The availability of fresh water is another issue worldwide, though mainly in certain places where it is scarce. There is mention of “peak water” like peak oil. Water access issues and conflicts abound around the world. We depend on agriculture. Agriculture depends on fresh water. Energy extraction, industry, and especially power plant cooling depend on fresh water. One example is the Ogallala aquifer in the plains states. It is being depleted rapidly, mainly by irrigation. Newer power plants use a closed circuit system for water cooling which ties up more water. The older ones use a “once through” system that when released back into the environment can do local ecological damage, and it is also wasted heat. Pumping water, sometimes over mountains (as is required in some parts of the American west). consumes large amounts of electricity (6.9 % of electric use in California is for water delivery – 3% for the nation as a whole – 19+% is used for water and sewer in California). The authors advocate water management reform. Problems ahead in water conservation include 1) desertification – often caused by deforestation and overgrazing, 2) forest-fire cycling – massive amounts of water are used to quench fires in dry areas, often year round, 3) salt contamination of fresh water in coastal areas – aquifers are expected to turn brackish further upstream from the coasts. Such scenarios require more pumping of water which require more energy use. The authors note that:

“The goal of water-management policy cannot realistically be to increase the supply. It must be to reduce per-capita water use in parallel with decreasing fossil fuel use.”

I might add that this is especially important in regions with scarce water resources.

Waste-water recycling is a big issue and is beginning to have a big impact. Power plants are increasingly using reclaimed water for cooling. Oil and gas operations are recycling “frack” water and some are using acid-mine drainage water in their ops which is a sort of double dividend. The biggest potential for conserving water (and thus energy) is in its biggest use – irrigation. Drip irrigation uses 30-70% less water. They note that in the U.S., 80% of water use is for agriculture but only 7% of irrigated land uses drip irrigation. Much of it is flooded and spray irrigated. Production of corn ethanol uses massive amounts of water – 10,000 gal per gal of ethanol. This equates to 42,000 gal per barrel in oil terms, magnitudes more than in oil and gas operations. The cheapest new water supply in the coming years will likely be recycling wastewater.

In discussing policy, the authors note the problems of ideology and NIMBYism. One thing they advocate is a change in the incentive system so that instead of selling commodities (oil, gas, coal) one sells final service (heating/cooling). Profitability would then be less tied to selling the most product, but more tied to selling the most service with the least expenditure of energy. This would require a fundamental shift in corporate business models. Indeed, it is the growth/productivism overly tied to company profits and stock market high-grading that leads to waste and lack of incentive to produce more with less since short-term growth is more profitable than investing in mid and long-term efficiency measures.

Markets cannot exist for environmental services or pollutants. No one really owns them and we all share in the benefits and costs. Government regulations have sought to protect the beneficial and deter, abate, and punish the malevolent. The authors advocate simplifying the often complex regulatory frameworks. This should appeal to both liberals, who tend to favor regulation, and conservatives, who tend to favor simplified government and regs. Industry generally hates the idea of a carbon tax but might do better with adhering to environmental and energy-performance standards. Some of the recent most progressive industry consensus has been in agreeing on best practices and adhering to goals beyond and ahead of regulatory requirements. The authors note the widely acknowledged failure of the early European “cap-and-trade” system. They suggest an emissions tax that would partially replace payroll and personal income tax and thus reward energy efficiency and emissions reduction.

Their policy priorities include encouraging all of their eight girders of the energy bridge: 1) Encouraging waste-energy recycling – if this can be done where excess energy can be sold at a fair price, that would be an incentive, but it would also reduce (likely temporarily) utility sales and profits. This would require changing outmoded laws (utility monopolies). This is de-regulation and encourages a free-market which theoretically should be attractive to conservatives. Utilities complain that this will weaken the grid – their grid – but the authors counter that reliability and uninterruptible power availability will keep the grid needed and new usage, especially from electric cars will take up the slack. If massive electric vehicle growth (esp. for lower power urban electric vehicles and e-bikes) can be accommodated without building new power plants, that would take a lot of carbon out of the environment. They also advocate rewriting PURPA for what I was intended to be: an incentive for free market competition in power production and distribution. A carbon tax or other incentives could favor zero-emissions production, especially since it theoretically would reduce climate change abatement costs in the future. This would incentivize power production from waste-heat, pressure-drop, and renewables. 2) Ramping up CHP – one policy suggestion is to mandate purchase of increasing amounts of DCHP as well as renewables (many states do this for renewables) and eliminate or drastically reduce “feed in tarrifs” charged by utilities – which would incentivize decentralized power production. Instead – perhaps the decentralized producers could finance and enable “smart-grids” tied into the main grid. 3) Ramping up energy efficiency in buildings and industrial plants – better incentives and ROI need to be found for efficiency. One possibility is charging more for excess electrical usage. Creation of “Energy Service Companies” (ESCs) who manage energy efficiency measures. The authors suggest a scenario where the company pays the ESC the same amount that they pay the utility, the ESC pays for efficiency upgrades and pays the utility bill(s) for a set amount of time and keeps the rest. Such a scenario might require the ESCs the ability to borrow at reduced rates (as a govt. incentive). After the set time period the savings would revert to the consumer. Time periods can be worked out based on initial upgrade costs and projected savings. They suggest making ESC investments tax free as an incentive that might attract venture capital. Another policy suggestion they mention is to establish a much simpler cap-and-trade system for carbon emissions. Their scenario would not use “offsets” or “grandfathering” but be an open market for producers of oil, gas, coal, ethanol, timber, and biofuels. This would increase their costs and the cost of energy to consumers. Downstream industries would not need permits. Benefits would come to individual taxpayers in the form of sellable permits with expiration dates in a fluctuating market. Thus the tax would be payable to people rather than governments and conservation would be incentivized even more. 4) Continuing efficiency gains in consumer end uses – strengthening CAFÉ standards to include maximum achievable mpg for all vehicle and airplanes as well. Incentivizing operating efficiency of products, maintenance, and disposal/recycling (by the manufacturer) are also recommended. The use of deposits for products encourages their return to the recycling stream. This can be a hassle for dealers and manufacturers though. Abandoned vehicles, appliances, and other equipment can be hazardous. Extended producer responsibility (EPR) policies encourage efficiency, recycling (which is cheaper than mining for metals), and durability. There is also incentive for the producer to optimize recycling potential under such scenarios. EPR supports “urban mining” as a profitable venture. 5) Decentralizing electricity production – rewrite PURPA and retire old dirty coal power plants by closing Clean Air Act loopholes. 6) Finding alternative ways to provide an energy service – esp. ways that conserve energy. Examples are telecommuting, internet shopping, biking or bussing instead of driving. Incentivize minimizing urban car use. 7) Redesigning cities – prepare for climate change contingencies, mandate energy-efficient new housing construction, develop evacuation plans, cost insurance with risk (usually flood risk) to encourage development on higher ground, and revise building codes in vulnerable areas. 8) Linking water management to energy management – goal is to reduce per capita water consumption. Water and energy consumption tend to exacerbate one another. Reducing one reduces the other. Ramp up drip irrigation. Utilize wastewater for power plant cooling.

The authors also give three recommendations for business managers and investors: 1) Bring energy management to the highest level of strategic planning – reducing waste simply saves money. It may not be the core business but it helps it. 2) Recognize the business opportunities, and risks, that will come with rising natural resource prices – reducing the cost of energy service becomes more consequential as fuel prices rise. Price rises seem to have been abated since the publication of this book with success in shale gas and oil and the very gradual move to a natural gas-based transportation economy. Oil and gas companies and utilities typically abound in capital which is a potential source of funding for new tech ventures in renewables and energy efficiency, even though energy efficiency was scorned in the past as hurting profits. 3) Get ready wherever you are -Perhaps a time of dual policies of producing energy and producing energy services is ahead for some of these companies. Costs of energy services and carbon footprints need to be part of business models. Timing is important as well. For example, if plug-in electric vehicles (EV) ramp up too fast, they may lead to building more coal plants, which would counter emissions reductions. Rapid buildup of EVs could also provide some storage capacity on the grid for solar and wind.

Waste-energy recycling opportunities are estimated at 65-95 GW, or 7-10% of U.S. electric output, with no or very little emissions and much lower cost than building new power plants. CHP plants produce 8% of U.S. power compared to over 50% in places like Denmark, though much of theirs is “district heating” which is mostly not applicable in the spread-out U.S. CHP opportunities in the U.S. have been estimated at 135 GW, also reducing emissions. Efficiency could be increased from the current 33% from centralized power plants to 50% by mid-century with the addition of small de-centralized fossil fuel plants. This could be increased further with the addition of rooftop solar PV and wind apps. Investments in energy efficiency are considered low-risk and moderate to high return and there is much opportunity in industry, which represents 25% of electric use, and buildings, which represents another 25%. End-use efficiency is a no-brainer for saving money and for reducing emissions. It is estimated that end-use efficiency of appliances, which represents 12% of emissions reduction potential over the next 4 decades, and better mileage standards for vehicles, which represents 24% (total 36%) offers a significantly greater emissions reduction potential than renewables. Statistically, improvements in fuel economy offer vast emissions reduction potential and should be pursued further.

The authors acknowledge that Al Gore’s 2008 suggestion that renewables can replace coal in a decade is unrealistic. We are halfway there and renewables have barely made a dent. It is clear that the ideas presented in this book offer much more in the near-term than renewables – although the authors agree that renewables should be more vigorously pursued.

This is certainly one of the best books about the future of energy I have come across so far.

 

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