Green Energy Policy Failures and Real Sustainability

The one thing that is missing in the whole sustainability area and renewable energy policy is a sound focus on the economics and the finance of green energy. With new buildings this is not a problem, but the greater market is retrofits in older buildings and in that arena by and large people are wasting their money with tinkering in the margin instead of making the most of the opportunity.

If it takes 10 years for a new efficiency standard to work its way through the car fleet, then the picture is much worse with buildings, because they typically last a bit longer than cars. Living in one of the older parts of NYC, I'm surrounded by 50+ year old structures, which still have plenty of life left in them.

Policy Failure #1:
Conflating Energy Efficiency and Renewable Energy

Conflating energy efficiency and renewable energy is an obfuscation which serves only the fossil fuel industry, which is why they eagerly embrace "energy efficiency." This is how they compete against renewable alternatives. Energy efficiency is a marketing strategy and a greenwash of the fossil fuel industry, and it is financially disruptive. In various posts on this website, I have demonstrated how this manifests itself across many programs, and acts as a way to divert investment from green technology, even if it would be financially more advantageous to property owners.

Since this approach benefits the fossil fuel industry, this is a typical policy failure, which achieves the opposite of what is intended, and change is in order.

Policy Failure #2:
Arguing over Clean Fuels is like rearranging the deck chairs on the Titanic

As argued in earlier posts, the whole NYC Clean Heat program is a massive example of policy failure in this area. The whole point is we are in a transition away from fossil fuels, and towards renewable energy, and now that we generally realize how much energy is consumed by buildings, and green energy technologies that are suited for mounting on buildings are proliferating, it is time for policy makers to encourage this development, instead of putting road blocks in the way. Even with all of the best intentions, this is how most programs have worked out so far.

Policy Failure #3:
Not seeing the forest for the trees - misguided incentives

Tremendous amounts of time, effort and money are wasted over what technologies are blessed with the Investment Tax Credit, which is good for sales for the companies that make them. However this puts the focus on individual technologies, and not on the whole project, which can only be judged on the property as a whole. If accountants start specifying the wrong components because of ITC, inferior projects will be developed, never mind how good the individual components are. There is a right place for everything. But having accountants make engineering decisions is counter-productive.

Policy Failure #4:
Disregard for long-term financial planning is encouraged by incentive programs

By various forms of incentives on equipment, such as the ITC, or a requirement to specify Energy Star equipment, regardless if it is the best for the job from an engineering standpoint,  suboptimal projects are being developed. What matters is to reduce the Green House Gas emissions on a building level, so the incentives should address the achievements of the building as a whole. Energy Star is fine for a fridge or a micro wave, which are one-off decisions, but specifying the credits on construction components causes accountants to  mess up the best engineering. More importantly the whole industry has gotten in the bad habit of evaluating financial decisions at the component level, based on payoff of that component in terms of savings, which gets in the way of long-term capital plans, which would reveal very different design strategies.

Policy Failure #5:
Absence of simple objectives, such as reducing Green House Gas emissions

Once the policy focuses on the right issues, namely reducing Green House Gas emissions building by building, better designs will proliferate, and long-term capital budgeting becomes the obvious way to design capital plans. Thirty year cash flow models should be the norm, and ideally should be required by financiers and e.g. PACE bonds. The whole point of PACE bonds was to have a way to raise the upfront capital needed for this transition, which would add to long-term asset values. Instead, a lot of PACE money is being wasted on dubious "energy efficiency" projects, and property owners are frittering away the long-term appreciation of their buildings by investing in renewable infrastructure, and moving energy from the liabilities to assets.

Conclusion:
How to Achieve Sustainability in Spite of Policy Failure

In spite of all policy failures, building owners have a vested interest in sustainability, because it increase asset values, and they should be using 30 year capital budgets for energy retrofits with green energy technology; in other words the various programs and incentives should be ignored and the long-term economics of the building should get priority, before you figure out how to qualify for the incentives.

NYC Clean Heat Amounts to Capital Destruction

Recently I demonstrated on this blog why NYC Clean Heat is regressive with respect to Clean Air compliance, because it diverted buildings to natural gas, that would have been perfectly suited for renewable energy deployments. The typical buildings that were (and in some cases still are) burning #6 oil, are ideal candidates for renewable energy conversions. In many cases that would have produced financially and economically superior outcomes for building owners, and certainly for the city in terms of Clean Air, and for tenants in terms of quality of life. Green House Gas Emissions could be reduced far more than is now the case, and NYC Clean Heat was an unqualified victory for the carbon energy industry. Next time we should get our fossil fuels facts, before we argue any fossil fuels pros and cons.

There are several other aspects to the matter, which make the picture even far worse. There is no argument that natural gas burns cleaner than #6 or #4 oil (and even than #2 oil), and produces less CO2 and fewer particulates. However, the reality is that the distribution losses of methane are 30+%, and the uncontrolled release of methane into the air from fracking ("unconventional gas"), add even more environmental burden, since methane is a far worse Green House Gas than CO2. Increasingly, our natural gas is "unconventional gas." Fossil fuels are the problem, and "cleaner fuels" are mostly simply an obfuscation.

Greenwashing Fossil Fuel

As has been pointed out in many ways on this blog, the greenwashing by the power industry is the single biggest PR stunt to halt the conversion to renewable energy. The argument is not over types of fossil fuels. it is a matter of renewable alternatives. With the evidence cited here, and more, it is clear that dubious claims were used to promote natural gas as a clean fuel, and a "bridge fuel," it is mostly a diversionary tactic, and it is absolutely imperative that we transition to renewable energy wherever it is economically feasible. Switching to different forms of fossil fuels is window dressing, not progress.

There are many more opportunities in the city's aging building infrastructure than are now being exploited (see my DaBx PlaNYC2020), because government programs are steering owners away from them. In a more general sense, it is also clear that the obfuscation that results from promoting energy efficiency in fossil fuel based systems makes them more competitive, and fuels the demand, crowding out investment in renewable energy. So energy efficiency of fossil fuel systems is not part of any green agenda, except simply if it is the only thing you can do and arguably better than the alternative.

Methane leaks and more from Fracking

How big is the problem of natural gas (methane) leaks from fracking? As usual the answers depend on who you ask. The article cited here is probably conservative and reports an extreme finding of 14% of production (output) in losses from fracking. And that is only the current leaks, during extraction. What no one knows is how much seeps out in the years following production. As the article notes, it will take a long time before we have an accurate fix on this issue, but it definitely takes away some of the charm of natural gas. The more alarmist view of methane losses from fracking can be found in many places, if you want to arrive at a balanced view. The fossil fuel industry talks of 2% or less, and more independent opinions are as high as 10% of all gas produced.

The only encouraging information is that while methane is anywhere from sixty to one hundred times more destructive than CO2, it dissipates in the atmosphere within 20 years, while CO2 builds up forever. Be that as it may, renewable energy would reduce our green house emissions faster than the natural gas bonanza, and the element of leakage takes away some of the charm of natural gas.

The environmental degradation from fracking may well be equivalent or worse than the toxic sludge from the scrubbers of coal-fired power plants. The jury is still out on this part of the story.

Green House Gas Emissions from Distribution

The distribution loss of Methane (Natural Gas), as you can see in this article, 5%-10% leakage from distribution may be the range in the UK, and according to the calculations cited there, anything over 2.8% leakage may be enough to offset the "clean" advantages of natural gas over coal, which is the dirtiest fuel. In the US losses may be lower. EPA estimates that the losses of natural gas are distributed as follows: 37% from transmission/storage, 24% from distribution, and 27% from production. Overall EPA estimates that globally the losses of methane from leakage are 3.2%, which would largely wipe out the advantages over coal or oil.

Green House Gas Emissions from Burning Natural Gas

Here is where Natural Gas has it over coal and oil, producing far fewer problems, starting with less CO2, but also fewer particulate emissions, as well as various other toxic exhausts, including mercury. This is what allows New York City to claim that a switch from #6 and #4 oil to natural gas would produce reductions in Green House Gas emissions. Evidently NYC is the point of consumption, and the fact that gas is cleaner burning seems to carry the day. However, it should be obvious from even this brief overview, that this may appear to be true locally, it is not true on a complete system-wide view of the matter. Hence the drive to gas conversions is little more than window dressing, particularly in light of the alternatives that are not being pursued.

Government Sponsored Capital Destruction

In short, the drive to convert from oil to gas is largely futile, and to the extent that it is forcing building owners to prematurely change boilers, it amounts to government sponsored capital destruction.

Most importantly, the opportunities discussed on this site, for green energy generation in buildings, which would permanently improve building values, and make huge contributions to Clean Air, are basically being disregarded as a result of the dubious environmental benefits of natural gas, and passing up that financial opportunity alone is yet another form of capital destruction, because with while fossil fuel is an ongoing operating expense, truly renewable, green energy moves energy from liabilities to assets, and permanently improves building values.

Conclusion

In short, NYC is missing the boat by rushing into a pseudo solution that merely shuffles the deck chairs on the Titanic of the fossil fuel economy, that has precious little real environmental benefit to offer in terms of reducing Green House Gas Emissions, except for some very short-term window dressing and greenwashing of the fossil fuel economy, while it passes up the long-term economic potential of substantially reducing Green House Gas emissions, greater building resiliency, and improved economic competitiveness that would result from a greater emphasis on switching to renewable energy within the city. Given the alternatives, the campaign amounts to government sponsored capital destruction.

Geothermal Heat Pumps and the Green Apple

Geothermal heat pumps seem to be a bit of a dark horse in the Big Apple, which these days has aspirations of becoming a Green Apple. In some respects the reasons for it are unclear, because there have certainly been successful geothermal projects. On the most practical level the obstacles seem to be mostly lack of knowledge as well as some quasi-regulatory issues. But geothermal heat pumps are probably the single most strategic renewable energy technology in the City, and it is gratifying to see that City Hall is finally studying the technology.

Lack of knowledge about geothermal heat pumps begins with the fact that people are  uninformed about the different geothermal technologies that exist, and what their applications are. There is deep geothermal, and if you are in Iceland, and you have a geyser or lava stream in your backyard, you may have an opportunity to exploit that technology. This is not what we do in urban environments. The shallow varieties of geothermal are really forms of heat exchange that exploit the largest solar collector in the world: the earth's crust. Below the frost line it is permanently 52 degrees Fahrenheit in NYC, and that is enough to set up a heat exchange which can provide cooling in summer and heating in winter, (HVAC), and perhaps Domestic Hot Water (DHW), and it might be able to heat your pool water, or provide an ice-melt system for your driveway.

NYSERDA MPP hampers geothermal heat pumps

The most practical problem that is holding up geothermal heat pumps may seem to be the difficulty of retrofits. Obviously, new construction is easier, but that issue is not as large as it seems, for the payoff from geothermal can be significant, particularly in the city, where space is a problem and we need to exploit every available angle if we want to generate our own energy. The most practical impediment to geothermal deployment is the NYSERDA MPP program, which penalizes a project (building) for adding any load to the grid. Their objective is reducing load. Besides all the other reasons why this program is an impediment to green energy technology deployment, here is yet another one.

From the standpoint of the overall improvement of the energy economics of buildings, there are few more powerful solutions around, however we've stacked the deck against it, because the focus of the NYSERDA MPP is narrowly defined by reducing electrical demand. This is yet another case where these kinds of programs are targeted to get building owners to do what is good for the utility in the short run, not even in the longer run. As a result, building owners are missing out, and so is the overall energy household of the city.

Geothermal heat pumps: the multiplier effect

The reason geothermal heat pumps are such a strategic technology, is because they create a multiplier effect, which can create compound returns from a renewable energy retrofit. At a Coefficient of Performance of around 4.0, which is the terminology the geothermal industry uses, they return 400% on their energy input. To put it differently, for every one BTU equivalent input, you get 4 BTUs out. Now that's a good trade! It may be marginally economic with grid power, depending on your rates, but you can boost the economics by leveraging time of use rates (for your geothermal field needs recovery time anyway, and you're designing around the objection mentioned above, against increasing demand from a building). Then, if you can generate some serious power from wind or solar, you can create a very powerful, and totally renewable, solution.

In short, if you can cover part of your BTU load from geothermal energy today, you have the option to generate more of your own energy with other means, either solar PV, or a wind turbine (there are more and more building mounted options coming on the market), so that if the electricity prices become to high to your taste, you can probably cover your requirements for your geothermal heat pumps, as well as taking part of your building off line, and there you will have a permanent energy price hedge. And remember, you are competing with retail electricity in your home or apartment building, and in NYC the rates are sky high, because we are far away from power generation, and the long haul transportation is expensive. Only Long Island is higher than the City. In either case the cost of transport is 60-70% of the bill in most cases.

Geothermal Heat Pumps for Multi-family Buildings

In a traditional multi-family building, the most obvious strategy is to replace the Domestic Hot Water (DHW) with either geothermal heat pumps or a solar thermal system. It usually represents 30-50% of the BTU load in the building, at least the for the building owner, who is responsible for heat and hot water.

With the proliferation of building mounted wind turbines, wind energy becomes a logical complement to the geothermal solution, particularly because pre-heated hot water becomes an effective storage solution, and that is the single most difficult aspect of creating an effective green energy infrastructure. It explains why we can create compound investment returns with these types of integrated green energy retrofits.  This way multiple green energy technologies can be exploited within one building and taken together, they produce superior investment returns, while providing enhanced building resiliency.

Conclusion: green energy and property values

The reason geothermal heat pumps are so strategic for a green energy infrastructure in a building is because they represent a multiplier with which you can build an effective energy price hedge into your building, and create a compound return on integrated green energy technology which will accrue to you by raising property values.