Energy Efficiency, Handmaiden of the Koch Brothers

We are still in an alternate reality, as in: "down the rabbit hole" in Alice in Wonderland, where planning the green future is concerned. Basically, we are stuck repeating the mistakes from 40 years ago, based on assumptions that might have been more valid than now. Be that as it may, they are no longer valid today. A new plan is in order.

When the grid was still THE GRID and Energy Efficiency the solution

Back in the day of the first serious energy price shocks, economists pretty quickly surveyed the energy landscape at the macro level, and figured out that the marginal dollar is more effectively spent on reducing demand than increasing supply. From that time forward the energy industry (oil companies plus the utility sector), adopted energy efficiency as an objective and participated in attempts to achieve those demand reductions, in order to keep its products economically viable.

After environmental damage (Green House Gas (GHG-) emissions) became more known as a cost of carbon energy, the energy industry hi-jacked the renewable future, co-opting green energy with a substitution of energy efficiency for renewable energy. Thereby "green" was now good for the shareholders of the energy companies, for it extended the franchise, and the do-gooders in the environmental movement fell for the snow job, and became the best allies of the carbon cowboys under the auspices of energy conservation, energy efficiency, or whatever other moniker will serve, anything that made people feel like they were sacrificing for the good cause...

All of this had its roots in a time when we thought that economic use of energy was the problem, and before it was widely known that GHG-emissions were the problem, and renewable energy the answer, but we have never adjusted our policies. Most importantly, what has also changed in the last 40+ years is the rapid development of renewable energy solutions that can be installed in properties, on the demand side of the grid.

The Energy Star Program takes the cake

The Energy Star program is the epitome of the problem of dysfunctional energy policy, because it focuses on the component level, not on the systems level. This may be valid when it comes to selecting a new fridge or microwave, but anything that is even potentially part of the permanent energy infrastructure of a property needs to be looked at on a systems level. Unfortunately, only too often these days, there are tax-credits for specific items of Energy Star rated equipment, and all-too often these get specified by bookkeepers and accountants even when the engineers know they make no sense.

The Energy Efficiency Trap

Energy Efficiency is actually an economic trap, and it is also an environmental trap, as is very convincingly argued by Prof. Steve Hallett in the book The Efficiency Trap. Economically and financially, energy efficiency is a trap because of the phenomenon of diminishing returns, which creates the perfect trap with which to lure suckers into uneconomic and eventually self-destructive behavior. Here is how it works:

1. In year one we finally grab some subsidized program that will offer us energy efficiency. So we did a certain amount of weather-stripping and insulation, a set-back thermostat perhaps, and other low dollar, high impact fixes. It reduces our bills somewhat.
2. In year two or three the bills went back up, because of price increases, so our "investment" in weather-stripping has been wiped out,
3. However we now look at what inefficient equipment we have and with help from the Energy Star program we figure out how we can further reduce our energy use. In reality we get that new fridge we always wanted, and some other gadgets, but we save energy, so we can shop without guilt. Nobody is calculating what the return on investment is.
4. Another year later, it's time to get serious, we have cumulatively spent a lot of money on energy efficiency, with little to show for it. But we know our water heater is coming to the end of its life, and the boiler should be replaced in a few years. So let's do the water heater this year. In comes a happy salesman with a tankless hot water heater. Energy Star rated, good for a 30% tax credit, and with a ten-year guarantee, and 5 year financing so we are spending less than the energy we now buy to heat water. Miracle of all miracles: a self-liquidating proposition. The salesman loves saying that, and we like it too: "Sign here, press hard, three copies!"
5. Two years hence we finally have to replace that boiler, so we shop for new Energy Star rated boilers (what else!). Our old boiler was 60% efficient, and the new one is going to be 95% efficient. More tax incentives, and self-liquidating financing propositions. Finally we're spending less on energy, but we're still paying off this equipment. By this time we may have a 25-35% reduction in energy consumption compared to the year we started working on this issue. Our oil or gas bills are going down, but our electrical bill is still stubbornly high.
6. The next year there seems little left to do. Replacing the windows? A twenty-five year payback convinces us otherwise. But, wait a minute, here comes another sales person, now with a solar PPA, for less than our average monthly electric bill, we can now really go green and help the environment, not to mention impress the neighbors. And we're saving 10% compared to paying the electric bill, and we already know the rates will go up anyway...

By the time you add all this up, we have spent a fortune on energy savings, and our energy savings result in an energy bill that is only slightly less than when we started taking into account the various payments. Our utility company and our oil company love us. They even send us certificates to congratulate us on how "green" we are. But the problem is, every next investment was bigger than the last one, culminating in the solar panel that was an $35,000 investment, and 10% reduction of the electric bill was only a 4% reduction of the overall energy bills, and we're paying for it over 20 years, but the actual payback is very slow, and in the meantime, the remaining energy portion of our bills keeps going up.

Why Energy Efficiency is a trap

In the six steps to energy efficiency above, there were several thresholds that were crossed. Instead of upgrading the boiler, we could have chosen a solar thermal solution, except it seemed expensive, and we had just eliminated the water tank two years earlier, not realizing that it could provide "free" energy storage, so what were we to do? Write off our brand new tankless hot water heater and scrap it? Of course not! So we upgraded the boiler. In short, we walked a path of successively larger investments, with less and less energy savings, and we still have an energy bill that is well over 50% of what we started with.

If we had done a systematic analysis at the outset, taking into account when various equipment would run out, we might have ended up with a new energy plan in which we perhaps also did some insulation first, but saved up some money to install either geothermal or solar thermal for HVAC and Domestic Hot Water (DHW). And we got some tax credits on those as well, but we ended up reducing our energy bills by 70-90%. Moreover, we eliminated most major sources of indoor air pollution (boiler, DHW), leaving only the stove. We could now convert to electric cooking, and replace the windows with new triple glazing, and get some heat-exchange ventilation. And we could end up with our old house being near net zero, certainly if we could combine geothermal with solar PV. Site Derived Renewable Energy (SDRE) permanently replaces subscription energy from the grid. It is also permanent part of the plant and equipment of our property, and raises the value.

Ten years later Site Derived Renewable Energy wins

In these two alternate realities for our lives, the energy-saving alternative had us walking into the efficiency trap. We reduced our energy but at a staggering cost, and we still have a significant energy bill left, and it keeps going up. In the second alternative, we bit the bullet and invested significant money in the early years, but it looked better with every passing year, for the payments did not go up, unlike the energy bills of the neighbors. This is the effect of Site Derived Renewable Energy (SDRE). In short, the value of the property goes up, and we are helping the environment by eliminating 70, 80 or 90% of direct carbon emissions from the house. Not only that, but a new development of net zero homes was going up nearby, and we were approaching that level for our own home, so the value of our property should hold up.

Conclusion: SDRE wins

SDRE means permanently replacing the monthly energy bills with our very own generating capacity, which we only buy once. It could be solar thermal, geothermal, wind, solar PV, various passive energy solutions, or a combination etc. It adds to the value of the property. In fact, our property's value now goes up with energy prices, and we won't have to worry about the carbon tax when it comes. Site Derived Renewable Energy should be prioritized over energy efficiency, and ratings of components should not distract us from the total design concept.