Energy Efficiency Exposed

Blissfully, even the New York Times is starting to let some light in on one of the biggest consumer frauds in history, energy efficiency. With an opinion piece, The Problem With Energy Efficiency, by Michael Shellenberger and Ted Nordhaus of Breakthrough, the prospect of addressing this fundamental flaw of energy policy is coming closer. The authors point out on the occasion of a Nobel prize for LED research, that LEDs will not save us, but lead to increased uses of lighting and thus energy. It is doing so already.

Energy Efficiency as it is promoted today, is a consumer fraud, it is a way of selling energy efficient products without the guilt.  The Energy Star program is the cheerleader for this misdirection, for it encourages incremental fixes, not radical solutions. There is not really any perpetrator other than the collective public delusion that energy efficiency will somehow magically bail us out, but the short-term beneficiaries are the utility industry, and the manufacturers of energy efficiency technologies, and property owners are paying the economic penalty for failing to do the economics of their energy decisions properly. The presumed benefit of energy efficiency is an unexamined assumption that seems sensible, but does not work in practice. Yet there is mathematical certainty that it cannot, because it is a limit function, which MUST produce  diminishing returns, as I have extensively documented on this blog.

The fundamental deceit which underlies the mistake is the labeling of energy efficiency as "green," and conflating it with renewable energy, and further to train clueless property owners to pursue energy efficiency on an incremental basis, as though it were additive, which it is not, because of the problem of diminishing returns, so it becomes a permanent money drain. This energy efficiency-driven approach amounts to a greenwash of carbon energy, and keeps us hooked. The result has been a massive market failure, and significant capital destruction. To this day, government is encouraging this pattern of helter-skelter spending on efficiency, which diverts resources from potentially productive investment in worthwhile projects that build value for investors. The beneficiaries of this confused guidance have been the utilities and energy companies. Current government programs are very successful if the goal were to save energy companies and utilities.

Environmental and Economical Fraud: Energy Efficiency

Fortunately, there are a growing number of critical voices who have taken to uncovering the misleading claims of energy efficiency, and hopefully to put us on the track to productive investment.

1.  First there is Steve Hallet's excellent book, The Efficiency Trap, which argues the case on a parallel to over specialization in nature. Clearly if the problem is over-dependence on carbon-based energy systems, it is not merely like the Jevons paradox, that there is blowback, in the sense that increased efficiency reduces the cost of energy and thus raises demand. There is a deeper effect of throwing good money after bad, which is ridiculous at a time when renewable technologies are becoming easily cost competitive on the margin.
2. Then there is David Owen's The Conundrum,  which deconstructs all our thinking about energy, and debunking solutions which make the problems worse.  It exposes the fallacies of energy efficiency and alternative energy on a deeper level.

These two books here are eye-opening, and will make sure that you never look at energy efficiency or even some of the renewable energy discussions the same way. This is the place to start to sort out the chaff from the wheat and learn to think for yourself about energy solutions.

Energy Investment, not Energy Savings

My focus continues to be on the viewpoint of the individual property owner, in terms of how to create maximum value from renewable energy retrofits. The only meaningful way to evaluate the issue is to look at your property value, and how you can increase it by going renewable. There are people who want to live net zero out of social responsibility, or religious conviction, but that is not interesting to me. It is interesting to me only when it is done on the basis of sound economics.

The trap we are falling into as a society is that typical programs we now have benefit either the utilities, the energy companies, or the manufacturers of e.g. solar panels. No program is looking at it from the standpoint of the economics of the property owner, and that is the only possibly meaningful way of approaching the issue. And, in many cases you will find that, with the right analysis, there is a hell of a lot that can be done, for energy is a big part of your running cost in a house.

Energy Efficiency done right

The right energy efficiency definition would make it clear that you first need to decide what your energy system should be, or you risk throwing good money after bad, and making your bad system more efficient, which is what happens a lot today. In other words, if it is done right, you would first implement renewable energy wherever it is economical and make the whole system as efficient as possible.

If you're spending $1,000/mo on energy, and you can eliminate 75% of that bill with a renewable energy retrofit that is $9,000 annualy in cash available to finance your conversion. And when you do make the changeover, you now have a permanent hedge against energy price increases, and mostly renewable technology has lower maintenance costs than fossil fuel burning equipment does. Most importantly, as part of your life-cycle planning for your property, you would consider ALL renewable energy technologies and prioritize them according to the highest yield, which today looks approximately as follows:

1. Solar Thermal energy 85-95% efficiency.
2. Geothermal 400% efficiency (it consumes electricity to run, but you might be able to generate your own.)
3. Wind energy gives more bang for the buck in the right location than does solar PV, certainly when considering the footprint, so per square foot of space the yield is much greater than Solar PV.
4. Solar PV, with efficiencies currently going from the high teens to the low 20s.
5. Various passive thermal measures, insulation, glazing, thermal storage, and so on will complement the picture.

The currently prevailing paradigm is one of incremental "energy savings," and as a result people never treat these decisions as investments, but they serially fritter away the money, and the more 'efficient' they get, the more the power company is ensured of retaining their business. This is one good reason why power companies are happy to finance these efficiency programs.

We need to shift our focus to investing in energy, not merely saving energy, and for that we need always to have a 30 year energy plan, which includes life-cycle planning for all major componentry, such as boilers, and a/c plant. We need to realize that thermal technologies, both active and passive, are often not as easy on a retrofit basis, but if you can do it, they give the most bang for the buck.

Under the incremental approach, people buy e.g. solar panels and they save 10% on 30% of their energy usage, so they lowered their bills by 3%. The same amount of roof space, if it were used for a solar thermal system, could eliminate 70, 80, or even 90% of the energy bills, particularly if it is combined with passive thermal solutions.

Conclusion

Energy Efficiency and energy savings sounds good but they are the wrong approach for long term asset values, especially when they are done on an incremental basis, and without a plan. They are a greenwash of carbon-energy.
Investment in permanent energy infrastructure to improve asset values is focused on creating the maximal increase in your property value with a renewable energy retrofit and energy efficiency, instead of a greenwash of carbon-energy with energy efficiency alone.