Wednesday, August 12, 2009

Climate Progress

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Climate Progress


Energy and Global Warming News for August 11th: Mass production expected to lower costs, size, weight of lithium-ion batteries

Posted: 11 Aug 2009 08:11 AM PDT

Mass production expected to lower battery costs, weight

Several automotive industry leaders said Friday they are convinced that the cost of lithium-ion batteries, as well as the size and weight of the battery, will decline substantially once automakers begin to produce them at higher volumes.

Further reducing the size and the cost of the batteries are crucial challenges facing manufacturers as they race to develop plug-in hybrid and all-electric vehicles aimed at consumers.

Already, GM has found a way to reduce the weight of the lithium-ion battery for the Chevrolet Volt, set to debut in 2010, to 400 pounds, down from 1,200 pounds for the lead-acid battery in the EV1, an unsuccessful electric vehicle that GM introduced in the 1990s, according to Bob Kruse, GM's executive director of global vehicle engineering….

"If you think about lithium-ion" batteries, "most people don't know that only 25% of the weight is actually storing energy," said Ric Fulop, founder and president of A123 Systems Inc., a battery supplier. "I think there is significant room for improvement to take that from 25% to 50% over the next decade … and costs should come down by more than half."

G.M. Says Volt Will Get Triple-Digit City Mileage

General Motors said Tuesday that its Chevrolet Volt with its rechargeable battery is expected to get at least 230 miles a gallon in city driving. The car is scheduled to be released in 2011.

G.M. said the number was based on developmental tests using a draft federal fuel economy methodology for plug-in electric vehicles.

The Volt uses a battery pack and is powered by an electric motor with a 40-mile range, and the calculation essentially assumes that most drivers using the car to commute will stay within that range and will not need the car's gasoline-powered generator to produce electricity. The majority of time, drivers in the city will be in an electric mode, the company said during its presentation.

North American cooperation on climate change

U.S. President Barack Obama said on Monday the United States, Canada and Mexico had made progress on concrete goals that will be negotiated at international talks on climate change in Copenhagen in December.

The three countries said they would cooperate on a series of measures, including building infrastructure for emissions trading systems and making the North American aviation sector "carbon neutral."

New figures show India emissions a fourth of China

India contributes around five percent to global carbon dioxide emissions, a new government report showed on Tuesday, but is still only about a quarter of the emissions of China and the United States.

The finding is based on the 2007 World Development Indicators figures of the World Bank.

The report, which said the energy sector contributed 61 percent of total emissions in India, pegged India's per capita emissions at only one-twentieth of the United States and about one-tenth of western Europe and Japan.

New Study Sheds Light On The Growing U.S. Wind Power Market

For the fourth consecutive year, the U.S. was home to the fastest-growing wind power market in the world in 2008, according to a report released by the U.S. Department of Energy and prepared by Lawrence Berkeley National Laboratory (Berkeley Lab). Specifically, U.S. wind power capacity additions increased by 60 percent in 2008, representing a $16 billion investment in new wind projects.

"At this pace, wind is on a path to becoming a significant contributor to the U.S. power mix," notes report author Ryan Wiser, of Berkeley Lab. Wind projects accounted for 42% of all new electric generating capacity added in the U.S. in 2008, and wind now delivers nearly 2% of the nation's electricity supply.

Companies rethinking the supply chain

The recession that seems to be winding its way down has taken a giant bite out of many a corporate bottom line over the past year or two. But it's brought other changes, too. For one, how what we buy gets from the factory to the store shelves. As shipping costs and pressure to reduce greenhouse gas emissions rise, companies are looking for ways to make their supply chains shorter and save some money while they're at it.

Raising Wind Turbine Output With Longer Blades

A basic problem for wind turbines is that the wind often dies down. As a result, they produce far less electricity than if the wind blew constantly, at full speed.

A good wind machine, therefore, may harvest just 30 percent of its maximum potential energy. By contrast, a nuclear reactor with a similar energy rating might reach 90 percent of its maximum potential, because it is running virtually nonstop.

One major turbine manufacturer, Siemens Energy, is trying to increase the proportion of potential energy that the wind harvests — by making the blades longer. The new machines, by Siemens, all use the common three-blade design. But a new Siemens turbine has a rotor diameter of about 330 feet, rather than one with a 305-foot diameter.

In Cold Northeast, Officials Consider Limiting Furnace Emissions

Eleven Eastern governors are expected to approve a blueprint for slashing carbon dioxide emissions from cars — and perhaps home furnaces — before January, according to state officials, potentially sparking a widespread shift to residential heaters that burn wood pellets.

Officials in states from Maine to Maryland are preparing the outlines of a regional plan that would limit the amount of greenhouse gases a unit of fuel, like a gallon of gasoline, could emit. That's meant to prompt oil companies, refiners and motorists to use cleaner fuels made from trash and plants and renewable electricity.

Prime Minister Rudd uses blackout to his advantage in climate change debate

Climate change continues to dominate debate in Parliament, with the Prime Minister even using a blackout to further his attack on the opposition.

The opposition came out firing with Liberal frontbenchers asking a barrage of questions of the Prime Minister demanding he explain why he wouldn't consider a proposal to cut pollution emissions while saving money.

Climate change an Australian 'security threat'

Australia faces more intense and frequent heatwaves, wildfires, cyclones and floods, with climate change becoming a threat to national security, a think-tank warned Tuesday.

The impacts of global warming were already making themselves felt, much faster and with greater ferocity than anticipated, the Australian Strategic Policy Institute (ASPI) said.

A record-breaking heatwave killed 374 Australians in January, with another 173 perishing in the devastating February firestorm which flattened entire towns and razed more than 2,000 homes, ASPI said.

"As a result of climate change disasters are likely to become larger, more complex, occur simultaneously and in regions that have either not experienced the natural hazard previously or at the same intensity or frequency," said report author Athol Yates.

Homes Go From 'Superefficient' to Zero Carbon Emissions in Europe

When Kay Helt moved into his superefficient home on the outskirts of Copenhagen two years ago, he felt as if he had just stepped into the lifestyle of the future. His high-tech house uses five times less energy for heating than his old one, and it recycles rainwater for the toilets and shower.

Yet in only a few years, Helt's house will already be obsolete.

With various degrees of urgency, E.U. countries are moving toward requiring new homes to only use clean energy and have zero net carbon emissions, despite some real estate developers' complaints that such homes cost more to build and will be harder to sell.

China's green leap forward

Behind the notorious clouds of filth and greenhouse gases that China's industrial behemoth spews into the atmosphere every day, a little-noticed revolution is under way. China is going green. And as the authorities here spur manufacturers of all kinds of alternative energy equipment to make more for less, "China price" and "China speed" are poised to snatch the lion's share of the next multitrillion-dollar global industry – energy technology.

The latest on hydrofluorocarbons

In the 1970s, scientists hypothesized that chlorofluorocarbons (CFCs), chemicals commonly used in refrigerants and aerosol cans, might deplete the ozone layer in Earth's stratosphere. Ozone filters out ultraviolet rays from the incoming sunlight, protecting life from the harmful rays.

After much resistance from industry interests, the US, Canada, and Norway banned CFC-containing aerosol cans in 1979. But when scientists discovered an ozone hole over Antarctica in the mid-1980s, countries around the world began phasing out the ozone-destroying chemicals. A new class of ozone-friendly molecules called hydrofluorocarbons (HFCs) replaced them.

Now, global warming is a concern. And a new study in the Proceedings of the National Academy of Sciences finds that HFCs, some of which are thousands of times more powerful than carbon dioxide as a heat-trapping gas, could become a significant factor in future warming.

Humans 'Damaging The Oceans' In Profound Ways

There is mounting evidence that human activity is changing the world's oceans in profound and damaging ways.

Man-made carbon emissions "are affecting marine biological processes from genes to ecosystems over scales from rock pools to ocean basins, impacting ecosystem services and threatening human food security," the study by Professor Mike Kingsford of the ARC Centre of Excellence for Coral Reef Studies and James Cook University and colleague Dr Andrew Brierley of St Andrews University, Scotland, warns.

Game changer 6: Will shale gas save the climate bill?

Posted: 11 Aug 2009 05:44 AM PDT

The NY Times — and U.S. Senate — have caught up to Climate Progress with this piece last week, "Is Shale Gas the Climate Bill's New Bargaining Chip?":

Natural gas from shale formations is the new magic phrase in the oil and gas industry, as new technologies have led to stunning increases in potential resources and anticipated profits.

Now some want to see if it carries any political magic.

With new discoveries of the fossil fuel in massive but difficult to drill shale deposits, advocates claim that climate legislation means a job boom for gas engineers and drillers, and revenue for producers. They say a cap on greenhouse gas emissions could lead power plants to switch to gas from coal, which emits about double the carbon dioxide of gas.

Some experts — but not all — say that a strong mandate to expand wind power and other alternative energy generation could be a boon for natural gas generators, which are a likely future source of backup power for renewables.

At the same time, some politicians on Capitol Hill are pushing for new natural gas incentives in climate legislation moving through Congress. They note that the fuel resource sits in many states, like Michigan and Pennsylvania, whose lawmakers are needed for passage of a bill.

"If you took a map of swing-state senators and look at where these new gas finds are, they match," said Sen. Mark Udall (D-Colo.). "It's more than ironic."

This echoes many key points of my series on gas.  There appears to be a lot more natural gas than previously thought (Part 1) and therefore unconventional gas makes the 2020 Waxman-Markey target so damn easy and cheap to meet (Part 2), which is great for low-cost climate action, bad for coal (Part 3).  As Part 3 discusses, natural gas is the critical low-carbon "firming" resource that can enable deep penetration of both windpower and concentrated solar thermal power.

Last month I noted that many of the key fence-sitting Senators come from states with major unconventional gas reserves, including Arkansas, Louisiana, and the Dakotas and that "If a serious climate bill passes the Senate in the next several months — and I believe it will — then activism by the natural gas industry may prove decisive." [see Tim Wirth to natural gas execs: "You don't have the right to sit back and do nothing" about climate change. "We are in very deep trouble, the edge of catastrophe, and you can help." (Part 4)].

Here are more excerpts from the NYT piece on this very subject:

He said he and his colleague Sen. Michael Bennet (D-Colo.) are working with other senators on provisions to promote natural gas in global warming legislation.

New benefits for gas are "going to be an essential part of my support for a bill," Bennet said yesterday. The first-term senator is himself a possible swing vote on a climate and energy package.

Another potential swing voter, Sen. Kent Conrad (D-N.D.), also said yesterday that he would like to see more legislative text favoring natural gas. Such a plan could be one of many bargaining chips that get lawmakers behind a climate and energy bill in the Senate, he said.

'Bigger than nuclear'

A former U.S. Senate aide who has been in close contact with Capitol Hill offices said natural gas "could be much bigger than nuclear" in getting politicians on board.

Legislation sponsored by Reps. Henry Waxman (D-Calif.) and Edward Markey (D-Mass.) passed the House last month establishing a mandatory cap on greenhouse gases, but the fate of the measure remains uncertain in the Senate. A bill draft has yet to be released in that chamber, and Democratic leaders are searching for 60 votes to block a filibuster.

Many natural-gas advocates believe that a carbon cap will benefit natural gas by default, but the industry also is pushing for things such as fewer carbon offsets in a climate bill. Offsets allow emitters — such as big coal-dependent utilities — to meet carbon caps by paying for projects outside their own factories, like forestation projects overseas. That offsetting allows them to avoid switching to gas as an alternative fuel.

Rod Lowman, president and CEO of the newly formed America's Natural Gas Alliance, said in a recent interview that he was "concerned" about the number of offsets allowed in the Waxman-Markey proposal.

The shale discoveries brought natural gas to the political forefront.

In recent years, the oil industry developed technologies to drill horizontally into gas-bearing shale seams and fracture the rock with high-pressure water injections, called hydrofracturing. These techniques make it possible to recover shale gas reserves that were separated in many tiny pockets that could not be tapped economically before, said John Curtis, a Colorado School of Mines professor.

According to a 2008 report from the Potential Gas Committee, estimates of gas resources surged from more than 1,300 trillion cubic feet (tcf) in 2006 to more than 1,800 tcf last year. Much of that jump came from shale gas, which made up 616 tcf of the 2008 total.

Some politically convenient geology

The geographic locations of these new shale gas resources overlap with the home states of many Senate lawmakers, like Sens. Arlen Specter (D-Pa.) and Blanche Lincoln (D-Ark.), who could make or break the outcome of global warming legislation.

During the House vote, majorities of delegations in Arkansas, Kentucky, Oklahoma, Ohio, Louisiana, Pennsylvania and Texas — sites of major shale gas resources — opposed the Waxman-Markey bill. House majorities from New York and Michigan, where shale gas is also found, backed the bill, and West Virginia's delegation split evenly.

Reid Detchon, executive director of the Energy Future Coalition, finds it puzzling that the natural gas industry hasn't lined up more forcefully behind the climate legislation moving in the Senate. Gas figures to be a big winner if climate policy mandates an ambitious renewable energy standard and restraints on power plant carbon dioxide emissions, he said.

In addition to being a potential coal replacement, gas generation is the obvious backup for the fivefold to tenfold increase in wind and solar generation that may be mandated in a climate bill. Gas-fired power plants can ramp up quickly when clouds block the sun or the wind stops blowing.

"Natural gas is best" for that role, said Jeffrey Eshelman, vice president of public affairs of the Independent Petroleum Association of America. "It's abundant. It's a natural backstop for renewable energy. It makes all the sense in the world to bring all of it online."

The Energy Information Administration last year analyzed how energy use would change if the nation were getting 20 percent of its electric power from wind in 2030, and predicted that gas turbine generation would increase significantly to back up wind power, but that more expensive combined-cycle gas generation from coal would be displaced by wind.

True, but with a moderate and rising carbon price — as the climate bill would drive — combined-cycle gas would replace coal.

It's possible that the shale gas phenomenon is so new that it hasn't reached its full political weight with Congress.

For example, two of the biggest shale gas plays are the Haynesville Shale in Louisiana and Texas and the Marcellus Shale, extending from New York's Southern Tier through western Pennsylvania and into Ohio and West Virginia. "Only in the last 18 months have Haynesville and Marcellus proven themselves productive," said Curtis, who oversees the Potential Gas Supply report.

Norway's national company StatoilHydro, the world's largest offshore oil producer, paid $3.4 billion last year for a one-third interest in 1.8 million acres in the Marcellus region. The company said it believes it may recover up to 3 billion barrels equivalent of shale gas, according to OilandGasInvestor.com.

A new Pennsylvania State University report that was requested by state legislators predicts that the Marcellus Shale could add $14 billion to the state's economy in 2010, create more than 98,000 jobs and generate $800 million in state and local tax revenues. Yet the economic benefits may not come for a while, making shale gas a potential tough sell for lawmakers looking for immediate results.

Actually, passage of the bill would immediately benefit the gas industry, since it would create sufficient long-term price certainty (because of the price floor) for the industry to start signing the kind of longer term contracts needed to replace a large fraction of coal in the electric sectory by 2020 — and even more by 2030.

Note:  The NYT piece was a reprint of a piece by Climate Wire.

For even more, see Game changer 5: RFK, Jr. on "How to end America's deadly coal addiction … practically overnight" thanks to "a revolution in natural gas production."

Clean energy bank could drive $200 billion in investment, generating over 2 million jobs

Posted: 11 Aug 2009 04:10 AM PDT

A little-discussed provision in the clean energy bill, the Clean Energy Deployment Administration, would have a huge impact on the U.S. clean tech industry, as this guest post by CAP's Jake Caldwell explains.  Yet the EIA didn't even model the clean energy bank in its recent climate bill analysis (see "Despite its many flaws, EIA analysis of climate bill finds 23 cents a day cost to families, massive retirement of dirty coal plants and 119 GW of new renewables by 2030 — plus a million barrels a day oil savings").  Combined with all the other provisions in the bill, plus the stimulus and the Administration's other clean energy and climate policies, Obama would easily meet his promise of $150 billion in U.S. government investment in clean energy over 10 years — and in fact will ultimately drive some $100 billion a year in total U.S. investment in clean energy.

Introduction

The United States must build and deliver clean energy today to create jobs, lower energy costs, and strengthen our economy. The establishment of a federally owned, independent, not for profit Green Bank—formally called the Clean Energy Deployment Administration, or CEDA, in legislation now before the Senate—will spur private-sector investment in innovation and American ingenuity to help end our dependence on oil, and help diversify our nation's sources of energy to lower prices over the long term while also confronting global warming. The Green Bank will improve our global economic competitiveness, too, by making the United States a worldwide leader in the manufacture and deployment of clean-energy technology.

The creation of a Green Bank will encourage a long overdue integrated and strategic approach to clean-energy innovation, efficiency, and deployment in the United States. In combination with Senate action on clean energy—legislation that provides incentives for the research, development, and deployment of clean-energy technologies, and a market-based pollution-reduction program that reduces greenhouse gas emissions and reinforces a predictable price signal on carbon—the Green Bank will open credit markets, motivate private business to invest again, and create good, clean-energy jobs here at home.

In partnership with the private sector, the Green Bank will enable innovative, commercially viable clean-energy technologies in such areas as wind, solar, geothermal, advanced biomass, increased efficiency, and transmission infrastructure—all to be deployed on a large scale. The construction and actual deployment of these clean-energy technology projects is vital to a clean-energy future.

What's more, clean energy delivers long-term job growth and holds tremendous new job-creation potential, particularly in the manufacturing sector. A recent report from the Center for American Progress and the University of Massachusetts Political Economy Research Institute notes that $150 billion per year in clean-energy investment can generate a net increase of 1.7 million jobs.

In short, the Green Bank can encourage the rapid deployment of clean energy and ensure that lower energy costs are passed on to consumers. In addition, the Green Bank can act as a bulwark against higher energy costs associated with volatile fossil fuel prices.

Costs and benefits of the Green Bank

A Green Bank funded at $7.5 billion could fund generation of 60 to 80 gigawatts of clean energy over a period of 20 years, or 3 to 4 GW annually. The result: Our national security will be enhanced by reducing our dependence on foreign oil. A fully capitalized Green Bank at $50 billion could:

  • Provide enough electricity to power approximately 22.9 million cars per year
  • Decrease gasoline consumption by an incremental 12.6 billion gallons per year
  • Decrease oil consumption by an incremental 642 million barrels per year, or 1.8 million barrels per day

In the past, Congress has encouraged private-sector equity investments in wind, solar, and other clean technologies through tax credits. Equity investments are important, but the deployment of major clean-energy projects will also require significant loans and low-cost debt financing. The Green Bank will marshal a variety of well-established financial tools and incentives to enable the federal government to enlist the private sector to increase the amount of debt capital available at lower rates to clean-energy projects. A Green Bank can vastly expand the tools available to lenders by providing direct support, such as direct loans, letters of credit, and loan guarantees, and indirect support, like authority to issue bonds, purchase debt securities, and other financial products.

In a clean-energy project, the Green Bank can potentially reduce the cost of debt by half—to about 4.5 percent in today's credit markets from around 8.5 percent without federal support. As the cost of debt is reduced, projects can still provide a 15 percent return on equity and meet debt coverage ratios without an increase in electricity rates. The upshot: By lowering the cost of debt, the Green Bank allows utilities to provide the same levels of electricity from clean-energy sources without passing on any additional costs to the consumer.

The result will jumpstart business investment, increase capital at reduced loan rates, lower energy prices to consumers, and spur the construction and operation of more clean-energy technology and energy-efficiency projects throughout the country.

Jumpstarting private-sector investments in clean energy

A Green Bank is essential because many clean-energy technologies face several unique obstacles along the path to large-scale deployment and then to the delivery of clean energy in our homes. Traditional banks and commercial lenders are reluctant to loan to many of these clean-energy projects with limited track records in the marketplace.

And many existing off-the-shelf clean energy and efficiency technologies are abandoned due to a lack of funding as they attempt to be deployed at larger scale.

Indeed, renewable energy investment dropped precipitously in the first quarter of 2009, the period for which complete data are available, to $500 million compared to $2 billion in the fourth quarter of 2008 and $5 billion in the first quarter of 2008.

In order to maximize the leverage of private capital, the Green Bank should have at its disposal a wide range of direct and indirect support tools and incentives to encourage loans to facilitate deployment of clean-energy technology. These direct and indirect incentives tend to reduce the risk to lenders so they are encouraged, in turn, to offer better loan rates to potential clean energy and energy efficiency projects.

Under current Senate clean-energy legislation, the Green Bank will be capitalized with $10 billion. This capital can be leveraged at the standard 10-1 ratio to provide loan guarantees in support of $100 billion in private-sector investment in clean energy. The private sector can also provide an additional $100 billion in equity. As a result, a $10 billion capitalization of the Green Bank translates into $200 billion available for in clean-energy investments.

The surge in capital will allow clean-energy projects to be deployed at the operational and commercial level in a shorter timeframe than is standard today. As clean-energy and efficiency technology is deployed at a larger scale, valuable experience and cost savings will be gained, and more and more clean energy will be delivered to American homes at lower prices in every region of the country. The United States will reclaim its rightful place as a global leader in clean-energy technology.

The Green Bank creates clean-energy jobs

As a nation, we can and must do better at nurturing and growing our clean-energy sector and clean-energy jobs, because competitors in other countries are already filling the void. A Green Bank will ensure the United States is a job leader in the clean-energy technology growth industry of the future.

Clean energy has the potential to create significant jobs in the manufacturing sector. A Green Bank will provide low-cost capital to help build clean-energy manufacturing facilities, create long-term jobs in the United States, and deliver clean energy at lower cost to consumers. As noted above, a recent Center for American Progress-University of Massachusetts Political Economy Research Institute report demonstrates that $150 billion per year in clean-energy investment can generate a net increase of 1.7 million jobs.

A significant portion of these jobs will occur in the struggling construction and manufacturing sectors. Moreover, the CAP-PERI report also notes that clean-energy investments generate roughly three times more jobs than an equivalent amount of money spent on jobs related to carbon-based fuels.

A Green Bank can ensure the clean-energy manufacturing sector is able to overcome several challenges, including securing access to capital when prospective lenders are reluctant to provide financing to manufacturers producing clean-energy technology. Frequently, clean-energy businesses are small, innovative, and highly specialized. They often have limited collateral and revenue and face cost uncertainties, as supply and demand for finished product fluctuates. The Green Bank can provide stability and incentives to leverage private capital, raise the comfort level of prospective lenders, and allow manufacturers to meet their goals and set us firmly on the path to long term job growth and a clean-energy economy.

The Green Bank can lower carbon emissions to reduce global warming

The establishment of a Green Bank will provide a coordinated, strategic approach to clean-energy innovation and energy efficiency in the United States, enhance federal government and private-sector complementary efforts to reduce carbon emissions, and deliver clean energy to American homes in as short a timeframe as possible.

The establishment of an independent Green Bank, governed by a board of directors and comprising additional members with clean-energy and energy-efficiency financial expertise, will make a significant contribution to the nation's overall energy innovation strategy and project funding decisions. Importantly, the Green Bank will not place the federal government in the role of picking winners and losers in specific clean technologies. Rather, the Green Bank would establish broad, overarching performance-based goals such as the deployment of clean energy that diversifies our energy supply, and reduces or sequesters greenhouse gases.

The Green Bank will work in an integrated manner with clean-energy and climate-change legislation that promotes clean energy, energy efficiency, limits on global warming, clean-energy jobs, and transition investment to ensure U.S. competitiveness. The Green Bank has the potential to reduce carbon emissions by an estimated 22 to 59 million metric tons a year, which would be the equivalent of:

  • Taking between 5 million and 13 million cars off the road every year
  • Neutralizing the carbon emissions of between 15 and 39 power plants every year

The Green Bank also can help meet the demand created by a national renewable electricity standard, and it will encourage the deployment of a smart grid and modernized transmission to ensure supply comes from optimal locations throughout the country. In addition, energy-efficiency projects financed by the Green Bank would include any project that results in a net reduction in energy use required to achieve the same level of service prior to their application. Such projects would include smart-grid technologies and energy-efficiency gains in existing buildings and new construction.

Smaller projects could be aggregated so as to attract more financing in an area where it has been difficult to secure financing in the past. As noted above, credit support from the Green Bank includes a wide-ranging toolbox (including direct loans, letters of credit, and loan guarantees) that will assist states, localities, and the private sector in rolling out innovative mechanisms to finance building energy efficiency retrofits at scale. This includes municipal bonds, utility loans with on-bill repayment, and increasing commercial loans for retrofits, as the Green Bank effectively lowers the uncertainty and technological risk associated with a lack of historic performance data.

All of these goals would be interwoven into expedited funding decisions as projects were evaluated for viability and creditworthiness by a professional and experienced staff. In sum, the Green Bank will provide the means to allow us to meet our most ambitious carbon reduction targets while promoting clean-energy jobs to ensure U.S. industry and workers will be leaders in the clean energy technology future.

Download this memo (pdf)

This post was first published here.

Energy efficiency, the low hanging fruit that grows back

Posted: 10 Aug 2009 01:09 PM PDT

Just like some print columnist run classic columns when they are on vacation, I'm rerunning this inspirational  energy efficiency story, first posted July 25, 2008.

Energy efficiency is by far the biggest low-carbon resource available. It is also, as we'll see, every bit as renewable as wind power, solar photovoltaic, and Concentrated solar thermal power Solar Baseload.

People who have little experience with what serious energy efficiency investments can do for a company or a state — this means you, neoclassical economists who consistently overestimate the cost of climate mitigation! – think it is a one-shot resource wherein you pick the low hanging fruit. In fact, fruit grow back. The efficiency resource never gets exhausted because technology keeps improving and knowledge spreads to more and more people.

After leading the country in comprehensive efficiency efforts that have kept per capita electricity demand flat for three decades, California does not merely believe it can continue at this pace, they plan to accelerate their efforts and actually keep electricity demand itself flat. I have discussed California's efforts and plans in previous posts (see Policies in Need of Californication and California makes efficiency "business as usual"), and will discuss them further in Part 4.

The focus of this post is the best corporate example of the inexhaustible nature of the energy efficiency resource — Dow Chemical's Louisiana division.

You might have predicted that by 1982, after two major energy shocks, if any company in the country had captured the low-hanging fruit of energy savings, it would be one as energy intensive as a world-class chemical manufacturer. Nonetheless, energy manager for the division's more than 20 plants, Ken Nelson, began a yearly contest in 1982 to identify and fund energy-saving projects. His success was nothing short of astonishing.

The first year had 27 winners requiring a total capital investment of $1.7 million with an average annual return on investment (ROI) of 173%. After those projects, many in Dow felt that there couldn't be others with such high returns. The skeptics were wrong. The 1983 contest had 32 winners requiring a total capital investment of $2.2 million in a 340% return – a savings of the company's $7.5 million in the first year and every year after that.

Even as fuel prices declined in the mid-1980s, the savings kept growing.  Contest winners increasingly achieved the economic gains through process redesign to improve production yield and capacity. By 1988, these productivity gains exceeded the energy and environmental gains. The average return to the 1989 contest was the highest ever, an astounding 470% in 1989, 64 projects costing $7.5 million saved the company $37 million a year — a payback of 11 weeks.

Anyone would predict that after 10 years, and nearly 700 projects, the 2000 employees would be tapped out of ideas. Yet the contest in 1991, 1992, 1993 each had in excess of 120 winners with an average our ally of 300%. Total savings to Dow from the projects of just those three years exceed $75 million a year.

Here's the shocking part:

Far from instantly spreading throughout the chemical industry, Nelson's techniques have hardly even spread through Dow. Worse, in 1993, Nelson retired; reorganization wiped out his coordinating committee; and any continuing efforts can no longer be tracked.

Dow's loss was, however, the Department of Energy's gain because 1993 happened to be the year I came to the DOE as special assistant to the department's chief operating officer, the deputy secretary. After benchmarking a number of the best companies, it was obvious that Dow's approach was one of the most successful. The only question was whether the department could duplicate Dow's results?

As a 15 billion-dollar agency, the Department of Energy is involved in a variety of activities that consume energy and generate waste, from basic research to the production of electronic equipment. Although our various divisions had robust pollution prevention programs, I was certain that some of the largest opportunities were being missed. To find and fund the project with the highest return on investment, we reorganized our Waste Minimization and Pollution Prevention Executive Board, with the department's chief operating officer as the chair and myself as the Executive Director.

We hired Ken Nelson to train several of our facility staffed around the country on Dow's program. We held a "Return-On-Investment" contest. As at Dow many in the department were skeptical that such opportunities existed. Yet, the first two rounds of the contest identified and funded 18 projects that cost $4.6 million and provided the department with $10 million in savings every year, while avoiding more than 100 tons of low-level radioactive pollution and other kind of waste. In addition, one special project identified by the contest but funded separately cost $4.2 million to implement a provider department a one-time savings of 37.6 million, a stunning 1300% ROI.

Finally, on the basis of the success of this headquarters-based program, many of DOE's regional operating officers decided to run their own contests. They funded 260 projects costing $20 million that have been estimated to achieve annual savings of $90 million a year.

If an organization as big and bureaucratic as the US Department of Energy could do this, any company can. So whenever the country gets really serious about high energy prices and global warming, I expect we will achieve energy savings beyond what even the biggest technology optimists believe.

This post was originally part of my multipart efficiencies series from last year.  Part 3 explains why efficiency is The only cheap power left, and Part 4 explains How California does it so consistently and cost-effectively. Part 5 explains why efficiency has the highest documented rate of return of any federal program.

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