Total Energy Consumed

Media274I was part of a panel discussion on Nov. 28th at the Total Energy USA Conference in Houston. The idea behind the conference was to pull together people working in all different parts of the energy industry: oil & gas, wind, coal, nuclear, solar, hydro – a real “all of the above” conference. Unfortunately, the fossil fuel industries didn’t really show up (despite the Houston location), so A) attendance was much lighter than the organizers had anticipated, and B) there was no bringing together of the two main camps of the energy world.

This is a shame because there were a number of extremely informative presentations. Ben Grumbles of the US Water Alliance presented one of the most balanced perspectives on the risks associated with fracking oil and gas shales – the real risks and the overhyped ones – I have seen. Dave Williams of Wastewater East Bay Municipal Utility District in Oakland, CA, talked about the incredible work they’re doing in using anaerobic bacteria to convert some of the nastiest, foulest waste in the area into power-generating methane. And they don’t just do this with the gunk people flush down their drains – they had excess capacity, so they’ve expanded their business to where everything from grease and fats from restaurants to chicken blood from a slaughterhouse is trucked in for eco-friendly disposal and power generation.

Larry Burns (former VP of research and development at GM, now a professor at the University of Michigan and at Columbia University) made an impressive case for the notion that energy and transportation are both ripe for disruption. Care to make a guess at what percentage of the energy consumed by an automobile is used to actually move the driver of the car? 1%. That’s it. The vast majority is wasted as heat (even the most efficient internal combustion engine only converts about 15% – 20% of the energy consumed into kinetic motion), and almost all of the rest goes toward moving the car itself. Dr. Burns sees this incredible waste as an engineering opportunity. We’ve all heard about Google’s driverless car, successfully navigating its way across the country from Lombard Street in San Francisco to the crowded avenues of New York. Cars of this sort communicate with each other, such that they don’t crash. Cars that don’t crash don’t need to be so massive, thus saving huge amounts of fuel (not to mention reducing the need for emergency medical attention). Of course, your corner body shop may not be thrilled with these developments, but progress has a price.

Another mind-boggling number: Even during rush hour, only about 12% of the cars in a city are on the road. In other words, at any given moment at least 88% of the cars in any city are parked. This is a staggering waste of resources, one being addressed by a number of new car-sharing companies. Why own something as expensive as a car when it’s going to sit idle the vast majority of the time? Why not just call one when you need it? Why waste enormous amounts of steel and concrete building parking garages that shouldn’t – and if Dr. Burns is correct, won’t – be needed?

But through the whole conference, two statistics made the biggest impression on me. Both came from Ken Smith, the President of District Energy St. Paul, a Combined Heat & Power – or “CHP” in sustainability jargon – company which warms many of the buildings in downtown St. Paul with heat that would ordinarily be wasted as a by-product of power generation (why doesn’t every city do that?). The first statistic is that of all the energy consumed in the United States, 57% is wasted, mostly in the form of dissipated heat. This is incredible. More than half of all the energy consumed in America is just frittered away and does nothing of any use to anybody.

The second statistic which floored me is that in 1970, this figure was only 50%. Think about that for a moment. We currently waste a higher percentage of the energy we consume than we did forty years ago. How in the world is this possible?

My two prime suspects are computers and an over-dependence on price signals. Computers have become ubiquitous, and the vast majority of the energy they consume is dissipated as heat (especially when they sit around idle, but switched on, most of the time). This in turn increases the need for air conditioning, which is really just a mechanism for moving heat from inside a building to outside. Put enough buildings together, all of which are pumping heat outside, and as the outside temperature goes up even further, the energy required by the a/c units to maintain a comfortable temperature inside goes up correspondingly. And the cycle continues. The hope is that “smart” systems can use computers to dramatically decrease energy use, and I fervently share that hope. But so far, I suspect that computers have done the opposite.

With regard to price signals, they don’t have a chance of working unless all of the costs associated with a product or service – including pollution costs, long-term environmental costs, military costs to secure transportation, etc. – are included in the price of that product or service (and even then, behavioral economics tells us that price signals don’t work they way they should). The costs associated with energy are almost never fully included in the price, and as a result, people are wasteful.

The next wave of this phenomenon is currently playing out in the development of shale resource plays in the U.S. and abroad. Increased supply causes prices to go down, and that causes demand (and waste) to go up. But as Ken Smith put it, just because we now have vast quantities of producible shale gas and shale oil doesn’t mean it makes sense to produce and burn the stuff as rapidly as possible. In developing nations, many state oil companies and/or oil ministries are quite conscious of the need to preserve their nation’s resources for future generations. But not in the U.S. If an NPV analysis says there’s more money to be made by producing it all now (and NPV always favors now over later), then we will indeed produce it now.

Does this make sense to anyone? If so, how?

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