Energy efficiency: What’s lean? What’s mean?

I’ve been thinking a lot about energy efficiency in buildings lately (in the BC context, anyway). About 11% of BC’s greenhouse gas emissions are attributed to residential and commercial buildings, so obviously efficiency has to come under the microscope as part of any GHG mitigation plan. Part of my reticence to look at this topic before is that there are few good primers. It is easy to say “energy efficiency” but if you are interested, you quickly get buried under metrics like gigajoules (GJ), kilowatt hours (kWh) and therms, and it is not always easy make comparisons from what you see online to what appears on your electricity or natural gas bill. I also take a hard GHG lens that seems to be slightly different discussion than energy efficiency per se.

Overall, British Columbians already emit one-third less than the per capita emissions for the country as a whole, largely on the back of abundant hydroelectricity. Alberta and Saskatchewan have much higher GHGs per capita because their electricity is largely created by burning coal, and this is true of much of the US, too. Ontario has coal in its mix as well but also some hydro and a lot of nuclear. The common denominator in all of these is that we need to spin a turbine somehow in order to generate electricity, either by getting water to run through it or by using coal or nuclear to boil water to get steam that drives it.

The source of one’s electricity makes a big difference in the interpretation of what energy efficiency means, in particular as it relates to natural gas. So there is a meme out there that switching to natural gas is more energy efficient, but it all depends. For predominantly coal-burning jurisdictions, the efficiency problem is that there is a large heat loss upon burning coal (and big time CO2 emissions) and smaller additional losses in the transmission to the end user, and finally, some efficiency loss in the appliance itself (heat loss from a hot water heater, for example). In these cases, switching to natural gas (either in your home, e.g. for a stove or hot water heater, or at a generating plant) is both more efficient and less CO2 intensive for producing the same amount of electricity.

In places like BC, with hydroelectricity as 90% of the total generation capacity, we do not want more people switching to natural gas as this will increase CO2 emissions. On some measure of efficiency, it might be more efficient to have a natural gas-burning furnace (for example) because it averts the transmission losses. Transmission losses aside, electrical appliances can actually be more efficient than natural gas-based ones (and in the case of heating, space heating the rooms you are using is more efficient than forced air furnaces). So I would prioritize the CO2 emission aspect, though in BC we should also count the 10% of electricity that comes from burning natural gas and other fossil fuels.

In BC, another issue is that less than half of homes are heated electrically; the remainder are gas customers. So not only do we not want more mode shifts to natural gas, we should be pushing for greater electrification of existing homes. But only if that can be met through green generation sources; ideally, from the existing hydro capacity. In effect, we want more energy efficient homes all around to free up hydroelectricity for conversions away from natural gas. (As an aside, it seems foolish to me for us to use natural gas for heating homes, because natural gas (aka methane) burns into carbon dioxide (bad) and hydrogen (good), and so down the road if we could burn it for one hit of energy, then capture the CO2, we could have hydrogen as a secondary fuel to be used for other applications. I’m not sure if the economics make sense here but the chemistry certainly does.)

Since there are costs associated with developing any new generation capacity (green or not), the case for a more efficient use of the existing hydro capacity is strong. In a report by John Calvert for the CCPA, he puts the cost of generating hydro power in BC at less than $6 per megawatt hour (MWh). This is cheap and green, and reflects investments made by the province in the 1950s and 1960s (that were at the time destructive environmentally). It also demonstrates the case for having a public utility since the cost of purchasing from independent power producers was eleven times that much, and BC Hydro (foolishly) was tendering for private power in 2006 at $88 per MWh. Interestingly, thermal plants using natural gas are even more expensive, at a cost of $141 per MWh (plus the associated GHGs). (These are just costs to BC Hydro for generation and do not include transmission and adminstrative costs.)

That is the backstory in terms of big picture electricity generation. In terms of improving home energy efficiency, there is a huge information gap because for a large share of homes, there are potential efficiency investments that would save households money, in many cases with a payback period of 4-6 years. People are simply not (in the words of McCloskey) “picking up a $500 bill lying on the ground”, largely because they are not looking. This is an important lesson for arguments that higher costs of electricity or carbon pricing will lead people to act in an economically rational manner!

To date, efforts on energy efficiency, federally and in BC have focused on providing information, and then subsidizing those who get the proverbial light-bulb turned on over their heads (compact flourescent, of course). We subsidize the provision of home energy audits, and then with the paperwork in place we subsidize aspects of retrofitting. Because BC’s hydro is not only green but so cheap, any incentives for investments in energy efficiency are reduced. While this is a good start, the uptake has been weak for these type of programs in general, like 2% of homes per year (the “best” programs get as much as 4%, which is still pretty small). Programs are also focused on retrofits rather than the periodic upgrades made by many families. This leads to concerns about free rider effects. That is, the subsidies go to people who were going to do the upgrade anyway, and so we have not really changed behaviour much but have expended public funds inefficiently.

One important implication of this is that, if public funds are limited, it is better to aim subsidies at low income households who are not going to be free riders because they cannot afford the upfront cost of making the efficiency investment, or because they are renters and do not have that responsibility. Subsidies will be likely be required further up the distribution, too. The reality is that the median family is not really saving much if anything, according to Roger Sauve’s most recent report so subsidies are probably not hurt by free rider impacts for at least half of households.

For everyone else, a much better solution would be to regulate minimum standards in the marketplace, so that when you need to purchase a new hot water heater it will be much more efficient than the old one, perhaps with subsidies to incentivize even more efficient options that may be more costly. So starting with EnergyStar standards (and they are rising over time) as a minimum for the marketplace would make more sense. This is based on the principle of capital stock replacement; that big changes can happen over the course of a couple decades as households and businesses replace and upgrade their equipment.

At the level of homes rather than appliances, ensuring higher standards for new buildings is part of the plan, and BC has implemented a greener building code. The shame is that the recent boom of construction did not have to adhere to that code. Capital stock replacement is obviously much slower for buildings, so some mandatory retrofitting should be required. I would start with older homes and work back, requiring an audit and whatever upgrades flow from that. There is a big improvement in buildings energy efficiency post-1980.

One way of making this affordable is to finance it through the hydro bill, which is what Manitoba Hydro is doing with some success: a loan for upgrades is paid back on the hydro bill, but energy savings are greater than the amortized loan, so the cost of the monthly bill actually goes down. A classic win-win situation.

This could also help to guard against another concern, rebound effects, whereby consumers use more electricity because they saved elsewhere. I’m not sure what the actual evidence is on this but it this seems to make more sense to me in the context of buying a Prius then driving more because you care less about emissions. In any event, given the scope of the problem, we should err on the side of doing too much even if there are free rider and rebound effects.

Ultimately, these issues have to do with how much public money we are willing to put at this and how quickly, which comes back to getting a meaningful green stimulus plan in place. And efficiency is about more than retrofitting existing stock. Greater density, for example, is inherently more green in a number of dimensions besides electricity.

14 comments

  • Hi Mark,

    This is a good overview and some good thoughts. I did a lot of work on this in Nova Scotia so here are a few of my own random thoughts.

    Your discussion on fuel choices is interesting. But even the most aggressive efficiency programs tend to be focused on dealing with load growth. Only places like Vermont are now slowly turning load-growth negative. So the efficiency that can be put on the system is likely to be preventing new builds. So if BC was to electrify you would have to ask what the utility would build to meet the new electric demand. If it is a new gas plant, then burning gas at home is better than in the plant.

    I fully agree with your comments on standards and such. But you need to consider that improving efficiency is an ongoing process because new innovations and improvements are always available and you really can’t discount the benefits of one-on-one interactions that can customize efficiency upgrades and financing arrangements in each home and business.

    Vermont is the leading state in North America on this and they have followed a strategy where they hire lots of staff to do the consultations. They have found that this is actually the more cost-effective way to go because they can customize (price discriminate) their incentives. So more staff means less free riders and more effective energy savings.

    Some people like the pay-as-you-save programs like in Manitoba and some people don’t. Hence the benefits of a staff person to customize the financing plans. I don’t quite understand how the Manitoba hydro program will prevent rebound effects.

    To the extent that the rebound effect is a result of the income effect, I don’t quite understand why the same people who are very much against energy efficiency programs because of the “rebound” also advocate tax cuts from carbon tax revenue.

    Also, I think it is important to consider the ‘political economy’ of efficiency programs. We need to consider that if we are going to be living in a world with higher energy prices (via carbon pricing or scarcity), energy efficiency needs to be for climate change policy what unemployment insurance is for labour market policy. Having some sort of more “universal” access to efficiency services (free rider effects be damned), I think is going to be crucial to the type of social contract we’ll need to create for a low-carbon future.

    I think all the talk about carbon pricing which was based on general and partial equilibrium analyses really missed this point. The ‘carbon pricing’ advocates convinced us that carbon pricing was the way to go, but never fully considered how to create the political consensus necessary for the introduction carbon pricing.

    cheers, Brendan

  • Thanks, Brendan,

    On the generation issue, one thing I forgot to mention was bringing in feed-in tariffs so that households and others can sell electricity into the grid from their solar panels, wind turbines or other green power sources.

    Normally, timing is an issue for these (when it is sunny or windy) but BC also has an advantage here as we can store power in the water reservoirs, as opposed to having battery racks in the basement.

    On the other hand, BC’s low price of electricity would make these options uneconomical, and would require BC Hydro to offer a higher price consistent with its call for power from private providers.

  • The new building code requirements are certainly a step in the right direction.

    As is the two tiered power pricing.

    And the carbon tax helps as well, of course.

    And also the installation of smart meters (which will support feed-in tariffs).

    I’m hoping that if the Liberals win the election they will go ahead with Site C. The provincial economy is likely to be crushed far worse than the rest of the country, and it will be a good time to undertake a large construction project while costs (labour + oil) are low. Their chances of their winning a 4th election are going to be low anyway, so they might as well take the political hit and leave us a legacy of a more sustainable energy supply.

    With respect to power options, I wish people would distinguish more between options that are ‘green’ and options that are ‘sustainable’. We can argue about how green large hydro may or may not be, but as long as it isn’t primarily fed by melting glaciers that are likely to disappear, it is definitely sustainable, in a way that fossil fuels (and nuclear) are not.

    Finally, a retrofit program that covers 4% of homes every year sounds pretty good to me, in 25 years you’d have the whole province converted!

    Good pint about density. Even with the mild Vancouver climate the difference in power consumption living in a house vs. part of a townhouse complex or particularly a high rise is massive. Not to mention the transportation infrastructure impacts.

  • What’s lean? Total passive heating and cooling. Zero carbon or electric energy is needed to keep building’s comfortable. And it ain’t rocket science, all it takes is the political will.

    And I suppose that lack of political or philosophical will is why we fiddle around with small tweaks to building codes and with minor retrofits.

  • It all starts small.

    Here is a case in point how regulation and the lack of innovative thinking can get in the way of carbon reduction in the small, but when aggregated to the big can make a difference.

    I bought my daughter a scooter/electric bike. The whole family will use it, in fact I picked up two bags of groceries today. Count that as one less trip to the store that was run on fossil fuels ( I think )

    First off, it is definitely a savings as the scooter is actually called a pedal assisted e-bike. It looks like one of those Italian scooters.

    Now onto the regulations. It is actually been specifically made to get past the laws for licensing and insurance, which from a regulation standpoint may prove to add benefits, but at what cost. The liscencing is surely a good idea for a vehcle that can reach high speeds. However this little scooter tops out at 32 km per hour. The max speed allowed under the Ontario government before deeming the scooter a vehicle.

    Next up, it has two removable pedals, that basically are a pain in the ass and get in the way and barely function. But needed because under the Ontario law, vehicles not requiring licensing and insurance, must be pedal assisted, so the engineers threw in a set of pedals, and let me restate, threw them in and in a many that directly effects the corning ability of the bike.

    Also, to be legal, the appropriate lights, signals and helmets must be worn.

    So with all that, the bike is apparently legal to ride on most roadways, without any license or insurance similar to a regular bicycle, which make the attractiveness of these bikes both cost effective and is a major selling pitch to the public.

    However but at what cost has the regulations inhibited the growth of these small fuel efficient vehicles. The bike has a governor put on it to limit its speed to 32 km an hour. Barely fast enough to makes ones hair mussed. Many states in the USA, let these bikes have a top speed of 50 km, which add a new layer of practicality and functionality. Why is 32 the top speed?

    Also as mentioned, the pedals have to placed on the e-bike, at the cost of what I would call safety as they get in the way.

    The electricity to recharge these bikes is minuscule and the weight makes them absolutely energy efficient.

    The is also a minimum gear threshold that the bikes are allowed to have, again limiting the design functionality of the e-bike.

    And if that is not enough of an over regulation of an innovative idea in transportation, a friend who has one of these bikes, was pulled over by the police twice in the 4 months he used the e-bike last year and was warned and then given a ticket even though he had a copy of the law sitting in storage compartment of the bike.

    I decided to roll the dice and spend 2300 and get the family its electric bike. Now the questions arise to me, why all the fuss with the licensing and insurance. 32km is definitely too slow to be practical. One also need a couple of gears more. 50 km would have been ideal, even 40 km. Why would one need a liscence, yes an age limit of 16 like the one in place right now is good, but why would i need a license and insurance to ride myself a bike that can basically goes slower than my pedal bike. I clocked myself at 40km on my pedal bike.

    Yet legalities, insurance lobbying, and some kind of cultural cement is preventing us from promoting new ideas, and new means to save.

    Again this is just another case of not thinking with the right kind of green thoughts we need.

    It is these small things, that on a micro managed scale keep blocking our macro scale objectives.

    Common sense you would think could rule the way forward, but not in this case.

    I am waiting to be pulled over soon, and I will launch my case. So strap on your helmet Mr.Chips and come and get me, my abilities at 32km per hour have proven to be uncanny, so “catch me if you can”.

    pt

  • “The ‘carbon pricing’ advocates convinced us that carbon pricing was the way to go, but never fully considered how to create the political consensus necessary for the introduction carbon pricing.”

    Parties that advocated ‘carbon pricing’ won a majority in the last Parliament. Somehow *cough*GG *cough*Liberals *cough* it never got implemented.

  • I would prefer coaxing everyone along with incremental increases in the price of carbon. If we require that everyone use Energy Star appliances and such, then there would be a sharp drop in the number of providers in competition, which would perpetuate Canada’s chronic problems of a small number of oligopoly providers in, well, friggin everything. At least with increasing prices through carbon pricing, you can encourage changes that people who don’t care about the environment will have to make for price reasons alone. Then you have the windfall revenues to plough back into subsidies for infrastructure changes. And if you want to be bold, just do it more quickly.

    Also, incentivize is not a word. This non-word is normally used by BMW-driving executive compensation consultants, who coincidentally are wrong about other things as well.

  • Mr. Murray, poor people can’t afford to pay for new energy-efficient stuff or retrofitting in response to higher prices. Heck, my family is almost precisely median income and my expenses probably lower than average, and *I* pretty much can’t afford that stuff.
    Higher carbon pricing for the average person mostly just means they have to pay more for carbon.

  • Dear Purple Library Guy

    Yes I agree that energy efficiency from newly designed production, within the current framework of allocation, is regressive. Which brings us back to the roll out of smart meters for electricity in Ontario.

    So lets see, the Government of Ontario spent some multi millions of dollars rolling out smart meters for households, with its stated objective of introducing a tiered, ultra regressive pricing schedule for electricity consumption. Since realizing the potential back lash, they seemingly have back off this smart meter plan. (not sure what is up with the future of this plan.

    However without the ability to invest in such energy saving tech, those within the lower income brackets will be hardest hit by this regressive energy pricing strategy. So what exactly was the plan with smart meters. Potentially McGuinty and his clan have finally realized that if they want to stay in power, the smart meter program had better be shelved as it will be so regressive, not a government in an eternity would last a month in office with such regressive energy pricing. At least within a civilized democratic society.

    So why is it then I have this quite expensive smart meter counting up all my energy. How about a wb page so I can actually monitor my energy usage. At least get some functionality out of these devices. I am sure they were no cheap to purchace such public infrastructure and they surely were expensive to install.

    I would really like to monitor Dalton’s energy consumption, and I would also like to see a feew other elected officals and maybe a few public institutions hydro bills posted onlines somewhere.

    It is exactly the potential of the information age that could help us meet this environmental challenge head on, bit the information is instead politicized and buried out back in some server farm, awaiting analysis from some historian in the supposed future.

    Lets innovate, by informating, analyzing, and disseminating.

    Without the information we can all fish in the morning, and maybe do a little hunting in the afternoon and when the cows come home and we can have some great debates in the evening.

    pt

  • If the regressive impact is a major concern, I think that would be better addressed through changes in income transfers and progressive taxation, rather than mothballing carbon charges. In BC our problem is that the current government is unlikely to do anything to reduce inequality. So we have a local scenario where any increase in cost is inherently regressive. But if a progressive government brought in carbon charges they could mitigate the downside through progressive income policies.

    Also, I’m a little touchy about policy debates where policy A, intended to solve problem B, falls into disrepute because it fails to solve problem C. I saw this with the minimum wage debate, where a policy that is intended to take wages out of competition and level the playing field, gets lambasted for not “eliminating poverty,” which it was never really intended to do. We shouldn’t be burdening individual policies with the objectives of the entire progressive agenda. Otherwise we wouldn’t get anywhere.

  • I agree with your analysis Stuart, however- lets say the smart meters in Ontario are put into practice. Suddenly we have daily life which is ritualized to the production process be interfered with by a scheduled pricing of energy. So we have people who at the lower end of the income scale turning their lives upside down to minimize the cost of energy. This of course is not by choice, but by necessity. So one could conceivably construct some form of compensation to accomodate this dissruption into ones daily life. But how do you put a price on such an issue. Say we have people staying up late into the night doing there laundry, or cooking a meal at 8 o’clock in the evening. THese are hard core ritualized behaviour one is messing around with. And quite simply I do not think these issues can be valued and if they are, one is being highly arrogant and regressive and in many ways being repressive.

    The whole scheduling and repricing of energy is a farce and should never have been considered. Who are making these decisions is what my question is and what kind of idiotic waste of taxapayer monies considering and spending millions on such dumb ass notions.

    Potentially there are other carbon pricing strategies that are much more workable, but market based strategies are still something that in my mind are made to fit with a hammer and it is always those without the resources that get hit. There are plenty of alternatives and they abound we need to launch into the orbit of public policy circles these other alternatives.

    pt

  • “what kind of idiotic waste of taxapayer monies considering and spending millions on such dumb ass notions”

    The idea was to avoid spending billions on new power plants because you have to build you generation capacity around peak demand, so if you smooth out those peaks you can save a lot of money.

    “Potentially there are other carbon pricing strategies that are much more workable”

    What do you have in mind?

  • I have to admit I am a bit surprised to hear people advocating the immediate construction of the Site C dam in BC’s Peace River country, and demands for more electric space heating.

    For years, Site C was a cause celeb of farming, outdoors, and environmental activists who didn’t want some of the last and best valley bottom lands in the NE part of BC flooded to provide electric power largely for industry and for urban users hundreds of kilometres to the south. Now I am told it’s somehow a prefered alternative compared to, … what? Can we not find something else, such as genuine small scale hydro, or coal fired plants with carbon capture? That would be a real breakthrough for BC Hydro, which has huge coal deposits at Hat Creek.

    The idea of using electricty for space heating is one whose time has come, and gone. BC Hydro used to market this approach on Vancouver Island, when there was no natural gas there.

    As for the GHG outputs from private homes heated with gas or oil, what about electric powered heat pumps, which provide summer-time air conditioning as well as winter warming, but need to be supplemented by some kind of furnace in cold weather. These electric appliances have motors, not heating coils, so their draw is much lower.

    Finally, suppose that in ten or fifteen years time we have many more electric and plug-in hybrid vehicles. Where is all that electricity going to come from? Are we going to insist on finding offoically certified green power sources, or are we going to use our heads and realize that these cars will be charged up overnight, and that coal-fired thermal plants have to keep burning coal 24/7, whether the generators are on or off. Overnite, turning on the generators and using all the electricity a given amount of coal burning can produce makes wise use of resources, and adds useful clean electrical energy for an unchanged amount of air pollution.

    But if we are going to have phoney environmental organizations, fronting for so-called “green” power producers dominating the discussion, they’ll try to exclude any use of coal no matter how advantageous. That’s the price we pay for handing the discussion of public policy over to a combination of neurotic fetishists and faddists, and very self-interested liars for hire who are being paid to promote some entrepreneur’s agenda. The only green thing these people are concerned about is found in bank accounts.

  • I have a moped and it has pedals and it’s only 49cc, people tell me that i have to get all the licenses and everything but under regulations it pedal assist. A little help???

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